An Economic and Operations Analysis of The Gambia Produce Marketing Board US Agency for ...

367 Pages·2010·5.58 MB·English

An Economic and Operations Analysis
of The Gambia Produce Marketing Board
U.S. Agency for International Development

Banjul

Final Revised Version

May 1985
Table of Contents

Chapter 1

INTRODUCTION

1. Historical View of GPMB's Current Problems
4

2. Selected Additional Important Findings
7

3.
The Gambia Produce Marketing Board and the History of West

African Commodity Exporting Agencies

10

4. The Statutory Framework and GPMB's Objectives
12

4.1 GPMB's Constitution--Composition and Status of

the Directorate

13

4.2 GPMB's Functions and Powers

15

4.3 Financial Powers of the Board

16

5. GPMB's Duties and Objectives: The Search for an

Evaluation Criterion

17
Table of Contents

MARKETING AND PRODUCTION EFFICIENCY
1. GPMB's Overall Operational Effectiveness . . . . .. . . . . . . . . 2

1.1 Historical Performance ......... ....... 2

1.1.1 Liquidity Analysis .. ....... ...... . .. 3

1.1.2 Solvency Analysis. . . . . . . .. .... 6

1.1.3 Profitability Analysis ................. 7

1.1.4 Operations Analysis. . . . . . . . . . . . . a. 0 10

1.1.5 Effects of Exogenous Factors on GPMB Operating

Costs and Financial Viability. . . . . . . . . . .. 13

1.2 Conclusions and Recommnndations . . . . . . . . . . . . . . . . 18

2. Analysis . . . . . . . . . . . . . . a. . . . . . . . . . .4 .6 ..
20

2.1 Trading Center Analysis .. ... ............. 20

2.1.1 Groundnuts ... . . . . . . . . 20

2.1.2 Hand Picked and Selected. . .. ......... ... 21

2.1.3 Oil and Cake . . . . . . . . . ............. 25

2.1 .4 Cotton . . . . . . . . . . . . . . . . . . . . . . .
27
2.1 .5 Rice . . . . . . . . . . . . . . . . . . . .
30

2.1 .6 Fertilizer .
32

2.1.7 Palm Kernel. . . . . . . ............... 35

2.1 .8 Maize/Sorghum ................ . .. . . 37

2.1.9 Lime and Manufactured Products . . . . . . . . . . . . . 39

2.1.10 Briquettes . . a . . .. . . . . . . . . .. . . 0 a 40

2.1.11 Conclusions and Recommendations . . .. . . . . . . . . 40
2.2 Cost Center Analysis. . . . . . . . . . . . . . . . . . . . . . 42

2.2.1 Produce Inspection and Quality Control . . . . . . . . . 42

2.2.2 Construction . . . . .
. . . . . . . . . . . . . . . . . 42

2.2.3 Shipping . . . . . . . . . . . . . . . .
. . . . . . . . 44
2.2.4 Office . . . . . . . . . . . . . . . . . . . . . . . . . 4.9

2.2.5 Stores . . . . . . . . . . . . . . . .
. . . . . . . . 46
2.2.6 Conclusions and Recommendations. . .. .. .. .. ... 47

3. Operations Structure Analysis . . . . . . . . . . . . . . . . . . . . 47

3.1 Buying and Transportation Allowances..#. . . . . ... . . .. 48

3.2 Groundnut Processing. . . . . . . . . . . . . . .
. . . . . . . 50

3,3 Capacity Utilization . ... ..........
....... 61

3.3.1 Oil Mill . . . . . . . . . . . . . . . . . . . . . . . . 61

3.3.2 Decorticated Groundnuts
.. . . . . . . ...... . 63
3.3.3 Cotton Gin . . . . . . . . . . . . . . . . . . . . . . 63

3.3.4 Rice Mill . . . . . . . . . . . . . . . . . . . . . . 64

3.3.5 HPS Plant. . . . . . . . .
. . . . . . . . . . . . 65

3.3.6 Break-Even Analysis ....... ........... 65

3.3.6.1 Hai., Picked and Selected. . . . . . . 0 66

3.3.6.2 Oil and Cake
. . .. . . .. ... .. ... 68
3.3.6.3 Cotton . . . . . . . . . . . . . . . . . . .
. 72
3.4 The Gambian River Transport Company (GRT) . . . . . . . . . . . 74

3.5 Conclu~qions and Recommendations . . . . . . . . .
. . . . . . 78
4. Divestiture: Experience and Recommendations . . . . . . . . . . . . 81

4.1 GPMB Disinvestments; Problems With Privatization. . . . . . . . 81

4.1.1 Soap . . . . . . . . . . . . . . . . . . . . ... 81

4.1.2 Lime . . . . . . . . . . . . . .
. .. 82
4.1.3 Feed Milling . . . . . . . . . . . . . . . ... 83
4.1.4 Comments &nd Analysis . . . . . . . . . . .. . . ... 84
4.2 Divestiture Rocommendations. ... ...... . ....... 85
4.2.1 Rice Distribution. . . . . . . . o . . . . . . . . . . 86
4.2.2 Fertilizer Distribution. . . . . . . . . . . . .. . 86
4.3.3 Groundnut Seed Distribution . . . . . 0 . 4 . 6 •. 0 . 87
4.3.4 GPMB Produce Depots. .o....
.. ..... 90
5. Management Analysis . 0 . . . . . .0. . . . .. . . . . . . . . . . 92
5.1 Management Organl.aton.o ........ . . . .. . 93
5.1.1 Organizational Structure ..... .... . .. 93
5.1.2.1 Analysis. . . . . .. . . . . 0. . . . . 0. . . 98
5.1.2.2 Conclusions and Recommendations . o . o o . . . 104
5.2. General Managerial Efficiency .. . . . . . . . . . . .. .. 105
5.2.1 Management Analysis . . o ....... ... 105
5.2.1.1 Job Profiles . . . . . . . . . . . a . . . 106
5.2.1.2 Budgeting . . . . . . . . . o . . o . . . . . . 108
5.2.1.3 Coaching . . o o .. . . . . . . . . . . . . . 109
5.2.2 Board Analysis . . . . . . o . . . . o . . . o . . . . o 109
5.2.3 Personnel, Education and Training Needs . . . . ... 112
5.2.4 Communications . . .0. . a . .. . . . . .0.. . . . . 113
5.2.5 Recommendations . . .. .. . . . . . . . . . . . . . . 114
Table of Contents

Chapter 3

PRICE STABILIZATION AND 'OLICY

1. Gambian Agricultural Policies and Domesitc Resource Costs 3

1.1 Resource Cost Analysis of Crop Production 7

1.1.1 Foreign Exchange Analysis

23

1.1.2 Output Supply and Input Use
25

2. Implied Prices from GPMB Trading Accounts 29

3. Price Determination in the Future

41

3.1 General Framework

41

3.2 Examples of Price Determination for 1984/85
44

4. Price Stabilization

51

4.1 Price Stabilization Funds

52

5. Other Pricing Policy Issues
65

5.1 Spatial and Temporal Price Variations 65

5.2 Retail Rice Prices

68

5.3 Floor Prices for Agricultural Products 69

5.4 Processing Costs and Subsidies for Local Sales

of Refined Groundnut Oil
69

5.5 Subsidy on GPMB Briquette Sales
71

5.6 Analysis of Eliminating the Fertilizer Subsidy
72
Table of Contents

Chapter 4

FISCAL IMPACT OF GPMB

1. From Price Stabilization to Savings Mobilization:

Changing the Order of GMB Objectives
2

1.1 The Accumulation of Trading Surpluses
9

2.
Development Finance, Price Stabilization

and Decapitalization of GPMB

15

2.1 Accounting for GPMB's Fiscal Impact
17

2.2 The Pursuit of Noncommercial Objectives
29

2.2.1 Subsidies

30

2.2.2 Producer Price Stabilization

31

2.2.3 Bridging Finance for the Central Bank
34

2.2.4 Food Aid Distribution

34

2.2.5 In-kind Credit to GCU and Ministry of

Agriculture 35

2.2.6 Employment

36

2.3 Below-Market Supply of Goods and Services to

Government

39

2.4 Financial Flows From Government to GPMB
39

2.4.1 Tax and Capital Subsidies 40

2.5 Financial Flows form Other Parapublic Agencies 41

2.6 Unrequired Transfers to GPMB
42

3. Evaluating the Fiscal Role of GPMB
42

3.1 Taxing Producers

44

4. The Required Dividend on Public Capital
47
Table of Contents

Chapter 5

GPMB's MONETARY IMPACT

1. GPMB's Recourse to Domestin Credit Markets
1

2. The Impact of GPM3's Outstanding Domestic Credit on

Inflation and the Balance of Payments

6

2.1 The Money Market
8

2.2 Excess Money Creation and Domestic Inflation 15

3. Quantitative Estimate of the Impact of GPMB

Outstanding Domestic Credit on Inflation
18

3.1 Excess Money Creaation on GPMB Outstanding Credit i9

3.2 Computation of Increment inMean Level of Money Supply
19

3.3 Computing Increment in Domestic Prices
22

4. Excess Money Creation and the Balance of Payments
28

4.1 Quantitative Estimate of the Impact of GPMB Outstanding

Domestic Credit on the Balance of Payments
30
Chapter 6

GPMB -- GOVERNMENT RELATIONS

1. Government Relations

1

3.1 The Contract-Plan: A Discription
3

3.2 Formulation of An Initial Contract-Plan for GPMB 7

3.3 Contract-Plan Negotiation and Monitoring Procedures

for The Gambia

8

3.3.1 Monitoring GPMB Performance in the Contract

Plan

9

3.3.2 On A Suggested System for Monitoring GPMB Costs

During the Contract-Plan
11

3.3.3 What to Monitor?

13

3.3.3.1 Measuring Volume and Spreads
14

3.3.3.2 Monitoring Operating Costs
15

3.3.3.3 Overhead Expenses
18

4. A Priori principles underlying a 1984/85-1989/90

multi-year for GPMB

19

5. Plan Cost and Profit Projections 1984/85 to 1989/90
21

6. GPMB Multi-Year Financial Plan 1984/85-1989/90 22

6.1 Year 1--1984-85

22

6.2 Year 2--1985/86

33

6.3 Years 3, 4, 5, and 6

34
CHAPTER 1
INTRODUCTION
This study has its origins in the economic crisis that began in The Gambia
in the late 1970's and continues today. Budget deficits, severe current account
imbalances, and accumulating external arrears are all visible manifestations of
the present dilemma. To deal with this critical situation the Government has
initiated a program aimed, in part, at stabilization of excessively expansionary
monetary and fiscal policies. An IMF Standby Agreement was designed for this
purpose in early 1982. In addition, efforts to eliminate supply-side weaknesses
and to stimulate economic growth have been intensified. A study of The Gambia
Produce Marketing Board (GPMB) is part of the program to address these latter
concerns.
As the most important economic and financial organization in The Gambia,
GPMB should be a principal concern in any effort to stimulate production,
particularly in agriculture. Furthermore, the Board is also central to the
Government's efforts to raise public revenues, earn more foreign exchange, and

generate employment. Unfortunately, in recent years the Board has realized
ever increasing deficits, beginning with a D6.4m loss in 1978/79 and ending
with a D38.1m loss in 1982/83. Along with burgeoning deficits, GPMB's debt
has increased year after year contributing to conditions of monetary insta­
bility. The point has been reached where the Board's growing deficits and
borrowings to finance them are unsustainable. If GPMB were self-financing, or
if its deficits, whether attributable to investment, inefficient operations,
or pursuit of noncommercial objectives, were covered out of government
resources or private savings under conditions of monetary stability, no issues
1