Hello, Mr. Chair, can you hear me?
Evidence of meeting #21 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was industry.
A recording is available from Parliament.
Evidence of meeting #21 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was industry.
A recording is available from Parliament.
5:15 p.m.
Liberal
Sean Fraser Liberal Central Nova, NS
Thank you very much.
Before I start my questions, are questions for Mr. Kelly now off the table?
5:15 p.m.
Liberal
Sean Fraser Liberal Central Nova, NS
Okay. I will have to adjust on the fly, as the case may be, and perhaps follow up with him another time. I'll turn first to Mr. Lowe from the Cattlemen's Association.
I had a chance to meet with some of your members, who made the point about extending some sort of price insurance that exists elsewhere in the country to different regions and, as you mentioned, Atlantic Canada. One of the things I'm curious about is that the mechanism doesn't necessary contemplate the kind of disastrous scenario we're facing this season, with a complete drop in the market right across the board.
I'm curious. If it's a member-paid-for program, would it have the resources to self-finance any kind of payout on a massive scale, which we would be seeing this season?
5:15 p.m.
President, Canadian Cattlemen's Association
No, not with the current premium structure, the reason being that nobody's going to take it out. Nobody's going to take out the insurance, because the premiums just cost too much money. It doesn't make sense.
The increase in the premiums is caused completely by the volatility in the marketplace caused by COVID. You see that the cattle market did exactly the same thing as the stock market. Futures prices in cattle markets collapsed.
5:15 p.m.
Liberal
Sean Fraser Liberal Central Nova, NS
Is this the kind of thing that you're suggesting might be a good measure to implement as we look at the medium-term recovery, rather than the emergency response?
5:15 p.m.
President, Canadian Cattlemen's Association
If the emergency part of this is that cow-calf producers.... There are three parts to the price insurance. There's the fed, the feeder and the cow-calf. For cow-calf producers right now, calves are being born, and there's a deadline for when they can insure their calf crop as they wean next fall, and that's the end of May. If we can get the volatility out of the premiums and the cow-calf producers can insure their next year's calf crop, that puts a stability into the market.
After what we've seen happen in the last month, I would suspect that if the premium were a reasonable number, every cow-calf producer in the country would insure their calves, though you don't know and governments do backstop this, and that would make it a lot closer to being self-sufficient.
5:15 p.m.
Liberal
Sean Fraser Liberal Central Nova, NS
Okay. Thank you for that.
My next question is for Mr. Lachaîne. I have a question about the start-up community. I take your point that there are groups of people who can't demonstrate a loss of revenue that would qualify them for the wage subsidy if they had no revenue in the first place or, in many cases, did not even exist last year. I think the new businesses that can demonstrate revenue month over month have somewhat been taken care of, but you've quite rightly pointed to some of the highest-growth-potential firms that exist in Canada.
When I've reached out to members of the start-up community, one of the points they've made to me is that not all businesses are without money right now, because they've had a pre-existing angel investor from before crisis. The VC community, however, is looking forward in the short term with a lot less confidence than it had even just a couple of months ago.
For these firms that are not without cash but are looking for their next round of funding from a pool of investors who are just not there, I'm wondering whether the better approach might not be a revenue-based wage subsidy, but some sort of a program that would provide grants to companies in the innovation space. Or perhaps they could even look at BDC, which is fairly plugged into this network, in taking equity stakes in companies, maybe not with a view to hanging onto them forever, but to demonstrate to the community of investors that, hey, BDC has confidence that the start-up community can exist.
Would a program of that nature fill the gap more effectively than a wage subsidy if it's a market-based approach that would give an opportunity for start-ups with real viability and potential for success to get access to further working capital?
5:20 p.m.
Chief Technical Officer, Sentiom Inc.
On your first question about how the private investors' rounds work, typically start-ups will raise money for 12 to 24 months but typically around 18 months. Any start-ups start to try to raise money about six months before they're out, because we typically aim for growth and not profitability in the first few years.
This means that the impact on the start-ups will be that they won't be able to start their rounds in the next six months. For anyone trying to close a round right now, it will be really, really tough. Especially in the early-stage companies that we call pre-seed and seed rounds, this will be very difficult. The other problem with all of those programs is that these companies are going to run out of money after the program ends, because the programs are available right now and the problem will come in many months.
The second part of your question was about the BDC. BDC was very helpful with my previous companies; I've worked with it. It has two parts, and one is the banking side. As I said, most of its programs are for companies with two years or more of revenues, companies that are profitable. The other side of its business is BDC Capital. It invests but it mostly invests in funds of investors. It sometimes co-invests with other investors, although keep in mind that 97% of start-ups do not have capital—outside of the moms and pops that have their own private capital—and fewer than 1% receive venture capital, VC.
Putting more money into BDC Capital would help the start-ups that already had some money, but as I said, the ones that are in the first two years of development are all out. They cannot get access to this money. The big problem with the programs is that there's a big delay in getting the programs out, the money in, etc., and all we're doing in the meantime is not working on growth but working on trying to fit in the different programs and figuring out how we're going to make this work.
What we would like to do right now is to work on growth and to have a fair playing space so that the incumbents, the existing companies, number one, would pay the same taxes that we do—if you read the news, you hear that Netflix and others are not necessarily paying all of their taxes here—and, number two, have a level playing field so that our competitors, who might have more than two years, are not subsidized when we are not.
5:20 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you. We'll end that one there.
We'll turn to Mr. Cooper and then we'll try Julie Dzerowicz again.
Mr. Cooper, you're on.
Is Dan Kelly's translation working, Clerk?
5:20 p.m.
The Clerk
No, Mr. Chair, the situation remains the same.
5:20 p.m.
Liberal
The Chair Liberal Wayne Easter
All right, we'll have to leave Dan out of this round and perhaps invite him back another day.
Mr. Cooper, you're on.
5:20 p.m.
Conservative
Michael Cooper Conservative St. Albert—Edmonton, AB
It's unfortunate that Mr. Kelly isn't there because all of my questions were for him, but since he isn't yet available, I know that Mr. Elsaadi hasn't had a chance to chime in.
He talked about not just the immediate term but also some of the longer-term challenges for small businesses. I invite him to chime in if he has any specific policy recommendations on getting businesses through not only the short term but also the intermediate and longer term.
5:25 p.m.
Business Owner, As an Individual
Thank you.
I believe that Dan was talking about rent deferral. We're always talking about big companies. For small businesses now in Canada, I wish that the Canada Revenue Agency would go through their T4s or their revenue. Not many of them make more than $50,000. In the short term, it's great that we're given the $2,000, but as a business owner, I can tell you that $2,000 does not pay for my insurance. I have businesses, insurance, cars. It doesn't help.
So I think the government should work directly with the landlords to give them subsidies for rent and work with them on a one-year proposal. If any business opens in Ottawa or anywhere in Canada and cannot pay its rent, it cannot survive. You're going to have 40% to 50% of those businesses closing their doors?
I'm talking now about small businesses. We're all afraid about what's going to happen when we open up again, with social distancing. What does that mean? I went to the bank yesterday. They made me stand six feet away. I was not able to get in. Most of these restaurants have 100 chairs. You're going to drop that to 50, or most of the services may not be able to survive, and there are the big things you have to think about, for the long term. Is the world going to open its borders? Is the United States going to open its border 100% for us? Is China going to open its border? Are the Mexicans going to visit? This is a big question the government has to consider, to help these people survive for the next year, at this specific point.
I talked earlier about businesses being able to survive. In Ottawa I know 20 to 30 businesses that pay rents of between $6,000 to and $7,000. They pay their rents and they get their salaries as dividends. This $40,000 program is not helping them.
5:25 p.m.
Business Owner, As an Individual
And how are they going to survive if they continue like this? There are no visitors. I don't know if members of Parliament will be coming back to the city. I'm talking about my city, Ottawa. If they come back, will they be social distancing? Is a government worker going to go back to work? Usually, before, they would sit on the street; they would talk to people.
So we need to talk about the long term more than the short term. For the short term, maybe some businesses have the money to survive, but what's going to happen in the long term?
5:25 p.m.
Conservative
Michael Cooper Conservative St. Albert—Edmonton, AB
Right.
Do you as a small business person have any recommendations on the rent subsidy and its delivery?
5:25 p.m.
Business Owner, As an Individual
I think the rent subsidy should go directly to the landlord. It should not go to the businesses, to the tenants.
5:25 p.m.
Business Owner, As an Individual
It should go directly to the landlords. I've had this conversation with a few people. The government should work strictly with the landlords. Look at their payment—what's their mortgage payment? If they have a huge mortgage payment, at least cover their mortgage payment and give them a percentage until this crisis is over.
I know that some of the gentlemen mentioned that some rents are big and some are small, so to be fair with them, you have to really work on a policy, because nobody can survive. You should not work with individual businesses. You should work directly with the landlords about the rents and work with the businesses with another long-term plan for how they can survive.
With regard to giving the $2,000 for students or for workers—
5:25 p.m.
Business Owner, As an Individual
—I have a few part-time workers. They make $200 or $300 every week. Now they're getting $2,000. Do you think I'll be able to bring them back? It will not be easy to bring them back to work.
5:25 p.m.
The Clerk
Sorry, Mr. Chair. I just want to say that I think we're okay right now to provide interpretation services for Mr. Kelly. We were able to connect with him differently.