Nipped By The Bud
IN September 1979, 3,000 Sengalese workers demonstrated in Dakar against the decision of the nationalised company, Bud-Senegal, to close down, leaving them unemployed. Bud’s Senegalese history is not long. It operated first as a private enterprise from 1971-1976 then as a nationalised company from 1976-1979. Still, the company’s brief fling in Senegal illustrates the nest of problems foreign agribusiness can create for a Third World country trying to develop by outside investment.
The company’s founder, Lester V. ‘Bud’ Anile, started his lettuce packing and shipping operation in California after the Second World War. Using state-of-the-art technology, Bud became the world’s largest private producer of ‘Iceburg’ lettuce — the crunchy, bland salad vegetable most North Americans think of when they hear the word lettuce.
By 1978, the company was a multinational operation selling about $80 million worth of vegetables a year. Seven years earlier Fritz Marsehall, an executive with one of Bud’s European affiliates, on a visit to Senegal noted the similarity of the West African country’s climate to California. The question arose: What was to stop Bud from setting up another California-style operation? The restaurants and dinner tables of relatively affluent Europeans with their fierce appetite for fresh fruit and vegetables during the long winter months would provide a ready market.
In addition to climate, there were a few other good reasons to set up shop in Africa. The distance between Senegalese ports and Europe’s major cities was not great by refrigerated cargo ship. And of course labour would be cheap. The World Bank was willing to help finance the project and the Senegalese government was also very helpful to the enterprise. In addition to holding 48 per cent of the stock, Senegal agreed to a moratorium on taxes and import-export duties for ten years, to charge very low land rental fees and to supply water for irrigation. The government also very kindly expropriated 800 hectares of land from villagers for one of Bud’s projects.
Operating through its Dutch affiliate, the company set up two different types of farming concerns in Senegal. One was a plantation type using the expropriated land and the other was based on local small farmers actually growing the crops.
The plantations were initially established on a 450 hectare site, 38 kilometres from Dakar, convenient to the port and to the airport. This was a high-technology operation using drip-irrigation to produce melons, green beans, green peppers and tomatoes. Once shipped and air freighted to Amsterdam, Brussels, Paris and Stockholm the produce could be sold by the company’s marketing agencies.
The drip-irrigation techniques which Bud was relying on had proven successful in Israel and other arid areas. Drip-irrigation involves a system of small tubes hooked up to pipes connected to a main water supply. In areas where water is scarce this has the advantage of giving the moisture directly to the plants. Fertilizers as well as water can be transmitted to the root systems by the drip method.
The system is very expensive and is also capital intensive, providing little employment for local people. The long-term effects of drip-irrigation were not studied beforehand and the whole operation was essentially competing with other parts of the country for scarce fresh water.
Bud cleared the land of the huge Baobab trees that picturesquely dot the West African landscape, resembling upside down grey carrots. The trees, however, are more than another picturesque ingredient to the local landscape. They protect the soil from erosion while providing the local inhabitants with an edible fruit and raw material for making houses, ropes and other household goods. Two and sometimes three large Caterpillar tractors were required to remove a single one of the large, deeply rooted trees. An inadequate crop rotation on the company’s land further impoverished the soil.
Bud’s second project Senegold, made use of another natural curiosity called naives. These are depressions near Senegal’s coast where ground-water is close to the surface. This land was to be farmed by small holders. Their inputs, fertilizer, seeds, pesticides and advice would come from the company which would also be their only marketing outlet. If things did not work out, the farmers would be the principle losers since the company’s investment was minimal.
Furthermore, Bud’s farmers would be competing with other local producers. If the former were successful they might drive their neighbours out of business. On the other hand, if farmers not involved in the schemes produced their crops more cheaply than those assisted by Bud, the participants in Senegold would be out of luck. In either case one group of farmers would wind up with the short end of the stick.
Senegal has suffered from food shortages in recent years. And Bud’s agribusiness activities were not doing much to provide food for the local population. It was the food preferences of Europeans and price advantages that determined what was grown. When green bean prices in Europe dropped below the cost of growing and shipping Senegalese beans, the company destroyed the harvest.
As one Bud official explained, 'since the Senegalese are not familiar with green beans and don’t eat them we had to destroy them.’ Furthermore, from May until December the European tariff system makes it unprofitable to export vegetables. The Senegalese land could have been left fallow or local people might have used it to grow food for themselves. Bud decided the best use for the land would be to grow food for livestock.
By 1976, Bud’s projects had run into financial difficulties. The company refused to invest any more money in Senegal and the Senegalese government became the majority stockholder with 61 per cent of the shares and nominal control of the corporation. There were charges the company had written off profits as losses by selling to its own marketing arm at exceptionally high prices, then had claimed it could not afford to maintain the operations and had allowed the Senegalese government to buy more shares out of government coffers.
The Senegalese government was left with eroded soil and imported machinery which could not be adequately maintained in Senegal. The state could continue growing vegetables but transportation and marketing networks were completely out of its hands. Transportation had been a persistent problem and there seemed no way out of this if the produce was to be sold in Europe.
In 1979 alone, 600 tons of peppers were lost due to transport problems. Finally, the government brought the operation to a total halt.
The International Finance Corporation, part of the World Bank, identified ‘management weaknesses’ and ‘high personnel costs’ among Bud’s problems. However, this mismanagement and an alleged loss of $27 million did not prevent the giant agribusiness company Castle and Cooke from acquiring Bud-Antle in 1978. Castle and Cooke markets under various brand names — tuna fish, pineapple, bananas, mushrooms and other products. They are also in the real estate and weapons business. This means in the future Bud will have even more resources to tackle the international scene. There is no reason to believe the results will be happier than they were in Senegal.