Keeping an Eye on the People’s Business: The GCNA and the Structural Adjustment Programme

Sandra Ferguson

by Sandra CA Ferguson

  1. Liberalisation of Cocoa and Nutmeg Sectors:

In its Memorandum of Economic and Financial Policies[1] annexed to the Letter of Intent of 12 June 2014 through which Grenada entered into an agreement with the IMF, Grenada committed ‘to Liberalise certain sectors to boost private sector participation and expand capacity.’ Among those sectors identified for liberalisation were the nutmeg and cocoa sectors: – ‘the Government will support the Liberalisation of the nutmeg and cocoa sectors, so as to encourage increased efficiency, and boost farmers’ incomes. This was categorised as a measure intended to ‘boost growth and social protection’

  1. Liberalising Slightly the Monopoly of the GCNA and the GCA:

The report of the IMF sixth, end of programme review[2] noted as follows:

‘The authorities are taking steps to boost private sector participation and capacity in agriculture, including commercialising remaining estates… and passing amendments to Liberalise slightly the monopoly marketing boards for nutmeg and cocoa. Staff encourages the government to continue in that direction and, based on past production volumes, notes that deeper reforms are needed to promote investment and employment in this sector.’

  1. Progress re Growth Boosting Structural Reforms:

The first review of December 2014[3], reported on progress in respect of ‘growth boosting structural reforms’ re the liberalisation of the nutmeg and cocoa sectors. The following was reported: –

  • Modernising Nutmeg and Cocoa Sector:
  • Enhance the investment environment, competitiveness and productivity: With the support of a Compete Caribbean Project, Grenada was working to ‘modernise’ the sectors to ‘enhance the investment environment, competitiveness and productivity’ of the sectors.
  • Reforming the 1947 Nutmeg Industry Act: Efforts would focus on ‘reforming the 1947 legal and administrative framework’ governing the sectors to strengthen their governance and institutional capacity, and introduce export quality standards for the sectors.
  • Compete Caribbean Project: Strengthening Export Competitiveness in the Grenada Agriculture Sector

The Terms of Reference circulated for a Consultancy to develop Legal Drafts of Reforms re Legislation/Regulations to Strengthen Cooperative Association Governance and Institutional Capacity for the GCA, GCNA and the Minor Spices Association noted the following in its background:

  • Since its inception, the legal framework to govern the development of the nutmeg sector had not kept pace with international standards and practices. Through a 1946 Ordinance, the Grenada Cooperative Nutmeg Association (GCNA) became the sole exporter of nutmegs from Grenada.
  • The objective in establishing the GCNA was to eliminate price competition between exporters, to stabilise prices and to enhance export quality. In recent times, this Ordinance, that created the association’s monopoly export rights, had been a point of contention and had been unsuccessfully challenged three times.
  • The purpose of the project was to advance agribusiness development in Grenada by improving the regulatory framework that governs the administration of the country’s two major agricultural export sectors: nutmeg and cocoa, under the Compete Caribbean Business Climate and Competitiveness Enhancement Facility. This consultancy will address the need to reinforce and strengthen the institutional role or capabilities of nutmeg and cocoa exporters.

It was further noted: –

  • The co-operative association governance was strongly focused on short term priorities (eg maximising the proportion of export revenue returned to growers while ignoring developmental and sustainability priorities) because growers had been highly effective at demanding that directors adhere to their singular priority of maximising price returns from the market. The Associations were ‘extremely accurate reflections of the very narrow concerns of their members’.
  • Any improvements in Association governance must come from the ‘bottom up’ rather than be imposed by the Board of Directors or management –— especially since prior attempts to improve governance without the members’ (ie farmers) knowledge or consent have been firmly resisted by them.

Accordingly, the objective of the consultancy was to improve and strengthen the legislation governing the roles, functions and responsibilities of the Grenada Cooperative Nutmeg Association (GCNA), the Grenada Cocoa Association (GCA) and the Grenada Minor Spices Association based on the recommendations provided by an international Cooperative Expert and an Incentive Framework Expert.

The report of the International Co-operative Expert[4], proposed a number of recommendations in respect of the reforming the governance and business model of the Grenada Nutmeg Co-operative Association and the Grenada Cocoa Association. Informed by the recommendations, a number of amendments have been proposed to the acts governing the associations. In view of the comments of the IMF sixth review report, one can conclude that these proposed amendments ‘Liberalise slightly the monopoly of the GCNA and the GCA.’

  1. Amendments to the Nutmeg Industry Act[5]:

4.1.      Background:

In a presentation to a stakeholder meeting on 5 January 2015, the Permanent Secretary in the Ministry of Agriculture identified a number of challenges of the current business model of the GCNA and GCA as identified by the Consultant’s report. Among these were: –

  • Board tenure, rotation and stability. The tenure of the GCNA Board was short, one year.
  • Skills Mix of Board: The skills mix required of the Board members was not defined and did not necessarily provide the skills required at that level.
  • Farmers’ Register: The farmer’s register, the database of the association, focused solely on the grower and not on the crop producing property and its occupants.
  • Ownership of Assets: Farmers did not own the assets of the Association.
  • Farmers’ Voice: Farmers voice and participation in decision-making were at the level of two area meetings and one general meeting.
  • Para-statal Body[6]: The operations of the GCNA were not in alignment with the Co-operative Societies Act.
  • Powers & Duties of General Manager and Board: While the powers and duties of the General Manager and the Board of Directors were defined, at times they seemed to it interwine.
  • Exports of Commodity & Value-Added Products: Export licences and other arrangements for the traditional crop and value-added products such as organic nutmeg or cocoa were the same and were exercised at the discretion of the Board of Directors
  • Ongoing financial losses: The association was experiencing ongoing financial losses.
  • Need for Prudent Investments: GCNA had to pay a monthly installment of EC$192,000 to service its debt[7]
  • Succession: There was a lack of succession to the aging farmers. This was a threat to business continuity.
  • Membership: Membership in association was based on sales not ownership of trees.
  • Objective of Amendments:

The document[8] available for review did not have an Explanatory Memorandum and the marginal notes did not provide any information on the objectives of the various amendments. However, it is expected that the proposed amendments are intended to strengthen governance and financial management, improve transparency and enhance ownership, more specifically to: –

  1. ‘improve/upgrade the organisational mandates, functions and services offered by the associations to their members;
  2. strengthen their operational sustainability , and
  3. make the sectors more competitive.’
  • Specific Amendments Proposed:

Among the amendments proposed are the following:

  1. Enable Joint Venture Arrangements: A new provision has been inserted to enable the association to enter into joint venture agreement with any member of the private sector.
  2. Members to Own Shares: There is a new provision which requires members to subscribe to shares.
  • Issuance of Shares: An amendment provides for the following category of shares – ordinary shares (at-risk shares), preference shares and investment shares). The issuance of shares would also be a means of raising capital for the GCNA.
  1. Board Tenure for Three Years: The tenure of the Board has been increased to three years.
  2. Disqualification from Membership of Board: Additional grounds have been inserted.
  3. Board Members Appointed by the Minister: An amendment identifies the skills set required of the three members of the Board of Directors to be nominated by the Minister — ‘…with proven knowledge or experience in finance, management, business, ICT, agriculture, economics, commodity markets and food technology.’
  • One General Meeting: Compulsory general meetings have been reduced from two per year to one annual general meeting. There may be mid-year general meetings.
  • Voting at General Meetings: All members are entitled to vote at general meetings, replacing the practice of choosing delegates at area meetings.
  1. Dissolution of the Board/Investigating Committee: Section 34 provides for dissolution of the Board by the Minister. It has been amended to provide for an Investigating Committee to be appointed by the Minister. If the Committee finds the Board at fault, the Minister will dissolve the Board.
  2. Amendment 52(A), Granting of Permits to Purchase Nutmegs: A new section, 52(A) is inserted: –
    • Provisions oblige the GCNA to grant a permit: This amendment obliges the GCNA to grant a permit to a person or entity wishing to purchase nutmegs, except where the Board is of the opinion that the granting of such permit is detrimental to the nutmeg industry. The Board can impose a fee for granting the permit.
    • Response Time: The Board is obliged to give a decision on the application within 14 days;
    • Appeal to the Attorney-General: An aggrieved applicant has 30 days within which to appeal to the Attorney-General.
  3. Repeal of Provisions for ‘Bonus’ Payments: Sections 63(5) has been repealed. This is the section provides for ‘bonus’ payments.
  • Dissolution of the Association: New provisions have been inserted for members to share in the assets in the event of dissolution of the Association after the claims of creditors have been satisfied.
  • Appointment of Manager: Sub-section 69(2) has been repealed and replaced by sub section (2) which identifies specific responsibilities of the Manager.
  • Amendments to Nutmeg (Regulation of Export) Act:

The Nutmeg (Regulation of Export) Act has also been amended.

  • Certification for Export: The amendment inserts a new section 3(A) which provides that the Grenada Bureau of Standards shall be the sole authority to certify the quality and grade of nutmegs and mace for export.
  1. Queries/Observations/Comments:
    • Membership, Ownership and Shares: There is an absence of clarity in respect of these amendments.
  • Membership and Shares: It is unclear how shares will be allocated. Will it be on ability to buy shares or on the basis of production or on the basis of sales to the Association?
  • Entitlements and Obligations of each category of shareholder: What will be the entitlements and obligations of the owners of the various categories of shares?
  • Consultant’s Recommendations:

It is useful to compare the proposed amendments with the recommendations of the consultant’s reports:-

  • Ordinary, at-risk shares: Members of the association should be required to own ordinary shares as their entitlement to annual dividends and bonuses.
    • Qualifying Shares: Qualifying shares must be bought by each member. It is not specified what is the level of qualifying shares.
    • Privileges, Rights and Benefits: The benefits, privileges and rights of members should be explicit ie it should be made clear in the Act.
  • Preference Shares: Preference shares should be issued to members only for a minimum guaranteed rate of return.
  • Investment Shares: Investment shares should be offered to members and non-members for a minimum annual rate of return.
  • Farmers Voice:

Provisions are made for one general meeting per year; the Board MAY convene mid-term-general meetings. While all members can participate in the one general meeting per year, does the reduction in the numbers of general meetings from two to one and the apparent abolition of area meetings improve opportunities for farmers’ participation in the affairs of the association?

  • Investigating Committee and Dissolution of the Board:
  • Composition of Investigating Committee: The amendment does not spell out what qualifications the members of the Investigating Committee should have. Should the Committee be chaired by a judicial officer?
  • Right of Appeal: There are no provisions for the right of appeal by members.
  • Political Outreach: Is there a possibility of political overreach by the Minister?
  • Amendment 52(A), Granting of Permits to Purchase Nutmegs:
  • Appeal to the Attorney-General: An aggrieved applicant has 30 days within which to appeal to the Attorney-General.
    • Political Overreach: Does the involvement of the Attorney-General facilitate political overreach?
    • Courts or Appeals Body: Should the matter be decided upon by the Court or an Appeals Body to which the matter is referred?
  • Arbitrations and Appeals: The consultant’s report recommended that a section for arbitration and appeals be included in the act. An aggrieved applicant should first have recourse via the Manager to the Board and then to the Courts.
  • Response Time: While the Board is obliged to give a decision on application within 14 days, the applicant has thirty days to appeal. Should the applicant also have 14 days to appeal the matter?
  • Duration of/Withdrawal of Permit: There are no provisions for the withdrawal of the permit nor for the duration of the permit.
  • Insertion of Loophole: Does the insertion 52 (A) re granting of permits insert a loophole which enables would be buyers to get around the issue of GCNA being the sole purchaser of nutmegs? It must be remembered that the reason for the GCNA being the sole purchaser was, among other things, to protect the price paid to farmer. While farmers may be induced by private entities through an initially higher price, there is no guarantee that this would continue.
  • Issuance of Shares and Dissolution of the Association:

A significant portion of the assets of the GCNA were accumulated in the early years of the association. Does the issuance of shares address this aspect in respect of persons who may have passed on or are no longer members of the Association?

  • Organisational Structure and Power of the Minister:

The GCNA is really a para-statal body over which the Minister’s power has not been diminished. It is useful to note that recommendations were made to re-organise the structure of the GCNA in keeping with a true co-operative or limited liability entity which pays dividends based on shares invested. It seems also that a number of recommendations to improve transparency and accountability has been ignored.

  1. Other Observations:
  • Politically Sensitive: Under the Structural Adjustment Programme, the government committed to the Liberalisation of the nutmeg and cocoa sectors. However, this is a very politically sensitive issue, particularly in a year when the country is on election watch. It is interesting to note that the language of the IMF Review Report. What does ‘Liberalise slightly the monopoly of the GCNA and the GCA’ REALLY mean?
  • Dismantling Monopoly Buyer Status: The focus of liberalisation is dismantling the monopoly buyer position of both associations. This was made clear in the background information of the Compete Caribbean Terms of Reference – ‘….association’s monopoly export rights, has been a point of contention and has been unsuccessfully challenged three times’.
  • Amendment 52(A): Once can conclude that ‘Liberalising slightly the monopoly status of the GCNA’ refers to the proposed amendment 52(A) which will oblige the GCNA the grant permits to other entities which may wish to purchase nutmegs directly from farmers.
    • It must be clarified that these proposed amendments have not yet found themselves yet the subject of debate in the Parliament.
  • Debate and Discussion by Farmers: It is uncharacteristic of majority of the members of the GCNA to accept such a significant proposal as the removal of the provisions for bonus payments WITHOUT ‘raising real hell’. Have the proposed amendments been properly ‘ventilated’ among the farmers across the country by those with the responsibility to do so?
  • Enhancing Competitiveness and the Investment Environment: A key question to be answered is how do the farmers, the pillar of the nutmeg sector, have a stake in and benefit from value added along the nutmeg value chain. What is the best mechanism and structure that will assure this? Do the proposed amendments respond to this query? The current state of Grenada’s telecommunications sector is an example of Grenada’s experience of ‘enhancing competitiveness and investment environment’ — mergers between global companies, increased prices to consumers, loss of decent jobs and less choice in terms of service providers and the service/product offered.
  1. Other Developments Pertaining to the Nutmeg Sector:

The following are noteworthy:-

  • Blue Growth and Climate Smart Agriculture[9]:
  • Funding of EC$5 Million: In April 2014 in the Netherlands, the Rt Hon Prime Minister signed two Memoranda of Understanding with the Dutch Government. Under the MOU arrangements, the Netherlands is providing EC$5million to Grenada and the Netherlands will also work with Grenada to attract a further $5 million from the Dutch private sector banks and businesses.
  • International Spice Institute: The co-operation agreement envisages the establishment of an International Spice Institute, to be co-located in Grenada and the Netherlands and also the establishment of a Blue Growth and Ocean Governance Institute. The institutes will help Grenada grow its economy through more value-added agri-business projects and through the development of an ocean-based economy.
  • Chimera and the GCNA:

The grapevine has it that the GCNA is doing business with a company, Chimera, registered in the Netherlands re the marketing of its nutmegs in Europe. The grapevine also has it that the representative(s) of Chimera is /are related to certain ‘authorities’ in Grenada.

  • Is the GCNA conducting marketing business with a company called Chimera? On what basis was it chosen? According to its website[10] Chimera was established in 2016. Who are its owners, operators or management and what is their track record?
  • What is the status re arrangements with the existing, long time tested and trusted agent in the Netherlands?
  • Is there any connection between Memorandum of Understanding signed in the Netherlands re attracting ‘a further $5 million from the Dutch private sector banks and businesses’ and Chimera, the company registered in the Netherlands?
  1. Concluding Comment:

No one disputes that reform of the GCNA is required for the benefit of the industry and all its stakeholders, most importantly the local farmers and the country as a whole. Have the recommendations and the amendments and their impact been properly ‘ventilated’ and discussed with nutmeg farmers across the country? There is much to know and understand in respect of the proposed amendments and other developments of which the nation may/may not be aware.

[1] June 2014, Letter of Intent and Memorandum of Economic and Financial Policies, para. 11

[2] May 2017, IMF Country Report No. 17/131: para. 31. Pg.15

[3] December 2014 IMF Country Report No. 14/363, ref. para. 6, pg. 55

[4] Lead Consultant, Melvin Edwards

[5] Draft Amendments to the Nutmeg Industry Act, 3 May 2016

[6]  The GCNA was established by an Act of Parliament and is in fact a para-statal body over which the Minister of Agriculture wields significant power.

[7] This debt servicing is connected with the GCNA Complex located on Kirani James Boulevard

[8] Draft Amendments to the Nutmeg Industry Act, 3 May 2016

[9] Grenada and Netherlands in EC$10 Million Sustainable Growth Co-operation  at http://www.gov.gov.gd/egov/news/2014/apr2014/24_04_14/item_2/grenada_netherlands_10_million_sustainable_growth_cooperation.html

[10] http://www.chimera-spice.nl/main.html

Article Footer 468x60

Facebook Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Related Posts