Tue | Jan 25, 2022

Alfred Dawes | Stop Carib Cement plunder

Published:Sunday | December 5, 2021 | 12:12 AM

On December 7, 2021, when you are busy arguing over states of emergencies, vaccination status and which party you support, there will be a blow to the Jamaican economy and average Jamaicans. I refer to the decision that will be taken for Carib...

On December 7, 2021, when you are busy arguing over states of emergencies, vaccination status and which party you support, there will be a blow to the Jamaican economy and average Jamaicans. I refer to the decision that will be taken for Carib Cement Company Ltd (CCCL), suddenly and without any moral reason, to pay royalties for the use of trademarks to its ultimate parent company, CEMEX. While this may at a cursory glance seem unimportant to you, the back story and intent make for a good plot line in the Netflix series ‘Billions’.

Carib Cement has basically been granted a monopoly for supplying cement in Jamaica. They are the only company that has a licence to produce cement. To import cement, you again have to have a special licence. Such licences are few and the local manufacturer is further protected by a 40 per cent tariff on imported cement. If you suspect that what you are paying for cement is unfairly high, you are right. A paper prepared by the Fair Trading Commission in 2009 demonstrated that the protectionist duties levied by the Government of Jamaica led to higher cement prices. Let’s go over that again. The Government sets a policy to protect CCCL and that results in higher cement prices and hence higher construction and housing costs for Jamaicans from all walks of life.

So, what does CCCL do with this money that is extracted from us at the bidding of our Government? Well, the shareholders have not benefited from it in a long time. The last time a dividend was paid out was in 2005. That has largely been because CCCL has been unprofitable for years. But in 2018, miraculously, the profit jumped by over 120 per cent!

Okay, so it was no miracle. CCCL was saddled with a suffocating lease agreement with its direct owner Trinidad Cement Ltd (TCL). That operating lease saw the company paying out billions of dollars to TCL to use kiln five and mill five. That money left the company as a non-taxable expense that disembowelled its profits. In spite of the monopoly paid for by Jamaicans, the only beneficiary of the burgeoning sales as Jamaicans built more was TCL. The company struggled because all the earnings were paid out through the lease payments before they could be called profits.

Jamaican shareholder activism played a key role in the lease agreement being terminated and CCCL began to experience record growth and profits. Year on year profits grew and the company expanded. Shareholders saw their stocks rising in value by double digits. More taxes were paid into the government coffers. Jamaicans were finally seeing the rewards of protecting a ‘local’ company and paying more than necessary for cement.

ALMOST DEBT FREE

This year, first-quarter revenue was up by 31.2 per cent and profits 216 per cent, a year into the local pandemic. A major expansion is planned for 2022. The company is almost debt free after paying off billions in debt. Then news broke in August that concrete steps were being taken to resume dividend payments. Finally, after nearly 20 years in the wilderness, minor shareholders would get their manna. Sadly, this will not be so.

CEMEX has now come up with a plan to create an even bigger non-taxable expense that will rip profits out of CCCL and repatriate to Mexico, in the fashion of the absentee plantation owners in the days of slavery. Up to four per cent of revenue, not profit, revenue, will be used to pay royalties to CEMEX for the use of brands and trademarks. This could mean upwards of $800 million this year alone and billions of dollars over the next few years if we keep wanting houses and sidewalks built. Decimated profits will wipe out the dreams of minor investors reaping any benefits from owning the stock and the Government will collect significantly less taxes on profits.

With this announcement, the share price of CCCL tumbled, wiping out $14 billion of value in one day alone. It might be bad for shareholders, but it’s worse for the country as less taxes will be paid by the government-protected company to pay front-line workers and fix roads.

It may sound unfair, but it will happen. CEMEX has enough votes to pass the resolution with ease. What suits them even more is that Jamaicans have devolved into beings who relish infighting, without realising who the true oppressors are. We tear each other apart and never unite for causes any more. Jamaica has been a place where fortunes have been made on the backs of those who toil here for the last 500 years. Alas, it will continue while we fight to be the top house slaves.

CEMEX and CCCL are not faceless companies. The board and executive are real people. There will be no outcry or petition for the Government to remove the protectionist duties that cause us to pay higher prices if CEMEX goes ahead with their masterstroke. Our differences matter more.

Some of us secretly wished we lived in another era, when lives were willingly traded for a cause. Not for the gain of immortality, but to satisfy the burning flame deep within that we were not born to be pawns, but our lives have a purpose, to fight injustice in any form, anywhere. Remember, remember, December 7, the day that the fire lit by our ancestral heroes was finally extinguished by our collective apathy to this blatant act of plunder.

- Dr Alfred Dawes is a fellow of the American College of Surgeons, CEO of Windsor Wellness Centre, and medical spokesman for Lifespan Spring Water. Follow him on Twitter @dr_aldawes. Send feedback to columns@gleanerjm.com and adawes@ilapmedical.com.