In July 1993, new arrangements for A.C.P banana trade came into force to limit preferential market access as an E.U commitment towards global free trade by 2001. Main elements of the regime were the introduction of tariff quotas on a country-by-country basis and the accumulation of saleable licenses for importation of non-A.C.P fruit. The concession has influenced A.C.P producers to become traders to generate additional revenue from selling licenses in Europe. On the other hand, the quota system penalizes countries by capping import levels. It also exposes producers to both a potential loss of license revenue and quota reduction, should export volumes decline.
To take advantage of the new arrangements, the WI
Governments and the BGA's opted for a structure which would allow the industry to earn
additional income and utilise full export quotas. To this end, WIBDECO was created as a
trading and strategic management company to:
1) conduct negotiations with GEEST and implement the ensuing contracts;
2) maximise returns over the duration of the E.U regime; and
3) guide the industry into open market competition.
During its first twelve months WIBDECO focused on establishing new contractual and transitional arrangements with GEEST. In May 1994, in anticipation of contractual commitments and to secure licenses promptly, WINBAN's U.K. office was converted into a trading company. Between March 1994 and May 1995, WIBDECO concentrated on finalising the following issues with GEEST:
WIBDECO was legally registered in the four Windward Islands between March and December 1994 to facilitate its planned take over of receiving and loading operations from GEEST in July 1995 and its operational trading activities on each island.
The company's EC $10 million share capital, consisting of 1,000 shares of $10,000 each, will be allocated as follows: $5 million in equal amounts to the four WI Governments (12.5%) and $5 million to the BGA's as a ratio of their respective export volumes over the last three years. The Governments will take up their shares in two trenches. Three of the four had paid for their first subscriptions of $250,000 each by April 30, 1995. The BGA's will take up their subscriptions by December 1995 following agreement on equity allocation in June 1995.
The allocation of 50% of the shares to the BGA's will be as follows: SLBC 24%: SVBGA 13.5%; DBMC 11.5%; AND GBCS 1%. WIBDECO's Articles of Association allow for dividend payments; however, Governments have agreed to waive their rights to profit to optimise returns to growers.
WIBDECO's aim is to strengthen the competitiveness of the
Windward Islands' banana industry. Its immediate goals are to:
1) maximise returns tot he industry - for example, by product differentiation, and by expansion within the marketing chain: and
2) help the BGA's to enhance productivity and quality through restructuring, operational research and bulk input procurement.
For a period in excess of four decades we in the Windward Islands have been involved in the Banana business as only primary producers. Bananas became the mainstay of three of our four economies, Grenada being the exception. For that entire period we remained primary producers.
But the world around us was changing constantly and in the last four years there has been a march towards globalization and the liberalization of trade. The European Market to which we traditionally sold our bananas was in integral part of that movement and the pressure mounted to "free up" the trade in Bananas. This led to the development of a New Banana Import Regime which came into effect in July 1993 which is less protective and is scheduled to last until December 2002. The reality of the development is that it signaled the end of the protection that we had been accustomed to and pointed to the need for our industry to become more competitive if we are to survive when such protection as we have, is further reduced or entirely removed.
With that in mind, the Government of the Windward Islands, and the industry represented by the BGA's, decided to establish on a 50- 50 basis a company to take the strategic and other Management decisions required to take the industry forward. This led to the incorporation of WIBDECO here in St. Lucia on March 28th 1994.
The joint venture is comprised of two companies called Windward Isles Banana Company (UK) Limited and Windward Isles Banana Company (Jersey) Ltd. These two companies which are owned 50-50 by WIBDECO/FYFFES acquired the Geest Banana Business. How is the joint venture financed? Both WIBDECO and FYFFES contributed GBP 20 M equity each and the balance of approximately GBP 50 M - GBP 52 M was financed by a none recourse loan which is secured on the assets of the joint venture. I will say more on this financing later.
The successful bid by the joint venture amount of GBP 147.5M of which GBP 55.3 M related to the lease obligation associated with the two island class ships making a total of GBP 92.2 M for the Banana Business to be paid at the outset.