Fronting in the retail and construction sectors
A recent ruling by Chief Justice Sir Ian Winder exposed what has long been an open secret, that a beauty and cosmetic store located in Downtown Nassau was a “fronting operation”.
The store’s managers and the vast majority of its staff were foreign nationals, most of whom it is now revealed had been working without the benefit of required work permits.
A disagreement between the foreign operators of the retail establishment and their Bahamian facilitators, who it turns out were just the landlords, led to a court action that spilled the beans.
The ruling referenced the violation of not only the country’s long-standing investment policy that, at least on paper, restricts ownership of wholesale and retail operations, and specifically “personal cosmetics and beauty establishments”, for Bahamians, but further noted that in this particular case, a number of Bahamian laws were also being ignored (violated) by the cosmetic shop’s operators — whether laws governing the issuance of business license, exchange control, the grant of work permits or the payment of value-added tax (VAT).
The cosmetics store is unlikely to be the only retail fronting operation on Bay Street and elsewhere. It should not be lost on anyone that the fronting business in question operated on Bay Street, Nassau’s main downtown thoroughfare, since 2016 – that’s six years and counting!
A review of the real owners and operators of many jewelry establishments lining both sides of Bay Street and of the work permit status of their managers and employees, some of whom routinely venture onto the street to peddle their merchandise, would be telling.
The same queries may be made of the growing number of construction companies operating in the country, some of which are engaged almost exclusively in the building of high-end residences that hardly qualify as “special structures requiring international expertise”.
Another long-standing Bahamian policy is that work permits are only granted to non-nationals in highly skilled and/or specialist fields when suitably qualified Bahamians are not available.
The large number of foreign nationals, housed in upscale residential neighborhoods, but transported on the backs of trucks to construction sites, hardly qualify as the construction “specialists” provided for in the investment policy. That at least some of these businesses are the subject of fronting arrangements seems obvious to inquiring minds.
Becoming an investor/owner in a segment of the economy that is reserved for Bahamian ownership through fronting arrangements falls outside of the definition of the type of “highly skilled or specialist” individuals that The Bahamas requires or seeks.
Still, the reality is that various forms of “fronting” have existed in The Bahamas for many years. And it continues because it is tolerated by the willful blindness of the authorities.
It appears that some “fronting arrangements” are the basis of the wealth of many of today’s leading Bahamian businesspersons who got their “start” by monetizing their nationality, gaining shares in the enterprises of foreign investors in need of Bahamian “faces” as “owners” or significant partners, on paper, to facilitate necessary governmental approvals and licenses to operate in the country.
It is only when one of the parties becomes aggrieved that complaints are raised and accusations made of wrong doings, fraud and the like.
It is especially revealing when one considers the significant time and effort spent by immigration authorities in locating, detaining and repatriating illegal immigrants at the lowest end of the totem pole – Haitian and other Caribbean nationals – as compared to the lack of attention paid to those engaged in the management and operation of jewelry outlets and construction companies in contravention of Bahamian policy and law.
Multiple exceptions to the rules and willful blindness to their infraction encourages disobedience and lawlessness.
Either the investment policy of the country should be changed or it should be enforced. The flagrant disregard of government policy and laws meant to enforce it cannot be permitted to continue.
Finally, “fronting” degrades genuine partnerships between Bahamians and foreign entities in which each participates meaningfully in the operation of the enterprise.
It is important that we all understand that citizenship as equity is “fronting”.