Consumers advised to spend wisely
In February this year, businessman Leonet Anderson said the COVID-19 pandemic was driving up the cost of manufacturing and shipping and consumers should brace for increased prices.
Anderson, the owner of General Hardware Supplies in Arnos Vale is still of that view but said on Wednesday this week that the problem is bigger than he expected.
“I would say that what is happening now is way beyond my expectations from February,” Anderson said during “The Press Room” programme on Wednesday hosted by Chanolde Munroe.
Anderson was a member of the panel along with Professor Justin Robinson, a senior lecturer in management, and Dean of the Faculty of Social Sciences at The University of the West Indies (UWI); and Dr Jules Ferdinand of the OSV Group.
The programme, a product of Interactive Media limited discussed the disruptions to the global supply chain and the effects this is having on businesses and the cost of living in St Vincent and the Grenadines (SVG).
Anderson said when he raised the issue of increased prices and shipping issues back in February, it was mainly because of the feedback he was getting from his suppliers in the United States of America (USA) who said it was because of COVID-19, and many persons were out of work.
Anderson said he was told then that when someone tested positive for COVID-19 in a factory, the entire production facility was closed and had to be sanitised and restarted, so factories were losing a lot of time and workers.
“Initially there was a short fall of goods because of low production, but now, especially for goods from the Eastern Countries and Brazil…those prices have more or less doubled and the report and feedback from suppliers is that this isn’t going anywhere right now and this is going to be here maybe until the end of 2022,” Anderson said.
He said its taking three times as long to ship goods and the cost of freight has tripled.
Professor Justin Robinson said there has been a disruption in the global supply chain and one of the issues is that there is a shortage of shipping containers.
An online report claims that ports in China are continuing to export goods in containers in strong numbers, but there are hardly imports, meaning that the containers are only being returned in small quantities.
Professor Robinson said he believes this is an issue and noted that global supply chains are important for island nations as goods that cannot be produce domestically have to come in by ship or plane.
He said this means Small Islands States like St Vincent and the Grenadines (SVG), are vulnerable during disruptions and the quantities of any goods shipped will not justify special shipment arrangements; as well the nature of the economy means that there are no domestic substitutes for many goods, hence the impact of the disruptions will be greater.
But, Anderson charged that the increase in the price of goods is also being driven by something more sinister, that is, a move by the bigger shipping companies to drive up prices.
He said that in some areas, it is about basic supply and demand but noted, “if there is a shortage of workers, how come there is a shortage of containers?
Anderson said that a shortage of workers means fewer goods being produced but then persons turn around and say there are not enough containers to carry fewer goods.
“…as I was saying goods from the US and England are not on the increase, marginal, once they are produced in those countries…” He pointed out that smaller international freight lines like Tropical and King Ocean are not charging steep increases but the bigger shipping lines that can carry upwards of 18,000 containers at a time are calling the shots.
“…and there is nothing that you can do really, but it goes beyond COVID as well.
Meanwhile, Professor Robinson pointed out that inflation and the expectation of increased prices trigger a set of behaviours that help to push prices up further.
“So you start ordering more than you normally order,” and, “when this happens and people stock up, that increases demand which has a way also of pushing up prices”.
Anderson shared that a shipment of plywood that he ordered in February arrived last week.
He is encouraging small businesses to source their goods from the US and buy in smaller quantities as shippers like Tropical takes a week to get to SVG. He noted also that persons can try to source their goods in the region and local business can help each another by selling one another wholesale if they are able to.
He said also that business people should look at investing more money in their products that are moving fast.
“Buy goods now and put them on your shelf.”
Anderson also is of the opinion that persons currently constructing homes are experiencing issues because of increased prices and someone who borrowed $300,000 last year to build a house would have problems completing it for that amount, and can possibly be looking at an additional $100,000 to complete the structure.
He said that some prices have increased by upwards of a 100% and persons are spending less, which is bad for everyone.
Meanwhile, the OSV’s Ferdinand noted that the extended time it is taking goods to get from China and other places is problematic as companies want their money upfront and that means you are tying up a lot of cash.
“So it takes so much longer before you can liquidate the stuff; it is so complicated in terms of what is happening now and the impact it is having on business,” Ferdinand said.
He said going forward, businesses should focus on items that are moving to increase cash flow, while shoppers should hold back on spending by buying only needed items.