Thu | Sep 21, 2017

Editorial: Not Gov’t’s job to bail out private sugar

Published:Wednesday | April 13, 2016 | 4:00 AM

Karl Samuda, the commerce and agriculture minister, says he is "cautiously optimistic" about talks he is to have this week with the top brass of the Chinese company, COMPLANT, about the future of their cane-farming and sugar-manufacturing business in Jamaica.

Frankly, we are worried. For we interpret Mr Samuda's optimism to mean that the Government will concoct a way for the COMPLANT operations - including its Monymusk factory in central Jamaica - to continue, accelerating a mission creep that will land the State firmly back into the sugar business and saddling taxpayers with more unaffordable bills.

COMPLANT is a Chinese state-owned conglomerate, which was already involved in sugar in Africa, when, six years ago, through a subsidiary called Pan Caribbean Sugar Company (PCSC), it acquired three of the sugar companies, as associated farms, being divested by the Jamaican Government. Apart from the US$9 million for which it bought the facilities, COMPLANT, we have been told, has, so far, invested US$200 million (J$24.4 billion) and lost US$60 million (J$7.3 billion).

Last month, within weeks of Mr Samuda's party winning the general election, it was disclosed that COMPLANT wanted to end, with immediate effect, sugar cane farming on the lands around the Monymusk factory and to cease operations at the factory itself in 2017.

COMPLANT obviously does not believe that Monymusk can be viable. Hence, Mr Samuda's scramble for ways to keep the

factory open and its lands under sugar cane. But many analysts also have doubts about COMPLANT's other facilities, Bernard Lodge and Frome.

This, however, is not Mr Samuda's only dilemma with an industry that employs perhaps 25,000-30,000 people, perhaps a fifth of them on a year-round basis. Last year, Everglades Farms, the owners of one of the divested factories, announced that it would not operate for the current crop, because it was losing too much money. Sugar cane from its region was to be processed by another long-standing, privately owned factory, Appleton, but that facility is closed because of a court injunction from an unrelated issue. So, Mr Samuda has said that the Government will operate the Long Pond factory on a short-term basis.

 

MAJOR FISCAL DRAG

 

We remind Jamaicans that the Government's sugar business has been divested three times in the past three-and-a-half decades, and twice it has returned to the Government, usually starting the way things are now evolving - the intervention of the Government to stave off a perceived crisis, motivated by the need to save jobs.

The Government should remember why it divested sugar. At the last go, the industry had racked up debts of more than J$30 billion and was losing nearly J$5 billion a year.

In other words, government ownership of sugar factories was a major drag on the fiscal accounts, which the country has made strides on stabilising, in large part by reverting to free-trade principles. Governments are better off staying away from commercial enterprise and it is not their place to go around bailing out failed private businesses. It might start with Long Pond and Monymusk, but who knows where it will stop given the precarious state of the whole sector?

It's time that Jamaica takes a hard-nosed look at sugar. People might conclude that the industry won't be profitable, as Antigua and Barbuda did 40 years and Trinidad and Tobago did in the early 2000s. Then we might begin a serious search for alternatives.