Sri Lanka’s plantations industry contributes almost 2 percent of gross domestic product (GDP). However, almost 65-70 percent of the tea plantation crops right now are produced by the smallholders and not by the regional plantation companies (RPCs). In reality, the situation should have been the other way around. That’s because the RPC sector has much more resources when compared with the smallholders. Had the RPCs known how to make use of the resources strategically, the story could have been quite different with a far higher productivity.
The omission on the part of certain RPCs, as per the simple comparison above and explained in detail later in this article, has created immense hardship to the employees of the RPCs at all levels (including certain CEOs) and to the public of this country. If anyone wants to counter the bitter truth expressed by us, may we reiterate our plea made during the past two years to Prime Minister Ranil Wickremesinghe to appoint an independent truth-finding commission to investigate and to document if the underperforming RPCs have followed the best management practices and lived up to the expectations of privatisation.
And at the same time, we salute those CEOs of the RPCs, who created and delivered value through better performance and for being visionary/futuristic in their job role. This proposed commission will also look into the contributions of the Plantations Restructuring Unit for the current state of the RPCs, if any and the corrective actions initiated by the Plantation Management Monitoring Division (PMMD) from its very inception to ensure the state resources are better managed for the greater good of the country at large.
We also suggest that the findings be used only for correction as we believe ‘admittance of past mistakes’ is the first point of meaningful correction. We still believe that we have the power within for correction.
Plantations are national assets
Whilst acknowledging that there was an official lease agreement between the state and RPCs, we are also aware that no agreement is above the constitutional framework of the country. And most importantly, two wrongs will not make one right either. Plantations are national assets. Their importance in terms of environment, economy and social profits are enormous.
Since the economy of Sri Lanka is transforming into a middle-income level, the aspirations of the employees and stakeholders have to be met without wasting time by comparing with that of poor economies. The net outcome will be out-migration of employees, which we already experience.
This is why we have been suggesting to look at plantations as land-based investments rather than thinking of a mono-crop or indeed agriculture alone. Also we have been repeatedly proposing to venture on to globally sought-after products and submitted a wireframe of a proposal to generate US $ 10 billion within a short period of time.
Due to the far-seeing economic proposals, these opportunities will now be available to global entrepreneurs simply because we have been sitting on golden resources since our independence in 1948 for the past 69 years without a viable outcome. This is the price we pay as a nation for being highly emotional and jealous, which are outcomes of lacking awareness, being under-educated and strutting around with inflated egos.
I am not an expert in management or in any other discipline but a generalist with more than 40 years of experience as a planter and then a visiting agent of plantations but belong to a different era of time. The plantation crops mainly include tea, rubber, coconut and cinnamon. The monopoly of oil palm (OP) is retained by the RPC sector. Given the opportunity, even OP will be better managed by the smallholders. One of the powerful contributory factors for the smallholders to do better than the RPC sector is their enthusiasm, dedication and commitment displayed by the psychology of ‘ownership’, which is a vital requirement in agriculture.
The above commitment leads to self-discipline and passion. It’s mainly due to lack of these two vital elements that well-managed plantations during the British management have deteriorated to this sorry state to-date within the past 43 years since the nationalisation of plantations in 1974.
Power of discipline
In order to understand the power of ‘discipline’ we have to hark back to history: the most recent performances of the industry under the late Gen. Ranjan Wijeratne. The obvious choice made available to all planters then was crystal clear to everyone. No shirkers were tolerated. Discipline was maintained. Mediocre persons irrespective of rank were given 24 hours to pack up their bags and get out without making a mess of the plantation.
Conversely best performers were duly recognised. That gave a serious message and most were falling in line. If not for the influence by the anti-social elements, the industry would have been best of its kind, envious by the rest of the competitors globally.
Since currently most of the RPCs appear to be aimless and lacklustre, there is no reason to be surprised over the mediocre performances affecting the national economy. We were then not short of best leaders such as: E.L. Daniels, J.S. Ratwatte, Malcolm Talwatte, Wickrema De Alwis, S.K. Seneviratne, Raymond Paranavitana, etc. even after the sad demise of Gen. Wijeratne. Not only were they were task-oriented but relationship-oriented as well to the same extent, which paved the way to make great teams that bred success all the way through. They had excelled the art of managing and they knew how to separate men from boys. They had a deeper understanding of the issues and were well updated on all sides. It is a proven fact that the leadership and business outcomes are correlated. Do we have the same quality visionary leadership now in all RPCs?
Planning is key
The first phase of professional management is planning. This is the most important activity in managing one’s own personal life and indeed managing a profitable business like an RPC. A sound understanding on the actual happening and futuristic probabilities with the internal as well as external business environment is a must before planning.
The successful CEOs of the RPCs that are doing relatively well seem to have mastered this art of correct planning and the rest like execution, monitoring and controlling the growth-oriented performances. In a natural scenario of impossibility of reaching perfection, we recognise Roshan Rajadurai for his operational excellence since his college days at Trinity College and to date with his business life. In fact, we have no personal squabbles with Rajadurai.
What however is inexplicable is why the Planters’ Association (PA) appears to have been deaf and dumb when some RPCs have totally mismanaged their plantations. Horror stories emerge of how estate lands have been blatantly encroached upon; those in authority appear to feign ignorance.
Yet another RPC perhaps blessed with the cream of upcountry and low country tea estates, which yielded well above 2200 kg/ha in 2012/13, has now plummeted to a poor 1,567 kg/ha.
Expressed in terms of Made Tea crop, dropping from 5.2 million kilogrammes [and 5.7 million kilogrammes in 2014/15] to 4.2 million kilogrammes in 2016/17 – a drop of a million kilogrammes of Made Tea [vide its annual report 2016/17].
Like for the high grown section mentioned above, the low grown cluster also sees a significant drop in crop – from 1.53 million kilogrammes [in 2013/14] to just 678,000 kilogrammes in 2016/17 – here again a significant drop of 855,000 kilogrammes [0.8 million kilogrammes] – accordingly, for the tea sector of this RPC, a sudden drop of 1.85 million kilogrammes, which when computed at the current tea NSA of Rs.509.87 [high grown] and Rs.547.42, works out to a huge loss of Rs.509,870,000 for high growns and an unacceptable Rs.468,044,100 for low growns, making up a total loss of Rs.977,914,100, almost Rs.1 billion, just for the year 2016/17.
These significant drops in yield per hectare (YPH) and crop cannot be only attributed to so-called ‘bad weather’ – factors such as soil nutrient deficiencies, poor harvesting techniques, ill-timed or sans vital agronomic inputs at pre-pruning and post-pruning operations, lack of an effective infilling programme to ensure bush vibrancy/population, etc. are contributory causes.
Surprisingly, the directors’ emoluments amount to a high Rs.35,182,000 – in the backdrop of Rs.8,291,164,000 [8.29 billion] net debt, vide annual report of this RPC for 2016/17. Also, as per its annual report, this RPC has mortgaged all conceivable assets such as lands, buildings, machinery, vehicles, etc. to banks and even with tea brokers with narration: “Primary [and even secondary] mortgage over leasehold rights of the estate and buildings fixed and floating assets…” and even “realised and unrealised values of the stock of teas catalogued and to be catalogued with broker...”
Another example: “Securities pledged: A promissory note, continuing undertaking and guarantee executed by the borrower in favour of broker whereas the borrower agrees to forward teas and sales proceeds on pre-allocated marks some of which are shared with brokers to [broker name withheld] until the payment of all monies due and owing.”
As per the annual report for 2016/17, the total liabilities are Rs.8,760,051,000 [Rs.8.8 billion] for the group and Rs.6,888,695,000 for the company managing this RPC.
The net debt – Rs.8,291,164,000 [Rs.8.3 billion] is for the group and Rs.6,665,311,000 for the company. The net debt to equity ratio is 519 percent – all figures verifiable vide annual report.
As per the annual report of this RPC, the share market value, which was Rs.168 in 2010/11, has dropped to Rs.10.10 in 2017 and currently trades for around Rs.11. No dividends have been paid from 2013/14 onwards.
The net assets have progressively declined 2013/14 onwards.
The net debt of Rs.8,291,164,000 [for the group] and Rs.6,651,311 [for the company] is mostly as a result of imprudent investments, some questionable overseas operations and high borrowings, even to service working capital.
Almost all assets – both moveable and immoveable – of this RPC have been mortgaged [some twice over].
It is suggested that a full-scale inquiry into the financial dealings, questionable investments both in Sri Lanka and overseas, etc. be conducted and those responsible for creating this mountainous debt be asked to make good this financial burden, perhaps liquidate assets of subsidiary companies, which collectively were bleeding the assets and working capital of this RPC and pump back such liquid assets back to the same RPC – a public quoted corporate entity. All concerned have to work towards making this RPC debt free and to invest in its core business of tea, rubber, oil palm growing and manufacture and identifying and enhancing its many assets that this RPC possesses abundantly.
After all, one must be cognisant of the fact that this RPC, like all other RPCs, still belong to the Government of Sri Lanka [JEDB/SLSPC] and in this instance, the assets of the Government of Sri Lanka have been improperly and carelessly managed, also creating a huge debt that was preventable. This why, we say that the PA is in fact an OA or owners’ association. There is adequate time if they want to unmask them rather playing hide and seek at the expense of less influential majority of the sector.
A travesty of justice
Instead of nurturing and enhancing the capital value of the 22 resource-rich plantations in Sri Lanka, this RPC has inconceivably diverted funds overseas and also invested in local companies mostly unrelated to its core business.
What a travesty of justice as this RPC, which has perhaps two of the best located and potentially agro-rich plantations in Sri Lanka, appears to give step-motherly treatment to these Sri Lanka-based plantations, such as limiting vital fertiliser inputs resulting in downward spiralling of crop and yields and inexplicably investing cavalier-fashion overseas with predictably negative returns, impacting the share price and total economic, agro-well-being and capital value of the RPC.
Plantations are national assets. The land mass belongs to the state. Therefore, when things go wrong continuously for a consecutive period of over 43 years and when it creates catastrophic consequences to the national economy in multiple ways, shouldn’t we look at it and discuss it openly with the objective of correcting them through a national consensus? Our criticism and offering alternative solutions are merely to assist those who are not doing well or else just to signal to them that something absolutely dangerous is looming in the near future.
Whilst both the minister in charge and prime minister himself have delved into the matter in detail, it’s only a matter of time before such rotten and unbelievable stories will reach mass media, doing more harm and damage through a weak public perception on the RPC management. That will speak for it for the causes leading to poor performances. The findings might point out the quality of planning, implementing, monitoring and controlling, the four phases of basic management if were performed by poor RPCs – they should learn from smallholders.
The PA, under which all the RPCs are taking shelter, wasted a great deal of opportunity to support the underperforming ones instead of finding solutions owing to the problems created by them. They used the PA brand (developed by hard labour of former planters) to hide their sins and still to live an extra day on the lap of luxury.
However, we appreciate the current PA President Sunil Poholiyadda, who appears to be much more patriotic and is wilful to coordinate with those who are keen to assist the RPCs to change for better. The first step is to introduce discipline into the RPCs, to let the active planters manage the affairs of the PA. We have enough promising planters who are ready to take up the future of the industry in their innovative way.
As per the constitution of the PA, it is mandated to support the planters in active service. Instead of doing so, this organisation catered to ‘has been’ to be in power without creating value. This is the place where some gathered to exploit the RPC-managed plantations by resorting to extractive agriculture and pressure the successive governments to dole out money.
The question they had in mind is, why invest when the lease period is less than 50 years? An extremely selfish argument there, yet some made maximum use of this argument to run down the plantations to the very core. The PA did not do anything against it although they called it the PA.
We pray, where was the recognition to those who did extremely well and looked after their employer and employees alike? Shouldn’t the protected sustainability efforts launched by such CEOs be recognised by the state? What is the role of the PMMD in this instance? Whom do they recognise: the blatant vandalism or conservation steeped in sustainability? We feel that it’s about time to wake up from deep slumber and speak out to be heard by all stakeholders.
The objective of this article is not ‘character assassination’, which is counterproductive. We have acknowledged the existence of better performers. But our bigger goal is to move forward as an industry that makes our country proud rather than praising just a handful. Anyway the country will or rather should recognise better performers, as they do not expect a pat on their back.
The bigger goal is to be a US $ 10 billion player in a US $ 87 billion economy. The RPC sector has the potential to achieve this bigger goal. We have disclosed the plan. A better plan can replace our plan already submitted. We are not disturbed over such rejection. The need is a similar master plan covering all areas of the industry. There is no great advantage by improving bits and pieces.
So we conclude that nothing is wasted if even the state could invest in the leadership development and to improve the competence of strategic planning in the RPC sector. There exists a dire need for the National Institute of Personnel Management (NIPM) to coordinate with Postgraduate Institute of Management (PIM) and offer tailor-made programmes on both knowledge domains to the corporate management of the RPC sector on a regular basis. Systematic knowledge leads to permanent change for the better.
We feel that the competency in managing change is inadequate as a national issue and in this instance is affecting 200,000 direct livelihoods managed by the RPC sector alone. Managing change is a scientific process and has to start from the owner and not from the CEO.
Withdrawing the typewriters and replacing with the computers is the appropriate example for managing change completely wrong. Most of the changes initiate earlier became utter failures because we did not handle change well. It is compulsory to manage change by changing four areas simultaneously. We have to change people, strategies, structure and technology simultaneously when initiating change. So, this is not an opportunity to defend but to expose and correct. Since problems lead to grand opportunities, here lies an opportunity for a Plantation Consultancy Group (PCG), a profit-making NGO comprised of CEOs of the RPCs, who can think differently and act differently. They could prove their mettle. Competencies of high level of leadership and strategic management are key requirements.
(Lalin I. De Silva can be contacted via firstname.lastname@example.org)