Should optimise assets, not limit themselves to being solely agriculture businesses
By Bhathiya Bulumulla
Over the past three decades, the Regional Plantation Companies (RPCs) have established themselves as a critical stakeholder of Sri Lanka’s plantation industry.
The RPCs were formed in 1992, primarily with the intention of bringing in the private sector, to improve the efficiency of the country’s large-scale estates involved in the cultivation of tea, rubber and other plantation crops. However, it is evident that the RPCs have gone beyond this mandate and that their actions have elevated Sri Lanka’s entire plantation sector.
This is evidenced by the numerous global certifications obtained by the RPCs, which have been critical in enabling Ceylon Tea to earn a premium over its competitors in the international market. The RPCs also contribute significantly to the country’s economy, both as a major employer and a generator of export earnings.
However, the RPCs are now facing challenges on multiple fronts. It is evident that the RPCs cannot focus solely on the production of commodities, especially given Sri Lanka’s high production costs. To be financially sustainable and to continue to contribute to the country’s economy, the RPCs must adopt a different business model.
In order to do so, firstly, RPCs must no longer see themselves as being solely agriculture businesses nor should they limit themselves to the plantation sector alone. They should instead diversify in a manner that optimises the economic benefit of the assets under their management. Many forward-thinking RPCs were quick to come to this realisation, diversifying into sectors like renewable energy, other profitable plantation crops and commercial forestry, as far back as early 2000s.
RPC-led vertical and horizontal integration
The RPCs must consider the feasibility of both horizontal and vertical integration, as well as product and market diversification. Prudent use of this approach has already yielded lucrative dividends for several RPCs. For instance, some have diversified within the plantation sector, successfully tapping into the high-value market for spices. Others have diversified into other industries, with many RPCs investing in hydro and solar energy projects.
The RPCs should also think out-of-the-box in these instances. For examples my company, Elpitiya Plantations PLC, partnered with a foreign company, to develop a state-of-the art adventure park as well as to cultivate and market strawberries. We are also testing the feasibility of growing several other types of berries in Sri Lanka, given the lucrative market for the product. Similarly, we are also establishing cultivations for hass avocado, which has a relatively long shelf life and hence is suitable for exports, pineapple and as well as bamboo – both edible types and those which can be used for fabric production.
Such diversification is vital to improve long-term business sustainability and avoid the proverbial risk of ‘putting all eggs in one basket’. These are strategies which will not only benefit RPCs but also their employees and the wider economy. Diversification would create new employment opportunities which are more aligned with the aspirations of the youth, who do not wish to engage in tea plucking or other similar activities. Addition of new high-value exports can assist in diversifying Sri Lanka’s export portfolio, which has been largely stagnant.
In addition to diversification, adoption of mechanisation is also important, particularly in addressing the labour shortage and high production costs in RPC estates. While mechanical harvesting cannot be used in all areas, given especially that many tea fields are located on elevations/slopes, the RPCs are cultivating new tea fields in a manner that would make them well-suited for mechanised plucking. Besides plucking, mechanisation has been used widely in field activities to overcome labour shortage and to increase productivity.
Broad stakeholder collaboration essential
RPCs cannot make such sweeping changes unilaterally. We require the total support of policymakers and all industry stakeholders – including the trade unions and local politicians. We must work together to develop a visionary framework for these reforms. Crucially, these measures must also be presented to employees, and the general public, so that further reforms are undertaken on the basis of an informed majority consensus.
Policy consistency is critical to enable the RPCs to make business decisions with confidence. This has been an area of concern in the recent past – particularly in terms of policies on importation and usage of agro-chemicals, synthetic fertilizers and the cultivation of oil palm.
Seven factors of concern at upcoming Monetary Policy Review
by Sanath Nanayakkare
The Central Bank of Sri Lanka (CBSL) is scheduled to announce its latest monetary policy review on 20th January 2022, with all eyes on dwindling foreign reserves and foreign currency exchange in the country.
In this context, First Capital Research has named 7 factors of concern that could be taken into account at the upcoming monetary policy review. They are as follows.
* Foreign Reserves USD 3.1 billion – Dec 2021
* Inflation CCPI 12.1% – Dec 2021
* GDP Growth -1.5% – 3Q2021
* Private Credit LKR 60.5 billion – Nov 2021
* 03M T-Bill rate 8.38% as at 12.01.22
Liquidity and CBSL Holdings LKR -364.0 billion and LKR 1.42 trillion
Balance of Trade (BOT) and Balance of Payment (BOP) USD -6.5 billion and USD -3.3 billion for Jan-Oct 21
First Capital Research’s Policy Rate Forecast – Jan 2022-Apr 2022 notes that they believe the CBSL may highly consider tightening the monetary policy rates in this policy review but given the concerns over economic growth, there is a probability of 40% for CBSL to maintain its policy stance at current levels.
“With high frequent indicators improving in line with expectations, we have eliminated any probability of a rate cut. We expect a continued increase in probability for a rate hike in order to prevent overheating of the economy amidst the given fiscal and monetary stimulus,” they said.
As per First Capital’s view, CBSL either can choose to hike policy rates by 50bps or 100bps or hold policy rates steady, while a rate cut is off the table due to the high debt repayment and the high domestic borrowing requirement.
First Capital believes that there is a 60% probability for a rate hike due to the remedial actions required in achieving external stability.
However, there is also a 40% probability to maintain the policy rates at its current level in order to further improve the high frequency indicators.30%, they noted.
Sri Lanka’s dash brand enters international markets
Multichemi International Ltd, which manufactures and distributes a wide range of products under dash, one of Sri Lanka’s leading detergent and household care brands, has begun exporting its products to several international markets in Asia and Oceania, with plans also to enter Africa. The dash brand includes a wide range of products in car care, household care, home fragrances and laundry care sectors. Multichemi International Ltd, which has been awarded ISO 9001:2015 certification, is a Sri Lankan pioneer in environment-friendly cleaning products, having launched the country’s first biodegradable, safe cleaning products over 28 years ago.
Amila Wijesinghe, General Manager of the Company said,”Having conquered the domestic market, we are now ready to capture the international market. We are confident that our products which are of high quality will receive a good demand overseas as well. The feedback we have received so far from our overseas customers is extremely encouraging. We are dedicated to taking our products to the international market, to bring in foreign currency to the country and help uplift the economy”,
Janaka Abeysinghe appointed SLT CEO
Sri Lanka Telecom PLC has announced the appointment of Janaka Abeysinghe as its Chief Executive Officer (CEO) with effect from February 1, 2022.
The incumbent CEO Kiththi Perera will be overseas on leave for a period of two years to pursue higher studies, according to a stock market filing by the company.
Abeysinghe joined SLT in 1991. In his present role, he leads the enterprise and wholesale business of SLT that provides integrated voice and data solutions to enterprises, government institutions, domestic telco operators and global wholesale carriers.
In his career at SLT spanning 29 years, he has held a number of senior positions, including general manager Enterprise and International Sales and has extensive experience in the areas of Enterprise Digital Services, Enterprise Communications Solutions, Data Communications, Business Development, Domestic and International Switching Operations and Global Wholesale Voice & Data Business.
He holds a Master’s Degree in Electrical and Computer Engineering from the University of Kansas, USA and a BSc degree in Electronics and Telecommunications Engineering with a First Class Honours from the University of Moratuwa.
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