No policy is perfect!

As such every effort must be made to review and amend policies as necessary based on changing dynamics, internally and externally. Enabling policies have been proven to incentivise desired outcomes, whether social or economic.

It stands to reason therefore that the small business sector was projected to benefit from the National Policy Framework for the Development of Micro, Small and Medium Enterprises (MSMEs). This body of work, which was the first of its kind for the sector, portended to represent the key interventions needed to pivot MSMEs to contribute greater to employment generation, gross domestic product (GDP), exports, the enfranchisement of vulnerable groups and the overall quality of life of Barbadians. A national strategic plan was intended to follow this framework with the appropriate key performance indicators.

First advocated by John Watson, founding president of the Small Business Association of Barbados (SBA), via a private member’s resolution as an Independent Senator in Parliament in the 2013 term, it was recognised that a comprehensive policy framework was needed to facilitate the growth of MSMEs.

The policy regime was the work of several key stakeholders in the small business sector who came together under the leadership of the then Ministry of Small Business and chaired by the SBA, to examine the needs of the sector and an appropriate set of policies that can contribute to the sector’s growth. Never before had these key agencies coalesced around a common objective and worked toward the completion of a shared goal. The CARICOM’s (Caribbean Community) draft model policy served as a source document since member states of the Community were encouraged to use the document to adapt to their respective markets. Jamaica and Belize had already introduced their regimes, but none existed for Barbados.

It is for this reason that some consternation is being expressed among MSME administrators that small business development programming appears to lack cohesion, clarity and strategic thought. Applying the rubric of SMART objectives, there is a clear void in the approach to MSME programmatic interventions. The goal of using technology to capture data seamlessly across agencies and to inform research & analysis to influence further policy development is nonexistent. The framework to transition the informal sector to the formal economy is unpursued. A diversified financial market offering a range of financial products is underdeveloped, and further incentives to increase exports and bring domestic firms to standardisation are limping along sluggishly. This list is not exhaustive but represents some of the key deliverables discussed by sector leaders for which the policy framework contemplated.

The 2017 policy regime focused on four broad areas designed to work in tandem towards the overall vision “to be a globally competitive, technologically driven MSME sector, contributing to the sustainable socio-economic development of Barbados.”

The four broad thematic pillars were:

• Legislative, regulatory and business development framework
• Access to finance
• Market access, competitiveness and productivity, and
• Development of entrepreneurial skills, knowledge and competencies through education and training.

 A brief review of realities on the ground reveals a growing informal sector as the self-employed appear disinterested in the formal systems that administer the sector. This must be curtailed. The policy envisioned that the informal community can be incentivised and brought into the formal economy, thus providing opportunity for quantitative and qualitative assessment of the sector and ensuring that businesses were able to grow while accessing needed resources. While it’s a truism that there will always be those not captured in the public accounts data, the vision of the Government should be to keep this number at a minimum. 

Admittedly, there have been existential shocks and changes to the business environment that have impacted the approach to business development. Since 2017 the country has experienced several natural disasters, the world was engulfed in a global pandemic and countries continue to battle issues of climate change and supply chain disruptions. These have all contributed to the need for relevant responses to business development that are reflective of the current specificities of doing business. While strategic conversations are needed on how to adapt to these challenges, there cannot be a disregard to proven methodologies and frameworks – drawing on the proverbial saying, you must not throw out the baby with the bath water.

Policymakers are encouraged to revisit a policy regime for the sector. Having fought for so long to be given pride of place at the ministerial level, the small business sector could least afford to be tossed to the sidelines at this critical time of national development.

Stakeholders will recall when the business ministerial portfolios changed from the traditional industry and commerce, to incorporate small business with the Ministry of Industry, Small Business and Rural Development circa 2012, and the several iterations that followed since. It was this strategic ministry focus that spurred the recognition of the sector’s contribution to the local economy and the resultant support from the international donor community. One significant project that attracted donor funding was the national research on the MSME sector in 2016. This research project provided critical information on the sector’s contribution to employment, GDP, exports and several other variables. The first of its kind in Barbados, this body of information has since been referenced by policymakers, academics, business administrators, and the like.

Now is not the time therefore for a weakening of the focus on small business. Every effort is needed to ensure a credible policy regime is in place to galvanise all stakeholders to work cohesively towards the desired goals and objectives of the country. MSMEs have contributed significantly to our development to date.

There appears to be a management problem in Barbados.

Listening to the call-in programmes on any average day, having a casual chat with a consumer trying to procure a service from some of the local businesses or even a member of the public interacting with Government departments – the complaints are universal. Failure to meet agreed timelines, poor communication and follow-up, lacked of trained human resources, and even the organisation’s ability to meet deliverables due to resource constraints. These summarise the issues affecting the delivery of services and suggest a failure of basic principles and processes in the operations of the organisation. Principles that point to management effectiveness.

Whether it’s Henri Fayol’s modern management theory, Koontz and O’Donnell’s functions of management, or Peter Drucker’s work in the field of business management, there are enough theoretical frameworks that can be employed to improve our management capacity. The University of the West Indies and other tertiary institutions offer several faculties of management that train scores of students per annum for there to exist a deficiency in the operational performance of organisations, at both the public and private sector level.

What then is contributing to the dearth of management competency in the executive suite? The issue may lie in the suitability and deployment of skills within the institution and the concomitant failure to employ the appropriate systems to support the management function.  

Though management itself is a profession, the situation at hand must not be confused with technical skills in professional services. A person trained as an attorney, architect, engineer, accountant, economist or even a politician who studied political science, is not necessarily a competent manager. Unless these individuals developed specific skills sets in management, it cannot be assumed they would perform effectively as the chief functionary of the organisation.

Small business owners too are often guilty of not employing effective management capacity in their operations to ensure the firm can pivot to a higher level of growth and profitability. Often the self-employed person or entrepreneur, who may have a particular skill or hobby they wish to monetise, enters the marketplace without a clear plan for the development of the business idea. The business model is more geared towards production of the good or service for which the business owner is skilled, without thought to records management, resource organisation and allocation, key performance indicators to monitor and measure growth, and a blueprint for business development and expansion. The absence of these processes and systems to ensure a viable and profitable business will result in the firm being stunted, uncompetitive, undercapitalised, resourced constrained and unsustainable. The outcome is usually closure of the business or limited operation for a finite period.

Understandably the small business owner may not have the requisite skill set and may wish to consider the procurement of suitable competencies within the firm. Following a business plan for development, such personnel may be engaged through the hiring of staff, engagement of business advisors or through the establishment of a Board of Directors with members who have the relevant skills.  

Similarly, public sector entities, business support organisations and the like, may wish to consider a suitable model which incorporates the appointment of management-trained and certified personnel as their chief functionaries. Persons with technical and vocational skills can be employed to lead business units based on the functional design of the workplace.

At a very minimum Koontz and O’Donnell’s functions of management – planning, organising, staffing, leading and controlling, should be understood and operationalised as an effective management framework. The five functions are:

• Planning: setting objectives and determining a course of action for achieving those objectives.
• Organising: developing an organisational structure and allocating human resources to ensure the accomplishment of objectives.
• Staffing: acquiring, training, appraising, and compensating employees.
• Leading: directing and motivating employees to work towards the objectives.
• Controlling: monitoring and adjusting the performance of the organisation to ensure that it is on track to meet its goals.

 Drucker once posited, ‘what gets measured gets done’. It is therefore an understanding of measurement as a key part of management, that will cause the competent manager to employ strategic planning and annual work plans with KPIs, in the management framework. Such persons will focus on establishing milestones for the organisation and systems to monitor organisational performance against the targets set. At the very basic level using the management framework of planning, organising, staffing, directing and controlling, will help the executive manager to align the resources of the organisation against the set plans, establish methodologies for reporting on performance and set up systems to measure and control the performance of the organisation.

Far too often persons who are not qualified in management are thrust into management positions resulting in the poor performance of the institution and heightened dissatisfaction among internal and external customers. The small business owner must as an imperative focus on developing his/her management skills at a minimum and put systems in place to procure these competencies where there is a deficiency.

Other organisations across the State also need to examine this matter of management deficiency. There is too much dissatisfaction among consumers and too much wastage of resources in the country. Barbados is not producing at its optimum to realise economic growth and social gains. Effective management is key to the turnaround needed.

For some time, this column has focused on business and what is needed to improve the competitiveness of the firm, the enfranchisement of persons to be self-employed and an enabling regulatory framework for business growth, etc. This week, Business Basics will look at the consumer – the individual who can arguably make or break the business; the person who must buy the products offered by the firm, or in the case of Government, procure services so that taxes can be collected. The consumer wields significant power.  

Not much has been said about the power of the consumer in the recent past, owing in part, to the lack of credible consumer advocates. Credit must therefore go to the recently launched Barbados Consumer Empowerment Network for seeking to fill that void in the marketplace. With recent developments relative to additional fees being charged by commercial banks, the increased cost of food in the supermarkets and further increases in utilities anticipated this year, the role of the consumer is critical at this time in advocating for the affordable price of key commodities and services.

The consumer is described as the individual who acquires goods or services for personal, domestic, or household use, without intended resupply, consumption in production, or repair purposes.

Recent developments in the local economy require that consumers are more astute in how they approach spending. The rising cost of living necessitates more vigilance and circumspectness in the use of the shrinking disposable income possessed by the average consumer. Whereas the price and availability of some products will be the circumstance of global supply issues, retailers, service providers and even Government must ensure that goods and services are not priced out of the reach of consumers.

Barbados recorded economic growth in 2023, driven primarily by a recovery in tourism. However, concerns persist about the country’s small size, high dependence on specific tourism markets, and susceptibility to external shocks. Many argue that this economic growth is not felt in the lived experiences of the average consumer.

Inflation reached a historic high of 9.2 percent last year due to rising food and oil prices, impacting the purchasing power of businesses and households, particularly the most vulnerable. This was compounded by the taxes imposed on fuel at the pump, which media reports suggest netted the Government revenue of over $400 million during the last five years. The consumer has therefore paid more in fuel tax than road tax during the period.

Additionally, the agriculture sector faced difficulties due to adverse weather conditions and the rising costs of inputs. The Barbados Economic Recovery and Transformation (BERT) plan, with its focus on transitioning to green energy, addressing climate change & reducing gas emissions, and diversifying the economy, proposes solutions to these challenges.

While the BERT plan is being rolled out and considering the volatility of food prices and Barbados’ high import bill, greater effort is needed to improve the availability of affordable goods and services to the consumer to avoid any decline in the standard of living of citizens.

One area that may be a low hanging fruit is the local agricultural sector. This sector demonstrated significant resilience and growth potential during the COVID-19 period.

The challenges faced by the agricultural sector have implications for consumerism and overall economic development. Work done by the UNCTAD (United Nations Conference on Trade and Development) underscored Barbados’ limited land and water resources, and constraints including vulnerability to natural disasters, high reliance on imports, dominance of a single commodity (sugar) in the agricultural sector, and high-cost production systems. The study proffers that limited land availability for commercial farming hinders economies of scale, and scarcity of water poses further challenges, especially for farmers outside Government-managed schemes.

The limited domestic production capacity, high reliance on imports, and constraints on large-scale farming operations lead to higher prices for locally produced goods. This, in turn, affects consumers' purchasing power and access to affordable, locally sourced food items. Additionally, the impact of trade liberalisation on domestic production of key commodities like poultry, vegetables, and pork, influences the availability and affordability of these products for consumers.

Furthermore, the Government's initiatives to enhance competitiveness through non-price factors can potentially impact the variety, quality, and affordability of agricultural products available to consumers. Needless to say, a blueprint to strategically develop the agricultural sector is required as a viable solution to provide affordable commodities to the market.

On the issue of the regulatory regime for consumer protection, several pieces of legislation exist. These include, the Consumer Protection Act Cap. 326D and the Consumer Guarantees Act Cap. The Fair Trading Commission administers and enforces these laws, addressing unfair trade practices, guaranteeing product quality and safety, and protecting consumers against misleading conduct.

Legal provisions also govern electronic commerce through various laws providing specific rights and commitments for consumers in electronic transactions.

Consumers also benefit from ‘Recall’ legislation, which prescribes requirements for product recalls, including mandatory action for unsafe goods, notifying consumers, and providing necessary information to affected parties.

A critical area not yet regulated and should be addressed, is cryptocurrency. Considering the emergence of cryptocurrencies in the mix of finance and investment instruments, a regulatory regime is needed to protect the consumer in this area.

Given a relatively enabling environment, the next step for stakeholders is the access to affordable goods and services, and the reduction in the cost of living for the average consumer.

As expected, Barbadians will be in a reflective mood this week, reviewing their accomplishments during the year just ended and making resolutions for 2024. Adopting the old adage “if you fail to plan, you plan to fail”, the beginning of a new year is seen as a good time for reflection, renewal, and refocusing of one’s priorities, both at the individual and the institutional level.

Barbadians have already been warned about what to expect this year. Several noted economists are projecting a challenging year due to continued disruptions in the global supply chain with the concomitant impact on the availability and cost of commodities. The ongoing war in the Middle East threatens to further destabilise the supply of oil and gas, resulting in increased cost of fossil fuel in the local market. Bajans were therefore told to tighten their belts.

The earthquake yesterday in Japan and the threat of a Tsunami recalls the heightened seismic activity in the region at the end of last year and the threat of not if, but when the Caribbean will be affected by an earthquake and/or Tsunami. Natural disasters seem imminent for the region.

The projections all around look very grim. Planning therefore in such an environment appears challenging for the studious business owner, yet planning we must!

Business Basics sought the views of small business owners on their outlook for the new year and what improvements they desire to assist them in navigating this year. As expected, the overwhelming response focused on access to capital. This point is being made so often that onlookers may soon question the efficacy of this request in light of the many announcements of funding being procured by the Government. The undeniable fact is that increased capitalisation of Government’s funding agencies has not been the outcome of the administration’s acquisition of loans and grants. The first item therefore on the Wishlist for 2024 is increasing the funding pool available to the MSME sector.

The second item for business owners is the level of taxation on inputs and processes that retard the competitiveness of firms. Examples cited were the 2% tax on online transactions, the sewage tax on water bills, and the high cost of fuel at the pump, to name a few. These have been described as disincentivising businesses, in circumstances where the increased cost cannot be easily passed on to consumers.  Small business owners opined that to encourage e-commerce as a new business model, yet taxing these transactions is nothing more than an oxymoron and counterproductive. Additionally, the agro-business sector, which demonstrated its viability and resilience during the COVID-19 pandemic, is burdened with a sewage tax that retards the growth and competitiveness of the sector.  

With both telecommunications companies recently announcing increased cost of their products offerings, and the expected increase in the cost of electricity, the rise in utility costs will be a further burden on the firm.

A third area mentioned by small businesses was the regulatory environment. Persons are querying the status of the collateral registry, which was touted by policymakers as a salvation for the many who did not have the traditional form of security to access loans. After much song and dance this appears to have died a natural death.

The Approved Small Business Status which forms a key part of the Small Business Development Act was no longer seen as an incentive and, as such, firms were not applying for the programme. The Act has been under review for some time, maybe 2024 will be the year when its amendments will be finalised.

Then there is the issue of emerging industries. With the persistent debate on diversifying the economy, the question was asked, what are the new industries under consideration? Since the development of the financial services sector in the 1980s there has not been any sunrise industries in Barbados. Hopes were dashed for many who developed business plans and sought to access funding to participate in the announced renewable energy sector. However, owing to the limitations of the grid, this sector is now stalled.

The cannabis industry is clearly not a viable alternative for many, due to the issue of financing, among other concerns. The lack of financing from commercial banks to develop the industry, results in retardation of this sector.

Space does not permit discussion on the issue of business facilitation, the prohibitive cost and unreliability of inter-regional travel and the regulatory regime to access digital media like Google, YouTube and Facebook for small firms to trade via these platforms.  

It may be a case of the chicken or the egg - either Government creates a regulatory framework for industries to emerge or entrepreneurs disrupt the status quo with new ideas and innovations. While the jury may be out, the reality is that in small open economies like Barbados, the regulatory environment is needed to drive the growth and development of business.

While 2024 may not be looking that bright, as the old folks say, where there is life there is hope. Against all odds, small business owners and the self-employed must rise to the occasion and champion their path this year. Access to money, markets and the development of management competencies should be pursued to realise sustainable businesses.

Happy new year to all!

An editorial in this newspaper recently opined that the time had come for property insurance to be made mandatory. In light of the many house fires and other disasters of late, property insurance was being proposed as a measure for homeowners to safeguard against the loss from such disasters.

In similar vein consideration should be given by business owners for the procurement of adequate insurance coverage as a risk mitigation measure for their businesses. This should be a mandatory business acquisition.

As the current year comes to an end, many will be making plans at the individual and institutional levels for the new year, Business Basics is this week advocating that insurance coverage should be top of the ‘to-do list’ for small business owners.

A business case can be easily made for insurance as a risk mitigation measure for the firm. The recent disruptions to business caused by natural disasters and the changing weather patterns, arguably a consequence of climate change, necessitates that firms build resilience in their operations and at the very minimum, be able to recover should disaster strike. The ultimate objective is to protect the assets of the firm and to ensure business continuity. The insurance policy can be used to cover a diverse range of risks, including property damage, liability, injuries, theft, and loss.

Though data is not readily available on the level of business insurance coverage in Barbados, executive vice president and general manager of Sagicor Life (Barbados) Inc., Paul Inniss, speaking on this issue in another section of the press, gave some insight worthy of analysis. He posited that the average market penetration rate for insurance in developed countries was 3.8% in 2019, while in Barbados, this rate stood at 2.7%, with Trinidad & Tobago and St. Lucia recording 2.8% and 2.3%, respectively. Inniss also mentioned that globally, 3.8% was considered below the ideal rate, indicating that the Caribbean markets were lagging significantly behind.

Furthermore, the insurance executive emphasised the risk of underinsurance for individuals and families, citing examples of the financial difficulties that could result from serious illness, disability, or death without adequate insurance coverage. He also stressed the importance of public education and the responsibility of companies like Sagicor to work towards increasing the level of coverage throughout the Caribbean region.

While there was no specific mention of small businesses in the provided information, it can be extrapolated that the below average penetration rate in the market for insurance coverage in general, includes the underperformance of small firms in accessing insurance coverage.

Though a 2.7% market rate may be below that of the developed world, an IMF report indicates that Barbados has a high level of insurance penetration as a percentage of GDP. The data suggested a rate of 7.4% of GDP, ranking the country 16th in the world for this measure with high premiums per capita at US$692, and a ranking of 28th in the world. This was second only to the Bahamas in the region. Again, this data represents coverage in general and does not address business insurance, particularly at the level of small firms.

In comparison with other Caribbean countries, Barbados ranked 79th in the world for total premiums in the insurance market, with a total of US$184 million. This ranked below Trinidad and Tobago (US$424 million), the Bahamas (US$321 million), and Jamaica (US$303 million).

What can be gleaned from the IMF report is that Barbados has high premiums per capita and an average market size among developing economies. There is also a positive perception and high level of coverage amount provided by insurance firms. Reinsurance sessions are notably high for property insurance, at between 85 and 90 percent of premiums for the industry as a whole. Business insurance, however, lags behind acceptable levels.

A scan of insurance providers in the local market revealed a number of products available to small businesses. One such insurance provider, Sagicor, offers various types of coverage such as group marine insurance, commercial property insurance, caricare advantage plan for frontline heroes, group liability insurance, group motor insurance, group accident insurance, and group life and health insurance.

Sagicor's comprehensive business solutions and insurance offerings suggest that there is a recognition of the importance of insurance coverage for businesses in Barbados and the wider Caribbean region. Based on the information provided about their Small Business Package designed specifically for small to medium enterprises with fewer than 25 employees, product offerings include comprehensive insurance coverage, such as protection against fire and other perils, accidental damage cover, public liability insurance, employer's liability insurance, loss of money insurance, additional expenditure/loss of rent insurance, fidelity guarantee insurance, goods in transit insurance, and plate glass protection

The level of coverage amount by insurance firms would likely vary based on individual business needs, regulatory requirements, and industry-specific factors.

What is evident, is the need for improvement in the level of business insurance among small businesses in Barbados and the Caribbean. Insurance firms must work with other stakeholders to increase coverage and public education, to improve the overall perception and level of coverage among businesses.

This is a clarion call for small firms to resolve that insurance coverage is a necessity and every business should make this a priority in the new year. The data revealed that our market penetration is too low, at a time when our region is too vulnerable to climatic events. Let us use insurance coverage to mitigate risk, protect our investments and assets, and ensure business continuity.

The small business community in the Caribbean has had a love-hate relationship with the commercial banking sector. The savings & deposits instruments, and other services provided by banks for business transactions, are seen as a necessity for the effective functioning of the business. However, based on the monopolistic nature of these entities, clients are often disadvantaged due to the unjustified high fees and arduous administrative burdens imposed. Some even argue that they are ‘lords unto themselves’ with little or no regulation in the market to protect the vulnerable.

In Barbados, there are a couple of banks that are considered small business friendly, as these have overtime adopted policies and programmes that enable business more so than retard their growth.

Business Basics is concerned with the majority of these institutions that appear to make it difficult for small firms to efficiently use their services. In citing their frustrations with some of the processes encountered in their interactions with some commercial banks, several small business owners opined that the Caribbean market may now be a ‘nuisance market’ for some brands.

The last decade since 9/11 has witnessed enhanced regulation in the financial sector, based on the view that the international financial architecture requires greater transparency and accountability. The global institutions have preached a gospel of needed financial reforms characterised by new Know your Customer (KYC), Politically Exposed Persons (PEPs) and Anti-money Laundering (AML) policies. Governmental regulators, banks and other financial institutions have been converted to the idea that these new policies will help to track terrorism financing, expose money laundering and crack down on those corrupt regimes that aid and abet the proliferation of criminal activity.

While the jury remains out on this, some evidence suggests there has been no retardation of terrorism funding, corrupt political regimes continue to exist, and money continues to be laundered in some of the most sophisticated financial systems in the developed world. US-based FTI Consulting published a report last year, which proffered that in 2020 compliance spending topped USD$213 billion worldwide, however funds estimated to have been laundered reached upward of USD$2 trillion for the same period – nearly nine times as much.

What has been the result of these new policies on small economies like Barbados? – increased regulation and administrative burden that makes doing business more arduous. In the area of banking compliance, small players are made to jump through hoops in order to open and operate a business account. Government regulators continue to impose onerous processes in the guise of compliance and some banks, otherwise headquartered outside the region, employ policies that are questionable in the realm of practically.

Several complaints have been made over time by business practitioners but one that challenges any right-thinking individual, is the request for the business to provide 12 months financial statements in order to open a business account and in some instances audited financial statements. In the proverbial saying of many activists today, mek it mek sense!

Anyone who logically assesses this requirement must conclude one thing – this does not make sense. Setting up a current account at the start of the business is encouraged to ensure a proper record is maintained of payment transactions. This account also aids in financial reporting for tax purposes, provides a history of the business operations, ensures transparency and an accurate record of the firm’s income and expenditure. How then can a firm produce statements after a year’s operation without a current account? Where was the income stored for the twelve-month period; how were payments made to vendors, staff, etc.? This is but one example of policies not being aligned to common sense and practicality but being adopted hook, line, and sinker from misguided sources.

Beyond the general KYC information, another area of consternation is the introduction of the PEP requirement – an example of foreign dictates in circumstances where the practicality can be challenged. In Barbados and other small jurisdictions, most adults can be considered PEPs. They are family and/or close associates of parliamentarians, Board chairs and directors, senior public servants, etc. In circumstances where there are two major political parties in Barbados, which tend to form the government at a point in time, most citizens will at some point fall into one or more of the above categories. It therefore begs the question why this term, PEP, has been accepted in the lexicon of business regulation in the Caribbean.

For the avoidance of doubt, these issues are not unique to Barbados. A scan of the financial system in Jamaica, Trinidad & Tobago and the Bahamas reveal some similarity in the requirements to open business accounts with commercial banks. This is not to be a surprise since some brands are Pan-Caribbean and operate in several jurisdictions. The added requirement of being registered with the Financial Intelligence Unit is noted in the conditions in some regional territories.

It is not being advocated that banks return to any archaic system of operation. We appreciate that times have changed, and market conditions necessitate that institutions keep pace with change. It is however required that the medicine fits the illness. In the quest to be compliant there must be a commitment to policies and procedures that fit the business environment and local culture. It should be about enabling business to be done and done profitably – after all it is still about the economy.