Thu | May 25, 2017

Editorial: Remove shackles from sugar

Published:Monday | July 20, 2015 | 7:00 AM

It has not been easy for statist ideologues, but Jamaica has, in recent years, made good strides in transforming itself into an economy where firms compete and their survival depends on efficiency and enterprise, rather than the fiat of bureaucrats. But there is still a way to go before the transformation is complete. The sugar industry is one sector where much work remains to be done.

Earlier this month, the bosses of the Seprod Group, its chairman P.B. Scott, and its CEO, Richard Pandohie, warned shareholders that they might have to write off Seprod's investment in sugar and close the group's sugar factory in the eastern parish of St Thomas. In other words, Seprod would walk away from an investment of J$3 billion made over the past six years.

The problem for Seprod is not only that this subsidiary, Golden Grove Sugar Company, has wracked up J$2 billion in losses since its acquisition in the Government's divestment of an industry it could no longer afford to fund. Messrs Scott and Pandohie, in the face of government regulation, see no way to staunch the haemorrhage.

As they explained at a meeting of shareholders, Golden Grove is not free to sell its product to whomever it feels, at the best price it can. It is forced to market its sugar via a quasi-state outfit called Jamaica Cane Products Sales (JCPS), which operates under the aegis of the Sugar Industry Authority (SIA), an agency mandated by law to "make arrangements for the marketing of sugar and molasses for local consumption and for export".

All this, of course, is a relic of the days of government regulation and preferential markets, when the European Union guaranteed quotas and high prices for the commodities from its former colonies in Africa, the Caribbean and the Pacific. The Europeans are not in that business anymore. But the SIA and the agriculture minister, Derrick Kellier, continue to cling to old ways.

NEED FOR RESTRUCTURING

Mr Scott is right. Firms have a problem if they are not in control of the "revenue side of the business", which is the effect of SIA-JCPS expropriation of the sales and marketing side of the operations of people's private businesses. We agree with Mr Scott about a need for restructuring.

There is precedence for removing the shackles from Golden Grove. The Chinese-owned Pan Caribbean Sugar Company was able to extricate itself from the JCPS and find its own markets for its sugar. That, however, shouldn't have, then or now, required a struggle.

The bureaucrats will claim that JCPS was able to get prices better than Pan Caribbean's for sugar exports. So what? But those are the kinds of risks private investors take when they make decisions. In the end, they will make rational decisions. It is not the job of the State to save entrepreneurs from themselves.

Mr Scott made it clear that if the regulatory shackles are not removed, "we will be exiting the industry". Jobs will be lost. Mr Kellier and the SIA's chairman, Wesley Hughes, should take heed.

If the SIA needs a role, let it continue to research sugar cane and provide, if it wishes, agricultural extension services. JCPS can continue to sell sugar for manufacturers. That, however, should be by freely negotiated arrangements, not enforced contracts.