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Editorial: Casting blame for sugar

Published:Monday | April 4, 2016 | 12:00 AM

The most striking feature of last week's forum, hosted by this newspaper, on the umpteenth crisis facing Jamaica's sugar industry is that almost all the bigwigs present dumped on the Chinese.

According to Derick Heaven, who used to be chairman of the Sugar Industry Authority, they were too slow in injecting capital into the run-down businesses they acquired from the Government, and the people they brought from China to manage their farms were almost clueless about growing sugar cane.

"So, what they inherited, in terms of fields of cane, have deteriorated," said Mr Heaven.

Karl James, the general manager of that amorphous entity called Jamaica Cane Products Sales (JCPS), chimed in with the complaint that when the Government, six years ago, sold three of its sugar factories to the Chinese company COMPLANT, no one appeared to have taken the time to determine that it didn't have "vast experience" in the sugar industry.

"They have no reputation to protect," he said.

COMPLANT, whose Jamaican operating subsidiary is Pan Caribbean Sugar Company (PCSC), could hardly be blamed if it interpreted the remarks as an invitation to pack its bags and go, which, in the circumstance, may be appealing, given Beijing's recent reassessment of how far to shore up state companies.

But here is the dilemma: Nothing emerged at the forum as a credible alternative to COMPLANT; nor did the talking heads present economically feasible and profitable solutions to the problems faced by Jamaica's sugar industry.

COMPLANT has invested more than US$200 million in its Jamaica operations and has so far racked up US$60 million in losses. Last week, the Government disclosed that the company intended, in 2017, to suspend, at least for a year, production at its factory in Monymusk, Clarendon, pending the finding of equity partners for the venture. It will end sugar cane planting at the Monymusk farms immediately.

The Holness administration is concerned about this development. Jamaica's sugar industry employs more than 30,000 people, and a halt of production in any region hurts surrounding communities. Unsurprisingly, therefore, the commerce and agriculture minister is scrambling for ways to keep Monymusk operational.

But, however incompetent COMPLANT and PCSC supposedly are, the crisis facing Jamaica's sugar sector wasn't manufactured in China, and it may be worth Jamaica's while to take a hard, unsentimental look at its future, with an appreciation that the basis of enterprise can't be social welfare.

 

YEARS OF LOSSES

 

Significantly, of the other companies that acquired government sugar entities at the time of COMPLANT, Everglades Farms last year mothballed its Long Pond factory while it attempted to fix its finances after years of losses. The Government now says it will operate that factory for three months to process sugar cane in the area. After losing more than J$3 billion and outsourcing its field operations, Seprod Limited only pulled back from plans to close its Golden Grove Sugar Company after it received the authority to independently market the product it manufactures.

Since Jamaica, like other Caribbean countries, lost preferential markets in the European Union, it hasn't been able to compete with low-cost global producers, despite an inflow of private capital. Nor has the country been able to create the sugar cane industry it conceptualised. The global price of ethanol, for instance, is too low to make it a competitive by-product; and co-generation at sugar factories, using the trash from ground sugar cane is, for now, unfeasible. The price offered for the electricity they would sell to the national grid is too low to be economic.

At the same time, the Government has to remember why it divested its sugar holdings: they lost nearly J$5 billion a year.