The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Retail Grocers Association’s president yesterday warned that many merchants would be “forced out of business” by any move to impose across-the-board controls on their margins.

Philip Beneby told Tribune Business that further government intervention to dictate wholesale and retail mark-ups, as seemingly suggested by a former Price Control Commission chairman, will likely leave many businesses unable to cover already-substantial overhead costs.

Asserting that it would be counter-productive to fight inflation using such methods, he added that no Bahamian merchant would willingly “over price our goods” because competitive pressures from multiple rivals would simply force them out of business.

Revealing that “it hurts our heart to see what some of the price increases are”, Mr Beneby said retailers and wholesalers “sometimes have to close our eyes” knowing the potential impact this will have on lower and middle class Bahamians already struggling to make ends meet following the devastation inflicted by the COVID-19 pandemic.

He added, though, that many persons were acting as if the current hike in prices was only happening in The Bahamas rather than being recognised as a consequence of inflationary pressures that are impacting the entire world.

“They’ll be running a lot of retailers out of business because prices are not in our control,” Mr Beneby told this newspaper of the suggestion by Danny Sumner, former Price Control Commission chair, that merchants cut their margins and mark-ups to help combat surging inflation.

“In order for you to maintain your business you have to cover overhead expenses. That has to be taken care of. Those expenses only come through your profits and revenues. If you don’t make anything, the Government won’t make anything and you’ll have to close down your business.

“None of the retailers wants to over-price our goods. Everybody wants to maintain reasonable prices and wants to be competitive in their prices. If you need a particular mark-up to sustain your business and to keep your operation going, then that’s what you have to do. It’s hard on our overheads.”

Mr Beneby listed typical overheads as including bank loan payments, rent, real property taxes, Business Licence fees, insurance, electricity and other utilities, labour (salaries) and National Insurance Board (NIB) contributions.

“All of that has to come out of the business,” he added. “If you can’t get it you might as well lock the door and go home because it’s unsustainable. That’s the reality of it. The fact of the matter is that there are price increases all over the world, not just in The Bahamas. Folks are carrying on like it’s just in The Bahamas, but it’s the whole world.”

Mr Beneby reiterated that, as a country that imports virtually all it consumes, The Bahamas is effectively a price taker and has little control over the cost of landed goods before they arrive in this nation.

“We are not a producing country; we are an importing country,” he added. “When prices increase we try and shop around for good prices because we want to keep prices down as much as possible. Some weeks we’re paying $100 for a case of limes, $100 for a case of eggs.

“At some point it will level off and begin to go back down. But the reality is that I don’t think high prices have even peaked yet, not from what we’re hearing in the marketplace and around the world. That’s just the way it is. It’s sad, and we don’t like to see the hurt.

“The way the prices are increasing, we sometimes have to close our eyes when we price the items. It hurts our heart to see what some of the price increases are. There’s only so much we can do. If you’re talking about price controls, there’s no price control on electricity, there’s no price control on Business Licence fees. The Government doesn’t put price control on those things.”

Mr Beneby spoke out after Mr Sumner, in what sounded like a call to further extend price controls, said: “If a certain food store chain brings in these foods for the country, we need to sit down and let them rationalise with us - either on the wholesale level or the retail level - as to how they get to the pricing before the items go to the shelves.

“If we do that we can minimise on some of the pricing that is going up. I don’t think we are really dealing with price gouging. It is more of a mark-up system that maybe is not consumer friendly.

“We know for a fact that the mark-up price on breadbasket items is only 23 percent. That is documented and that is law, so the items that are being deemed as breadbasket items, the mark-up is 23 percent. Now, there is no set mark-up for other items other than breadbasket. So we don’t know if they are marking-up the other things 30 percent, 40 percent or even 50 percent.”

Mr Sumner continued: “This is something that is critically important. I think it is something that needs to be looked at to see how the merchants or how the owners reached the prices that they are targeting on the Bahamian consumers and if they can do that I think and maybe perhaps the government could revamp the law a bit. I think the price control law needs to be brought up to speed a bit.

“We don’t want to overburden the retailers and wholesalers because they do have overhead expenses and staff to pay, etc, but on the same token the consumers have to survive and are bearing the cost of these high prices.”

The Prime Minister is understood, according to this newspaper’s sources, to have met with representatives of major wholesalers yesterday, including D’Albenas and Lightbourn Trading, as well as retailers such as AML Foods, to discuss possible ways of easing inflationary pressures on foods prices.

Price controls were initially imposed by the Government to prevent what it viewed as a unscrupulous merchant class from exploiting lower income Bahamians by unreasonably hiking the price of food staples and other products, thus placing them out of reach while undermining living standards.

However, opponents argue they are an out-dated and distortionary mechanism that create more unintended consequences than problems they solve. They can result in product shortages, while retailers and wholesalers have to increase prices and margins on non-price controlled items to compensate for selling these goods as effective “loss leaders”.

Michael Halkitis, minister of economic affairs, recently argued that the Government “cannot control the market” when asked whether it planned to expand price controls as a measure to combat inflation.

Inflation’s impact here is likely to be worsened by The Bahamas’ consumption-based tax structure, which means that import tariffs and border VAT - which are charged as percentages - will also increase. The amount of VAT dollars paid by the end-consumer will also increase.

The one mechanism at the Government’s disposal to mitigate inflation’s impact is to thus reduce taxes on essential commodities, such as food and fuel, but it is highly unlikely to do this as the post-COVID fiscal crisis means it needs every cent of revenue it can get.

Inflation, described as a sustained rise in prices across the board, devalues savings and causes particular problems for those on fixed incomes such as pensioners. It also raises the cost of living, reduces living standards and narrows disposable incomes, with those less well-off inevitably hit hardest.

And, with many Bahamian households still struggling to rebuild jobs, livelihoods and incomes following the COVID-19 pandemic, the spectre of inflation could not have emerged at a worse time. It will also likely result in increased demands on the Government for social assistance.