The Economy
At the end of September, concerned about the state of
the Bahamian economy and its impact on the ordinary consumer and aware
of the downturn in the economy, the Opposition determined to move a resolution
in the House of Assembly to give all members and the government an opportunity
to recognise what was happening and together to consider the options available
to us to stem the tide.
We decided to use Opposition Day to stimulate the creation of a strategy to minimize the adverse effects already being experienced by Bahamians throughout the country from Grand Bahama to Inagua. Grand Bahama has been in a slump for the past two years with the closure of the Royal Oasis and the dispute at the Grand Bahama Port Authority, to name just a few.
Inagua has been stalled by the ongoing strike.
Mayaguana had been stifled by the delays in the I project.
Exuma has been crippled by the failure to sell the Emerald Bay Hotel.
Eleuthera has been stalled by the resumption of the neglect
it experienced under the last FNM government…poor roads, dangerous bridge,
poor health facilities etc.
Need I go on?
The government, on assuming office in May 2007 was determined to stop, cancel or review every project or contract that had been started or agreed by its predecessor government, the PLP. They were determined to fire employees in government departments who had been employed by the predecessor government in order to make way for their supporters.
As a result, they brought the economy to a screeching halt and sent many persons home without a job and without any prospect of getting one, having regard to the economic slow down.
Construction workers, who thought they could get employment at the new straw market or the Cable Beach strip, or the new school in Grand Bahama or Acklins, were left high and dry.
Hotel workers who looked forward to jobs on Cable Beach or South-west New Providence or Exuma or Grand Bahama were left high and dry.
This government took a delight in inflicting punishment on the Bahamian people, whether working class, middle class or other!
They created opportunities for their cronies when they issued Millions of dollars in no bid contracts for school repairs in direct contrast to the promises they were making.
They took contracts from qualified Bahamian contractors and gave them to their cronies with the measliest excuses.
They caused heartache among the straw vendors as they had them going from pillar to post, almost bringing them to their knees as they threatened to turn their beloved property into a so called green space!
Earlier this year, after giving tax and business licence relief to Bay Street merchants, they denied the same to over the hill merchants who need it at least as much and instead, under the guise of rationalization of the tax codes, inflicted unconscionable new taxes on everything from food, to shoes, to clothes to school supplies including books!
Everyone was caught by surprise, even the government itself, some members of which are reporting that they did not realise what they were doing.
Consumers and business persons have been deeply affected by these increases which threaten to run some persons out of business.
They went further and eliminated the arrangement by which BEC was authorized to make arrangements with its customers for unpaid bills and began a policy of disconnection without mercy; this from a corporation that routinely has power failures, some of which damage consumers’ appliances for which the corporation hardly ever accepts responsibility.
Now they have reintroduced a plan for consumers to negotiate a payment plan. The only problem is when there is no money for the initial payment or no job to meet the new bills, what is going to happen?
They have pussy footed around with the privatization of BTC, a matter on which their predecessor had an agreement and has now come up with an arrangement which on the surface can have a devastating impact on what was once one of the country’s most prized assets. The government, which has demonstrated no transparency in the handling of this matter since taking office, and which has for all intents and purposes has excluded the BTC employees unions from the discussions, should come clean with the Bahamian people and reveal the results of the advice given to it by their advisers KPMG.
Today the Bahamas economy is in disarray and they would say that this is because of the state of the U.S. economy. Today the potential of a U.S. recession is so real that General Motors, that bastion of the U.S. system of business, has lost 30% of its value and is threatened with bankruptcy.
Here in the Bahamas there is precious little FDI, precious little tourists and precious little government activity.
This FNM government is paralysed; powerless and visionless!!
Those with all the brains and the plans and the governance are laid bare for all to see. They do not know what to do.
How many times are we going to re-brand The Bahamas? Remember “hip to hop”?
The Banking System - Default Loans
Bahamians are having great difficulties meeting their
financial obligations.
Out of $2.2 billion in outstanding consumer loans at July 31st 2008, 14% or $297 million were in default (more than 30 days overdue). 15% of all commercial bank loans to Bahamian businesses were in default at end July 2008.
Of the $1 billion in outstanding loans, $147 million were delinquent, more than 30 days past due, compared with 9.4% or $94 million at December 31st 2007, an increase of 56% in seven months! What is worse is that more than 50% of the delinquent loans, $75 million, are non-performing, i.e. more than 90 days in default.
It has been reported that Bahamian banks actually have more than $300 million in non-performing loans. Of these, $100 million (33.3%) are consumer loans and $130 million (43.3%) are mortgage loans. The remaining 27.6% are commercial loans.
Consumer loan defaults grew by $24 million between December 31st 2007 and July 31st 2008, but commercial loan defaults over the same period grew by $52 million.
The Central Bank statistics show that compared to the same period of 2007, commercial loan defaults tripled in the first nine months this year.
This confirms that the economy is slowing and times are more difficult for businesses and consumers, according to Ross McDonald regional head of the Royal Bank of Canada.
While some bankers see the trend as part of the normal economic cycle, others are not so sure.
RBC Finco
There has been growth in the delinquent accounts of this
company leading to a fall in net income of 21% ($3.1 million) in the first
nine months of the fiscal year to July 31st 2008. This adds insult to injury
for shareholders who are faced with higher cost of living while their share
earnings have declined as has the share value has fallen from $12.50 to
$12.
This performance is said to mirror the performance of other banks in the country which are suffering from the faltering economy and the inability of an increasing number of clients being unable to meet their commitments.
Impact on Businesses Businesses which were prudent when
things were good, may have built up reserves for these rainy days.
Even for business persons where the sales have increased,
that does not mean necessarily that the profit would increase, due to increased
import duties increased energy costs.
Many businesses have now to choose whether to stay open.
Grand Bahama – Some Observations