Committee Reports > List of Committees > Joint > 1980 > Committee on Commercial State-Sponsored Bodies > Report No. 13 - Comhlucht SiÚicre Éireann, Teoranta

APPENDIX 8

SUBMISSION ON BEHALF OF FASTNET CO-OPERATIVE SOCIETY LTD., SKIBBEREEN

Why we make the submission:

We are a Co-Operative Society, located in a disadvantaged area of the West of Ireland and in partnership with C.S.E.T. since our inception in 1963. We have a vested interest in the well-being of Erin Foods. We have an even more vested interest in the future of our own area in West Cork. We believe that our view from a very local, decentralised area may have it’s own particular value in any assessment of C.S.E.T.

The beginnings:

In the late 50’s and early 60’s, depopulation and emigration were rife in West Cork. Enormous efforts were made locally to attract industry and to build up tourism. About the same time, Lt. General M. J. Costello was toying with the dream of an Irish Processed-Vegetable industry, allied with an Irish Sugar industry. In 1973, the local (purely social) objective of providing jobs for people was wed to the Costello objective (social and economic) through the establishment of Fastnet Co-Op. Hopes were high. The Sugar Co. would provide the markets, the Co-Op. would produce the raw materials and process them.

The Co-Operative thus launched was a unique concept—a co-operative venture between a large State-owned company and the farmers and workers of a small rural hinterland. This 50:50 partnership is reflected in the structures of the Co-Op.—in the Management Committee, in the professional management of the business—and it has been a source of confidence and strength to local efforts. The spirit of participation which has been built up has led, in 1977, to the direct election of two worker representatives to the Management Committee of the Co-Operative.

Progress:

1. Finance:

From the start, there was enormous local enthusiasm and support. Through the branches of Muintir Na Tire from Goleen to Timoleague, share-capital was gathered-in and, for every £1 provided locally, the Irish Sugar Co. responded with another £1. In a short while, £36,000 local capital, had been matched by another £36,000 from C.S.E.T.

In addition, C.S.E.T. provided a Debenture of £40,000 as part of the funding.

Under an agreement negotiated with An Foras Tionscail in 1975, four stages of development were planned for Fastnet over an approximate ten year period:—

By April 1974, the total capital expenditure had reached £485,030—just short of the figure envisaged for Stages 1 and 2. The I.D.A. owed Fastnet £62,000 in grants at that time. That money has never been delivered.

An analysis of the financial structure of the Co-Operative in 1974 and 1979 shows its growing dependence on creditors and on borrowing from outside financial agencies.

Total Capital Employed rose from £619,609 in 1974 (of which £485,030 had been spent on Fixed Assets) to £875,262 in 1979 (with Fixed Assets of £614,969). These totals were funded as follows:—

2. In the factory:

The processing of vegetables has provided a real boost to job-opportunity in West Cork and, even though the Fastnet operation is seasonal, the majority of the workers prefer this way-of-life to an all-the-year-round commitment. The factory gives substantial direct employment which varies with the crop being processed. The level of employment ranges from 73 people in the five month off-season (43 men and 30 women) to 160 people at peak production (83 men and 77 women). The average employment throughout the year is 102 people (60 men and 42 women). Although the Co-Operative can provide only seasonal work for a large number of its employees, this suits a number of the men who are small farmers or who supplement their earnings with part-time fishing.

3. On the land:

Naturally, there were problems in the initial years in growing a variety of vegetables, many of them completely new to the region. In 1965, 214 acres were harvested. By 1970, the acreage had risen to 1,216. Outstanding was the acquisition of the skills and technology needed to produce crops like celery and french beans. No other region in Ireland can produce celery of the quality of West Cork celery.

The development aspect of this work must be stressed here. The achievement of high quality standards on the farm and in the factory came about as the result of the co-operation between the local farmers and workers and the staff of C.S.E.T. A major example of this co-operation has been the development of celery harvesting machinery which is now widely used outside Ireland. The choice of suitable potato varieties for canning also involved co-operation in research work. The following table shows the acreage grown at Fastnet through the years:—

All these crops provided a new input into many of the West Cork farms and gave work and initiative where it was badly needed.

Benefits:

The benefits of this partnership between a State-sponsored company and a local Co-Operative have been profound. Individual people have had, often for the first time in their lives, the satisfaction and dignity of a regular job and wage. Families have been lifted out of depression both from the new crop returns and from the job opportunities in factory.

The following table will illustrate the extent to which the local farmers and workers and through them the rest of the community, have benefited from the processing operations at Fastnet since production commenced in 1965. These figures must be viewed in the context of the general low level of economic development in the area in the 1950’s and 1960’s.

The circulation of that £5m has affected town business, home improvements, social habits, farm development.

And when, in 1970, the Co-Op. needed further share-capital, an appeal to growers and workers again elicited a fine response. A Deferred Payment Scheme for Fastnet employees was introduced in 1970, whereby the majority of workers agreed to forego 3% of their gross earnings for a period of three years. This has brought in £3,500 per annum, but it was not acceptable to the I.D.A. for grant purposes because the money has to be repaid eventually. From 1973 to 1978 it was part of the vegetable contract signed by Fastnet growers that they contribute 2½% of the gross return on their crops towards the purchase of shares and this has amounted to £18,071 in share capital from growers. A similar share deduction scheme has been introduced for Fastnet employees and this has brought in £10,280 in share capital in addition to £5,419 in the Deferred Payments Loan Scheme.

The operation at Fastnet has on the whole been quite successful. As originally planned, it was expected that the operation would be run at a loss through each of the three stages until it had reached maximum capacity under Stage 4. The following table shows the total sales and the cash flow at Fastnet:—

With the exception of 1966, the cash flow for the first four years was adverse. In 1969, with additional capital expenditure, the turnover was doubled and there was significant cash flow of £41,000 in spite of the fact that our average labour rate at 40p/hr, was exactly double the 1965 rate. In 1970 there was a cash flow of £52,000. Again the expansion in production had counteracted the inflation. The inflation has continued unabated since then, but there has been no expansion in production.

For the past three seasons, the year-end figures showed a break-even on cash flow, but this was possible only because of a special adjustment by C.S.E.T. of the transfer price at the end of the financial year. This cost C.S.E.T. £71,055 in the year 1976/77, £16,617 in 1977/78 and £148,837 in 1978/79. It is expected that £260,000 will be needed on the current financial year.

Present situation:

The Fastnet Co-Operative today faces serious problems, many of which relate to the overall marketing and financial difficulties of the Food Division of the Sugar Company. Sales have fallen in real terms and cost escalation has produced a growing end-of-year loss situation.

In recent years, the Co-Operative has taken steps to diversify its activities in order to counteract some at least of its difficulties.

A range of trials and development work has been carried out at Fastnet down the years in an effort to broaden the base of our activities. We have looked at:—

The growing of daffodils and strawberries for the fresh market was also carried out for a few years, but the distance from the market in Cork was too big a burden. Hand made candles have been in production since 1968—they employ only two people permanently, with a turnover of £20,000.

The Nursery Development is more hopeful. Already there are 14 people employed full-time on shrubs production and this figure should rise to 20/25 people when we reach our initial target of half million shrubs per annum. We expect a contribution of £150,000 then on a turnover of £450,000 from the Nursery.

Two potential projects have been investigated in depth in the past year; one in the confectionery area, the other in toy manufacturing. Neither of these has materialised as a project for Fastnet although the toy project is proceeding as a new industry for Skibbereen under direct I.D.A. sponsorship.

The problems at Fastnet stem from its location and from marketing difficulties which have resulted in financial restrictions. Because of its location, freight on cans and packing material in, and on finished goods out is more expensive. The procurement of machinery spare parts from Dublin or abroad is very difficult, the transport service erratic and large stocks have to be held to overcome this.

The slowdown in sales opportunities on the canned and air-dried vegetables markets has resulted in losses and in shortage of funds for desirable capital investment.

To sum up, we have at Fastnet a core of good growers, the availability of con-acre to develop new crops, a good committed work-force, but too little acreage, too few facilities and too short a production period.

Conclusion:

Faced with its present problems the Fastnet Co-Operative believes that solutions should be sought within the framework of the existing Co-Operative structure. The fundamental nature of the relationship with C.S.E.T. should not be changed whatever the outcome of the dialogue on future prospects which is at present underway within the Co-Op.

The Co-Operative’s 2,000 shareholders, its workforce and its growers all see the C.S.E.T. relationship as an essential element in any future development. Partnership between local interests and a major State company must be seen as a most important source of support and resources for the creation of economic activity and of jobs.

We believe that the social role of State enterprises as exemplified by the C.S.E.T. involvement in Fastnet should be given special recognition by the Government of the day. Efforts such as Fastnet which have a most significant effect upon the local economy and social structure in less advantaged areas should be clearly identified and openly supported.

The inherent problems of the Fastnet operation spring from its location and from the long history of economic under-development in this area of the country. In effect, the creation of the Fastnet Co-Operative was a practical attempt to tackle a most serious regional problem and its maintenance into the future is crucial for the solution of those problems.

Transport is a major issue. Skibbereen is 53 miles from Cork City and Harbour in an area of roads unsuitable for major commercial traffic. Every aspect of the enterprises’ business is adversely affected by transport costs and difficulties.

Consideration should very seriously be given to the direct subsidisation of the transport element in any industrial activity in such areas.

The maintenance of the present mix of activities at Fastnet gives rise to many real problems. It is recognised that serious marketing difficulties exist and that these are likely to continue. It is, however, essential that nothing is done to further curtail activity or employment at Fastnet without the provision of a fully satisfactory substitute activity on an agreed basis.

The search for a complementary or replacement industry is a major concern at the present time. The preference of everyone concerned with the project is for an industry which would fit into the established patterns of the local economy involving agricultural or fish products—and which would utilise the acquired skills of the workforce. Such an operation would have great advantages.

In this search the role of major State agencies such as the Industrial Development Authority must be stressed. It is important that the full resources and commitment of the I.D.A. should be available in conjunction with those of C.S.E.T. and that the needs and aspirations of the local people should be fully taken into account in this important work.

Financial support will also be necessary for the achievement of a satisfactory outcome to the present problems. Future development will require capitalisation. The existing difficulties of C.S.E.T. in respect of its capital structure and borrowing requirements are reflected in Fastnet’s problems and must be dealt with as a matter of urgency.

The contribution made by C.S.E.T. to the establishment and development of the Fastnet Co-Operative has been of the greatest importance. It is vital that the C.S.E.T. enterprise should be enabled to go forward into the future with the strength and financial support which will be needed to continue its positive work throughout the country.

July 1980