The Tribune

• Retailers seek ‘mutually acceptable compromise’

• Working on ‘alternative solutions’ to give Gov’t

• Minister signals neither side will have full win

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Grocery retailers are anxious not to be “demonised” over their opposition to an expanded price control regime they fear could undermine Bahamian food security, an attorney said yesterday.

John Bostwick, the Retail Grocers Association’s legal adviser, told Tribune Business that merchants are seeking “a mutually acceptable compromise” with the Davis administration over efforts to ease the cost of living crisis for Bahamians and are working to provide “alternative solutions” to the Government’s proposed price controls.

The former Free National Movement (FNM) senator, who was present when industry representatives met with Prime Minister Philip Davis KC and several Cabinet ministers at 5pm on Monday to discuss the controversy, sought to dampen any adversarial sentiments from either side by praising the Government’s “willingness to consult” - albeit after having announced the price control regime’s expansion to 38 product categories.

“The group is now in a consultation process with the Government towards trying to find alternative solutions to price control - the revised suggestion on the price control basket being drastically expanded,” Mr Bostwick told this newspaper. “The Association was pleased that the Government demonstrated a willingness to consult. Ultimately, I think the Association will try and reach a compromise.

“The Association is pleased that the Government is prepared to consult towards a mutually acceptable compromise. The Association wanted to be very clear that the owners and operators of these stores do not want to be seen to be demonised by their resistance to this issue. At the end of the day, we are all Bahamians, we all have families, and their customers are family.”

Mr Bostwick declined to say more. Tribune Business was informed that food retailers and wholesalers are presently reluctant to say much more publicly for fear the Government would view this as negotiating via the media, thereby potentially prejudicing the outcome of further negotiations.

However, Philip Beneby, the Association’s president, in brief comments to this newspaper last night said the meeting with the Prime Minister had eased some of the “anxiety” over a price control regime expansion that the industry was never consulted over. “The Government has asked the retailers to present a workable solution. That is where we are, and what we are working on, which will involve all of the retailers; the small, medium and large grocers,” he added.

Besides Mr Davis, those present on the Government side at Monday’s meeting included Chester Cooper, deputy prime minister; Michael Halkitis, minister of economic affairs; Ryan Pinder KC, the attorney general; Clay Sweeting, minister of agriculture, fisheries and Family Island affairs; Simon Wilson, the Ministry of Finance’s financial secretary; the head of price control and several of her officials.

Besides Messrs Beneby and Bostwick, Tribune Business understands that food retail industry representatives included Franklyn Butler, AML Foods chairman; Debra Symonette, Super Value’s president; Thomas Sands, the Eleuthera Chamber of Commerce president whose family own and operate a food store; and representatives from the Manufacturers Representatives and Wholesalers Association plus the Light Industries Development Council.

Mr Halkitis, speaking to media yesterday ahead of the weekly Cabinet meeting, signalled the Government’s willingness to compromise over the controversy by saying “both of us understand that perhaps we’ll both not get everything we want”.

He found it harder, however, to explain why the Government did not consult food retailers and wholesalers prior to unveiling a major expansion of the price control regime that has so alienated an industry vital to feeding The Bahamas. When asked, Mr Halkitis suggested the extent of cost of living crisis - and the squeeze inflationary pressures have imposed on thousands of Bahamian families and individuals - made urgent action imperative.

“You want to bring relief and you want to bring relief quickly, alright,” he said. “This idea hadn’t been floated before. We know what the issues are and, like I said, we had a good meeting, we thought, and we think we can move ahead and hopefully people can start seeing the impact in their pockets.”

Mr Halkitis, voicing optimism that the controversy will be “resolved” by this Friday, said the price control regime’s expansion was merely the Government’s latest step in making basic necessities more affordable. “The Prime Minister impressed upon them [retailers and wholesalers] the addition of items to the price control list was an effort to bring relief to the public,” he added.

This, the minister said, “follows on from [cutting] VAT at 12 percent to 10 percent, the reduction in the last Budget of Customs duties on 56 food items, the representations the Prime Minister is making to shippers to bring their costs down. The objective is to make sure all these things trickle down to consumers, and this is the latest effort”.

Mr Halkitis said he believed the private sector understood the Government’s position, and added: “We heard their concerns about the impact on their businesses. One of the main points they made was they thought the notice period should have been longer. They came away saying that we will get some additional input from them on adjustments they think can be made, and we will hopefully have all those issues resolved by this Friday.”

The Davis administration reaffirmed not to fully enforce the new price control regime, and any sanctions, fines or penalties on merchants, until the controversy was resolved and merchants have sufficient time to adjust shelf and point-of-sale pricing. “We’ve asked them to provide some additional suggestions on how they think we can attain the goals we have - ie, bringing relief to the public,” Mr Halkitis said, describing the talks as “cordial” and “fruitful”.

An obvious alternative to expanding price controls, which the Association’s Mr Beneby has described as akin to “a death warrant” and “suicide mission” for food retailers if they comply, is to eliminate import tariffs and 10 percent VAT from the selected 38 items.

One source, though, speaking on condition of anonymity, said removing VAT would likely be seen as “too politically sensitive” given that the Davis administration just reimposed it in January 2022. Such a policy reversal would likely be viewed as the Government admitting defeat, and that is not something the administration will want.

The Public Treasury also “needs every dollar they can get”, and that, too, makes it unlikely that the elimination of VAT on these products will be accepted even though some merchants and wholesalers are understood to be pushing for the private sector to take a hard stance on this issue.

“The Government is now collecting VAT and duty on these items and asking retailers to take the hit,” the source said. “They are effectively asking the food industry to subsidise a food aid programme.” They added that the product categories listed by the Davis administration ran into hundreds, if not thousands, of line items.

Another source, echoing these sentiments, said: “The Government were trying to help the vulnerable but it was pointed out to them it would not help them. They need to provide money for people to buy foods, but all this is doing is reducing the cost of living for middle and high class voters and not the vulnerable people they are trying to help.

“They’re not thinking about the poor. They’re thinking about politics. They’re thinking about the food industry subsidising the cost of living for the entire country. They’re trying to get others to stand the cost for them. It’s a silly political move.”

Another food industry source, again speaking on condition of anonymity, said retailers and wholesalers felt the way the price control regime’s expansion was unveiled was designed to bounce them, and generate public pressure, into meekly accepting the move. They also fear it could create an “us against them” scenario by seemingly pitting operators against consumers.

“The business model of these shops is volume, and they are operating in some cases at 5-15 percent profit margins on these items,” they added. “When you start talking about a reduction to 25 percent gross margins, in some cases it works out to a net loss of 4-5 percent, 7 percent because of spoilage and pilferage. These are very small gross margins.”

Among the consequences of an expanded price control regime, such as that envisaged by the Davis administration, are merchants further raising prices on non-price controlled goods to compensate for an increased percentage of their goods being sold at a loss, thereby further feeding already-high inflation. And it also provides a disincentive for retailers to stock price-controlled items, which could result in a shortage of such products.

Tribune Business was told these issues were aired at the meeting with the Government. “You’re looking at a real serious threat to food security,” one source said if the Government moves ahead. “If they don’t resolve this and solve it you’re looking at a catastrophe with the food industry, and that speaks to a hell of a problem in The Bahamas where we import 92 percent of what we consume.

“The Family Islands would be in dire straits in a matter of weeks. Shelves would be empty, choices fewer and far between, and that’s a problem already with empty spaces on the shelves.”

Mr Halkitis, when asked about warnings that some food stores may be forced to close, and employees terminated from their jobs, as a result of the price control expansion, replied: “We weigh in the balance that concern that I’m sure you’ve all heard... I’m sure you’ve heard it because you ask me about it every week, the increase in prices and impact on consumers.

“We are sure that there is a middle ground that we can reach. We don’t see this leading to, you know, massive business closures. We do not see that but we’ve asked the associations to provide us some numbers that we can look at. But we don’t.... we don’t anticipate that.

“We think it’s reasonable what we are what we are proposing. Bear in mind that these initiatives are in place for six months, at which point we will review them and that review will will take into account the impact of this.” Pressed again, the minister added: “I don’t want to speculate. Businesses open and close every day. And I don’t think this is going to be the cause of [it] personally, you know, so I don’t want to speculate on that. People open and close for different reasons.”