Sun | Oct 25, 2020

Editorial | Holness right on sugar

Published:Thursday | July 23, 2020 | 12:19 AM

HOPEFULLY, IT is now settled policy. As we have urged for years, Prime Minister Andrew Holness last week announced that his Government was out of the business of managing sugar factories, or otherwise bailing out the sugar industry.

“The conversation cannot always be about preserving it (the sugar industry), but how quickly can we see the transformation and diversification of the economies around sugar,” Mr Holness said in a speech in a sugar cane growing region of the southwestern parish of St Elizabeth. Mr Holness, however, should move the matter beyond a verbal declaration by formalising the position in a Ministry Paper, bearing the imprimatur of his office and the Cabinet.

The prime minister’s declaration, ironically, was provoked by fears that the rum manufacturer, J. Wray & Nephew (JWN), owned by the Italian drinks company Gruppo Campari, is about to mothball its Appleton sugar factory, making hundreds of workers, including seasonal cane harvesters, jobless. Opposition politicians want the Government to protect these employees.

Two years ago, when JWN gave back to the Government 2,400 acres of leased sugar lands, but declared its commitment to sugar production, this newspaper warned that the assurance was not “bankable for the very reasons there have been so many studies and enquiries into Jamaica’s sugar industry”.

“Except for periods when it was buoyed by preferential markets in Europe, or … when the world market price for the commodity is high,” we explained, “sugar production in Jamaica is unprofitable.”

Part of the problem is that our industry cannot achieve the economies of scale of, say, India’s and Brazil’s, where sugar cane is grown on vast tracts of land, the terrain allows for the mechanisation of harvesting, and sugar cane yields per hectare are up to 20 per cent higher than Jamaica’s.

These facts are not new. Neither was it a sudden revelation that Jamaica could not rely on preferences in perpetuity. These questions have been debated in the Caribbean for decades. Some countries extricated themselves from sugar as early as the 1970s. Jamaica held on, though the Government periodically found itself having to rescue manufacturers and run sugar factories. Two factors have driven these interventions: the foreign exchange earned from the export of sugar, and the fact that up to 40,000 mostly rural people are economically dependent on the industry.

At the start of the 2000s, the European Union (EU) made it clear that the period of preference was on its last lap. By midway through the decade, the EU agreed to provide macroeconomic support for a 15-year transition from a largely government-owned sugar sector. In 2009, the Government, for the second time in a decade and a half, divested its sugar holdings to private players, including the Chinese-owned Pan Caribbean Sugar Company (PCSC). In the process, taxpayers absorbed J$20 billion in losses by the state-owned Sugar Company of Jamaica, as well as a J$2.3-billion bill for redundancies.

All of the buyers, however, except PCSC, which itself has scaled down its operations, are now out of sugar production. They could not sustain the losses. Of the two private sugar producers, Worthy Park and JWN’s Appleton, which were thought to be relatively healthy, the latter’s continued operation is in the balance.

Prime Minister Holness’ call for a conversation about “transformation and diversification” will add to the many in which Jamaica has engaged for generations, including seven major reviews or commissions of enquiry over the last 60 years. But it would, nonetheless, be welcome if it means that we become rational about sugar, rather than seeing the industry primarily through the lens of social welfare. Indeed, it would be much cheaper for the Government to make a direct transfer to the industry’s mostly older workers for the rest of their lives, rather than reabsorb the sector.

DOMESTIC FOOD PRODUCTION

Further, a primary undertaking in any transition from sugar production must be that freed lands are left for agriculture, rather than ‘ploughed’ into new cities, as is contemplated for Bernard Lodge, St Catherine, which has, according to the National Environment and Planning Agency, “the most fertile soil in the island” and “class 1 soils”.

Agriculture’s economic potential is enhanced by issues of food security and supply chain dangers, highlighted by the coronavirus pandemic. The threats posed to food production and agricultural productivity reinforce the logic for domestic food production.

Before the crisis, Jamaica’s food import bill was upwards of US$900 million, of which, the experts say, 20 per cent or more could be substituted by domestic output. Potentially, that would be upwards of J$25 billion flowing into the domestic agriculture and agro-processing sectors, creating jobs and helping to spur innovation. In this context, the foreign exchange saved would be as good as earning it from exports.