The Tribune

• Super Value chief tells PM: Go in opposite direction

• Shocked industry not consulted on regime expansion

• Warns stores may drop staples if ‘squeezed too tight’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Super Value’s principal yesterday urged the Government to abolish the price control regime rather than expand it, arguing: “Consumers will be better off.”

Rupert Roberts, speaking to Tribune Business after the Prime Minister pledged to extend price controls to 38 extra products and further cut existing mark-ups allowed on food staples such as chicken and eggs, argued that the administration needs to move in the opposite direction by allowing retailers and wholesalers true freedom to compete.

Describing price controls as akin to “price fixing”, he explained that they eliminated incentives for grocery retailers to seek out efficiency savings and sell below what rivals charged since all operators simply offer price-controlled goods at the same cost.

Voicing shock that the Government had not consulted the industry before Philip Davis KC’s national address on Tuesday night, Mr Roberts told this newspaper: “It’s really better to let the competition in than control it. With price controls, everybody sells at the price controlled price, but if you allow competition the everybody tries to outdo one another.

“I think the public would be better off. Everybody will try to outdo one another’s prices. That’s what happens in a non-price controlled environment. Price controls are kind of price fixing. We can all sell for the price controlled price. We don’t have to try and outdo each other.

“The Bahamas is the only country in the world that I know has price controls. The other countries as far as I know didn’t initiate price controls or, if they did, they gave it up 50 years ago.”  The Davis administration, though, has chosen the reverse course by unveiling a major expansion of the existing regime in a bid to further counter the cost of living crisis as well as show Bahamians it is acting on the pressures caused by soaring inflation.

Emphasising that the price control regime’s expansion is for a six-month trial period, Mr Davis said on Tuesday evening: “Tonight, I want to announce that we have added 38 new items to be subject to price controls in our country.

“We are limiting the wholesale and retail mark-up of everyday items like diapers, and food like chicken, eggs, bread, bananas, apples, oranges, broccoli, onions and potatoes. These items are being added for at least a six-month period, at which point we will review and evaluate the impact on businesses and consumers.

“We are also reducing the profit margin on price-controlled drugs, providing additional relief to Bahamians. During an inflation emergency it’s important to take the steps we can to improve affordability.” The price control regime’s expansion, which also involves an increase in the number of inspectors, is designed to work in tandem with the minimum wage increase to help further offset inflation’s impact on vulnerable, low income Bahamians.

The 38 extra items to be covered by price controls were not identified, and nor were the extent of the further cuts to retail and wholesale margins on products already overseen by the regime. No mention was made of when the changes will take effect, and Clint Watson, the Prime Minister’s press secretary, did not respond to a message seeking clarification on these issues before press deadline.

Price controls have always been a controversial instrument among the private sector - especially those companies and businesses impacted by them. They were imposed by the Government decades ago to prevent what it viewed as an unscrupulous merchant class from exploiting lower income Bahamians by unreasonably hiking the price of food staples and other essential products, thus placing them out of reach while undermining living standards.

However, opponents argue they are an anachronism that have no place in a modern 21st century economy. The private sector views price controls as an inefficient, distortionary mechanism that creates more unintended consequences than the supposed 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”.

Mr Roberts, meanwhile, said the Government ought to save the outlay on additional price control inspectors by putting those hires “to better use”. He added: “They could inspect until the cows come home. Merchants will make mistakes, but no sensible person will see for more than price-controlled prices when you have a $5,000 fine per item.

“That used to happen in the old days; they would fine you for mistakes, but they stopped doing that because it was increasing the cost of living. I don’t know if there’s been a price control violation since the days of E J Bowe, when he brought cameras into our stores. I think both parties indulged in that. It didn’t do any good; it just led to bad blood between the Government and the merchants. I don’t know of a single case that was intentional where a merchant sold above price control. That wouldn’t be smart.”

The Super Value chief said it was impossible to determine the impact of the price control regime’s expansion without knowing what extra products are included, the extent of cuts to existing margins and when these will take effect in an initial six-month trial period. He warned against “squeezing us too tightly” as food stores may then have to reconsider whether they continue to stock staples such as eggs and bananas.

“Write a question mark until we know,” Mr Roberts said. “That [mark-ups] must be a political term. We don’t recognise that. The industry goes by gross margins. They haven’t said what the new mark-ups will be, so it’s hard to comment. Give us a mark-up like they do on dry groceries because we have at least a 5 percent loss on perishables, which go into refrigeration.

“Electricity is going to double, and the same government is asking us to employ more persons and pay higher salaries, but they are cutting our margins and expecting us to do it. If bananas come in ripe we have to sell them at half-price. It has to be flexible.

“We were not consulted. Before they announce the mark-ups we’d like to consult the Government and let them know our position because if they squeeze us too tight, those items like bananas are not worth carrying. Eggs are already price controlled, and I hope they’re giving us a better mark-up because we’ve been fighting for that a long time and have been considering giving up eggs due to the gross margins, refrigeration and breakages. We can’t afford to carry them.”

While the minimum wage increase will “not bother us” since Super Value pays staff at or above that level, Mr Roberts said: “It’s really surprising they didn’t consult us. We’d like to get to the Government before they make it public and adjust it. We should be able to work out something that’s reasonable for ourselves, the Government and the public. We’d like to consult the Government. We’re supposed to be working on that as we speak.”

He added that food stores “can’t survive” if the price-controlled mark-up on perishable products is less than 30 percent, since an automatic five percentage point discount has to be factored in immediately for spoilage, wastage and loss.