Articles

Value-added opportunities
By: Basil Springer

“The definition of a value chain is the sequential set of primary and support activities that an enterprise performs to turn inputs into value added outputs for its external customers.” – www.ichnet.org/glossary.htm

The history of the Caribbean has been one where primary products have been produced and sold, as such, to external customers. These external customers have then added value for their own benefit along the value chain and have created wealth without sharing the benefits with the producers of the primary products. Historians, economists and sociologists have undoubtedly written volumes on this system that has contributed to today’s wealth divide. They have not necessarily provided solutions which would result in a more equitable distribution of wealth for the various enterprises that participate in the value chain.

Examples of primary commodities that have traditionally been exported from the Caribbean would be: sugar, bananas and cotton. In the case of sugar, raw sugar has been sold to European markets at an agreed price and this commodity has then been processed into refined sugar and sold back to the Caribbean as an input into various culinary delicacies and manufacturing industries. This was just accepted as the norm, perhaps a relic of the slavery mentality. It is true that by-products of the sugar industry, such as rum, have indeed been produced in the Caribbean.

In the case of bananas, the fresh produce has been sold and has found its way to retail shelves where it is in great demand. Here again, the largest component of the added value is at the retail end and none of this is shared with the primary producers.

In the case of the cotton industry, the lint is sold and other enterprises benefit from the spinning, knitting/weaving, finished goods manufacturing, wholesaling and retailing processes.

Much of the effort from the Caribbean end has been to negotiate the best price it can get for the primary product. It is at this point that I would like to reflect awhile on the life of our recently departed former Prime Minister, Sir Harold St. John. He has been a stalwart representing the Caribbean position and fighting for the best prices for the primary commodities produced in the Caribbean over the years.

The extent of my professional interaction with him was at the Barbados National Bank where I was Deputy Chairman and he was Senior Counsel to the Bank. His advice was sought on many an important occasion. I respected his vast knowledge and, having heard the various tributes paid to him over the last two weeks, Barbados has indeed suffered a great loss. I am sure that Sir Harold’s life will go down in history as an example to be emulated by generations to come. I would like to join others in expressing my sincere sympathy to the family and close friends over the loss of this great resource.

My little interaction with Sir Harold, nevertheless, made me feel that I understood his way of thinking and, in that context, I am confident that he would have been equally forthright in promoting vertically integrated Caribbean enterprises as he was in fighting for prices for our primary export commodities. The vertically integrated operation takes advantage of the value added outputs at each stage of the value chain and attempts to share the proceeds from external customers equitably among those who contribute at each stage of the value chain.

We are now moving into a self-enlightened era where, as primary producers, we recognise the value of smart partnerships based on win-win philosophies. We are, therefore, seeking an opportunity to share in the value added revenues which arise at the various steps in the value chain.

Let us take West Indian Sea Island Cotton. This is a unique commodity in the sense that, if it is grown optimally, well harvested and ginned, the lint possesses qualities in terms of staple length, lushness of sheen and tensile strength which are superior to other long-staple cottons in the world. West Indian Sea Island Cotton has been sold at US$10.00 per lb. as compared with other long-staple cottons which sell for US$2.00 per lb. This is a manifestation of its uniqueness. It should also be noted that 1 lb. of lint can easily make one 100% Sea Island Cotton shirt which may retail for over US$200.00. Significant value is added along the value chain which begins with the purchasing of seed cotton from the growers and ends with the purchasing of a shirt by the consumer. This value is inequitably distributed, especially as far as the grower is concerned.

The self-enlightened era has resulted in the formation of a new vertically integrated company called Exclusive Cottons of the Caribbean Inc., which will not be selling the lint, as has been the case in the past, but will be “holding hands” with strategic marketing partners to ensure that there is an equitable distribution of the revenue from the value added from retail right back to the grower. This would mean that the growers and the pickers of cotton would gain significantly higher revenues from their investment and labour and would be motivated to produce more thus stimulating a dying agricultural sector and, at the same time, creating a harmonious win-win environment.

(Dr. Basil Springer GCM is Change-Engine Consultant, Caribbean Business Enterprise Trust Inc. (CBET) - www.cbet-inc.org )