Along with tourism, agro-processing is another area that holds significant potential for the diversification of Tobago’s economy. According to stakeholders there are three developments that will help to realise this potential of the industry. The first includes a revival of the island’s traditional agriculture and livestock production. Farm output in Tobago has seen a long-term pattern of decline in recent decades, which is associated with the boom in oil and gas production. It is hoped that the passing of the oil boom will allow a revival in agriculture. Second, it is important to find the right products to process and package as well as the right markets to sell them to and the right marketing strategies to make agro-processing profitable and sustainable. And lastly, it is vital to identify and support a core of new entrepreneurs who are willing and able to take on the challenge of setting up and developing private sector agro-processing companies.
One of the factors thought to be holding back the development of entrepreneurs is the dependence on the public sector for employment. Despite a recent increase in fiscal austerity, unemployment in Tobago remains comparatively low, with most of the workforce in relatively secure employment in the public sector. The country also has an effective social safety net, with mechanisms such as the Unemployment Relief Programme (URP). Many sources say people on URP work less than a full eight-hour day. This means there is a disincentive to leaving a relatively secure and non-taxing environment in order to take on the long hours and risk associated with launching a start-up.
Challenges For Start-Ups
Charmaine Springer, a member of the Agro-Processing Association of Tobago (APAT), told OBG that there were a number of practical issues facing agro-processing start-ups. She explained that local processors buy raw produce from local farmers, process it in a variety of ways and then sell it to supermarkets, small shops, hotels and restaurants. Typically, operators in the sector elaborate root crops such as dasheen, sweet potatoes, yams and cassavas, producing jams, jellies, fruit juices and various types of traditional sauces. According to Springer, the challenges include developing attractive product lines, raising working capital and breaking into wider markets. Her company, Springtime Food Products, has been in business for six years, starting as an operation to peel and package garlic. Over time it had developed 11 different product lines, including cassava dumplings, and now employed four people. After attending the Fancy Foods Show in New York, Springer was convinced there was a strong market for her foods, not only in Trinidad and the wider Caribbean, but also in the US, Canada and the UK.
However, among the challenges Springer faced was the difficulty in raising the necessary working capital to expand her business. Despite receiving a TT$25,000 ($3700) grant from the THA’s Business Development Unit, she did not have enough funding to meet operational costs. Springer estimated that the type of food processing equipment she required to expand the operation would cost 10 times that much. Given the tough phytosanitary requirements of developed economy markets, she needed high-quality equipment in order to comply with health and safety standards. To compound matters, commercial banks were unwilling to lend money without guarantees or collateral. These difficulties led some of Springer’s fellow APAT members to use the multi-producer unit at the Cove Eco-Industrial and Business Development Park, as they too were finding it difficult to raise sufficient funding for the equipment. Springer ran her processing operation at home and bought a small plot of land where she intended to move the operation.
The key issue facing small operators is to find a way to increase the scale of production and reach wider markets. However, Springer agreed that future expansion of the Tobago hotels sector might give local agro-processing entrepreneurs the kind of critical mass they need to make a breakthrough in sustainable growth.