Thu | Aug 17, 2017

Editorial | Let’s talk frankly about sugar’s future

Published:Wednesday | November 9, 2016 | 11:00 AM

It is urgent that the Holness administration begin a full and frank discussion on the future of Jamaica's sugar industry, lest, as warned, the Government find that it has been, imperceptibly, drawn back into ownership of the business, or substantial chunks thereof.

Our concern has been deepened in the face of last week's disclosure by Karl Samuda, the agriculture and commerce minister, that the owners of the Long Pond sugar factory in Trelawny will again not operate it for the 2016-17 crop, to which the Government's response will be to subsidise the transportation of sugar cane grown by farmers in that parish to the Worthy Park factory in St Catherine. The proposed bill for that venture is J$50 million, which, on the face of it, is a manageable sum. Except that the Government could find itself ensnared by a moral hazard of its own making.

Indeed, we would not be surprised to hear the old voices in the industry, the vested interests who fear radical disentanglement, urging the administration to do as it did during the last crop and operate the factory, which, if it acquiesces, might well start on a course of mission creep. Before long, the Government could find itself back to where it was seven years ago.

Up to 2009, the Government's SCJ Holdings owned five old, inefficient sugar factories and several thousand acres of land. The operation, whose survival rested on the rapidly retreating preferential market of the European Union (EU), was losing around J$5 billion a year and had accumulated deficits of about J$30 billion. This financial bleeding was unsustainable, especially in the context of Jamaica's fiscal crisis and weighty national debt.

Three of those factories were divested to the Chinese-owned Pan Caribbean Sugar Company and one each to the Hussey family-controlled Everglades Farms (Long Pond) and Seprod Group (Golden Grove, St Thomas). These acquisitions, thus far, have not been happy ventures. Despite heavy investments, they all lost substantial sums.

Late in 2015, Everglades announced that it would not operate its factory for the 2015-16 crop, and the previous administration decided to subsidise the transportation of sugar cane from Trelawny to the privately owned Appleton factory in St Elizabeth. But when a legal case kept Appleton closed, the Government decided to run Long Pond for a single season. In short order, Pan Caribbean announced it was, with immediate effect, relinquishing control of several hundred acres of sugar-cane lands around its Monymusk factory in Clarendon and that it would not operate the factory itself in 2017. So, the Government again jumped in. It would operate the factory for a year and help Pan Caribbean find partners. It also found farmers to lease he former Pan Caribbean lands.

 

NOT GOOD

 

Now follows the new situation, which Mr Samuda conceded is "not good". The owners have not found the capital to do so, or are not interested in injecting any more money in the business. It is questionable, too, whether Pan Caribbean, whose owners, COMPLANT, have been edging away from some of its sugar operations in Africa, will find its way back into Monymusk.

Jamaica's sugar industry has lost money for more than a century. It has been kept going because of the foreign exchange it earns and the estimated 30,000 people it employs. Walking away from it is, for any government, a difficult political decision. Yet, it is a discussion worth having with great seriousness, including what can be done and grown apart from sugar. That dialogue must be initiated by the Government.