More than half the Venture Capital Fund has been expended, though the jury is still out on how well the money has been spent, according to FNM Senator John Delaney.
Senator Delaney used his budget debate contribution this week to criticize the government’s small business development strategies.
He also called for tax breaks for Bahamian small business owners, something he said seems to be reserved for non-Bahamian investors, and tax incentives to stimulate private sector investment in affordable housing.
Regarding the fund, Senator Delaney was both appreciative and critical.
“The VCF is a creditable start, but it is only a start towards assisting business ideas to move towards reality,” he said.
“At $2 million – and now a further $1 million in this budget – to be used as equity participation in start-up businesses and existing small businesses, the fund is obviously severely limited in its ability to reach entrepreneurs and those businesspersons requiring increased capital to become more efficient [and] competitive, or to become larger in their operations.”
Senator Delaney added that it is too soon to determine how effective the management of the fund has been.
His criticisms echoed similar concerns raised by Opposition Senate leader Tommy Turnquest, who in his contribution on Monday excoriated the government for “bragging” that more than 140 entrepreneurs had gotten loans from the $2 million fund.
“I ask you to do the math,” Senator Turnquest said. “How can a $15,000 loan empower Bahamian entrepreneurs and level the playing field in this multibillion-dollar economy?”
Financial Services and Investments Minister Vincent Peet, however, told the Journal on Wednesday that “there are sizeable loans given to entrepreneurs to get going from the Venture Capital Fund – up to $50,000 – and many of [those loans] are [around] the $50,000 mark.”
“If [those entrepreneurs] need further assistance, we have specialists who are there to help them, to guide them and to advise them, and to minimize failure of their projects,” the minister said.
He added that the fund is “properly manned,” “working extremely well,” and “heavily patronized by Bahamian entrepreneurs.”
Elaborating on an idea he raised during his budget debate contribution last week, Minister Peet explained that he is encouraging the private sector to contribute to the fund, “so we can double or triple or quadruple the amount available.”
During his contribution, Minister Peet said he was exploring the possibility of foreign investors voluntarily contributing to the fund.
He pointed out that the first million dollars set aside for the fund is gone, the second million is being used now and reminded that there is a third million provided for in the government’s new spending plan.
“The idea is one that is being well-received and we are creating many young entrepreneurs through this Venture Capital Fund,” Minister Peet said.
On Tuesday, Senator Delaney also lauded the concept of the Domestic Investment Board, but said the board has “a mighty long way to go to fulfill its concept.” He told senators that, according to his research, going into business in the US takes as little as three days. In Canada, it takes seven days and in The Bahamas, 179 days.
According to Senator Delaney, Marlon Johnson, president of the Small Business Association, said in April that, “The Bahamas is lagging behind other Commonwealth countries in the development of the small business arena.”
“And he called the state of our public sector mechanisms for delivering capital and delivering expertise antiquated and highly ineffective. To date, no streamlining of laws or procedures has taken place. If there have been procedural adjustments, they have not been clearly communicated to the public, which is yet another problem.”
Minister Peet explained that the streamlining process is “being worked on now,” and is “the whole purpose of the Domestic Investment Board.”
“We will be doing a briefing shortly to announce what the changes would have been in terms of streamlining,” he said.
Senator Delaney said it has yet to be seen whether the Domestic Investment Board will be of any “qualitative value” to investors, or if it would simply become another opportunity for government bureaucracy.
On the question of tax incentives, Senator Delaney suggested a real property tax exemption, which in appropriate cases might be paired with a duty free convention on materials subject to conditions.
These measures, he said, “are collectively referred to as a tax incentive, [and)]may be used as a tool to encourage desired commercial or economic activity by Bahamians, capital creation and the attainment of important social objectives.”
The senator called it “unfortunate” that tax incentives for business, it seems to him, are more commonly associated with “non-Bahamian investors.”
“In appropriate cases, under transparent rules, Bahamians utilizing land in the course of business ought to be given tax incentives respecting developed land in New Providence up to reasonable amounts,” Senator Delaney said.
“The real property tax exemption component for small businesses might correspond to that presently allowed regarding Bahamian owner-occupied residential property in New Providence.”
He reminded senators that for Bahamian owner-occupied residential property in New Providence there is a real property tax exemption for the first $250,000 – “but that is residential property.”
“What has [the government] done to stimulate the private sector [to construct affordable housing for sale]?” Senator Delaney asked.
“What has the government done to stimulate the private sector in providing affordable rental units for our people who may not be able at this time to afford their own home?”
The senator called for a tax incentive and “other assistance which might be in the nature of technical assistance” in order for the government to develop the affordable housing sector.
By: Quincy Parker, The Bahama Journal
