Costs weighing on small business

There were signs of hope for small business in 2013, but work permit fees, duty and electricity costs will likely remain barriers to robust growth in 2014.  

 

The cost of doing business remains a key concern and the key barrier to job creation for entrepreneurs, despite signs that the economic gloom is starting to lift in the Cayman Islands. 

High electricity costs, customs duties and work permit fees are among the biggest gripes of small businesses still struggling to adjust to the “new normal” following the global recession in 2008. 

While several businesses say they saw signs of improvement in 2008, the Cayman Islands Small Business Association has highlighted a raft of measures that would help the sector, including duty breaks and a reduction in electricity bills. 

David Kirkaldy, a former Chamber of Commerce president who runs several small businesses, including Massive Equipment Rental & Sales and Fireworks Ltd., said he had been able to hire new staff in 2013 after several years of downsizing. 

“Our business has done OK. There are signs that the economy is turning around a bit. However, we are still a way off from the pre-recession days.” 

He said there is opportunity, even in a downturn, for nimble, well-run businesses. But he sounded a note of caution over immigration reform. 

“The key barrier to growth and by extension, job creation, in a small business is a declining population or a stagnant economy.  

“The uncertainty around the future of rollover, and the further uncertainty on the path to residency and eventual citizenship create a real chilling effect on the spending of those sectors of our population,” he added. 

Markus Mueri, who runs Abacus, Deckers and Karoo, said an upsurge in “stay-over” tourists made 2013 a decent year in the restaurant sector, though this was offset slightly by a decline in cruise arrivals. 

“I believe 2013 was a great year to catch up for many small businesses,” he said. “With record numbers for stay-over tourism and the brilliant support of the Department of Tourism, we are looking forward to an even stronger 2014.  

“Cruise, on the other hand, had a really tough year. The decline in arrivals created hardship for all cruise related operations.  

“The schedule of cruise arrivals for [2014] looks positive,” he added. “Hopefully this will be a trend for the island so all these businesses can catch up and hopefully create a little bit of stability.”  

He said the island is heading in the right direction economically, but high costs remain a key concern. 

“The main issue is still the cost of doing business on the island. Our industry, hospitality has so many hard costs – CUC, gas, water and work permit fees.  

“We have no control over these fees and annual increases are hard on our industry. “Many times, people are complaining that the island is becoming too expensive, but we need to increase the prices because of the annual increases in fees.  

“The island needs to stay competitive in the region and we hope that there will be no more increases.” 

 

Retail  

In the retail sector, particularly, customs duties are a significant concern. 

Kirkaldy said, “I feel that it is not correct that I can have a business license and hire staff, invest in stock, honor warranties, develop staff and rent or own premises, yet I pay the same import duty on anything I am licensed to be operating or selling as any private citizen. This defies logic. 

“The narrative of the large profits being reaped by local business is simply wrong. We are burdened by costs of doing business that all take out of that profit, costs that the consumer cannot see or appreciate when they are only having to pay import duty.” 

For Agata Kalicki, owner of Bread and Chocolate vegan restaurant, one of the biggest challenges of starting a business in Cayman has been staffing, particularly the process of getting work permits approved, where necessary.  

The restaurant opened in April to rave reviews and is now the top-ranked Cayman eatery on TripAdvisor. 

But Kalicki acknowledges it will take time to make it an economic success. 

“We opened during slow season, so we could iron out any kinks before things started to pick up. We knew it would be difficult at first, but we believe in the food, and the response from customers so far has been great.” 

Nelson Dilbert, co-owner of Cayman Spirits Company, said 2013 was a big year for the company, which moved into a purpose-built new distillery in George Town to meet growing overseas demand for its signature Seven Fathoms Rum. 

The centrepiece of the new facility is a 1,200-gallon still. The distillery has the capacity to produce 500,000 liters of rum per year, and Mr. Dilbert says they are working to meet orders from the U.S., Germany, France and Canada. 

Mr. Dilbert, who is also chairman of the Chamber of Commerce’s new Local Producers’ Committee, said government is already doing a lot of the right things to enable the sector to flourish. He said duty waivers on raw materials for such items as packaging, including glass bottles, are a big help, though he accepts that some business are simply not aware of which waivers they are entitled to. 

He says there are some great local products, from homegrown honey to sea salt and hot sauce. The sector, in general, would benefit from more professional packaging and marketing, he says, but demand for locally made products is high. 

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Markus Mueri

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