|The Bahamas Investor Magazine|
January 19, 2012
January 19, 2012
Entrepreneurial innovation is often cited as being the lifeblood of an economy. In The Bahamas various innovative sectors are being explored to help diversify the island nation’s economic base and lessen the reliance on tourism and financial services, which have been the stalwarts of growth over recent decades.
One such avenue of innovation is alternative energy. The Bahamas relies heavily on fossil fuels imports, which are generally expensive and subject to enormous upward price pressure depending on global geopolitical circumstances. According to a 2011 economic and financial developments report by The Central Bank of The Bahamas, the Bahamas Electricity Corporation’s (BEC) fuel charges grew by 14.3 per cent in August and by 41 per cent in 2010.
Efforts are being made to find energy alternatives and reduce the burden on consumers. Last September, BEC signed a Memorandum of Understanding with Hawaii-based renewable energy firm Ocean Thermal Energy Corp (OTEC) to develop two of its plants in The Bahamas to deliver ocean-powered electricity.
Solar power is also an obvious choice for a nation that gets on average 13 hours of daylight per day, and several local and international companies are looking to develop affordable solar panel systems for commercial and residential use.
Attempting to carve its own niche in the energy market, Bahamas company Green Fuel Enterprises has chosen a different route, spearheading efforts to introduce renewable biofuels as a viable alternative to fossil fuels.
“Importing fuel doesn’t create anything for The Bahamas except costs,” says Wilfred Smith, the head of the company. “Oil and gas is the largest industry in the world, with some $7 trillion in annual [worldwide] sales. The Bahamas spent about $1.1 billion in 2008 importing fossil fuel.
“We have to look at what we can do that is viable, practical, bankable, exportable and offers an opportunity to diversify the Bahamian economy and create a third industry.”
Although still in its early stages of development, Green Fuel Enterprises is looking to manufacture a biofuel derived from an unnamed “non-food stock, natural crop that requires very little to no fertilizer, little irrigation and works well in brackish water.”
The company started in 2009, but the idea began five years prior to that when Smith attended an energy conference and met Al Binger, energy science advisor for the Caribbean Community Climate Change Centre.
“We started talking about the opportunities in the area of renewable energy. As a business person, I could see the potential,” says Smith.
However, the entrepreneur still needed to find the right niche within the sector upon which to base his business. “Everybody is into solar and there’s also wind, geothermal and waste-to-energy. The challenge from a practical business point of view is to determine what is the most viable, which is the most ‘drop-in’–meaning an easy replacement for existing utility infrastructure.”
In Smith’s opinion, biofuels are the answer.
“We have to make The Bahamas self-sufficient in all its energy needs and biofuel can do that.”
Currently looking for investors, Smith has been busy putting together a business plan and amassing key data to back his argument. “We’ve done tests already on four islands in The Bahamas that are ready [for production],” he adds. “We have the capability to replace all fossil fuel imports. Right now a barrel of oil is about $90. Depending on volume, our production costs will be $19 a barrel.
“This is an export-quality fuel and with the ability to export this, we can create massive employment, [self-sustaining] wealth and, of course, it is the best solution to fight climate change by not using fossil fuels at all.”
At press time, Smith and the other principals at Green Fuel Enterprises’ biofuel programme were in the process of submitting a proposal to the Inter-American Development Bank (IDB) for funding.
New ideas for an old industry
One sector that thrives on innovation is agriculture.
Marikis Alvarez, representative for the Inter-American Institute for Cooperation on Agriculture (IICA) notes that the agriculture sector in The Bahamas “has huge potential for a revival of niche markets.”
The current absence of competition in this sector provides an opportunity for Bahamian entrepreneurs to easily enter [this field],” he explains, adding that, currently, the agricultural industry contributes less than three per cent to The Bahamas’ gross domestic product (GDP).
Several Bahamian agribusinesses have already made their mark in the industry. Goodfellow Farms in southwest New Providence has successfully combined agriculture with tourism at its working farm, country produce store and restaurant. Other success stories include Lucayan Tropical, which uses hydroponics to grow fresh produce, and Abaco Big Bird Poultry Farm, which raises organic chickens that are 100 per cent free of hormones and steroids.
With the rising cost of food imports, Alvarez stresses that more innovative measures are needed to boost The Bahamas’ agricultural industry.
“There are some new innovations being explored in The Bahamas,” he says, citing other new initiatives in organic agriculture in Abaco, expansion of greenhouse production, and the introduction of new fruit and vegetable crops and livestock including sheep and goats.
“With increased private sector involvement and an enabling environment, these will definitely have potential for export,” Alvarez adds. “Rising food prices are tightening the squeeze on populations already struggling to buy enough food. So, how should we meet this increased demand? Through innovation for productivity and competitiveness.”
Innovations are also needed to diversify the country’s manufacturing industry.
One manufacturer, Cariluxe (Bahamas) Ltd, supplies revolutionary maintenance-free, sustainable building materials throughout the Caribbean.
“We had several meetings with local architects during the first couple of years [of business] to introduce new building materials, primarily products with the look and feel of wood, but engineered to last and withstand Mother Nature’s challenges in the Caribbean environment,” explains Cariluxe head Johan Rostad. “After several years of product introductions, we created good sales and many of the architects and developers recognized the importance [of these materials], even if they were cost-prohibitive once landed in Nassau.”
Because the products carried a freight cost, Rostad says it didn’t take long for the company to realize the potential of setting up a millworks in The Bahamas.
“Our motivation was fuelled by the fact that the lower and middle markets had been priced out of being able to afford these types of materials, and they were the markets that could benefit greatly from the reduced costs if we set up a synthetic millworks factory on the island.”
In order to bring this to fruition, Cariluxe Bahamas had several meetings with the local government and garnered support from the Bahamas Agricultural and Industrial Corporation (BAIC) which recognized Cariluxe’s potential. Since then, Cariluxe Bahamas has constructed a new warehouse location in Gladstone Road Agro-Industrial Park and is exploring a potential millworks project in North Andros.
For The Bahamas to fully realize the potential for innovation, it also has to look at emerging industries, such as the fast-paced Internet technology and e-commerce sectors. “The time frames in e-commerce are so short, you have to innovate perpetually and stay on top of things,” says Damien Forsythe, one of the founders of the Bahamas Internet Association.
Bahamian born Forsythe, who holds a degree in e-commerce from the University of New Brunswick in Canada, decided to start the Bahamas Internet Association in 2009 after he realized that an Internet industry body did not exist in The Bahamas.
“When I returned to The Bahamas, I quickly realized that the e-commerce industry was very small and scattered,” he says. “It was difficult to find any sort of cohesion or trade meetings or governing body to get involved with. Even as a Bahamian, it was hard to make contacts.
“I also thought that an industry body would make it much easier and safer for expatriate Internet professionals, who may have been thinking about moving to, or investing in the Bahamian online industry.”
Since it started, the Bahamas Internet Association has attracted about 100 people representing a mix of web designers and programmers, small business owners and executives of large companies who are interested in learning more about e-marketing and e-commerce. The association has also hosted a few international speakers, including Jon Cross who is senior project manager at Google’s UK?headquarters in London.
“I think The Bahamas has the potential to become an offshore tech industry hub, but it will take very aggressive and very innovative policy from the government, educational systems and the private sector,” adds Forsythe. “If you have the technology and policy in place, it’s an area where someone can profit and advance themselves. Innovation is very important for The Bahamas–it’s what drives our economic growth.”