The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Up to 100 farmers could be impacted by a Bahamian cigarette manufacturer’s decision to “scrap” its Andros tobacco growing plan, its chairman telling Tribune Business that conventional agriculture will also take a hit.

John Wilson, the Bahamas Cigarette and Tobacco Company’s (BC&T) principal, said its failure to-date to obtain an exemption from the 220 per cent Excise Tax on domestic sales meant its plans to “transform” Andros by contracting local farmers to grow its tobacco had been abandoned for the foreseeable future.

And he also revealed that BC&T had been forced it to cancel a $200,000-plus investment in a planned Andros-based warehouse/packing house facility.

While this would have been used to pack, dry and store its tobacco, Mr Wilson said the crop’s limited growing cycle meant BC&T had planned to sub-lease the facility to Andros farmers for more conventional agricultural use during the off-season.

This plan, too, has had to be abandoned as the wider ramifications of the Government’s decision not to grant BC&T the Excise Tax exemption so vital to its business model start to bite.

Mr Wilson told Tribune Business that all efforts to-date to meet with the Ministry of Finance to plead BC&T’s case had proven fruitless, with no reply yet received to any of the three letters the company has sent.

“We’ve made one significant decision, which is to scrap our growing project in Andros,” he said. “Most certainly it’s been scrapped. I’ve also cancelled a packing warehouse that was probably worth around $200,000-odd dollars.

“That was a steel packing facility that we were going to buy out of Florida. We had been provided with some property by the Bahamas Agricultural and Industrial Corporation (BAIC), where we were going to do our packing, drying and growing.

“Tobacco is grown once a year, and we were going to sub-let it out to farmers during the off-season. We’d already met with and identified 25 farmers in the first round, and there was potential to have 100 farmers on contract” growing tobacco for BC&T.

Tribune Business contacted Mr Wilson after being tipped that the company was mulling whether to sue the Government in the courts over it failure to grant the Excise Tax exemption.

The BC&T chairman, while denying that there were any current plans to take this route, hinted strongly that legal action was a ‘last resort’ option if all else failed.

“I’m going to take it to the very end,” Mr Wilson said. “I’m hoping wiser heads prevail.”

Describing the company’s proposal to create multiple farmer entrepreneurs through sub-contracting out its tobacco growing as a “win all-round”, Mr Wilson said this would have been “integrated” into BC&T’s Nassau-based manufacturing operation with all due taxes paid.

“That was our development plan, as opposed to us going down there, acquiring a huge acreage and growing the tobacco ourselves,” the BC&T chairman, a McKinney, Bancroft & Hughes attorney and partner, told Tribune Business.

“We wanted to empower local farmers, each growing 10 acres. They would tend it, then bring it to us where we would cut it, package it and pay them for what they have done.”

BC&T had already grown an experimental tobacco field in Andros to determine the project’s viability, the company having spent over $50,000 to fly in experts from the US.

Suggesting that BC&T’s plans could have created another industry for the Bahamas with export potential, Mr Wilson added: “It would have transformed Andros.

“You just have to look at the Brazilian model, where entire regions and communities survive on growing tobacco. If we can nurture the product to where it becomes a valuable leaf, hopefully we could export it.

“Other people would have gotten into the business, and we would have created an entirely new industry. We’re on the same geographical line as Cuba and the Dominican Republic, so there’s no reason why our soil could not grow some quality tobacco. The water would need to be treated, but that can be fixed.”

The Government’s decision not to grant BC&T and its fellow Bahamian-based Palms cigarette manufacturer an exemption from Excise Tax on domestic sales again highlights the issue of whether the Bahamas should protect its ‘infant industries’.

Rival foreign imports, such as British American Tobacco (BAT), have lobbied the Government for an Excise Tax ‘level playing field’, and it seems the latter has responded to their pleas.

Yet even the largest multinational conglomerates at some stage enjoyed favourable treatment from their home country governments to facilitate their survival, raising questions as to whether the Bahamas should be any different.

All countries have given their domestic producers ‘protection’ against stronger rivals until they are able to ‘stand on their own feet’ against the competition, and Mr Wilson has repeatedly pointed out that, unlike imported cigarette and tobacco brands, BC&T created both direct and indirect jobs as part of a broader contribution to the Bahamian economy.

This contribution includes utility bill payments, Business Licence fees, National Insurance Board (NIB) contributions and multiple other spin-offs.

The cigarette/tobacco Excise Tax affair also exposes two other burning issues, including the Bahamas’ potential loss of national sovereignty and decision-making power in some economic areas due to its entry into rules-based trading regimes.

The Economic Partnership Agreement (EPA) with Europe, and the accession to full World Trade Organisation (WTO) membership, will take the Bahamas into a world of ‘reciprocity’, non-discrimination and ‘national treatment’.

The latter term means that, in many sectors, the Bahamas will have to offer the same incentives and benefits to foreign firms as it does to their Bahamian-owned competitors. In such circumstances, the ability of BC&T and others to secure favourable treatment will be questionable.

Then there is the apparent policy disconnect between the Ministry of Financial Services, which provided BC&T with its Industries Encouragement Act incentives, and the Ministry of Finance, which is responsible for the Excise Tax policy.

One seemingly wants to encourage the development of Bahamian industry and manufacturing, the other does not.

“Someone has to explain the rationale to me. It absolutely makes no sense to me. It makes absolutely no sense at all,” Mr Wilson told Tribune Business of the Government’s Excise Tax policy.

“The Government is not interested. I don’t quite understand it. We can’t get any help, and it seems like you’ve got to be foreign to get things done. I can’t even get a meeting.”

He added: “The question is: What’s wrong with government policy? It is a bit frustrating and discouraging that I can’t even get a meeting with the Government after writing to them three times. I can’t even get a response to my communications.

“It seems as if when we want to play by the rules, life becomes difficult.”

Stymied in the domestic market, BC&T has instead been focusing on exports, as it manufactures product under licence from Canadian cigarette manufacturer, Grand River Enterprises (GRE).

Currently employing 25 persons, BC&T recently had to release three persons and put another 15 hires on hold due to the ongoing Excise Tax saga. It had anticipated employing 60 persons by this stage.