Jamaica has just extended its BEST Cash grant for another quarter to the end of this year, for a total of nine months. The programme pays the salaries of local hotel workers, up to a cap, using the company payroll as a pass-through mechanism for government financing, with the objective of workers retaining their employment and connection to the company. The programme has been extremely important to the survival of the local industry.

Barbados has now taken a different approach. At the end of September, the Eastern Caribbean country launched the Barbados Employment and Sustainable Transformation Programme (BEST), the architect of which is special envoy to the Barbados prime minister, global economist Avinash Persaud. The Barbados programme is focused on re-engagement of workers in the tourism sector, which it correctly observes cannot recover on its own before a vaccine or treatment for COVID-19 is widely distributed.

The programme was announced by Barbados Prime Minister Mia Mottley in her address to Parliament in September during which she noted that “Tourism accounts for 45 per cent of Barbados’ GDP [gross domestic poduct]. It employs a significant amount of our workforce. Some 15,000 people are employed directly in the tourism industry, while a further 32,000 workers are estimated to be employed in tourism-related jobs and services”.

She observed that the BEST Programme budget of BBD$300 million for hotels and tourism facilities made it “the largest fiscal stimulus package being offered to the country”.

Under this innovative programme, the Barbados Government will make an investment in tourism firms by way of grants and an investment in preference shares which will enable these companies to re-engage their workers at 80 per cent of their normal pay (the companies would become responsible for paying them up to two years), cover a limited voluntary separation package (VSEP), and make investments in the transformation of their tourism plants.

A critical part of the programme is comprehensive “tourism specific” training, to raise quality and productivity. Companies can choose to pay severance to their workers in a new expedited process (saving both the company and the social security scheme from an onerous severance liability), or accept grants and share investment to re-engage their workers, train and invest, repaying the investment when profits return.

To encourage companies to employ whatever cash they have, ahead of accepting Government investment, the Government will match 100 per cent (120 per cent if in US dollars) of whatever proportion of wages, VSEP or investments the company can contribute, in the form of a grant, to a maximum of $500,000 per property, and no more than two properties per ownership group. Only the balance of the wages, VSEP and investment plans will therefore be funded by the sale of BEST preference shares to the Government.

The BEST share is not debt, but an equity investment by way of non-voting, redeemable, convertible preference shares which the issuer or company may redeem at any time without penalty. The Government is also able to sell the shares at any time, with the company having the right of first refusal to buy the shares at a maximum price of their face value. The companies’ owners and shareholders cannot withdraw any dividends until the BEST shares have been fully redeemed or repurchased (the definition of dividends will include any additional fees and levies paid to related parties). There can be no asset sales or increase in management compensation (other than cost of living adjustments) without the prior approval of the holders of best shares.

For the first two years the BEST shares will carry a zero per cent coupon, and after year two the BEST shares will carry a two per cent coupon paid out of profits where they exist, rising to five per cent, and seven per cent after year seven. While the dividend is not cumulative, if a company has not paid the coupon on its BEST shares in any two years out of four, the holder of the BEST shares will be entitled to convert their BEST shares into the ordinary voting share capital of the company at net book value, with a fair value adjustment, as determined by external auditors.

Of particular importance, as a condition for funding investments, the company must also submit a Greening and Digitisation Investment Plan, meaning switching to renewable energy, adopting water-saving/building-resilience strategies, and digitising all its services and processes.

In a short interview, Persaud noted that in designing the programme “the elephant in the room is that nobody in the tourism sector knows when the current COVID crisis will end. This has been stopping people making investments. We have made a commitment that irrespective of whether the crisis ends this month or next month or next year or thereafter, we will fund this programme”.

He added, “When we speak to the operators, we learn there is no shortage of demand, as expressed by bookings. However, the bookings can disappear tomorrow for medical reasons.”