The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Less than 50 percent of Bahamian businesses are using social media to drive sales and promotions, it was revealed yesterday, exposing just how much work the government faces in its digitisation drive.

The Inter-American Development Bank (IDB), in a report accompanying its latest $140m loan to The Bahamas, said local companies as well as their Caribbean counterparts are not investing sufficiently in technology despite the impetus provided by the COVID-19 pandemic and associated lockdowns.

Drawing on the findings from a Compete Caribbean survey, and contrasting the region with others, the multilateral lender added: “The COVID-19 crisis has accelerated the digitsiation of businesses, forcing companies to develop new business models.

“During 2020, and compared to 2019, Latin America experienced a 150 percent growth in the adoption of digital technology, with 1.7m new users of the e-commerce site Mercadolibre, teleworking of up to 25 percent of the population in large cities, and a 40 percent increase in use of digital education platforms. This has been recognised as an irreversible trend.”

Comparing this to the Caribbean, the report said: “Caribbean businesses, including Bahamian ones, seem not to be investing sufficiently in digital technology. A 2020 survey of technological capabilities of MSMEs (micro, small and medium-sized enterprises) in the Caribbean showed that firms are doing limited investment in digital technologies, and investing in technologies that do not provide the most benefits.

“Meanwhile, in The Bahamas, 28 percent of firms have identified the need for technical support in digitisation to ramp up operations post-pandemic, and only 45 percent of firms are using digital media for their businesses (Facebook, Instagram etc). In addition, 38 percent of firms identify the need to increase or modify their digital forms of operation to adapt to the COVID-19 pandemic.”

The Government has targeted technology and digitisation, both in the public and private sector, as a critical area for reducing inefficiencies and the cost of doing business, as well as improving The Bahamas’ wider economic competitiveness. The IDB report, though, suggests that a long road lies ahead to achieve the Minnis administration’s ambitions.

Elsewhere, the IDB report said the pandemic had created immediate challenges for Bahamian MSMEs by causing an immediate halt to operational income while also delaying payments due for goods and services rendered. 

“The pandemic created an imbalance in cash flows, generating short-term liquidity needs to be able to cover fixed operating costs and maintain employment levels,” the paper added. “Aside from the cash flow difficulties generated by COVID, two factors affect the competitiveness of small-scale businesses.

“First, informality, estimated around 20-30 percent of GDP, and second, basic business capacities. Informality causes unfair competition due to avoidance of social and fiscal obligations, and limits capacities to innovate, increase productivity and grow due to lack of access to credit markets or to public financing.

“High registration costs generate perverse incentives fostering informal start-ups, especially of micro enterprises. In The Bahamas, the percentage of informal firms is 74.6 percent in the small firms’ segment and 52.6 percent among medium firms. Therefore, changes in start-up registration should incentivise formalisation through simplified registration and digitisation of business registration processes.”

These figures, taken from the IMF and a variety of sources, have been regarded as on the high side by many in the Bahamian private sector, although all acknowledge that the informal economy is of significant size.

Meanwhile, the Prime Minister yesterday sought to highlight the ability of the vacation rental market to drive Bahamian entrepreneurship and tourism sector ownership despite having introduced legal reforms to extract an extra $31m in annual taxes from the same industry just a week ago.

That is to be achieved by ensuring the likes of Airbnb levy VAT on the rent as well as commissions they receive, but Dr Hubert Minnis said: “Many Bahamians and residents have embraced this philosophy in recent years and have begun to invest in new streams of income in the vacation rental market through popular online portals such as Airbnb.

“According to recent data, as at end of March 2021, some 4,222 Bahamians and residents participate in this market earning more than $14m in the month alone. However, Mr Speaker, 28 percent of the rented properties consisted of three bedroom or larger rentals. 

“Data also indicates a large proportion of the rented properties are located in typical second home hotspots such as Exuma with 498 listings; Central Eleuthera with 409 listings; and Bimini with 185 listings. To ensure that more Bahamians take advantage of the increased need for room capacity now and in the future, I am pleased to announce that I have directed the Small Business Development Centre to reserve a minimum up to $2m in funding to provide funding to support Bahamians who wish to enter the home rental market,” he added.

“This new SBDC initiative will have built-in covenants to ensure that successful applicants follow through on preparing these properties for guests and that they list the properties for short-term rental. The programme will also include consultancy assistance to help guide applicants on how to list and manage these properties successfully.”