Second shrimp farm goes out of business - Praedial larceny, tax on inputs cited as reasons

Published: Friday | December 20, 2013 Comments 0
Vitus Evans, former president of the Jamaica Exporters' Association and director of Caribbean Aquaculture Limited. - File
Vitus Evans, former president of the Jamaica Exporters' Association and director of Caribbean Aquaculture Limited. - File

Tameka Gordon, Business Reporter

Caribbean Aquaculture Limited, the second of Jamaica's two marine shrimp farms, has closed down operations due to praedial larceny and financial problems being experienced as a result of the imposition of duties on its inputs.

The company has been placed in liquidation and sent home its 88 workers.

Established in 2007, the farm, located at Brampton Farms, Old Harbour Bay, St Catherine, produced about 20,000 pounds of shrimp monthly and grossed approximately J$12 million a month in sales at the height of its production.

But they have opted to sell off the assets because "we just could not maintain the business, especially with the increase in production and electricity costs," Director Vitus Evans, a former president of the Jamaica Exporters' Association (JEA) told the Financial Gleaner.

Evans said the company went into liquidation in November, following several failed attempts at staying afloat amid the theft of its stock, and has released and paid off all its 88 employees.

"We are closing down for three main reasons," said Evans, indicating the most burdensome hindrance to the company's viability was the 40 per cent duty imposed on the importation of its inputs earlier this year.

"When the new tax regime came into effect, a duty was imposed on both the feed and the post-larvae baby shrimp we import for the production." He said.

"Prior to this, we actually brought the inputs in duty-free because it is not made any where in CARICOM (Caribbean Community)," he explained, noting that the company imported feed from Ecuador and the post-larvae shrimp from the United States.

"With the duty and general consumption tax, the added expense translated to about J$860,000 per container that we imported. Before the duty, that process was a zero cost," Evans said.

Caribbean Aquaculture imported two to three containers of feed monthly, which translates to taxes of J$2.6 million.

The company employed 28 persons on its farm and 60 in the processing plant. The farm and plant are sited on 250 acres of land, with 120 acres in ponds, Evans said.

The marine shrimp farm was initially owned by Caribbean Mariculture Limited, a joint venture between the Jamaica Agricultural Development Foundation (JADF) and the University of the West Indies.

They spent in excess of J$120 million in 2007 to construct the ponds. When the company went into liquidation in 2007, Caribbean Aquaculture was formed and leased the ponds from JADF.

"When we took over we put in $36 million to recapitalise the farm and at the height of operations we were making sales of $9 million a month," Evans said. "In fact, we were making a profit in the first years of our operation with approximately $4 million made in the first year," he added.

The marine shrimp production company supplied the local market, with Rainforest Seafoods as its "major customer purchasing about 30 per cent of our produce," the director said.

"We also sold a lot to the hotels and restaurants and we also sold to Trans-Global Aquaculture to make up their shipments for export," he added.

With a production target of 40,000 pounds monthly, Evans said the company actually produced some 20,000 pounds in its later years, but had previously been on target.

The assets of the company, which have been advertised for sale by liquidator, Worrick Bogle, are worth J$34 million. About J$10 million in assets have so far been sold.

Related parties are further owed some J$32 million, Evans said.

Caribbean Aquaculture also produced salt water Tilapia for the local market, having developed a strain of the fish that was "good for salt water," said Evans, noting that "everyone said it was a better tasting fish because it was grown in salt water."

He said the company approached the Ministry Agriculture and Fisheries and the Ministry of Finance and Planning for waivers following imposition of the duty.

"They agreed that we should apply for waivers for the feed and we applied but the bureaucracy really caused us some problems," Evans said.

"The process of applying meant we had to first order the feed, get the pro forma invoice, send it to the Rural Agricultural Development Authority, which then sent the invoice to the Ministry of Agriculture, which then sent it to the Finance Ministry for approval," he explained.

"The entire process took two to three months within which time we had to feed the shrimp. That bureaucracy didn't work and when we did get the waivers and should collect back from customs, we just haven't been able to collect on those invoices," an evidently frustrated Evans said.

He said five invoices totalling J$2.8 million were still with the customs department.

"What we proposed to them is that since we used to order about 20 tonnes of feed per year, that they should give us a waiver for the 20 tonnes and when we exhausted that we come back to them, but they were not in favour of that. Each container had to be ordered to get the invoice which really wasn't helpful in any major way at all," said the former JEA president.

To compound the problem, he said, "the other issue was praedial larceny. We actually calculated that we were losing at least 10 to 15 per cent of production due to theft."

He said the company tried "all the security firms that we could think of but that still did not alleviate the problem," adding that "security was our third highest cost."

Evans said "thieves would come onto the farms and steal from the ponds. I can't really say that the security personnel ever caught anybody but we could see clear signs of theft. When we came on the farm we could see the foot prints going to the ponds and even in the harvesting areas you could clearly see that some of the shrimp was taken out."

The company operated by pumping water from the sea, hence was strategically positioned near the shore, similar to Trans-Global Aquaculture Limited which has also gone into liquidation due to preadial larceny and other issues.

Thieves "would hold up the security guards and just take what they want" at Trans-Global. After awhile the (overseas-based) owner got so fed up he refused to come back to the island," former manager at Trans-Global, Noel Thompson said in a recent interview with the ].

Trans-Global incurred losses of roughly J$12 million to J$15 million, resulting from theft of its shrimp stock, Thompson said.

"There were only two shrimp farms, ourselves and Trans-Global Aquaculture Limited and we have both gone out of business and I must say it is not because growing shrimp in Jamaica is not profitable. I believe that we meet all the parameters of the industry," Evans argued..

"The difficulty for us was the duty regime, in that while we were being charged duty on the inputs - the feed and the post larvae - for the production, the final product with which we compete were coming in duty free," he explained.

"People who were bringing in the shrimp from Guyana and Belize, which is our main supplier of imported shrimp, could bring it in duty free because those were coming from CARICOM countries. So whilst we were paying duty on the inputs and suffering from other issues like high electricity costs, the competitor was getting it duty free," Evans said.

The company paid demand charges for electricity based on their production levels and the size of the farm, Evans said. "Even at times when we closed down the farm for renovation, we still had to pay electricity bills, which were in excess of $400,000 monthly" he said, noting the energy intensive nature of the business.

"How it works is that Jamaica Public Service says since they have to produce that electricity for you, whether you use it or not, you have to pay for it," he said.

Evans put the extent of the company's losses at J$91 million.

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