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Refined sugar cess to fund JCPS

Published:Saturday | May 2, 2015 | 11:02 PMTameka Gordon
Refined sugar
General Manager of Jamaica Cane Products Sales, Karl James.

Caribbean Depot Limited is adding up equipment and expanding capacity to package refined sugar under the Jamaica Gold brand for distribution to local and, eventually, Caribbean markets on behalf of brand owner Jamaica Cane Products Sales Limited (JCPS).

JCPS is not saying whether it is putting capital into the expansion of the Jamaica Gold line, but Sugar Industry Authority (SIA) boss George Callaghan told Sunday Business that financial support will come from the cess on refined sugar to be levied on manufacturers by the Government.

JCPS is a consortium of private producers, through which their sugar supplies are pooled and marketed in Jamaica and overseas. Government has no ownership in the company, but JCPS is a marketing agent of state agency SIA.

Ownership of JCPS is split equally between the All-Island Cane Farmers' Association of Jamaica and the Sugar Manufacturing Corporation of Jamaica, which itself is owned by a number of sugar estates.

Both entities refused to be drawn on why Government would be putting funds into a business in which it did not have a stake.

"I don't have any answer for that," said JCPS general manager Karl James on Friday. James had earlier redirected queries on how the project would be funded to the company's contracted packer, Caribbean Depot.

But he also laid out some of the history behind the JCPS-Government partnership, saying he proposed that since the State no longer had to support the privatised estates, it could back a facility to do packaging.

Previously, when JCPS had a monopoly on the marketing of all sugar, the company had arranged bagging services at four factories - St Thomas, Bernard Lodge, Monymusk and Frome.

"Monymusk was the best organised; they packaged raw, refined and brown sugar," said James.

But with the sale of that estate to the Chinese, only St Thomas was left do packaging, he said.

"The idea now was to establish an additional bagging facility so you can bag enough for the domestic market and the region," he told Sunday Business.

He said some packaging of refined sugar has already begun under the label Jamaica Gold Premium Refined.

The head of Caribbean Depot, Michael Jureidini, says his company has already made an initial investment of over US$400,000 in equipment, "with the expectation that this thing would take off", but there have been delays in implementation," he said.

It was expected that the refined sugar regime would have been legislated by now, said Jureidini.

Callaghan, SIA's chief executive officer, said the proceeds of the cess on imported refined sugar - which the Jamaica Manufacturers' Association estimates will amount to US$35 per tonne - will be used to boost JCPS' capacity to produce and market both brown and refined sugar products.

He said, if implemented, the new regime will provide funding that can be channelled into the sale of pre-packaged sugar to regional markets and improve the quality of the output. He reaffirmed on Thursday that the SIA stands by its decision to support the bolstering of the JCPS through the refined sugar regime and proceeds of the cess.

"We will be supporting JCPS because they are the ones who actually carry out those operations, and we, in our capacity as the regulatory agency, are supporting that thrust," said Callaghan.

The Ministry of Agriculture is reforming the refined sugar market to give full control to the Sugar Industry Authority over imports. The state agency plans to use the the JCPS as its distribution agent Under the newly proposed regime, large manufacturers will be allowed to import, but under permit from the SIA.

"The JCPS is the marketing arm of the industry and the guidance that I have received from JCPS, particularly from Karl James, is that in order to focus on selling into the regional markets, we need to package more sugar," Callaghan said.

However, manufacturers say they are being taxed to serve other private interests.

With the sugar industry now fully privatised, "we are concerned that the Government would be placing a cess on one sector of industry to support another", said Group CEO of GraceKennedy Limited, Don Wehby.

The Government contends that manufacturers leak refined sugar imported as raw material input into the retail market, leading to lost revenue for the treasury. The new regime is meant to curb the leakage by centralising imports, but Wehby doesn't buy the rationale.

"We believe that the solution to the problems cited by the Government should be addressed by monitoring and enforcement and not by taxing those who are honest and successful," he said.

Refined sugar is a major ingredient in GraceKennedy's beverages and ketchup, and the conglomerate is "opposed to any direct or indirect tariff on our raw materials that would put us at a cost disadvantage to our foreign competitors".

Last year, the conglomerate moved production of juice drink Tropical Rhythms from North America back to its own factory in Jamaica "to take advantage of the improving competitiveness of the local economy", but the cess would make the product less competitive and would likely result in the production of the juices being shifted again to an overseas factory, Wehby said.

Caribbean Depot packages about 8,000 tonnes of brown sugar under the Jamaica Gold label. The expansion is expected to grow capacity to 20,000 tonnes of sugar annually.

The plant upgrades are already underway. With the US$400,000 of investments in equipment, including a third packaging machine, production can be cranked up by 50 per cent within six months, Jureidini said.

James said JCPS has been quietly packaging refined sugar in response to demand from large and small supermarkets, and that proceeds of the cess would finance improvements for the production of Jamaica Gold Premium Refined.

Jamaica Gold brown sugar is sold in Jamaica and the Cayman Islands. Plans for export of the refined product will come later, said the JCPS head.

Aside from boosting the JCPS, Callaghan said the cess would seed a Sugar Industry Capital Development Fund as a source of financing for other improvements to the sector, including cane roads, product packaging and the building out of export markets.