Duties and BEC bills are ‘killing us’
Local manufacturers are speaking out against high duties and power bills crippling their businesses, forcing some firms to scale back production, diversify their offerings or shut down entirely.
In an economy already heavily dependent on imports, the fear is that market conditions in The Bahamas could starve an already sparse manufacturing scene.
Suzannah Eneas, the manager at Bahamas Food Packaging Ltd., told Guardian Business that the parent company, Bapak, has scaled back its operations due to utility bills and high duties.
“It’s hard enough trying to compete and when you get concessions taken away; it makes it very hard to be in the business,” he said. “It makes it hard to get contracts. You have to tweak the margins so much just to make the contract profitable.”
The past concessions Eneas referred to is the Industries Encouragement Act, which was changed last year. Businesses that were in operation for more than five years did not qualify for duty-free exemptions on raw materials needed for manufacturing.
Bapak, which manufactures bottles, also has two subsidiaries, including Bahamas Extruders & Investments, which creates pipes and a range of cleaning and industrial chemicals, and Bahamas Food Packaging, a food processing company.
Established in 1976, Bapak no longer qualifies for the exemption and now pays 10 percent duty on a variety of material. As the only company in The Bahamas that produces electrical conduit piping, Eneas said the company continues to struggle to stay in business in the face of big business from the U.S.
“It has really impacted our bottom line. The government took the duty exemption away, and it has hurt our competitiveness and [the] profitability of the entire manufacturing industry in The Bahamas,” she said.
Another burden for Bapak is rising utility bills.
According to the company, Bahamas Electricity Corporation (BEC) charges them up to $90,000 per bill during the summer months, and around $60,000 in the winter.
Bapak is calling on the government to once again consider a similar system to Florida, which offers three different rates: residential, commercial and industrial. In other words, something must be done to allow local businesses to survive.
Winston Rolle, the chairman of the Chamber of Commerce and Employers Confederation (BCCEC), agreed that the cost of utilities in particular “is something that needs to be explored”.
He pointed out there are plans now underway to bring in legislation to allow flexibility in terms of allowing businesses to create their own alternative energy and sell it back to the grid.
“It seems to be something the government is committed to doing,” he said.
However, he told Guardian Business that the issue of utility costs also affects foreign businesses, and of course, the everyday consumer in these challenging financial times. He said the price of oil and fossil fuels holds BEC hostage, so they cannot be blamed entirely.
Alec Knowles, the managing director at Aquapure, one of the largest water manufacturers on the island, agreed that only so much can be done, considering The Bahamas’ dependency on the price of oil and gas.
Nevertheless, he said the operating costs of local manufacturers are “out of wack” when compared to those they are competing with.
“In our case, utilities are killing us with our production costs,” Knowles said.
“They go up every month. It is really hampering our business and operating costs. What can be done?”
Improving efficiency is one way forward, he explained. Alternative energy is an interesting concept but he doubted whether larger manufacturers could use it effectively. Meanwhile, the 10 percent duties on raw materials continues to be an equal burden, Knowles said.
“It has increased our costs by 10 percent automatically. It’s difficult to eat that and pass it on. I think it’s true for all manufacturers … we’re all facing the same problems.”
For Eneas at Bahamas Food Packaging Ltd., their strategy, along with Aquapure’s, is to continously find ways to diversify their offerings to make more money. The company will soon be launching Frutar, a new juice-flavored beverage. But when it comes to securing contracts for the core business, she said the outlook is not too bright.
“It has been a struggle,” she said.
“We’re hoping the water and juice will help us, but the winter season is slower. We will have to restructure our pricing, so we’re worried about getting new contracts.”