Sun | Aug 20, 2017

Editorial: Nagging feeling of sugar déjà vu

Published:Tuesday | March 29, 2016 | 3:00 AM

In doing what governments are prone to do - attempting to save jobs and shore up what, often, are uncompetitive and decayed industries - the Holness administration must be wary of mission creep and moral hazard.

For if it is not careful, Jamaica's taxpayers may discover that they again own a red ink-spewing sugar industry or are providing subsidies to privately owned entities.

After decades of failed attempts at staunching losses, that is precisely what the Government sought to escape when, between 2009 and early 2011, it divested its sugar holdings. The largest chunk, the factories and lands at Frome, Monymusk and Bernard Lodge, went to the ubiquitous Chinese via one of Beijing's state-owned firms named COMPLANT, through its subsidiary, Pan Caribbean Sugar Company.

No divestment success

The divestments, thus far, have hardly been a roaring success. The Hampden factory is closed this season, while its owners, the Hussey family-controlled Everglades Farms - having pumped hundreds of millions of dollars into the enterprise - attempts to reconfigure the business to cut its losses.

Similarly, with accumulated losses of more than J$2 billion on the operation of its factory in St Thomas, eastern Jamaica, Seprod, the commodities company, has restructured its Golden Grove Sugar Company. Sugar cane-growing operations have been outsourced, and Seprod has assumed the direct marketing of its sugar.

Then last week, the Government of Jamaica announced that even the deep-pocketed Chinese were having trouble, despite spending more than US$200 million on the business. The Government, through its spokesman, Ruel Reid, said it was seeking to find "other private players" to invest in Pan Caribbean's sugar cane-growing operations amid an intended pullout of the company by June. Mr Reid has since clarified that despite Pan Caribbean's accumulated losses of US$60 million, the partner that the Government was hoping to entice was only to the firm's Monymusk division. And at no time, he said, did Pan Caribbean indicate an intention to leave Jamaica.

This will be good news for the Government, given the sugar industry's employment of more than 30,000 people and its two per cent contribution to GDP. But what happens if there are no takers and Pan Caribbean decides not to cough up any more money? Usually, there is a fancy dance, then an embrace by the Government that traps taxpayers.

The Government, however, could hardly provide subsidies to Pan Caribbean without doing the same for Golden Grove, Everglades, or the McConnell family-held Worthy Park, which, while it has not said so publicly, is presumed to be also hurting. Then it might get a call, too, from Appleton Estates, which is owned, ultimately, by the Italian drinks firm, Gruppo Campari.

The problem with Jamaica's sugar industry, like the rest of the Caribbean Community's (CARICOM), is the loss of the preferences in the European Union (EU). There has been much talk about moving from producing merely sugar to becoming a multi-product sugar cane industry, but, instead, productivity has faltered.

Maybe it is that Jamaica and the Caribbean cannot produce sugar efficiently. Or, perhaps, there is a regional solution, given that CARICOM countries, if they sold all their sugar in the Community, would satisfy only half its demand, and none for the 300,000 tonnes of refined sugar. The fix, if there is one, is for private players, not governments.