Author: SME Chamber

The Family Business Act to help family-owned businesses survive was discussed during a business breakfast earlier on this week.

During his opening address, Minister for the Economy, Investment and Small Business, Hon Christian Cardona said that the Family Business Act is one of the initiatives that are being implemented by the Government to safeguard jobs, invest in enterprises and to boost Malta’s competitive economy. Its aim is to address obstacles and problems that those operating a family business face especially in instances of business transfers.  

Family businesses constitute 75% of Maltese enterprises and thus they employ a substantive number of people. Most of these family enterprises pass on to the second generation. However, during this transition, only 30% of these family businesses succeed and only 10% make it to the third generation. For these reasons a committee was then set up  to create a legal framework on which family business owners and members could plan and affect their transfer of business.

In order to have an efficient and effective legal framework, widespread consultation has been carried out. Amongst other things, the Family Business Act will include a clear definition of what constitutes a family business. This will control abuses and is a very important initiative considering that family businesses registered under this Act will be eligible for tax incentives.

Dr Nadine Sant, Legal Advisor to the Economy Ministry,  highlighted  that the structures of family businesses, the vast majority of whom are micro-enterprises, are often poorly defined.

Dr Sant explained that the proposed Family Business Act would aim to encourage family-owned businesses to register themselves, who occupies what position, the actual ownership structure, who has voting rights and decision-making rights. These will have to be clearly established.

The draft act defines family businesses as those owned by at least two members of the same family, although a small minority stake by non-family members is permissible.

A structure where one family member owns 99% and the other owns the remaining 1% will not be deemed acceptable for the purposes of the act, in part to ensure that other family members would have a say and an interest in the company’s wellbeing but also to encourage the transition from one generation to the next during one’s lifetime.

Malta Enterprise Head of Incentives Administration Karl Herrera said that registered family businesses would qualify for certain assistance and benefits.

Many of the proposed incentives involve the modification and extension of existing schemes, including increasing the guarantees that can be provided through the Micro-Guarantee Scheme, extending special benefits provided to start-ups under the MicroInvest scheme to family businesses, and providing advisory services that are specific to the needs of family-owned businesses, including legal and accountancy services related to succession and the services of an arbitrator to address any possible disputes relating to the transfer of assets.

GRTU would like to take the opportunity to thank Hon Cardona for involving the  GRTU as one of the main stakeholders which has worked on the legal framework of the Act in conjunction  with other stakeholders which have worked on the Family Business Act.  

The next step is for Parliament to debate and ratify the Family Business Act and next to encourage family businesses to trust the legislation and register.

GRTU has replied to a public consultation by MEPA on the Guidelines for Outdoor Catering Areas on Public Open Space.

While welcoming the consultation, GRTU has however suggested that this should be regarded as an initial step and once concrete proposals are in place MEPA should carry out a more in depth consultation explaining in detail the policy changes that are envisaged and any proposed change in procedures.

GRTU does however in principle agree with the objectives outlined by MEPA. We believe that a clear set of objectives is essential to implementing a system that is fair to all the stakeholders involved, including the commercial establishments. GRTU feels that this element of fairness is currently lacking because today, due to a number of reasons, different commercial establishments benefit from different permits when it comes to tables and chairs placed on public open spaces. This variation does not only apply in cases where establishments are found in different localities but also between establishments that are situated next door to each other. GRTU therefore believes that whatever guidelines are established they must be clear and available to any commercial establishing holding the relevant license.

One of the main problems emanating from the system today is that a large number of entities are involved in the decision of permitting and these entities serve the commercial establishments with different interpretations and points of view, which in actual fact makes the acquisition of a permit very time consuming and difficult. The current bureaucratic system should be replaced with a one-stop-shop system that still incorporates the views of all the stakeholders however is able to act according to a clear set of guidelines that limits the level of interpretation, gives commercial establishments equal opportunities, as much as possible, and the permit is issued within a reasonable timeframe.

GRTU feels that when deciding on permitting, the one-stop-shop system should bring together all the stakeholders involved and this includes not only representatives of the various entities but also a business representative, such as a representative from the GRTU. The business perspective is normally lacking within decision-making structures and it is important that the new system caters for such a perspective. In addition the commercial establishment should also be given a right to appeal a decision and be granted an opportunity to be heard by an appeals board.

1. Competitiveness first: There are a lot of factors affecting the competitiveness of enterprises, these include access to finance, unfair competition as well as the regulatory environment. Enterprise competitiveness is still not given top priority. Environmental regulations heavily impact the competitiveness of European SMEs. This does not mean that the environment is not important but regulations need to be implemented in a manner that is sensitive to business and keeping in mind the competitiveness of enterprises when compared to enterprises outside the EU, which are direct competitors. 
2. Access to Finance: The issue of excessive interest rates and bank charges that heavily effect a country’s competitiveness is an issue in many European Countries and GRTU contends that the problem is very pronounced in Malta. GRTU emphasized that more finance facilities must be made available to SMEs and these must be affordable and easy to access. These funds must be made available to all local banks so as to encourage full participation. The Commission should however also facilitate the distribution of such funds to intermediaries apart from banks and encourage bodies that really have SMEs at heart to build the necessary infrastructure. 
3. The Small Business Act: The Small Business Act was a good paper exercise however it was implemented to different extents in the Member States because there was no legislative obligation on the Member States. The Small Business Act has not reached its desired results and a more aggressive stance is required.
4. Standardisation: Standards tend to be complicated to acquire as well as costly. Larger enterprises therefore fair better than smaller enterprises to acquire standards and making standards accessible to smaller business still requires a lot of effort at national level by the GRTU and at EU level by UEAPME.

GRTU is putting together its proposals for the replacement of the despised eco-tax – a promise made by the government in the last Budget – but there are still numerous hurdles.

The tax has to be removed by September 2015.

The issue has been delegated to the Environment Ministry, which will also have to find a way to put into force the environmental contributions Malta should be imposing through the Waste Electrical and Electronic Equipment (WEEE) Directive.

This tax will apply to everything that operates with either electricity or batteries, from white goods to toys, from sports equipment to power tools. The new system will cover hundreds of items, a considerable increase compared to the eco-tax.

The cost of the eco-tax imposed on products no longer made sense as time went on, as it did not keep abreast with technological advancements which saw IT equipment change drastically in weight, size and components. The extra cost imposed by eco-tax made Maltese businesses uncompetitive compared to purchases made abroad and from the internet, and to add insult to injury there was also no proof that the money collected was being used to take care of the environmentally-correct disposal of these goods.

It is estimated that the financial contributions imposed by the directive should be lower than those under the eco-tax regime – although the cost depends on a vast number of variables which are still being worked out. It might be more for some products: for example, it is expensive to collect refrigerant gas as well as the gas and mercury from the old-style cathode ray tube television sets and monitors.

So far, MEPA has issued a number of permits to carry out waste management related to WEEE, including to GRTU’s fully-owned subsidiary, Green MT. Those selling goods that fall under the directive have until June 2015 to join a recycling scheme or to present plans for how they intend to comply with the directive.

“We need to get moving as otherwise, Malta will not reach its recycling targets and it will be fined,” GRTU vice-president Marcel Mizzi warned.

He acknowledged that considerable numbers of items that fall under the directive were already being sold for scrap – for as much as €100 for a van-load – but since this disposal method is hardly in line with the directive specifications, it cannot be registered with the European Commission.

Other countries can focus on manufacturers and very large operators and easily meet the EU set targets. In Malta, entire logistical operations will be needed and pretty much all waste must be collected if we are to reach the targets.

“It might make sense for the different operators and permit holders to pool resources to make the operation more viable and cost-effective,” GRTU CEO Abigail Mamo said.

“Discussions with the different operators are ongoing and so far all options are still being considered, including exporting the waste.”

There are a lot of questions nobody seems to have the answer to yet. For example, one of the options is for the recycler to be paid by weight while the charge will be passed on to the customer by item.

Mr Mizzi said that GRTU has a fair amount of data about what was put onto the market and how much it costs to recycle.

“Perhaps I am making it sound easier than it actually is! With packaging, it was straightforward as we had only a few categories like paper and cardboard, or glass. Can you imagine working out the recycling cost for a car? You would have to look at the cost of recycling the metal, the bumper, the windscreen and so on …”

GRTU members hope that the WEEE Directive will help them to compete, by levelling the playing field when it comes to those who currently evade eco-tax, as well as by bringing their costs into line with those of overseas suppliers.

“But the only way to ensure that small items ordered online get into the recycling channels would be to intercept them through Maltapost, which does not seem to be an option unfortunately,” he said.

Identifying items on which the WEEE has already been paid is another problem.

“A number of our members want the WEEE cost element to show on the receipts as then the customer knows what he has been charged for. And it would be much easier to identify those who are cheating.

“My personal preference would be for retailers to buy stickers showing the tax that has been paid on that item – similar to the banderols showing excise tax paid on wine – but that poses logistical problems. Could you put ugly stickers on toys or mobile phones, for example? And some goods are sold in packaging and fixing a sticker only makes sense if it is on the product directly.

“Of course, that all depends on enforcement in any case. Enforcement by the VAT Department was one thing, but now that MEPA will be in charge it will need to step up its enforcement efforts. MEPA enforcement of the Packaging Directive already leaves much to be desired.

“GRTU expects guarantees that our efforts and those of our members are matched with proper enforcement by MEPA. GRTU would gladly carry out inspections and enforcement itself, but we have no executive powers.”

Source: ‘The Business Observer’ published on 12th March

Deputy Prime Minister Louis Grech and Parliamentary Secretary responsible for EU funds Ian Borg have this morning officially launched the 2014-2020 Operational Programmes for Malta. This following, what has been described as a very lengthy and intense negotiation phase with the European Commission.

This events marks the start of the implementation phase of the funds, and as a result we will start seeing the initial calls being pre-announced with immediate effect.

A total of €850M in funds is available for the coming 6 years for the country to achieve its vision as well as its EU 2020 targets.

€53M of such funds are specifically earmarked for SMEs and will include the investment in facilities targeted at businesses such as business parks and incubation centres as well as financial incentives for businesses.

In addition to this SMEs will also be benefitting from increased access to finance through the recently announced SME initiative. There are €15M in funds available to facilitate finance however this is still at early stages and more tangible information will be available later on this year.

The funds are divided into two programmes. The first programme OPI aims to further economic development, improve environmental sustainability and invest in a more social inclusive society. The second strand of funds OPII aims at investing in human capital to create more opportunities and promote the well being of society.

How will the funds be spent?

OPI

• Investing in research, technological development and innovation
• Consolidating investment within the ICT sector (incl incentives for e-commerce)
• Enhancing Malta’s competitiveness through investment in SMEs (incl business parts and financial incentives)
• Shifting towards a low-carbon economy (€57M for the RES in financial incentives for the domestic and private sector)
• Protecting our environment – investing in natural and cultural assets (incl tourism related incentives)
• Sustainable Urban Development (incl regeneration of public spaces)
• Shifting towards a more low-carbon transport sector (incentives for green transport)
• Investing towards a more socially-inclusive society (Health and Sport)
• Developing our future through education, training and lifelong learning (incl. Vocational Education and Training)
• Investing in a more environmentally-friendly society (Waste management, recycling, reducing the volume of waste going to landfills, waster quality, etc)
• Investing in TEN-T Infrastructure (Road projects)

OPII

• Investing in the employability and adaptability of human capital (employment incentives, job seekers and inactive people, family friendly measures and youth guarantee initiatives)
• Towards a more inclusive society (discrimination, vulnerable individuals, health and care)
• Investing in people through education, training and lifelong learning (early school leaving, illiteracy, enhance educational experience, tertiary education, update study programmes to meet the needs of industry)
• Building the institutional administrative capacity (Government, local councils and judicial reform)

GRTU will keep its members informed as the new funding opportunities become available.

GRTU President Paul Abela and GRTU Deputy President Philip Fenech attended this week’s business breakfast organised by The Malta Business weekly which was addressed by Opposition leader Dr Simon Busuttil.

During his speech Dr Busuttil mentioned that in the harsh international economic recession, Malta’s economy consistently registers the best economic growth rates along with Germany. For this to continue it is essential that businesses continue to compete and invest to get new customers. This will also allow the country to preserve its social model which combines Malta’s economic growth with the living standards and work conditions of the Maltese people.

On this matter GRTU President Paul Abela commented that the economy is still growing due to the fact that it is based on solid foundations, which did not occur in the last 2 years alone. This growth was nurtured due to the development in certain sectors such as the financial, gaming, aviation and the tourism industry. GRTU hopes that we will continue to register growth in the future, as only through growth can we create jobs and improve our living standards.

Mr Abela continued by stating that GRTU has been calling on the Authorities to address the problem of Access to finance for Small businesses. It is of concern that the Central Bank reported that in the previous year they witnessed a decline in lending to SMEs. Another problem that must be tackled is the high interest rates and bank charges that our banks are charging to local businesses. This is unacceptable due to the fact that the European Central Bank lending is 0.05 per cent and in Malta it is between 4 to 6 per cent. GRTU hopes that good reasoning will prevail, and the formation of the Development Bank and the SME initiative will also solve part of these problems.

Another issue mentioned by Mr Abela is the rent law which was passed in the past with both parties agreed to this law. GRTU feels that this law is harming family businesses and if it is not addressed and amended this could lead to Malta   losing most of the small business that will have their rents terminated by law.

GRTU President Paul Abela concluded his intervention by providing the results of GRTU retail survey which was launched earlier this year which highlighted that retail trade is decreasing. This can be due mainly to the results that online shopping is increasing more than 25 per cent. We do not suggest that this trend should be stopped but on the contrary we are trying to convince our members to better equip themselves by offering and investing in this service. It is also evident that the retail sector is being affected by unfair competition entering our island through imports by sea from Italy. GRTU has continuously urged the Government to intervene, and put in place a system that imposes the payment of the same taxes and obligations our members have to pay.

GRTU is participating in ETC’s initiatives aimed at integrating persons with special needs in order to support efforts of inclusion at the work space. The initiative which GRTU is taking part in is referred to as Sheltered Employment which involves tasks being undertaken by this group of individuals at ETC premises, or even if necessary on-site, and under the supervision of a qualified job coach. A group of six individuals have been offering their services at no cost to GRTU. This can also similarly be an opportunity that other employers take up.

It is an experience that is also providing both staff and public with a direct experience of understanding the skills of each person that irrespective of one’s situation can contribute positively to the workplace. As can be witnessed through the   following picture, any mass postal mail postal mail postal mail correspondence that you as GRTU members, have received in the past weeks, was prepared by this team of individuals.                                        

Apart from back-office work, other individuals under this program have also provided services to GRTU through telephone call tasks, office work and inputting of data. This service is not only a positive corporate social responsibility exercise that provides opportunities for inclusion and employment, but it is also free of charge. We therefore encourage interested members to contact GRTU if they are interested in an undertaking such positive experiences within their own company.

You are requested to contact GRTU on or 21232881/3.

The following is an overview of ETC’s initiatives in this sector which may be of interest.

Sheltered Employment Training

Sheltered Employment Training activities have the overall objective of enabling persons with a disability to easily integrate into the labour market through the simulating of a work environment. Through these activities 25 job coaches we will be assisting 150 persons with disability acquire employment skills. The Sheltered Employment Training Facilities is temporarily set up at Mtarfa (but will later move to Msida). However if the work cannot be outsourced to be done at the facility and if the situation so allows, the Persons with Disability can carry out the employment training tasks at the employers establishments (always under the eyes of the job coaches).

During the tenure of the project no payment is made for the work carried out as the employers would be providing the employment training opportunity. Of course if during the training itself the employer identifies a person or persons that he would be interested to offer regular employment to, the persons can leave the project and the supported employment model from the Bridging the Gap stage will kick in.

Supported Employment

ETC runs a pre-employment programme called Job Bridge. It is targeted for young persons with intellectual disability between the ages of 16 to 25 and who have completed compulsory education. Trainees will participate in a structured programme that caters for the acquisition of skills in three main areas ‘Employability’, ‘Social’ and ‘Independent Living’. During this programme trainees will be provided with various job tasters and will also participate in on-the-job experiences. By the end of the programme, through the supported employment method, the trainees should be ready to actively join the labour market. 

The Supported Employment Method means that following the completion of the vocational profile stage (where what the client wishes to do and is capable of, is established) the client will be first placed on a job taster (this is usually a few hours on a particular day. No payment is involved for the employer).  If this proves to be successful we will move on to the work experience phase (a number of hours for a small number of weeks.  No payment is involved for the employer).  In this phase the client is given a longer opportunity to consolidate on his wish to work in a particular occupation.  If the employer knows that there is a vacancy in the said occupation and is pleased with the output of the client ETC can kick in the Bridging the Gap Scheme. 

During this Scheme the client will attend the place of work for a number of hours for a number of weeks and will receive remuneration from ETC – once again there will be no direct cost to the employer.  Finally there will be formal employment, usually on part-time employment basis.  Employers employing a registered disabled person are exempted from paying their national insurance contribution for three years.

For the purpose of supported employment ETC would be after a task or a number of tasks that the person can engage in rather then a full occupation.  As part of the service ETC can also assist in identifying the tasks.  Moreover during all this process the client will be assisted by a job coach to make sure that the client knows well the work he needs to carry out.  The Job Coach also supports the employer by firstly being responsible for the on-the-job training of the client and secondly to address any concerns that the colleagues of the person to be placed, may have on the person’s ability to carry out the work assigned to him.  Once the job coach is satisfied that the client can work on his own without the job coaches supervision, s/he will leave the employer’s workplace.  If however something comes up and the employer needs the services of the job coach, the employer would still have access to the job coach.

Mainstream Recruitment Services

This is the normal recruitment service we offer with the difference that if the client is a person with disability, before formal employment we can make use of the Bridging the Gap Scheme. Employers employing a registered disabled person are exempted from paying their national insurance contribution for three years.

Other Services

There a number of other similar services. These may also include rehabilitated former substance users and former prison inmates.

Pharmacies are currently faced with a request by the Authorities to increase opening hours so that the consumer would be better served. GRTU has found that not all pharmacies agree with such a request however the absolute majority are ready to increase their opening hours as long as this is comprehensible and where they feel it will make a significant contribution to giving a better service to their clients.

A survey commissioned by Browns Pharmacy has shown that consumers are very satisfied by the level of service offered to them by the Pharmacies. Understandably however, when asked if they would like the service to be extended, respondents replied in the positive.

Pharmacies that are against extending their opening hours mostly are concerned on the viability of opening during extended hours, and this is more pronounced in certain areas of Malta.

Finding a happy medium between the requirements of consumers and the realities of pharmacies is not an easy task. The pharmacies however agreed that the roster could be extended to cover Saturdays, Sundays and Public Holidays, including Christmas and New Year, so that pharmacies that are on duty, according to the roster, would open the extended hours. In addition to this and to increase the viability of opening on extended hours, all pharmacies, including those within Special Designated Areas would fall within the roster. In order for the initiative to make sense the districts would need to reorganized so that consumers are reached better and we decrease the chances of overlapping.