By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian small businesses have “come too far” to close down, a sector consultant asserted yesterday, even though many will likely restructure in early 2023 due to escalating cost pressures.

Mark A Turnquest, of Mark A Turnquest Consulting, told Tribune Business those entrepreneurs who have survived COVID-19 are not about to throw their investments and life ambitions away now despite being faced with a substantial increase in Bahamas Power & Light (BPL) bills, continuing inflationary pressures and a minimum wage increase.

But, while those he has spoken to will do everything possible to avoid shutting their doors, restructuring via staff terminations and salary cuts may prove unavoidable in the New Year when many small businesses will focus on “survival” in the aftermath of the Christmas spending season.

Mr Turnquest, who is also president of the fledgling 242 Small Business Association and Resource Centre, told this newspaper that both members and his clients had largely expected a smaller minimum wage increase - to within a range of between $225 to $240 per week - rather than the 24 percent jump to $260 that was unveiled by the Prime Minister last week.

While the Davis administration indicated it was seeking to increase the present $210 per week to at least $250 as far back as its Blueprint for Change election campaign manifesto, he added that small businesses are also seeking “a seat at the table” when policy decision that impact their own livelihoods are taken. The seeming lack of consultation/collaboration by the Government, and absence of timely information enabling the sector to smoothly adjust, remain concerns.

“They indicated they are going to have to revisit if they are going to let staff go,” Mr Turnquest said of feedback from members and clients. “They said because of the Christmas holidays, and with Thanksgiving coming up, they will not put their staff and employees in a compromising position before Christmas.

“But, most definitely, they said that come January they will maybe eliminate one or some employees then and see if they can renegotiate with others, making them part-time. You’re looking really at electronic and clothing retailers. The convenience stores and smaller stores do not have much staff to let go.

“That is the main challenge for my clients and my members. They say nothing is going to take place between now and Christmas because they don’t want to let staff have a bad Christmas, but what they want to do is inform them. Everyone’s looking at percentages of increasing costs. They’re all analysing, the ones I’m dealing with, salary increases and increases in electricity costs,” he continued.

“All they see are increases in expenses and increasing costs right now. In January, they have to make a determination as to exactly what they want to do with their overall business model. But what they did indicate is that they do not foresee closing down. They say they’ve come too far in relation to the pandemic.

“They say they are not closing down. That’s the positive. Don’t mind people saying they are closing down; they are talking out of their heads. The ones I’m dealing with are not closing down. They’d just rather cut salaries, and streamline inventory to focus on certain products. They’re not in the mindset to close down. They say they’ve come too far, and this is how they pay their bills and it’s their main investment,” Mr Turnquest said.

“They most definitely are going to streamline their business model because survival is key in January. They said they’ve somewhat got a handle on shipping costs and shipping delays. They know it takes longer now, so they’ve already ordered product in time for Christmas and Christmas stock.”

While Bahamian small businesses and entrepreneurs will do everything possible to remain viable and solvent, whether they will be forced to do the unthinkable and close down is another matter given the huge escalation in their cost base that will be coming in 2023.

For businesses and households that use over 800 kilowatt hours per month (kWh), BPL’s fuel charge is set to increase by 122 percent, 163 percent and 138 percent - more than doubling compared to the present 10.5 kWh rate - during the periods of March 1 to May 31, 2023; June 1 to August 31, 2023, and September 1 to November 30, 2023. That covers a nine-month period next year, the bulk of 2023, and includes the peak summer month consumption. 

And, while few would argue against a minimum wage increase to enable the lowest-paid workers in Bahamian society to earn a little more and help somewhat offset inflation’s impact, the effect will be to increase payroll costs for many employers. As a result of such surging expenses, and broad-based cost rises due to global and local pressures, businesses will have no choice but to pass much of this on to end-consumers via price hikes.

A significant increase in National Insurance Board (NIB) contribution rates for both employers and employees also looms in the immediate future despite the Prime Minister’s efforts to delay this yet again. This represents a further cost hike for the Bahamian private sector in what is shaping up as a tough economic decade made worse by COVID-19 and hurricane-related catastrophes.

Mr Turnquest told Tribune Business that the concerns of his members and clients depend upon which sector they operate in. While all are fearful over the prospect of BPL increases, and harbour some concerns over the minimum wage, ‘Mom and Pop’ food and convenience stores are fretting over the Government’s decision to expand the price control regime to 38 items.

“They say as BPL goes up on their light bill, and the Government is decreasing their margins, most definitely their profits will go down,” Mr Turnquest said. “To top it off, they were not expecting a minimum wage rise to $260. They were expecting it to be between $225 to $240 at the most. They expected it to be marginal; not a steep hike.”

While some government officials have argued that the minimum wage increase will boost economic activity by stimulating consumption spending among low income workers, he added that this will not necessarily aid Bahamian small businesses. “They’ll spend it on rent and bills, but small businesses will not see it spent on clothes and other stuff necessarily,” Mr Turnquest said.

“They [businesses] said all governments do certain policy changes without informing private sector groups so they can release information to small businesses. It’s too much stuff at one time, and it’s all come down on them without any type of collaboration and any type of information. Especially for the small business community, that’s a big challenge. They must have a voice at the table to inform them about certain policy decisions.”