Prime Minister on Bananas - January 27, 2000

My fellow St. Lucians, Good Evening.

Over the past few weeks, developments in the banana industry, some of them arising out of an initiative by the St. Lucia Banana Corporation to sell its bananas outside of WIBDECO, have occupied the attention of our country.

Mamay Sent Lisi bonswe. Se jou pase nou ka tan pil difewan kalite pawol asou ki sa ki ka fet an industry fig la. Oswe-a, mwen vle pwesante la vewite sitiwasyon-an. Nou kay kose asou twavay WIBDECO ek posizyon gouvedman Sent Lisi.

It has been suggested in some unenlightened circles that the non-interference of the Government in the affairs of the private companies that now manage the banana industry amounts to "incompetence and foot dragging". It has become necessary, therefore, for me to explain the workings of the external environment that drives the banana industry, outline the numerous steps that have been taken by this administration to ensure that our banana farmers receive a larger share of the profits of the industry, and state the Government’s position on the present impasse between the SLBC and WIBDECO.

Let me start with the environment in which the industry operates. The Windward Islands banana industry comprises the Dominica Banana Marketing Corporation, the St. Vincent Banana Growers Association, the Grenada Banana Cooperative Society, the St. Lucia Banana Corporation, the Tropical Quality Fruit Company, the recently formed Agricultural Commodity Trading Company, and the Windward Islands Banana Development and Exporting Company (WIBDECO). WIBDECO, of which much has been said in recent months, was formed in 1994 to function as a trading company for the banana industry. It is a two-tier company comprising WIBDECO Windward Islands and its wholly-owned subsidiary, WIBDECO (UK). The shareholders of WIBDECO are the Governments of Dominica, Grenada, St. Lucia, and St. Vincent and the Grenadines, which each own 12.5% of the shares, the Dominica Banana Marketing Corporation which owns 13.2%, the St. Vincent Banana Growers Association, which owns 15.6%, the Grenada Banana Cooperative Society, which owns 1.2%, and the St. Lucia Banana Corporation, which owns 20% of the WIBDECO shares. The fact of the matter is that the largest single shareholder in WIBDECO is the SLBC. Yet we hear statements that suggest that the Government of St. Lucia is the major shareholder in WIBDECO. It is no surprise that our industry presently has to grapple with the effects of years of bad management when those who once managed it, appear now to be so ignorant of its operations.

In 1996, WIBDECO borrowed 20 million pounds sterling from the Allied Irish Bank to purchase a 50% share of Geest Bananas. It did so through a Joint Venture comprising Windward Isles Banana Company UK Ltd and Windward Isles Banana Company Holdings (Jersey) Ltd. The Irish Company, Fyffes Plc. holds the other 50% stake in Geest Bananas.

This indicates, very clearly, that in matters pertaining to WIBDECO, the Government of St. Lucia has no greater influence than the Governments of the other Windward Islands, and in terms of shareholding, even less influence than the St. Vincent, Dominica and St. Lucia Banana companies. Therefore, the Government of St. Lucia, contrary to what some may believe, cannot compel or force WIBDECO to do anything, if the majority of the shareholders do not agree. Where Geest Bananas is concerned, the Government of St. Lucia has no real influence, as Geest Bananas is owned jointly by Fyffes and WIBDECO. Again, therefore, it must be understood that the Government of St. Lucia cannot tell Geest Bananas with which banana company it should or should not trade.

This takes me to the question of privatization and the steps that have been taken by this administration to allow the banana industry in St. Lucia to operate in a commercialized and competitive environment.

In 1997, in fulfillment of a promise that we gave during our election campaign, the banana industry was privatized. This involved the repeal of the SLBGA Act, which restricted the ability and the right of banana farmers to trade with whosoever they chose. It also involved the clearing of the huge debts that had built up over years of poor management and political interference and patronage in the industry. The St. Lucia Labour Party Government absorbed over $44 Million worth of debt from the banana industry. And we must not forget that this debt was amassed during the stewardship of those who now dare to speak of "incompetent handling". Recently, the Government cleared a further $700,000 worth of trade payables that had been left unpaid during the days of the old SLBGA. This represents the last of the outstanding liabilities of the former SLBGA. In effect, we have done for our farmers what no other Government has dared to do.

The wisdom of the decision to privatize the industry has been confirmed by several reports and studies that have been commissioned on the Windward Islands Banana Industry by the European Union, our partners in the development of the industry. Permit me to quote from a report prepared by Robert Kruger for the European Union in September 1998 on the subject of the Restructuring of the Windward Islands Banana Industry. Kruger states, "Major structural and organizational weaknesses have left the industry out of touch with today's competitive realities". He goes on to say that "the only way to establish a lean, efficient and competitive industry is through letting farmers take control of their own destiny", and that "privatization must be a part of an overall strategy aimed at turning the tide". A 1998 Review of the Institutional Structure of the Windward Islands Banana Industry, undertaken by Deloitte & Touche Europe Services, recommended that the Growers Organizations be reformed, and that Governments should not retain a shareholding in part of what is, in total, a commercial enterprise. Both these reports therefore, in mid 1998, recommended to the Governments of the Windward Islands that they privatize the banana industry. Yet, even before these reports had been written, this Government had already completed what others were being advised to do.

Even more recently, in July of last year, the Governments of the Windward Islands and the Banana Donor Group, which comprises the European Commission, the Embassy of France to the OECS, the British High Commission, the British Department for International Development, the Caribbean Development Bank, and the United Nations Development Programme, signed a Windward Islands Action Plan to Achieve a Competitive Banana Marketing Structure. This Action Plan committed the Governments to implementing activities in nine areas that our international partners thought were important to ensure the sustainable future of the industry. The Plan also served as an important requirement for accessing funds under a new European Union Programme of Assistance.

The Joint Consultative Group that was established to review the progress made by the respective Governments in achieving this competitive banana marketing structure, at its most recent meeting, held on the 10^th of January 2000, gave St. Lucia an average score of 94% on the progress made in the nine indicative areas. In four of the areas, St. Lucia received a 100% rating. A comparison with our neighbours reveals that Dominica’s average score was 37% and St. Vincent’s 48%. Not much more needs to be said on this issue, except to inform that on the basis of our progress in the banana industry, the European Union has agreed to disburse to St. Lucia almost $24 Million a year, for the next five years, for rural economic and social development. This money will be available to St. Lucia as of April of this year, and the Government will indicate in the Budget how it proposes to spend the money.

On the ground, we have put in place the necessary institutional framework for a commercial trading environment. In June of last year, a Banana Industry Trust was established to oversee the implementation of sound farm practices in the industry and to manage the financial resources and investments in the industry. This broad-based group, which comprises representatives of the local banana companies, the Chamber of Commerce, the Banking Sector, the Government, and the European Commission Delegation, has made it possible for better management of the financial resources that are at the disposal of the industry. This is another good example of the emerging cooperation between the banana companies, the private sector and the Government.

Between 1998 and 1999, over $22 Million worth of funds were disbursed to St. Lucian banana farmers for certification, purchase of inputs, construction of mini wet pack sheds and other on-farm activities. Over the next two years, in excess of $24 Million will be made available to the Banana Industry Trust, for on-lending to banana farmers, for irrigation and drainage works on farms. Yet we hear those who ought to be better informed speak of credit systems being limited. We also hear loose talk of assistance schemes being available, since 1996, for irrigation. Apparently, those who managed the industry for thirty years have only now discovered the importance of irrigation. Be that as it may, it is only this year that financial resources have become available for irrigation.

In an effort to provide greater support for our banana farmers in the post-harvest handling of their fruit, the Government has embarked on the construction of three modern multi-purpose Inland Reception and Distribution Centres. These IRDCs, as they are called, will cost over $12 million to construct, and will result in a 3% improvement in fruit quality, a $3.7 Million reduction in transportation costs to farmers, and a reduction in the average time between the harvesting and the cooling of bananas from 22 hours to 8 hours. The groundbreaking at the first of these IRDCs will take place in La Caye, Dennery within the next two weeks. The construction at the second center in Odsan is expected to commence soon thereafter.

The presence of more than one company purchasing bananas from farmers and offering credit to farmers has necessitated the drafting of Credit Legislation to address the problem of farmer delinquency. This legislation has been drafted by the Attorney General’s Chambers, circulated for comments, and will soon be debated in Parliament.

The Government has also addressed the issue of pest and disease control in the banana industry. On the basis of agreement reached between the parties, legislation has been introduced that will allow for equitable sharing of the costs of pest and disease control. The Banana Industry Trust has agreed to assume responsibility for the contracting of these services. This will result in an independent, more cost-effective system of pest and disease control for the industry.

All banana farmers, regardless of which company they choose to trade with, can now purchase all their inputs duty-free. The granting of concessions on all banana inputs to SCIC and the St. Lucia Agriculturists Association means that all farmers enjoy equal status in the St. Lucian industry.

We have also recognized the need to mitigate the many effects of the poor land use planning that characterized the banana industry during the 1980s and early 1990s. One of the most alarming effects has been the compromising of our water resources by unchecked and ill-advised cultivations in our critical water catchments. So, when we speak of irrigation, we must be aware that we are unable to irrigate vast areas of land because our watersheds have been damaged by poor land practices over the past two decades. It is in response to this that we have received funding from the European Commission for a Water Resources Management Project. This project will address the critical issues of watershed and groundwater protection.

Therefore, when we hear talk of the need for Government intervention and for regulations to govern the industry, and we review all that has been done to ensure that for the first time in its long history the industry operates within well-defined boundaries, we are left to wonder whether those who are making these calls are actually asking for the Government to take the backward step of denying our farmers the right to manage their own affairs. We will not revisit the horrible past.

When we hear glib, uninformed statements that there is drift and loss of morale in the industry, we must not forget that between 1992 and 1997, over 49% of our farmers left the industry. The fact is that we were not in office when production in St. Lucia fell from 132,854 Tonnes in 1992 to 71,397 Tonnes in 1997, or when over 2000 farmers turned their backs on the industry. Had it not been for the aggressive action of this administration in 1997 and early 1998 to move the Certified Grower Programme forward and introduce some measure of quality assurance, our banana industry would have long collapsed.

While we accept that production has fallen, this situation is not unique to St. Lucia. St. Vincent and Dominica both had declines in production in 1999. Surely, they have not privatized, yet their production dropped. While we accept that the drop in St. Lucia was greater, much of it can be explained by the intensive drought we experienced in 1999. So when we hear persons lay the blame for production drops on privatization, we realize that although this administration has attempted to remove the politics out of bananas, some still have not understood that this industry is too important for us to use it for petty political gain.

It is instructive that those who speak of production drops in St. Lucia conveniently do not admit that banana farmers in St. Lucia, because of privatization, receive more from their companies for their bananas than farmers in the other islands. Figures for the fourth quarter of 1999 indicate that while St. Lucian farmers received an average of over 45 cents per pound, farmers in Dominica received 35 cents, farmers in St. Vincent 42 cents, and farmers in Grenada 27 cents.

Fellow St. Lucians, when we took the decision to privatize the SLBGA, this Government understood that this would require changes in our approach to the industry. We recognized that there would be times when we would have to check our instinctive reaction to some of the developments in the industry so as to allow our farmers to develop and establish their own methods for managing their industry. The privatization of the banana industry has placed the onus on our farmers to find new ways of making more profits from what is, for many, a very profitable industry. And this fact must not be lost: there are some who are reaping large benefits while our farmers suffer. This situation is unacceptable, and must change.

It is precisely for this reason that we have repeatedly called for a restructuring of the marketing arrangements for Windward Island bananas and for the removal of all unnecessary layers in the production to marketing chain. We are not the only ones who see the need for this. In January 1998, in what has been called the Castries II meeting, the Heads of Government and the Donor Group agreed to conduct an exercise to identify areas and measures where cost reductions and efficiency improvements were possible in the marketing chain. Later, in July 1998, at the Castries III meeting, the Heads of Government, the European Commission and the rest of the Banana Donor Group, decided to conduct an analysis of all levels of the production to marketing chain, to identify all costs, overheads, and other commercial practices, and to introduce the necessary reforms to ensure that the highest possible percentage of the market price went to the growers. Later, in July of 1999, the Heads of Government and the Banana Donor Group agreed that a larger proportion of the market price for bananas should go to the farmers, and that this could be done by, among others, changing the roles of the institutions that are involved in the purchasing, transporting and ripening of fruit. Also at that meeting, the industry was asked to prepare a strategy to achieve a competitive, sustainable and efficient marketing structure. So, there can be no doubting the wisdom of our calls for a restructuring of the marketing arm of our industry.

The recent efforts of the SLBC to secure more profitable arrangements for the marketing of its fruit, must, therefore, be seen from this perspective. This Government believes that many of the functions currently carried out by WIBDECO in the Windward Islands can be carried out by the respective associations, providing, of course, that these associations operate in a commercial and competitive environment. This position is endorsed by a 1998 Deloitte & Touche institutional study of WIBDECO. Page 12 of this study recommends that in order to rationalize services and achieve cost savings, WIBDECO should maintain its UK presence and retain its export clearing and financial services, but should transfer most of its Windward Islands services to the banana companies or contract some of these services out to these companies. In other words, that WIBDECO should allow the banana companies to handle most of its operations in the islands and should concentrate its activities in the United Kingdom. This is what our Government has been saying all along. If there is any conflict between our Government’s position and the position of the WIBDECO Board, it arises from our acceptance of the findings of this report and the WIBDECO Board’s rejection of a British Government funded review of its operations.

We recognized, however, that due to our limited shareholding, we could not dictate the direction of WIBDECO. Yet, we needed to encourage WIBDECO to take a hard and honest look at its operations, and to do all within its power to pass a greater share of the profits from the sale of bananas on to our farmers. Therefore, we appointed as our Director on the WIBDECO Board, Ambassador Julian Hunte, who, in addition to having quite extensive knowledge of the workings of the local and regional banana industry, also understood the delicate nature of the diplomatic lobby to secure a future for the European Union banana trading regime. Ambassador Hunte would ensure that what we did locally matched what our diplomats and international partners were doing overseas on our behalf.

Since his appointment, Ambassador Hunte has worked tirelessly to secure a better arrangement for the marketing of our bananas. He has carried our brief for better shipping arrangements to help us, once and for all, see an end to the problems that have plagued the industry and caused such unacceptable financial losses to our farmers.

One of the persistent complaints has been the vexing issue of dead freight. Whenever there is a drop in production, fewer tonnes of bananas are exported. That is simple to understand. What is not so easy to swallow, however, is the fact that for years, our farmers have been charged for the empty space or dead freight in the ships, caused by this drop in production. While we recognize that the issue of dead freight is not just one of shipping, but also depends on accurate production forecasting, it is unfair for our farmers to bear the total cost of dead freight. Clearly, a solution to this problem must be found immediately.

The St. Lucian Government has also, through Ambassador Hunte, tried to obtain more transparency in the determination of the price paid to our farmers. We have to be certain that, consistent with our agreements with the European Union, the highest possible percentage of the market price goes to the persons with the highest stake in the industry – our hard-working farmers.

It is on that basis that I asked Ambassador Hunte to accompany the SLBC to the United Kingdom to hold talks with WIBDECO, Geest and Fyffes, in an attempt to secure a more profitable Sales and Purchase Agreement that would succeed the present contract that expires after February 6, 2000. There is hope of the possibility of an agreement that would still allow SLBC to sell its bananas within the formal marketing structure for Windward Islands bananas. It is my understanding that WIBDECO sells 78% of its bananas to Geest, 16% to Fyffes, and 6% to the Jamaican Producers. Therefore, an SLBC sale to either Geest or Fyffes would not harm WIBDECO’s United Kingdom arrangements, as it would simply require a WIBDECO adjustment and reallocation in the volumes of fruit it sold to its traditional suppliers.

Our Government appreciates, however, that any decision for SLBC to trade directly with Geest Bananas requires the blessings of the Boards of WIBDECO and the Joint Venture companies. Therefore, I instructed Ambassador Hunte to request a Special Meeting of the WIBDECO Board to deliberate on this matter, and I wrote to the Chairman of the Joint Venture also seeking his assistance to convene a meeting of his Board to consider the SLBC request. Unfortunately, I have been informed that the WIBDECO Board has not responded favourably to our request for an emergency meeting this week. We are optimistic, however, that WIBDECO will see the need to convene a meeting of its Board of Directors before February 6, 2000.

The position of our Government is that it will not interfere with the right of the SLBC or any other private company operating in St. Lucia to trade with whosoever it chooses. However, we do not wish to see a marketing arrangement that compromises the integrity or the viability of the Windward Islands banana industry or the relationship between the four Windward Islands. We are confident that a solution will be obtained that will allow the SLBC to market its bananas on the UK market within the traditional Windward Islands system, and we will do all within our power and authority to facilitate this.

Fellow St. Lucians Thank You and Good Night.

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