CAB129-37 — Page 620

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Page 620

and expenditure which are outside accurate estimation, and in any case the Corporation would not be prepared to recommend facing a deficiency of this order over the four year period. They recommend, therefore, that £3 millions only be reserved on the understanding that" agricultural operations must be conducted on a cash deficiency not. exceeding this figure within the period, which must be regarded as a development one.

8.

The income from the operation of twenty units (Appendix IV) is similarly estimated. It will be seen that after allowing for depreciation a margin of £1 million is forecast, but it must be made clear that on a prudent estimate of prices this would be converted into a deficit provided that, when the time comes, the estimated yields and the ratio of groundnuts to sunflowers cannot be increased and the estimated expenditure reduced. The fact is that there is no data at present available for these areas which allows reliable conclusions to be drawn, but nor is there as yet firm ground for the assumption that agricultural production cannot, time, bo conducted at a profit.

9.

as follows:

The alternatives now open, in the Corporation's view, are

(A) To close down at once. Allowing for the re-assumption of

liability for the port and railways (now assumed by the East African Railways), notice and leave pay to staff, the effect of a mass sale of plant and stores, the negligible value for any other purpose of most of the buildings and installations which would become redundarit, compensation. for cancelled contracts and so forth, it is unlikely that total net expenditure would be loss than £30 millions. It might be more. The area then available to the Corporation for agricultural production would be 112,000 acres, mostly in the less promising Kongwa region. It could make no appreciable contribution to charges on a debt of this order. Something like £30 millions would therefore be a dead loss.

To proceed on the lines of the latest East African plan (with such modifications and provisos as may be decided upon); a plan which estimates a capital expenditure of £32 millions to 31st March, 1950. (of which at least £30 millions is already committod) with a further £13 millions over the four years to 31st March, 1954; bringing the area cleared for agriculture from 112,000 acres as at 31st March, 1950, to 600,000 acres as at 31st March, 1954, and requires, in addition, a reserve of £3 millions to cover the risk of losses in agricultural production over the four year period; that is a total estimated liability of £48 millions.

10.

In considering the recommendation that they are to make, the Corporation must have regard to the obligations. imposed upon them by Section 15 (1) of the Overseas, Resources Development Act, which requires them to secure that their revenues are not less than sufficient to meet all sums properly chargeable to the revenue account taking one year with another. It will be plain from the preceding paragraphs that the Corporation are in no position at the present time to put forward long range estimates which show this result or to predict when, if ever, such a result can be attained. Experience has demonstrated that when agricultural industries are put to a test which threatens their survival vory drastic economies can be made, and on the face of it there seems a margin in the present estimates for such economies over and above those which are incorporated in them. While on broad grounds therefore, the Corporation scos no reason to suppose that given time the agricultural operationPage 620,6f90970s cannot be conducted Page26df 10gy can hold out little hope that this profit will ever carty debt and redemption charges on the full capital, which at that stage will approach £50 millions.

/ 11. Provided that