While in curfew, I contemplated whether to write about my review of the Government’s COVID 19 stimulus package. The moment you say something differently, you are attacked and seen as being as negative and an opponent of the Government. However, it is incumbent upon me to objectively analyze the proposed package and clearly communicate the good, the bad, the ugly and the missing elements to those who do not have the capacity or time to dissect it for themselves. It is for that reason, I cannot be quiet and will not be quiet but I will behave responsibly.
Let me first congratulate the Government on developing a stimulus package as a result of this COVID 19 virus. The package does have some good elements particularly for the hospitality industry. However, the package is not comprehensive nor is it a stimulus package. It is a relief package for the hospitality industry. Hopefully when the Government reviews the package again, they will consider and address the issues as outlined in this article.
Some of the good things about this package is that Fortis will defer the 6.8% increase for three months. Fortis along with Flow and Provo Water Company will waive the penalty fees for late payments.
Workers in the hospitality sector will get a one off payment of $1200. These are for employees and self-employed who were laid off, seized operations or terminated since March 16th.
The hotel, restaurant tax for March will be waived thus providing some cash flow for this industry.
The Banks will deferred mortgage payments from 3 to 6 months thus giving some persons a cushion if they begin to experience cash flow issues.
The water bill in Grand Turk will be written off.
There are grants available to MSME Sector ranging from $2000 to $5000.
Duty exemption on COVID 19 basket of goods.
Deferral of business licences for three months for certain categories primarily the hospitality sector.
The expedition of Government capital projects to help boast injection of cash in the economy.
While it is true that the hospitality industry is impacted directly and as result the Govt sought it fit for the main beneficiaries of this package to be the workers in the industry and the developers and owners of hotels and villas who will get a $5million increase in concessions. The truth is there are other businesses that are not directly in the hospitality industry but are also impacted significantly. In fact everyone and all businesses are impacted. How will the employees of the other sector get paid especially if their businesses are temporarily closed? At least the hospitality workers are going to get 1200 but what about other employees in the other sectors. Furthermore, there are some hoteliers who are paying their staff a percentage of their income already. More than likely, they are in a position to do so given the excellent revenue they experienced in November to Mid-March. However, other businesses are not in a position at all to pay their employees so some employees in other sectors will not get anything at all. This stimulus package is not comprehensive at all. There should be some sort of compensation for all persons impacted by this virus not just the Hospitality Industry. According to the National Skills Audit, the labour force is 23,027. This plan caters to 10,000 workers, 1261 self employed and 2000 MSMEs
Furthermore, given the uncertainty, the compensation should not be one off.
Will there be something in place to ensure that duty exemption on COVID basket and building materials are passed onto the consumers? I know one retailer listed a change in price already but what about others. If consumer will not ultimately benefit, then it does not make any sense for TCIG to implement it.
The Government has agreed for the hoteliers and restaurants to retain the taxes they would have to pay for the month of March. It is estimated to be $4million and If that is the case, then they should have also agreed for the hoteliers to use some of those funds to pay their employees and the 1200 that the Government is using to pay hotelier workers could have been used to pay workers in other sectors. Ironically the Government is deferring the payments for accommodation taxes for May and June. This is very misleading and will not create any impact as tourism will be virtually dead in May and June and even perhaps for the rest of the year, God forbid.
The Government is insisting that we do not evict tenants and if legislation is required, it may to do so. However, the stimulus package does not take the obligations of landlord into consideration. What plans are in place for those landlords whose only source of income is rental income?
Deferring the loan payment is not ideal as it will cause you to get into more debt. While the banks will defer payments for a period of 3 to 6 months, interest is still being accrued and will be capitalized to your loan and thus your loan will be higher and repaid over a longer period. I think that Governments throughout the Caribbean should have collaborated and petitioned the banks to reduce the interest rate (for those persons who had a fixed rate agreement) so your payment can be lower and thus you can reduce your rent with the tenant. Obviously if you had a variable rate, you should experience a decrease in your payment therefore please pay your mortgage if you can. Embrace the lower rate.
The 9million water is not any loss in revenue. However, it is an opportunity loss in cash collection. Revenue was already recognized and now will be written off as a bad debt expense. Perhaps TCIG should list the names, the amounts and time frame for these outstanding water bills like what was done when the tax was written off in the hospitality industry. I am quite sure that this old bill would have been written off eventually anyway whether there was a crisis or not.
The concessions on building materials during this period may not be effective during this time as people will be very careful on spending money on construction materials due to the uncertainty. Furthermore, there will be an abundance of apartments on the market available because the short-term rental has ceased operations.
Most businesses should have had the funds set aside by now to pay business licence between April 1st and April 30 to avoid any penalties. However, given the crisis, some businesses will have to prioritize what to pay and so I understand the rationale for the deferred payment. If we are going to defer for hospitality sector, we should defer for all businesses as everyone is impacted especially after the shutdown of the country. However, we have to be careful about this one as well because it is possible your financial position may be worsened after three months and you may not have money to pay the license fees in three months
The truth is we are bailing out the hoteliers while the average Joes and the small businesses are sinking. The average Joes and the small businesses do not have money to pay their staff because no income is coming in. While, the Grant is better than nothing but it will only be able to cover your rent or one employee.
One of the missing elements in this package, is the opportunity to explore other sectors. The peak in tourism season is normally from November to April and therefore unless a miracle takes place, we will not feel a significant impact of tourism for the rest of 2020. Americans are already encouraging their own not to travel outside the USA after the crisis is over because USA also needs to recover. Therefore, I think there should be a package to stimulate and promote the diversification of our economy. We can do this by offering grants for people and businesses to explore new areas unrelated to tourism such as Agriculture and IT based initiatives.
Commercial crown land leases can be very expensive and perhaps this is an opportunity for a 50% reduction in land leases so that the lessees can afford the payment and then commence their projects.
While I applaud the Government in the shutdown, there is nothing in the stimulus package to assist businesses and others during the shutdown other than the grant of 2000 to 5000. There is too much assumption that businesses can work remotely or relocate staff in other areas. There needs to be a forum whereby all businesses can document pertinent information such as number of employees and loss of income as a result of this crisis.
The current procurement process allows Tenderers not based in TCI to bid on Government projects. Now is the time I believe to remove this from the procurement process and only allow local tenderers to bid. There should also be something in place to limit the number of projects one company can get in a year so other companies can benefit.
Sooner or later, many businesses will have to lay off staff and some of these businesses will not be in a liquidity position to pay severance pay or even the next pay period salary. There should be some proposed legislation on unemployment benefits because unemployment is inevitable.
The world has not seen anything like this and so this is a first for Governments throughout the world. I know that it is a challenge to develop a plan that most people can benefit but it is possible. As implied in my introductory paragraph, the plan in itself is a good start for the hospitality sector but given the state we are in and the fact that there is uncertainty on how long this crisis will take place, now is the time to encourage and stimulate innovation and creativity and to ensure that plans are in place for other sectors other than hospitality.