Plantation crisis: Let’s start a new journey in 2016 with end in mind
28 Dec 2015 - {{hitsCtrl.values.hits}}
When looking at the overall achievement after 40 years since the initial nationalization of the plantations, it is very off-putting to observe that the plantations industry of Sri Lanka is in grave danger. Nonetheless, if the sectors of the plantation industry make a progressive change towards a short and medium term, very soon there is a definite possibility of saving the industry from its self-destruction, saving nearly 200,000 direct and 1.2 million stake holders from a jobless condition.
The statements made by the Planters Association surprise me because whenever they speak on behalf of the plantations industry, they speak of high costs loud and clear. Are we to believe that the high costs took place overnight? Some RPCs (Regional Plantation Companies) are managing their companies to the likes of managing small boutiques or even worse. What were their strategies to mitigate the risks of escalating costs? Do most of these CEOs expect their employees to work for a diminishing salary? Do they take care of the management of assets? Why the staff and executive bungalows are like cattle sheds in most locations?
Careful study on the existing HRM (Human Resource Management) systems of RPCs may aid in understanding why the labour productivity on RPC-managed plantations is low. The usage of IT is instrumental in assisting employees to do better. Finance and marketing must be facilitated to achieve their full potential to achieve overall progress at a global level. If a detailed analysis of the current situation is undertaken by the industry experts other than planters of the industry, it will help in developing correct policies for the future without a doubt.
So it is my opinion that the government must improve the competence of corporate and plantation management and this must be made a top priority, if we are to turnaround the financial viability of the industry and save over one million livelihoods. The RPCs are good at two things—nationalizing losses and privatizing the profits. Although they haven’t invested in quality replanting, the profits made were divested in other businesses. Such investments by RPCs since 1993 bear evidence to what I am stating here and without further adieu the golden shareholder must investigate into these financial crimes. RPCs are supposed to distribute 5 percent of the profits they make amongst employees. How many RPCs did this to the letter? We have also failed to recognize those ‘smart’ RPCs publicly and encourage the low performers to learn from them.
Low investment and poor quality replanting
Like in the case of animals, the plants have a life cycle, too. When grown at a large scale, the productive phase of this cycle matters very much as most of the income is gained through the productive phase. The only solution to maintain a seamless growth/productive phase is to plough back a certain amount of capital. Stopping investment in maintaining the growth/productive phase is suicidal. Some argue that the cost of replanting is beyond their affordability. However, some companies have continued to replant at their own expenses having understood the impending doom to economic viability. Although, those who were not strategic and could not think far did not replant. In the case of tea, infilling can support the cause although some have not undertaken it. There were instances in the past certain plantations undertook systematic infilling and the levels of yield rose from 1200 to 1700 kgs within 3-4 years.
Failing to manage the growth of RPCs
Growth is of paramount importance in any industry. Most industries follow growth strategies such as joint ventures, alliances, licensing, introduction into new markets, development of new products, and outside financing. The officials of RPCs do not seem to recognize the necessity of addressing the growth of their businesses. What have the RPCs done to ensure growth of their businesses since 1993? Although the escalating costs year on year is an accepted phenomenon, costs cannot be absorbed if there is a negative growth. According to the Companies’ Act that was amended in 2007, the directors of a company who are responsible for mismanagement are personally liable to be sued in a court of law.
Tea Industry
The price of a kg of tea varies from Rs.8000 – Rs.18000 on an average in a shelf of many leading supermarkets abroad. This means that the consumer is willing to pay a reasonable price for tea. This also means that someone is making a fast buck in between. Brokers have been unable to gainfully attract that slice for the betterment of the industry. So we need effective strategies to get a deserving price for our tea. Let’s start with that “End in mind”.
We need to bypass the broker and diversify this “150 year old product” – the black tea, green tea or oolong tea. Why do this? Because consumers drink only the tea extract that come out when hot water is poured on to black/green/oolong tea. So why take all that trouble and waste a massive amount of energy when the desired outcome can be achieved through a number of low cost alternative methods. This will help to increase level of innovation and cut down time which paves way for more cash.
Look at Nestea, a product similar to Nescafe. Nestea however, has fallen short of tea taste due to absence of thiamine which seems unique only to tea.
Lot of quality is wasted between plucking and the point in the trough. The ideal solution is an integrated machine of making a beverage product – tea polyphenols- from their homes itself. That’s a lasting solution to sustainability of the tea industry. Given the opportunity, the Japanese and Sri Lankan universities can surely do it with a bit more research.
So the solution to the problem is right under our noses. It is only a matter of executing it.
Tea should never leave the factory in a traditional form but as a ready to drink – bottle or sachet form; an extension but an improved version of Nestea. Tea should only be dispatched from the factory branded, labeled and straight to the supermarket shelf. Why dispatch waste that ends up in a dustbin or in flowerpots later. The king of tea is in polyphenols. The content can be determined /quantified and exchanged with a value for money.
The Tea Board should go to food scientists, R&D scientists and marketers instead of going to the World Bank. When we are guilty of incorrect actions, we should change our ways instead of doing the same thing over and over again and expecting miracles to happen. Such a mindset is not going to bring about the betterment of the industry but will rather lead the industry to its doom. In Sri Lanka, this sort of mindset is nothing new but an accepted form of living. This is why we suggest that the universities and crop research institutes join hands to support the plantations industry. The existing level of knowledge has failed due to whatever the reason. When the prices are high we clap for ourselves and when the prices are low we start blaming each other. This should not be the system to support an industry.
The tea industry of Sri Lanka lacks a marketable product at a deserving price and as a result we adopt a wrong process of manufacturing at an exorbitant cost (and still claim that the costs are high). The next observation is that the tea factories are not capable of managing the process of manufacturing. In simple theories of management it is stated that what you cannot measure you cannot manage. So it is with these major shortcomings that we intend concurring global market place while competing with other giants in the beverage industry. Aren’t we insane indeed?
Some say that the government must stop allowing tea blending and re-exporting as Ceylon Tea. What matters to the government is revenue. If the blending business can generate more revenue than manufacturing and selling of our tea, then why not utilize blending? This itself show the importance of working towards national targets such as US $ 10 billion by 2020 from the entire industry and US $ 5 billion from tea alone.
Labour is the biggest cost
Moreover, HRM theories can help most RPCs to reduce costs in many ways. A strategically driven performance management system is a blessing in this direction. If the garment industry can reach world class levels through the correct application of HRM, then so can the plantations industry, which is also labour intensive to a similar extent.
Plantations should also obtain services from experts on compensation and benefits. The disparity between the salaries of the top most executives and grassroots level employees have to be managed. Only such professionals could expose the correct perspective at a time salaries are being negotiated.
HRM concepts are heavily under-used in the RPC sector compared with the garment sector. Every RPC must have a strong HRM department directly under the CEO or the MD that will help turnaround the RPC management effectively. There is a great possibility of a giant leap forward in RPC management if the other pillars of any successful business such as IT, finance, engineering and marketing are also given equal opportunities in the board rooms of RPCs. This situation is absolutely neglected at present in many RPCs. Sometimes these departments are made ceremonial. All these factors amounting to huge levels of mismanagement are contributory for the high level of employee dissatisfaction. Employees that are not motivated do not contribute positively and as such, these anomalies need to be corrected first if RPC management is to be turned around.
Let’s start a new journey in 2016 with the “end in mind” and the goal is US $ 10 billion US$ by 2020. Having ‘smart’ Plantations is not a want but a need. (The writer is a former Editor of Ceylon Planter’s Society Bulletin)
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