Sat | Aug 19, 2017

Editorial | Catatonic sugar policy

Published:Tuesday | August 8, 2017 | 8:00 AM

Judging from the grovelling supplication in which Karl Samuda is seemingly engaged, we can only conclude that the Holness administration has formulated neither policy nor strategy for Jamaica's limping sugar industry. The danger from this, and about we have previously warned, is a catatonic walk back to the ownership of segments of the sector, for which taxpayers will have to pay dearly.

Mr Samuda, the agriculture minister, will quite understandably reject our characterisation of his recent interaction with the Chinese-owned Pan Caribbean Sugar Company (PCSC) with regard to the future of the Monymusk sugar factory in Clarendon. He, need, however, only review his remarks last week to this newspaper on the matter.

Monymusk is one of three factories and sugar estates that PCSC, a subsidiary of the Chinese state-owned company COMPLANT, acquired in 2009 as part of the Jamaican Government's most recent divestment of its sugar holdings. The sell-off hasn't, to say the least, led to the hoped-for rejuvenation of the sector.

Sugar production, despite major capital injections, remains below the 2009 levels, and the new owners, including COMPLANT, have been weighing their options. For instance, the Government is operating the Monymusk factor for the current 2016-17 sugar harvest, thus preventing the mothballing of a facility. A year ago, COMPLANT gave up several hundred acres of lands in the vicinity of the factory, causing to Government to scramble to find new lessees for them.

But what happens at Monymusk during the 2018 crop, as well as after that, remains uncertain. The owners of the factory have indicated they have no intention of firing up the plant, unless it happens with investing partners, or if somebody buys it outright.

The problem for Mr Samuda is that no new investors are in sight and he appears to be getting a cold shoulder from COMPLANT in his bid for them to pay for the 2018 operations. Or worse, based on the minister statement - on which he has made no claim of misquotation - he is not even getting them to listen.

"We have tried exhaustively to have a meeting with them (COMPLANT) to let them understand that while we are prepared to assist in managing the facility for them, they must pay back the cost or a portion thereof ... ," Mr Samuda said.

 

PROJECTED OPERATING COSTS

 

The Government projects that it will cost it J$250 million (US$2 million) to operating Monymusk for the current harvest, which it feels to be a worthwhile investment to keep the adjacent towns afloat. The State is also subsidising the transportation of sugar cane for farmers in the parish of Trelawny, where the Long Pond factory, one of those it sold in 2009, is mothballed while its owners recalibrate their business plans. The Government managed the Long Pond factory during the previous crop.

The administration, perhaps, needs to be reminded of why it got out of the sugar industry in the first place. The state-owned sugar company, at the time, was losing around J$5 billion a year and accumulated deficit and debt of around J$30 billion. The situation was unsustainable.

When the Government went into Long Pond and initially talked about what it intended to go at Monymusk, this newspaper warned of the danger of moral hazard. The other private companies in sugar, which aren't now profitable, could well make a case for subsidies and bailouts.

Mr Samuda has failed to initiate a serious dialogue on sugar's future, including the fact that the industry can't be treated like social welfare.