Mon | Aug 20, 2018

Mahfood won’t pay sugar cess

Published:Wednesday | April 29, 2015 | 12:00 AMTameka Gordon
William Mahfood, president of the Private Sector Organisation of Jamaica and CEO of Wisynco Group.
Agriculture Minister Derrick Kellier (right) and his permanent secretary, Donovan Stanberry.

Jamaican manufacturers are banking on a retreat by the Government over plans to impose a US$35 cess on refined-sugar imports, but the Ministry of Agriculture and other officials appear to be holding fast for now to plans for the fee, which they say is needed to bankroll areas of the sugar sector.

William Mahfood, who runs one of the largest beverage manufacturing and distribution companies in the Jamaica, says he has not calculated the impact of the fee on his cost of doing business because has no plan to pay it.

"It's not even a matter of how it's going to affect us - we are just not going to pay the cess," said Mahfood, CEO of Wisynco Group. He added, however, that it would likely add "tens of millions of dollars" to Wisynco's production costs, and "hundreds of millions" across the manufacturing sector.

"It would make us further uncompetitive against Trinidadian imports because in Trinidad, the manufacturers don't pay such a cess," Mahfood said. He has similarly been vocal in his opposition to the cess as president of the Private Sector Organisation of Jamaica (PSOJ), which sees the fee as counter to the objectives of economic growth.

Some manufacturers have raised the spectre of outsourcing their production to Trinidad if Agriculture Minister Derrick Kellier does not back down. On Tuesday, one of the most vocal of them Lasco Group chairman Lascelles Chin said he would have to determine whether a move to Trinidad would take the form of contracting out his manufacturing to a third party or investing in and commissioning a plant there.

Kellier, who took office last year, began a review of the refined-sugar policy under which he initially proposed that the Sugar Industry Authority (SAI) would be the sole importer and distributor - a process that would force manufacturers to buy from SIA's designated agent.

No stakeholder consultation

That decision was amended, with the second proposal reportedly being that large manufacturers would be able to obtain a permit from SIA to import their own supplies.

Kellier is said to have announced the cess on imports without consultation with the sector.

The agriculture ministry's permanent secretary, Donovan Stanberry, said some 80,000 tonnes of refined sugar is imported yearly overall, but that the ministry would not say how much revenue was expected from the cess, which the Jamaica Manufacturers' Association (JMA) has said would amount to US$35 per tonne.

"The Government cannot make any projections on something that has not been a reality yet," Stanberry said, while noting that discussions were ongoing. He also declined to confirm the US$35-per-tonne charge quoted by the JMA.

"We are still in discussions with the JMA and I think it would be inappropriate to start talking about any levels of cess at this point with the public before we reach an agreement with them," he said.

Like Lasco Manufacturing, beverage company Coldfield Manufacturing, makers of Pure Country juices, says it, too, is weighing a move to Trinidad if the cess was imposed "because we cannot absorb any more increases on our raw materials.

"Eventually, we would probably move to importing [juice] rather than trying to make it for ourselves. We would have to change our business model in order to remain competitive," said Managing Director Brett Wong, who called the cess a "race to the bottom" and a policy that favours the sugar cane sector over manufacturers.

In a statement issued Tuesday, the Ministry of Agriculture said current initiatives in the sector are in line with the goals of the 2005 PIOJ study that resulted in the Jamaica Sugar Adaptation Strategy, as well as the findings of the 2010 Wint commission of enquiry into the sugar industry.

Otherwise, George Callaghan, chief executive officer of the SIA, said that if implemented, the new refined-sugar regime should yield funds that can be channelled into investments that would position Jamaica to tap into new regional markets

with pre-packaged sugar, for example.

Callaghan, who took up the helm of the agency in January, said the industry hopes to sell packaged brown sugar into Caricom markets through marketing agent Jamaica Cane Products Sales.

Funding for improved capacity to feed these markets is expected to come from the refined-sugar regime, he said.

"In order to support some of the actions that we are proposing, like improvement to infrastructure, like cane roads and making investment in the packaging and bagging capacity, we would need additional capital investment. Should the minister proceed to implement the refined-sugar regime, we expect that some funds will come into what is called the Sugar Industry Capital Development Fund, which would allow us to use some of those funds to address investments that we need to make now in, for example, research in packaging," Callaghan said last week.

JMA's demand

Stanberry said the agriculture ministry will continue its dialogue with manufacturers and the JMA "soon".

JMA President Brian Pengelley said the association has no meetings set with the ministry and will go public with the demands it intends to make at a press conference to be held today, Wednesday.

The PSOJ, meantime, is urging Kellier to meet with manufacturers before taking action, saying "any incorrect decision could be fatal" at a time when the country is focused on finding ways to transform and grow the economy.