Annual Report of the Small Business Association
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By now, most business operators in Barbados have heard that effective May 7, 2014, the Central Bank of Barbados (CBB) will no longer issue one cent coins.
According to the media brief circulated by the CBB, “the coin has simply become too expensive to produce. Despite changing the metal content of the coin over the years, each one cent coin at the last minting cost the Central Bank five (5) cents. This means that the coin costs more than its face value.
Additionally, the one cent coin on its own has no purchasing power. There is nothing that costs one cent and the main use of the coin is to make exact payments for cash transactions.
Finally, the coins are hoarded or discarded and are hardly ever redeemed by the Central Bank. The Banks statistics show that only around 20% of one cent coins are redeemed compared to over 90% of the one dollar coins. This means that the Bank has had to issue large volumes of one cent coins annually.”
Barbados will now join other countries such as Australia, Israel, South Africa, New Zealand, Canada and Nordic countries that have replaced or removed their lowest denominations
Consequent to the removal of the one cent coin businesses will now have to use a rounding system to have prices reflect the new dispensation. According to the CBB, “the prices of individual goods and services as shown on shelves or quoted on invoices will not need to be altered in any way. At the checkout or other point of payment, when that payment is being made in cash, the total of all the items to be paid for will be rounded up or down to the nearest .05 or increment thereof.
Totals ending in .01 or .02 will be rounded down to .00. Similarly, totals ending .06 or .07 will be rounded down to .05. Conversely, totals ending .03 or .04 will be rounded up to .05, and those ending .08 and .09 will be rounded up to .10. The maximum gain or loss for any single transaction is .02¢.
Non-cash transactions, e.g. those made using debit or credit cards or by cheque, will not be subject to rounding as exact payment can be made.”
IMPACT ON BUSINESSES
CEO of the Small Business Association Ms. Lynette Holder, when asked about the impact of the changes on SBA members, noted, “any change to the denominational coin structure will definitely impact the operations of small businesses. More importantly, small firms will need to fully understand the implications for the proposed rounding system that may very well see some of them losing revenue. The other area of concern is that the public is made fully aware of the rounding process, since some consumers may interpret any change to the price structure, as an attempt at price gouging and this may have serious implications for small operators.”
The CEO went on to state that “we are beginning the educational process by inviting representatives from the Central Bank of Barbados to address our members, but we want to encourage the relevant authorities to continue the educational process particularly in the public domain by making it easy to understand instructional literature available to consumers at all point of sale locations”.
Despite the withdrawal, the one cent coin will remain legal tender and can continue to be used by the general public to make exact payments when doing business on a cash basis.