Sun | Aug 9, 2020

Cocoa growers stake claim to proceeds of divested assets - But MICAF says no way, debt takes priority

Published:Wednesday | November 29, 2017 | 12:00 AMAvia Collinder
In this Gleaner file photo, Roger Turner shows off fruit on his farm. The farmer is a former chairman of the Cocoa Industry Board.
Permanent Secretary in the Ministry of Industry, Commerce, Agriculture and Fisheries, Donovan Stanberry.
Wet cocoa beans are displayed in an open pod.
A cocoa pod hangs from a tree.

The Jamaican Government has had little success in divesting the assets held by the Cocoa Industry Board (CIB), but is making another try after the deal with Michael Lee-Chin collapsed.

Cocoa growers are demanding that whatever proceeds come from the sale should not go to the Treasury, but pumped back into the sector or otherwise distributed to farmers.

That proposal is not catching fire with agriculture officials, who say there is hardly likely to be any surplus remaining from the sale proceeds once the Cocoa Board's debts are paid off.

Roger Turner of Tulloch Farms in St Catherine and former chairman of the Cocoa Industry Board, insists growers are entitled to the proceeds on the basis that the fermentaries and properties controlled by the commodity board were purchased from the proceeds of bean sales by the CIB on behalf of growers.

"It must not be the intention of the divestment process to reverse gains ... . It was not the intention of forming the CIB to invest in fermentaries in order to sell them and give the proceeds to the Government's Consolidated Fund," the grower charged.

Turner said the fermentaries in Clarendon and Hanover, nurseries at Sunning Hill, Osbourne, Spring Valley and Water Valley, and cocoa plots at Richmond, Haughton Court and Morgan's Valley, plus investments in 17 properties - some of which have since been sold were funded from bean sales revenues over time.

Payment structure not satisfactory

He argues that the payment structure operated by the Cocoa Board effectively treated farmers as owners, and that bean revenue was often used to offset CIB losses.

"For all intents and purposes, in this transaction, the farmers are being treated as shareholders, receiving dividends - their shares being based on the number of boxes supplied during the year," Turner said.

He also noted that the Jamaica Agricultural Society (JAS) was once owner of 60,000 shares in Richmond Farm. JAS President Norman Grant, when asked to confirm the information, said he would be researching it to determine its veracity.

In 2014, the Development Bank of Jamaica (DBJ) struck a preliminary agreement with Lee-Chin controlled Wallenford Limited for the disposal of Cocoa Board's idle processing plants and other assets. Negotiations broke down, however, and the Ministry of Industry, Commerce, Agriculture and Fisheries (MICAF) announced in March that Wallenford had withdrawn from the talks. The parties have not disclosed what derailed the negotiations.

On Wednesday of this week, DBJ confirmed that the fermentaries in Richmond, St Mary, and Morgan's Valley, Clarendon, were still on the divestment list, alongside Montrose Farm in St Mary and a property in Haughton Court, Hanover.

The JAS president is siding with cocoa growers, saying that the sale proceeds should be pumped into the sector more precisely, in replanting and research and development to exploit niche markets.

"I think it is also very important to look at a modern processing facility driven by private sector and farmers the JAS would explore the opportunity to be a part of that," said Grant.

"There should also be investment in extension services in supporting the farmers in growing the crop. There is also going to be a need for funding for certification as well. This is something we are going to be very energetic about, quite frankly," he said.

However, permanent secretary in the Ministry of Industry Investment & Commerce, Donovan Stanberry, said that what the cocoa growers are demanding may not be realistic.

He pointed out that efforts to find buyers for the assets have failed, so far, and that even if a deal emerges in the future, the priority has to be on paying off the Cocoa Board's mounting liabilities.

"First of all, you have to sell the assets I don't know why people are sharing up the money and they are not sold yet," said Stanberry.

"Second, remember the framework going forward Government's responsibility will be regulatory and setting the framework to deal with extension services," he said.

Reform programme

That was a reference to the reform programme for commodity boards, under which the State is giving up all commercial involvement in agricultural crops. Its regulatory function will be executed under the newly created Jamaica Agricultural Commodities Regulatory Authority.

"Whatever extension officers are now at the Cocoa Board, those will remain, as we have a responsibility to provide extension services. But as to the production of cocoa, that will be a purely private-sector thing," said the permanent secretary. "We are here to support development in whatever sector - cocoa, coffee, pimento, you name it. Our role is very clear; we are there to provide the enabling framework."

Stanberry declined to comment on the value of the assets as well as the size of the CIB's liabilities, saying those numbers would not be made public due to the divestment.

MICAF is also disposing of coconut assets, but that process has been full of rancour and seems headed to court for resolution.

Stanberry also declined to comment on the claim by Turner that the cocoa assets under the State's control were actually purchased from diverted income that was due to farmers for their beans.

Turner asserts that the financing strategy ended up hurting the sector.

"The diversion of revenue away from the farmers' income to the CIB farms severely depleted the working capital of the farmers, and has marginalised cocoa production to a small class of farmers who reap the pods because they have the trees," he said.

Among several initiatives, he is proposing that the Government consider setting up a "new cocoa regulatory arm", funded by a cess on bean production and imports of chocolate products, to police farm practices and drive up the quality of the beans to GlobalGAP standards.

He is also floating the idea that monies spent on sugar be diverted to cocoa, saying the returns would be better.

"Jamaican cocoa is one of only seven fine-flavour cocoas produced in the world. As such, it is unique and commands a well-deserved high price. Brokers in Europe can spot Jamaican beans in any pile of cocoa on account of its polished appearance - a result of tumble driers used to bring the beans down to seven per cent moisture, which optimises shelf life," said the farmer.

"We could end up with an industry far better than sugar on a revenue-per-acre basis, and earning hard currency," he said.