Sustaining agricultural development

Jan 21, 2020 Letters

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DEAR EDITOR,

The promotion of the sustainability of agriculture in Guyana is vital to the long-term economic success of the country and the well-being of its people.
It should be well known that the previous fortunes of the sugar industry, for example, were built on Guyana’s amenable tropical environment for crop growth, the availability of low cost willing labour and the resourcefulness of the Bookers entrepreneurship in investing for the potential profits.
The establishment, development funding and market access for sugar were all within the purview of the then British investors who also wielded important influence over the range of local resources that served the sugar industry.
With all the necessary ingredients for success at their disposal it was no small wonder that the sugar barons as well as their mother country prospered to the disproportionate advantage or as it turned out disadvantage of the producing country and nation.
For an agricultural industry to be sustainable it must be capable of regenerating itself economically, while benefiting from sustained material support in its many forms for its continued existence. However, for those supporting elements to be sustained, an economic operating equilibrium must be attained and maintained.
In former colonial and early post-independence days that sustainable financial support for sugar was amply afforded by the umbrella company and its metropolitan connections at the highest level, ensuring access not only to loan funding, but remunerative and protected markets.
With the inevitable rise in production and other associated costs, the sugar companies found it increasingly less rewarding to retain connections with the industry. Consequently, controlling ownership and responsibility for the industry was vested over to the State under the Nationalisation Act.
It was inevitable that the sustainability of the industry would be challenged without the support and interest of ready, willing and sympathetic financial institutions to facilitate and sustain investment in the retooling and modernisation of the industry, which in support of its own interests had also assumed other social and community responsibilities.
Thus, the sugar industry was established and kept alive by relatively stable elements at the time, maximising the opportunity to set up a financially viable enterprise, which to some extent played its role in the economic development of the country.
These elements as instruments of support proved not to be sustainable in the long run and their progressive dismantling has seriously jeopardised the continuity of the industry in the form we have come to know it.
There was some attempt by the EEC/EU, an erstwhile beneficiary, to soften the impact of debilitating losses by providing a parting token of support, but that could in no way replace sustained access to long term soft loans and unconditional grants required to rejuvenate a failing industry.
Fortuitously a potential element of support in oil and gas proceeds is emerging, which may not necessarily prove to be as sustainable as we may hope, but in the immediate future offers the prospect of providing indigenous support to the sugar industry, in particular into its next phase of sustainability.
On the assumption that a profoundly and relevantly restructured sugar industry is presented for funding, it is recommended that in those circumstances a mix of soft loans and strategic indirect grants be offered to the industry to respectively support operating and capital requirements on the one hand, and infrastructural redevelopment on the other hand.
While such funding for capital equipment should be made available on semi-commercial terms, the agricultural industries for survival should not be burdened by funding responsibilities for even internal access roads and bridges, or for drainage and irrigation re-structuring.
Such infrastructural support on a sustained basis will be vital for the successful establishment and re-establishment of both small farmers’ undertakings and larger agricultural projects. Not only will responsibility for infrastructural funding by private agricultural enterprises be a serious diversion of resources from actual crop cultivation, but it will be unlikely to attract the funding interest of traditional commercial or international banking agencies on concessionary terms.
With State resources undertaking all essential infrastructural works, farmers will be encouraged to focus on crop development and production for supply to proposed central processing units. These instituted State units will be a feature of a new proposed public-private partnership in large-scale crop production for export of finished products. It is unlikely, based on recent past experience, that private enterprise will be immediately willing to or capable of funding substantive state-of-the-art processing equipment for a developing small farmers’ engagement. If the State shows the way, perhaps private enterprise will engage or take over processing at a later stage.
Of course this relationship was the small farmer-rice miller model successfully adopted by the rice industry for past decades and may well be worthy of adoption for our dairy development as well as for a re-modeled sugar industry.
With climate change apparently producing more pronounced vagaries in the weather, the effect of such unfavourable meteorological variations on crop equipment mobility can be minimised by imposition of weather-robust infrastructural features such as permanent internal roads and enhanced drainage structures.
Establishment of a network of weather resilient roads on cane lands for example would serve the long-term interest of all agricultural development whether it be for sugar, rice or other crops as well as other future industrial or civic development.
Funding from oil and gas proceeds will therefore be an opportunity presented for infrastructure development so necessary for initiating some of the major diversification crops like coconuts, oil palm, aquaculture, sorghum and other oil seeds and food crops for export and supply to expanding local markets for processing.
Incidentally careful attention will need to be paid to the durability of infrastructural works consistent with minimising maintenance, if the facilities are to be cost effective and serve their purpose.
Although these considerations are a proposed solution for sugar essentially, they are applicable as well to all large-scale agricultural engagements in the light of their known revenue-generating capabilities, provided the initial investment is facilitated.
While it may be true in the light of our developing economy that some commercial and regional /international banks may now come forward with agricultural loan packages, it is likely that only through indigenous oil revenue funds from the State can farming investors be provided with concessionary loans for capital and initial operating expenditure to kick-start or expand such enterprises.
Additionally, the level of direct funding required for substantive infrastructural development can only be provided by the oil-funded State, which will clearly benefit economically and financially from future crop results.
In this projected scenario it will be to the advantage of farmers, large and small, bound by firm contractual obligations for farm lands leased or to be leased from the State, to expeditiously execute on their lease holdings or be replaced by other willing interests.
I can proffer that the truth is, sugar in particular will require enormous financial support from the State for its sustainability. Such level of support is unlikely to come on concessionary terms from the international or regional financial institutions, nor would private capital be willing to risk any heavy investment in Guyana’s agricultural potential. It is only an interest in the country’s economic development that will prevail in terms of funding support for such potential.
Fortunately an opportunity has presented itself from the advent of Oil and Gas for part of its proceeds to be utilised for the specific funding of soft loans and strategic grants for agricultural development. While I would not advocate use of the Sovereign Wealth Fund for grants to agriculture itself, except for concessionary interest loans for capital and initial operating expenses, no viable agricultural operations can bear the substantive cost of infrastructural development required for modern agricultural operations.
With the long-term benefits that can accrue to the economy, funding of such infrastructural development and its associated maintenance works must clearly be a function of our State, provided for, from a developing Sovereign Wealth Fund.
Yours faithfully
Fritz McLean

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