CAB129-37 — Page 601

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The capital requirements of the new plan. My officials are also, satisfied that the programme should be

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capable Bestofriment within the Corporati 602 wing

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powers, even if it is assumed that in some instances the Corporation have been optimistic in their cost estimates. is, of course, impossible to make absolutely reliable estimates of all the unknowns. The Corporation estimate that their plan can be carried through by total borrowings of £47,600,000 of which £3,000,000 are earmarked as a reserve to cover the risk of loss on actual agricultural operations during the development period. My officials have checked over this calculation and, after making some adjustments which they feel reasonable but which it is not clear would be wholly acceptable to the Corporation, they conclude that the total borrowings required to complete the plan will be £48,430,000. Both estimates agree therefore that the plan can be carried through within the limit of the resources which have already been approved. And my colleagues will welcome the assurance that these new estimates are based on actual experience in East Africa to a far greater extent than has been possible hitherto. The original calculations were made without the benefit of any practical experience in the actual operations. The Corpora- tion, in framing their new programme, have had the benefit of all the hard won and costly experience of the past three years.

8.

What sort of asset will the Corporation have in East Africa when their development programme is completed? By the end of 1953 there will be 600,000 acres cleared and 540,000 acres will be under crop in 1954.

It is a formidable task to make any reasonable estimate of what the earning power of 540,000 acres will be four years hence. The major uncertainty results from two main variables - the actual yield per acre of oilseeds, and the price of oilseeds in the years ahead. In their case the Corporation have produced ühtr own estimate and another indepen- dent estimate has been produced by my officials.

The earning power of the new Scheme.

The Corporation's Estimate

£55 per ton for ground-

If they had accepted acre) and if the

9. (a) The Development Period. In making their estimates on agricultural operations during the development period (1950-54) the Corporation have assumed yields of 750 lbs. per acre of both groundnuts and sunflower. They have also assumed the current price of oilseeds of nuts and £35 per ton for sunflower seed. a "safe" estimate of yields (580 lbs. per estimate of oilseed prices prepared by my Ministry (falling to £40 per ton for groundnuts in 1953-54) had also been used, there would be a loss on agricultural operations over the four years of £4,500,000. Against this the Corporation have earmarked £3,000,000 in the belief that both pessimistic assumptions will not be fully realised simultaneously, and because they are determined to secure that the deficiency on agricultural operations in this period does not exceed this figure.

(b) The First Post Development Year. The Corporation's estimate for 1954-55 shows an operating profit for that year (after allowing for depreciation but not for interest or amortisation of capital) of £1,097,000. In reaching this figure they have again assumed yields of 750 lbs. per acre, of both groundnuts and sunflower. They have also again assumed the current price of oilseeds of £55 per ton for groundnuts and £35 per ton for sunflower seed. The Corporation have recognised that this profit could easily be turned into a loss if lower yields and if lower prices were assumed. But because there is hardly a limit to the assumptions which can be made for the purpPage.602 nd d097ypothetical calculati Bage 602 obr997ation retain the present prices at the yields which the experts believe will be attained, given experience.

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