Senator Lyder: Some SMEs won't survive Christmas

OPPOSITION Senator Damian Lyder on Sunday predicted that some small and medium businesses (SMEs) will not survive the Christmas season owing to an inability to access foreign exchange (forex) and to access VAT refunds.

He wasaddressing a briefing at the Opposition Leader's office in Port of Spain.

Two business leaders gave mixed reactions to his allegations.

Lyder said the Government created a "perfect storm" of problems with VAT refunds and forex access, harmful to SMEs.

"They are the ones standing in line in banks, only getting hundreds of US dollars a day when they need thousands." Many SMEs turn to the black market, he added.

Lyder said only 28 per cent of forex from the Exim Bank goes to micro, small and medium enterprises.

The bank supplied only 158 of TT's 400-plus small and medium manufacturers, he said.

Lyder said, "Because of this utter neglect of SMEs, many will now struggle to survive after Christmas."

He said for raw materials and finished goods to be shipped in time for Christmas sales, they must paid for by July-September.

"Given that this exacerbated foreign exchange crisis would have occurred during these months many of these SMEs, being unable to acquire the required foreign exchange, would have literally missed the boat and would have lost the opportunity to capitalise on this peak period of Christmas.

"For many, it will be a dark and dreary Christmas. And in the end, in January of next year, many of these SMEs will pay the ultimate price as they join the more than 6,000 SMEs that shut their doors following the covid19 pandemic under this PNM government."

Lyder said SMEs earned 30 per cent of TT's GDP and created thousands of jobs, yet were abandoned by the Government.

"You see, I myself am a businessman. I am a medium-sized manufacturer. I know how hard it is to survive as a business in this PNM-plagued economy.

"I bank with three different institutions and in the last fortnight, one of the banks indicated that they would only be able to provide one-tenth of the foreign exchange I usually get from them for my business." He said he must pay shipping companies in US dollars, amplifying his costs.

"I have seen many colleagues leave business, leave Trinidad and Tobago, and leave their workforces on the breadlines because they simply cannot afford to operate in this country with little to no foreign exchange."

Lyder said the forex crisis was coupled with the non-payment of VAT refunds to some businesses, the latter crippling the private sector.

"Because of the patriotism of now-former independent senator Amrita Deonarine, who questioned the Minister of Finance on VAT refunds, we know that the total outstanding as of March was $7.8 billion." He lamented she was later removed from her position.

Lyder alleged owed VAT refunds had near doubled since 2015 to $7.8 billion

"As businesses continue to suffer in this economy, I have to ask the question as to why did the Government withhold these VAT refunds for so long?"

He alleged the Government had "crashed this economy, destroyed revenue, killed business and devastated the nation’s liquidity."

"You see, by withholding these VAT refunds, the Government has taken a multi-billion-dollar interest-free loan from the manufacturers of this country, the only place they can scrape more money for their schemes."
He said the Government should have taken the advice of the business chambers on handling VAT refunds by creating a VAT account to avoid the refunds being muddled in the consolidated fund.

In the forex and VAT refund crisis, it was the SMEs suffering, he said.

"The suitcase trader, the hustler, the man trying to make an honest living and make a few dollars. It is the small manufacturer that wants to continue to grow.

"The big boys will be okay. They will get their foreign exchange.

"But these SMEs will continue to shut their doors, sending home thousands of employees, losing their lives’ savings, while at the same time, monopolies and oligarchies will be created in this country, where we see only the large companies surviving this crisis."

Supermarket Association (SATT) head Rajiv Diptee said supermarkets don't import but buy from suppliers, distributors, importers and manufacturers.

"With respect to food, the major food importers have access to the EximBank. But I do agree, SMEs could be under pressure if they have not got arrangements to ensue they can pay for goods within the monthly business cycle."

He reckoned 2024 would present some forex challenges, as voiced by Lyder.

"If importers have to pay more for goods, we must pay more for the goods from the suppliers.

"If the goods are coming to us now at higher prices, we have to find funds to get goods at more expensive prices, which means it's going to be more onerous on us to have cash-flow available to keep business going as usual.

"That's going to continue to put pressure on the current situation. When you look forward, it's going to be a pressure cooker for suppliers."

Diptee singled out micro, small and medium enterprises (MSMEs.)
"I could imagine MSMEs who depend on their credit cards and the monthly business cycle will be under immense strain to ensure they can secure arrangements with their bankers and their suppliers to get the payments in train."

TT Manufacturers Association (TTMA) head Ronald Roach told Newsday big and small member manufacturers could register to access forex at the EximBank.

"So the issue really is the amount of forex they could access from their own commercial bank, but where there is a shortfall the forex window at the EximBank is just for that." He said in the Mid-Year Review, Imbert had said $7.8 billion was owed in VAT refunds, but  should now give an update.

Roach promised to peruse Lyder's statement and if required the association would issue a comment on it.

Newsday pressed as to whether the forex and VAT crunches could drive businesses bust by Christmas.

He said the most vulnerable were those solely dependent on imports, either for retail and local distribution.

"If all of your inputs are US-dollar inputs – whether it comes from China, US and anywhere else – you have to settle those bills in US.

"Then if you only sell those goods to the local market and you don't have any US-dollar earning potential, those types of businesses find themselves in situations where, when they need US dollars, the banks are unable to provide an adequate supply. That is what is happening.

"But manufacturers who export, you will find a percentage of their US comes from their earnings and they then would beg the commercial banks to make up their shortfall."

Imbert did not reply to Newsday's queries.

Last May 10, the Board of Inland Revenue (BIR) invited VAT registrants to apply for refunds. Businesses owed over $250,000 would get bonds with a three-year tenor at a 3.15 per cent annual interest rate.
The BIR statement said, "Refunds of $250,000.00 or less will be paid in cash, during the months of May and June 2023."