Thursday, February 5, 2015

$ 30 million on GGC is a waste of public funds

This blog post was first published published on April 13th 2014 under the title "Offer GGC for D1" i.e the Gambia Groundnut Corporation.

The reasons we advanced for liquidating GGC are as valid today as they were a year ago, and more urgent because the regime's plan to contract s $ 30 million Islamic Development Bank loan.

The loan, according to the Director of GAMWORKS, designated as the Implementing Agency, made some alarming and disturbing revelations to the Joint National Assembly Committee.

He told the parliamentarians that the project has already been delayed by one year due to the inability of the regime to fulfill the loan conditions and also "problematic procurement modes" thus putting additional problems to an already complex project.  These are red flags that should have been enough signal for any responsible government to stop and review the entire project to determine whether it is prudent to proceed.

It appears that this project will fail in achieving its main objective because of the rapidly changing economic fortunes since the loan was approved by the IDB Board in July of 2012. It took the regime a whole year, to April 2013 before the loan was signed.  The project is into its 3rd year with nothing to show, in terms of project implementation while economic and public finance conditions are rapidly deteriorating, necessitating a bail out from the International Monetary Fund.

We hope this project will be an item that will feature in the negotiations with the IMF, especially when GAMWORKS has attributed some of the delay in project implementation to the inability of the regime to provide the counterpart funds in a timely fashion, as required under the loan agreement, because of the precarious financial position of the regime.

The $30 million loan is coming at a time when groundnut production is at its lowest levels, and GGC's purchases slowly diminishing correspondingly.  GGC should be liquidated (taken it off the government books) and handed over to a private concern to manage which would be at great savings to the public treasury.


Offer GGC to ALIMENTA for D1

The seizure of the ALIMENTA-owned and operated Denton Bridge and Kaur milling facilities, together with their other assets in 1999 by Yaya Jammeh was the start of the rapid decline of the groundnut sub-sector; a decline that continues to date.

To reverse the trend, the regime must, first and foremost, admit that the current marketing arrangements have failed under the apex organization, Gambia Groundnut Corporation (GGC).  It has become painfully obvious that the synergy between production, extension, research and marketing was neither appreciated nor understood by the "soldiers with a difference" even though they all claimed to be of rural backgrounds.  Ironically, their first major act in this sector, after seizing power, was to dissolve the farmer-own Cooperative Movement, followed by the seizure of the privately-owned ALIMENTA properties.

Over time, public investment in agricultural extension and research slowed under their watch, leaving the National Agricultural Research Institute and the Department of Agriculture strapped for basic financial resources to carry out their basic mandates to the farming community; to provide support and extension services.  Production subsequently declined because of poor input distribution system and support.  Seed quality also deteriorated correspondingly.  Th marketing of the premier foreign exchange earner remained a major stumbling block even in bumper harvest years.  GGC is, and has been a bankrupt business enterprise since it was formed.  It was rescued from itself on two occasions from total liquidation, thanks to Gambian taxpayer's bail-out.  It lacked resources, both financial and managerial know-how, to survive as a viable business.

The genesis of the GGC will help explain why the GGC must be liquidated. The defunct Gambia Divestiture Agency failed primarily as a result of the regime's refusal to allow it the operational independence necessary to successfully divest the ALIMENTA facilities and similar government assets.  Many saw the failure of the GDA as a self-induced outcome. The regime simply did not want a transparent method of disposal of government assets which led it to constantly interfere in and reverse the decisions of the GDA.   It was this strong desire to maintain control and influence over the groundnut sub-sector for the economy that led, eventually, to the creation of Gambia Groundnut Corporation (GGC).  The interests of farmers played little part in its creation, in direct contrast to the colonial-era Gambia Oilseeds Marketing Board (GOMB) or its successor the Gambia Produce Marketing Board (GOMB).

The failure of this year's groundnut production and marketing is directly attributable to Jammeh's interference in the market, just as we saw last June when the regime interfered with the foreign exchange market that we have yet to recover from.  One the even of the start of the groundnut buying season, Yaya Jammeh fired the Agribusiness Services and Producers Association (ASPA) and walked away from the terms of the MOU between government and ASPA, effectively banning private buyers from participating in the buying of groundnuts.

He also gave monopoly power to GGC, a bankrupt entity.  The result of which we are beginning to see emerge from the rubble of the 2013/14 trade season.  When I ask a North Bank resident this morning about this year's trade season, he responded thus "Uncle, there is no trade season.  This is a failure."  When I responded my suggesting that perhaps if private buyers were allowed, as they were in the second half of  the 2012/13 season, things would have been better.  His response was "that's the issue" which led me to my Facebook commentary and this blog.  Late year GGC bought 30,000 tons.  This year, they will be lucky to match the figure, leaving the farmers poorer than they found them last years.

The recovery of the agriculture sector will not take place until (i) government interference in sub-sector stops (ii) GGC is liquidated in one form or another and (iii) agricultural research becomes a priority again (iv) a robust extension service is reintroduced (v) top-down  re-organization of the technical departments under the purview of the Ministry of Agriculture and Allied Ministries.

Government interference in the sector will remain as long as Jammeh remains on power.  So it is an issue we will grapple with for sometime to come.  But the issue of what to do with GGC should be in the uttermost minds of any successor government.  It is not premature to start thinking about what to do with it and how to effect a transition that will cause minimal disruption to the ground-nut sub-sector.  Returning the GGC in private hands is a necessary prerequisite to a return to normalcy in the sub-sector.

Of course, there are various forms of privatization but given the history of the evolutionary transformation that led to the GGC, it would be worthwhile to consider offering ALIMENTA its former assets for the price of D1 (one dalasi) with the rest of the terms to be negotiated on a long-term basis.  The Gambia needs the guaranteed markets that an association with a world class company like ALIMENTA can bring to the table. It was a grave mistake committed by a bunch of power-hungry and corrupt individuals that has costed the Gambia US$11 million in compensation to the company, and it has limited our access to a market that we once had access to through ALIMENTA.  The company will not entertain any proposals from the Jammeh regime for obvious reasons, but a successor government may stand a better chance to, at least, being listened to.

Offering GGC for one dalasi is, at least, one option among many, that deserves serious consideration.   The present arrangement under Jammeh is untenable and must be changed to respond adequately to the needs of the farming communities across rural Gambia.