Business View: As long as Europe spoon-feeds its farmers, the Third World will go hungry

Click to follow
The Independent Online

Having spent most of the past week in Africa, I know how important the coming trade talks are going to be. Kenya is one of the world's poorest countries yet it has fantastic farmland with rich, well-balanced soil, and a climate that means you can grow anything from sugar cane to rhubarb. It has developed some good export businesses, from the beans you buy at Tesco (pre-packed before they leave Nairobi) to the cut flowers that are flown daily on two jumbo jets to Amsterdam.

You can make a lot of arguments about "air miles" on your vegetables - why buy Kenyan beans when they could be grown locally? - but the main thing preventing countries such as Kenya from developing stronger exporting businesses is farm subsidies in Europe.

The generally accepted figure is that we in the European Union spend six times as much on support for our farmers as we do helping out the poor in the developing world. In France, one of the main countries blocking genuine farm reform, they argue that a million people could be thrown out of work if the subsidies went. Well, why not use the money to find alternative employment for these people rather than pushing up food prices and disadvantaging the Third World?

The halfway house farm reform package struck a couple of weeks ago will look even more limp if the warring factions fail to agree on allowing cheap drugs to be sold to the Third World. The cost of retrovirals for an Aids sufferer in Africa is more than $3,000 (£1,900) a year - 10 times the annual income for someone living in Kenya - and that is when the drug is available.

All sorts of problems would be thrown up by pulling down the trade barriers which hold back the developing world. But problems are there to be solved and the alternative to supporting a World Trade Organisation that delivers social justice is the continuing spiral into misery for countries that have a great deal to offer.

It is with a rather depressing inevitability that the best three bids for the Scottish & Newcastle pubs division come from firms with strong private equity elements. Spirit is a bars business controlled by US venture capitalist Texas Pacific, which divorced from Punch Taverns just before Punch floated; Laurel Inns is backed by Morgan Grenfell Private Equity and is planning to float if it wins S&N; and the third bid is from Cinven and CVC, two venture capitalists which apparently need no publican veneer.

Now you cannot argue that the private equity sector has failed to donate time and attention to pubs. Attracted by the strong cash flow from bars, everyone from Nomura upwards has fiddled in this sector over the past dozen years. And, to be fair, they have not been bad landlords, showing a willingness to invest as well as extract dividends.

But private equity houses are never long-term owners; the old joke is that they go into a room backwards because they are looking for the exit. However, the City has shown it is not willing to give a quoted pubs group, Mitchell & Butlers, the cash to make a decent offer for S&N.

So will stodgy old pension funds be willing to put money into either Laurel or Spirit if they come to market after winning the S&N auction? Or will it be another case of private equity passing the public house parcel?

Voodoo economics at Sellafield

It does not take a nuclear physicist to work out that BNFL's Thorp reprocessing plant at Sellafield doesn't have much of a future. Even if the damn project worked at full capacity - which it doesn't, because of problems with its waste disposal, as we revealed a few weeks ago - it would have a precarious business case because few nuclear companies want the stuff it produces.

Putting those two factors together, you must assume that it will be difficult for BNFL to win new contracts for Thorp. And if it does not win any new contracts then there is no point keeping the business open after the existing contracts are due to end, which is in 2010.

But I can confidently predict that Thorp will be operating past 2010. That is because the infernal plant is so inefficient that it will not be able to deliver its current contracts on time. Nowhere is the term "voodoo economics" more appropriately applied than up at Sellafield.