FROM THE TIME Government granted those extensive tax concessions to Sandals, it was in for problems. Those concessions came mainly as incentives to bolster a flagging tourism that Barbados is experiencing.
As a result of the flagging, the entire hotel plant, with few exceptions, was experiencing cash flow difficulties, so that their tax liability was a serious burden. Not only that, but also the ability to service loans, make repairs and advertise worldwide was inhibited. Consequently, many hotels found their servicing of loans/overdrafts and meeting maintenance expenses a burden.
Thus the appeal to Government to make the playing field even by being able to access the same tax concessions as Sandals was going to be a controversy. On the other hand, Government itself is experiencing a cash flow problem owing to the inordinately high debt burden it must service. It found it hard to offer all of the hotels and restaurants tax concessions on par with Sandals. The stalemate has been badly handled, leaving a bitter taste in the tourism sector’s mouth. Appeals as reported in last Thursday’s Daily Nation for tax relief are difficult to answer, as the Government is broke and needs the taxes.
The Central Bank came out with a promise to aid ailing hotels, but unless it is offering free loans, what it was offering did not make business sense. It has no money and is like the blind leading the lame.
Next, Thursday’s Daily Nation (June 4, 2015) also drew our attention to the Barbados Entrepreneurial Foundation’s launching an organisation called Trident Angels Investors Network. This is in fact a venture capital organisation as it takes shares in any venture that it supports. As a matter of fact, this type of organisation is desperately needed in Barbados. The Barbados Development Bank was partly fulfilling this role and about a third of its portfolio was dedicated to the tourism industry. Another third was dedicated to small businesses including the fishing industry.
Barbados is ripe for assistance with entrepreneurial help. Youngsters more than anything else, in spite of challenges to our education system, are highly educated. From degrees in modern languages, medicine or history to certificates in motor mechanics, masonry, computer sciences, our youngsters can hold their own anywhere in the world. However, what most of them lack is the initial push that can catapult their ideas into reality. Now this is what I believe the Angels Investors is attempting to do. It is providing that assistance that Government has failed to do. Governments do it in other countries.
The problem is that most entrepreneurs starting out are naïve about business. They are big on ideas but small on experience. On the other hand, they are entering the world of possible wolves.
There are some things of which an entrepreneur should be careful. If the business necessitates intellectual property, the intellectual property should be registered BEFORE entering into any arrangement whatsoever so that the entrepreneur retains his rights. An entrepreneur should be careful about the percentage of the business he proposes to cede to the venture capitalist. Most venture capitalists finance with a mixture of loan and equity and the entrepreneur should be careful (a) about losing control of the business and (b) finding himself at the mercy of the venture capitalist for the existence or further development of the business. It is an experience that must be negotiated carefully. Actually, those who watch the television show Shark Tank will see that people who enter the tank often state up front what percentage of the company they are willing to cede. It is most important.
For me it is perfectly correct for the Central Bank to say that the most important guideline to be observed is the level of foreign exchange available. However, if you have a situation where the income of a household is far below the debts (for example, where there is a house mortgage), then the most important factor is the rate of repayment of the debts. If income is hard to come by (taxes on the part of government), then the household has to suck salt in order to continue the debt repayment. The squeeze becomes tighter as income (taxes) diminishes. The unions have an uphill battle.
The eight per cent offered by Clico was a great attraction to savers!
• Harry Russell is a banker. Email quijote70@gmail.com
