The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government last night backed down from imposing sanctions on food retailers and pharmacists who fail to enact the expanded price control regime - which one branded “a death warrant” - by today’s deadline.

The Ministry of Economic Affairs and Ministry of Health and Wellness, in statements issued near-simultaneously and using almost identical language, said no “penalties” or enforcement measures will be levied against food stores, pharmacies and their wholesale suppliers during the “extended period” necessary to adjust inventory, margins and mark-ups to the new regime’s requirements.

The move came after Prime Minister Philip Davis KC was warned by Philip Beneby, the Retail Grocers Association’s president, that merchants would not implement the new price controls by today - as required by law under newly-signed regulations - because to do so would leave them facing “massive losses” and be akin to “signing a death warrant for our businesses”.

Mr Beneby’s letter to the Prime Minister, which was being widely circulated on social media, added that the addition of 38 products to the price control regime would make “operations unfeasible” for small and mid-sized food stores since between 40-60 percent of their inventory will be covered by government-imposed mark-ups resulting in these items being sold at a loss.

Subsequently confirming that the letter is authentic, Mr Beneby told Tribune Business the Davis administration’s expanded price control regime and new mark-ups as they stand are the equivalent of “ suicide mission” for both food retailers and wholesalers.

Disclosing that these concerns are shared by stores of all sizes, “from Grand Bahama to Inagua”, he revealed another merchant said the proposal was such that the sector “might as well give the Government the key to the stores” and simply hire the private sector to manage them on its behalf.

“That is the position we have taken,” Mr Beneby told this newspaper of the refusal by the Association and its members to implement the new price controls from today, as stipulated in the Price Control (Application to Additional Items) Regulations 2022.

“The proposal, for the retail grocers and wholesalers, would put us on a suicide mission. We cannot sign our own death warrant. That’s what we’d be doing. It’s not just coming from retail grocers in Nassau; it’s coming from grocers all over the country; from Grand Bahama to Inagua. They’re not happy with it, and are not going to comply with it.

“We’re chatting with all of them. Abaco, Eleuthera, Long Island, you name it. That is where the whole argument comes from. No one was consulted; everyone was blindsided. In the Family Islands, they said they knew nothing about it. Some heard it on media, some heard it in various [social media] chat groups; some on Facebook. Some only heard it for the first time on Friday or Saturday.

The price control regime’s expansion effectively means merchants and wholesalers will be selling more of their inventory as ‘loss leaders’ where they are unable to recover their cost of sales. The consequences will likely involve merchants further raising prices on non-price controlled goods to compensate, thereby further feeding already-high inflation. And it also provides a disincentive for retailers to stock price-controlled items, which could result in product shortages.

Mr Beneby yesterday voiced disappointment that the Government had not consulted food retailers and wholesalers first before deciding that more price controls were the best policy response to the inflation and cost of living crisis squeezing many Bahamians. He argued that such discussions could have produced alternative, better options to achieve what the Government is seeking rather than endangering the industry and the thousands of jobs that rely upon it.

The sector is due to meet the Prime Minister over the matter tomorrow, and Mr Beneby told Tribune Business that items such as chicken and turkey spin-off into multiple product varieties - the latter giving rise to patties, drumsticks, wings, ground turkey and turkey meat just to name a few. As a result, the expanded price control regime quickly morphs into more product lines than just the 38 cited by the Government.

Selling all those at a loss is “a death warrant. We cannot survive. You’re going on a suicide mission”. The Association chief added: “It all hinges on what happens at the meeting. We just hope they would hear us, and we can try and work out some kind of amicable conclusion.

“You cannot kill the industry trying to accomplish whatever it is you’re trying to achieve. You’re killing one segment of the industry trying to appease the next. You cannot do that. What happens is that you’ll have thousands of people out of jobs and you can multiply that by several thousand people again in terms of those going to be affected.

“Like the saying goes, small businesses are the engine that drives any economy and we cannot afford to put small businesses out of business. I don’t think that’s the intent but that is what’s going to happen and will happen with this present proposal as is. That’s exactly what’s going to happen,” Mr Beneby continued.

“As one merchant said, that proposal as is, we might as well give them [the Government] the key to the stores and tell them just pay us to manage the stores. They’ll be the supplier and we’ll manage the stores for them and just pay the rent for the properties.”

Mr Beneby added that “the numbers are being crunched” in terms of the negative financial impact that the expanded price control regime will have on the industry and individual businesses, and the results will be presented to the Prime Minister at tomorrow’s meeting.

In his letter to the Prime Minister, he called for the proposed price control changes to be suspended to give all parties a chance to work out a solution better able to satisfy the needs of consumers, the private sector and the Government. 

“The effect of this unilateral decision will be devastating to our members, especially the owners of smaller family-owned and Family Island stores who provide a vital and essential service to persons living throughout our country,” Mr Beneby wrote. “The expansion has been announced without any form of consultative process and the vast majority of our members are finding themselves without proper and due notice.

“Had there been consultation, the Government would have been seised of the fact that the proposed expansion of the price control basket will result in 40 percent to 60 percent of our sales volumes falling under price control, which would make many of our small to mid-sized businesses’ operations unfeasible.

“An allowed mark-up of 25 percent will, in most cases, result in a net margin of less than 15 percent after we account for the cost of doing business inclusive of losses, pilferage and Business Licence fees. The fixing of profit margins is frightening, and not reflective of a free and open market system.”

Mr Beneby said the price control regime’s expansion was coming when food retailers and wholesalers are being asked to absorb a 24 percent increase in the minimum wage to $260 per week, plus up to an 80 percent hike in electricity costs over the next 15 months due to skyrocketing Bahamas Power & Light (BPL) fuel charges.

Combined, he warned the Prime Minister that these “may prove to be the proverbial straw that breaks the camel’s back for many of our members who are still in post-COVID survival mode. Currently, our expense base is well over 20 percent. These changes across-the-board will increase this number drastically, thereby seriously impacting a sector that provides jobs for hundreds of Bahamians while itself being a vitally essential service in the provision of food”,” Mr Beneby said.

“We are gravely concerned that the expanded list will result in job losses and, indeed, store closures which will impact additional businesses and the wider community. As an association, we have taken the considered decision that we are unable to make these price changes on October 17 due to the fact that we were not consulted prior to such a decision being made.

“The changing of our prices without due and proper notice will have the direct consequences of massive losses being made on items which have been recently landed as well as those en route and many businesses are operating on the narrowest of profit margins given the overall cost of doing business. In short, to do so would be to sign a death warrant for our businesses.”

The Government appeared to concede this last night. The Ministry of Economic Affairs said it “values public consultation with all of our stakeholders regarding the understanding or impact of government policy announcements and changes”, and pledged that it will “continue to consult broadly with the retailers and wholesalers” and their associations on the price control changes.

“The changes to the price control regulations come into full effect on October 17, 2022. However, the Ministry of Economic Affairs and the Price Control Commission recognise the need for an extended period to phase in the price control adjustments and will forgo any penalties and enforcement during the adjustment period,” the statement added. 

“The Ministry of Economic Affairs and the Price Control Commission will continue to review this recent change in the regulation while maintaining an open channel of consultations in the interest of consumers, retailers and wholesalers.”

The Ministry of Health and Wellness also gave similar ground after Dr Michael Darville, the minister of health and wellness, and permanent secretary, Colin Higgs, met with pharmaceutical retailers, wholesalers and representatives from the Bahamas Pharmacy Council and Bahamas Pharmacy Association to discuss the price control changes.

“The minister of health and wellness confirmed that recognising the effective date for implementation of the regulations is Monday, October 17, 2022, time allotted for adjustments on inventory has been given in light of the number of items listed,” the ministry said. “Minister Darville confirmed the Government’s position by adding that no penalties will be exacted while these inventory adjustments are being made. He described the meeting with the group as fruitful.”

The Prime Minister, in unveiling the expanded price control regime, said it was for a six-month trial for food items and three months for pharmaceutical drugs, although there is every possibility it may be extended further.

Food wholesale margins, or mark-ups, are capped at 15 percent for all 38 product line items listed, while those for retailers are set at 25 percent across-the-board. Those goods impacted, some of which are already price controlled, are baby cereal, food and formula; broths, canned fish; condensed milk; powdered detergent; mustard; soap; soup; fresh milk; sugar; canned spaghetti; canned pigeon peas (cooked); peanut butter; ketchup; cream of wheat; oatmeal and corn flakes.

The remainder are macaroni and cheese mix; pampers; feminine napkins; eggs; bread; chicken; turkey; pork; sandwich meat; oranges; apples; bananas; limes; tomatoes; iceberg lettuce; broccoli; carrots; potatoes; yellow onions; and green bell peppers. The regulations were signed on October 12, the same day as the Prime Minister’s speech, by the minister responsible for consumer protection, who is Michael Halkitis, minister of economic affairs.

The retail mark-up for eggs appears to have been increased from the present 10 percent to 25 percent, providing a very modest boost for retailers. But, while the 25 percent maximum across-the-board mark-up is slightly higher than the “general” 23 percent permitted currently, retailers say the increase is insufficient to offset the expansion of price controls to more products.

The Price Control (Drugs) (Amendment) Regulations 2022  impose price-controlled mark-ups ranging from 15 percent to 18 percent on pharmaceutical wholesalers. For retailers, the range is from 35 percent to 40 percent. The medicines covered include vaccines, anti-diabetic drugs, decongestants, laxatives, contraceptives, antacids, anti-hypertension medicines, cough preparations, cardiovascular agents and serums.