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OVERSEAS FOOD CORPORATE 618 of 1097
MEMORANDUM ON
EAST AFRICAN GROUNDNUT SCHEME
STRICTLY CONFIDENTIA
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The first Annual Report and Accounts of the Overseas Food Corporation now being available, the Corporation have made al re-assessment of the Scheme in the light of the financial results of the first two years, the scale of expenditure now being incurred under the 1949/50 budget and the operational experience to date. The nature of this re-assessment, although still tentative in many respects, inevitably calls into question the whole basis of the Scheme.
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Operations in East Africa commenced at the beginning of 1947 on the plan set out in Cmd.7030. When the Corporation assumed executive direction on the 1st April, 1948, decisions had been taken (including the location of the three main production centres and the new port and railway) and action was completed or in hand (including the purchase of equipment and the engagement of personnel) which had already fixed the pattern of future development in accordance with the original plan. While it was obvious at once that this plan could not be implemented as it stood, the Corporation accepted at the outset the view expressed by the Managing Agency, in their report on the first year's performance, to the effect that it should be possible to develop the whole plan within the broad framework of Cmd.7030 and to achieve the results anticipated by the end of the six year period. Reasons to doubt this view soon arose
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One of the first tasks of the Corporation was to produce a detailed plan of development, and later to cost it. This plan, as finally presented in December, 1948, was designed to produce on a revised agricultural rotation the quantity of oil aimed at under the original scheme but from the clearance of 2,355,000 acres to 31st March, 1958,"as against £3,210,000 acres to 31st March, 1953. The capital expenditure totalled £95 millions, with a maximum cash drawing of £67 millions, the difference representing estimated surplus earnings to 31st March, 1957. An informal discussion of this plan with the Chancellor of the Exchequer made it clear that there was no prospect of the Corporation's borrowing powers (£50 millions on long term and £5 millions on short term) being extended at this stage, and that a programme must be produced within the present limits. This has now been done with results which show a further upward rovision in capital cost and a downward revision in estimated earnings.
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The position on the capital side is summarised in Appendix 1 to his memorandum. In round sums the figures show that £32 millions will have been expended in the peri da to the 31st March, 1950, when 100,000
acres will be available for agriculture, and that a further £13 millions expended in the period 1st April, 1950, to 31st March, 1954, are estimated to produce an aditi nal 500,000 acres, making 600,000 acres in all for a total capital expenditure of £45 illi ̈ns.· ́ A statement showing the contrast between the se figures and those of Cmd. 7030 is at Appendix 11 1
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The difficulties which have confronted the scheme to the 31st March 1949, are fully set out in the Annual Report and need not be repeated. There were, amongst other things, serious defects in management over that period bu it will be apparent from the figures in Appendices 1 and 11 that the problems guestions of managment or prandir109 Nothing that
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/the Managing
M.2749/25/9.49/DB