Consumer prices in St. Eustatius and Saba increased by respectively 17 and 25 per cent since they became Dutch public entities almost seven years ago, but it is a myth that this rise was caused by factors such as transportation and electricity cost, the tax burden and the supermarket margins.
This was stated in an elaborate report of the research bureau Ecorys in cooperation with the Curacao advisory bureau Curconsult titled “Research of prices of food products in the Caribbean Netherlands,” which Dutch caretaker Minister of Economic Affairs Henk Kamp sent to the Second Chamber of the Dutch Parliament last week.
The researchers presented a number of recommendations that may apply to St. Eustatius and Saba: introduce or expand the voluntary system of maximum prices, clarify and publicise the different supermarkets’ prices and expand the number of tax exemptions on a number of basic necessities, including chicken and diapers.
Furthermore, the governments should keep investing in local agriculture, look at the possibilities of using the purchasing power of the St. Eustatius and Saba Governments to achieve lower prices, and increase consumer awareness through budget planning.
The Dutch Government supports these recommendations and will pass on them together with the Island Governments, except for the recommendation to arrange joint purchasing of the supermarkets together ; with the local governments. “Purchasing by the supermarkets is their own responsibility. Joint purchasing by or with the government is not realistic. This is not a task of government,” Minister Kamp stated.
The research focused on the price development of 17 basic food commodities and a few basic non-food items. The items were: flour, white bread, biscuits, white rice, jeans pants, oranges, tomatoes, chicken wings and drumsticks, toilet paper, milk with a long shelf life, cheese, soap, corned beef, orange juice, bottled water, diapers and toothpaste. The list was compiled based on information about items that people purchase most, Central Bureau for Statistics (CBS) data and the input of the islands.
The research showed that food prices in Saba have increased by 25 per cent since 2010 and in St. Eustatius by 17 per cent, with the biggest price increase taking place in the first few years of the islands’ new constitutional status. The prices of the items selected for the research showed a continuous increase.
St. Eustatius and Saba barely produce their own food. The majority of the products are imported from the United States and to a lesser extent from Europe, via the wholesalers in St. Maarten, and transported to the islands mostly by Mutty’s Pride. The net profit by the supermarkets is about three per cent.
The factors that are usually mentioned as those that drive up the food prices in St. Eustatius and Saba — transportation cost, electricity cost, tax burden and the margins of the supermarkets — only make up a relatively limited part of the prices. “That these often-mentioned factors
largely cause higher prices appears to be incorrect, it was stated.
The lion’s share of the prices is determined by the products’ sale value, which makes a quick, substantial permanent decrease of food prices unfeasible. Measures to force a reduction of prices by law are unrealistic because the research has shown that supermarkets do not have exceptionally high margins. Forcing a reduction of the transportation cost does not work either, because this cost is only a small portion of the prices that consumers pay for their groceries.
What could have a positive effect on prices is the expansion of the voluntary maximum prices agreement between the government and the supermarkets to set a maximum price on a number of basic food products on a voluntary basis. Such an agreement is already in place in Saba, but doesn’t exist in St. Eustatius as yet.
The research showed that the prices differ per supermarket. Consumers can be made aware of lower prices through a system whereby the different supermarkets’ prices are made more transparent and are made known to the public. The Dutch Government together with the Island Governments will organise periodic price comparisons.
The Dutch Government will look into expanding the list of tax exemptions, specifically the general consumer tax ABB, for basic food items. Exempting chicken and diapers from ABB will be considered. Also, the Government will look at ways to increase consumers’ awareness, including providing information on how to spend money for groceries more wisely.
The Dutch Government and the local governments will keep investing in the stimulation of local agriculture, the growing of fruits and vegetables on the islands. This will reduce dependence on import and create local jobs. Schools will be dedicating more attention to local agriculture to make children more aware of the benefits of growing and eating more fresh produce.
Minister Kamp noted that unlike in the Netherlands, supermarkets in the Caribbean Netherlands cannot make use of (large-)scale benefits. “The governments are aware of the challenges to achieve lower food prices and acknowledge the importance of working together on this. The governments will take on the challenge, knowing that this will result in a bigger consumer awareness, lower prices and the eradicating of poverty on the islands,” he said.
The Daily Herald.