Mr. Speaker,
The sugar industry, being the oldest segment of the agricultural sector, and currently engaging over 35,000 employees directly, as well as another 100,000 indirectly, inclusive of some 9,000 independent cane farmers, and with earnings of over US$70 Million, warrants consistent updates to this Honourable House on issues concerning its development.
Mr. Speaker,
This Honourable House is aware that the reform of the EU Sugar Regime which commenced in 2006 with a 36 percent reduction in the price for our sugar exports to the EU over a four (4) year period, triggered a significant re-examination of the sector in Jamaica. It was felt then that the sector could only survive this price cut if we undertook fundamental changes to the way sugar production is organized in Jamaica. These changes involve the exit of Government as a major player in production and operations, re-tooling of factories and improvements in cane yields, as well as full utilization of all the possible bi-products that this versatile crop can produce. These considerations essentially informed the Government of Jamaica’s Sugar Adaptation Strategy, which was presented to this Honourable House in October 2005.
As if the 36 percent reduction over four (4) years was not enough, the Sugar Protocol under the Cotonou Agreement, which many held as sacrosanct and immutable, was terminated with effect from September 2009. This House is also well aware of the progress so far with the divestment process - we have sold two (2) estates - St. Thomas and Trelawny, and we are still in the process of divesting the remaining three (3). With the divestment of these three (3) estates, the sugar industry in Jamaica will after many years, be completely in private hands.
Mr. Speaker,
These fundamental changes in the sector warrant a comprehensive review of the regulatory, marketing, pricing and institutional arrangements. Against this background, the Cabinet approved the appointment of a Commission of Enquiry to look into and recommend changes if necessary, to these current arrangements. This Commission of Enquiry, is consistent with the time honoured practice in the industry, of reviewing current arrangements, at critical junctures in the life of the industry. The last such Commission was the Mills Commission in 1987, out of which the current pricing mechanism based on quality testing emerged. The Commissioners approved by Cabinet are:
- Professor Alvin Wint, Professor of International Business and Pro Vice Chancellor of the University of the West Indies – Chairman;
- Mrs. Marjorie Henriques, former Director General of the Planning Institute of Jamaica;
- Mr. Wilfred Baghaloo, Director, PriceWaterHouse Coopers Limited; and
- Mrs. Carol Jones, retired Deputy Financial Secretary, Public Enterprise Division of the Ministry of Finance and Planning – Secretary.
Mr. Speaker,
The hearings will commence in earnest shortly and we expect the recommendations of the Commission by the end of September 2010. It is our expectation that these recommendations will provide the framework for a new, robust, prosperous, multi product sugar cane industry, led by the private sector.
Mr. Speaker,
In my last update to this House I advised of the Partial Pre-shipment Financing Agreement with Eridania, which allowed us to continue operations of the Frome, Monymusk and Bernard Lodge estates, whilst we continued with the divestment process. I am happy to report to this Honourable House that we have so far shipped 60,800 tonnes of the 79,000 tonnes agreed, as at the end of April 2010. With the $15 Million pre-payment obtained, we have not only been able to secure the jobs of 2,700 workers, but we were able to plant some 1,300 hectares of cane, rehabilitated over 24 irrigation deep wells, and properly retrofitted the factories for the existing crop. These improvements in field and factory operations has resulted in significant improvements in factory efficiency and labour productivity overall. Overall confidence in the sector has improved significantly, evidenced by the over 400 percent decline in illicit fires at Frome.
The pre-financing agreement with Eridania will end with the current crop. It became obvious to us earlier this year that we would not have been able to divest the remaining three (3) estates within the current crop year. In an effort therefore to continue the operations of these estates, with the approval of the Cabinet, the SCJ Holdings Limited concluded a two (2) year Partial Pre-shipment Financing Agreement with Tate & Lyle of Britain. Under this Agreement SCJ Holdings will supply a minimum of 100,000 tonnes of raw sugar to Tate & Lyle in exchange for pre-shipment financing of approximately US$46 Million over the two (2) years. The guaranteed price per tonne of raw sugar under this Agreement is 370 euros plus Pol premium and profit share. Tate & Lyle has also given a commitment to collaborate with the Jamaica Cane Growers to facilitate Fair Trade Certification. With Fair Trade Certification, the sugar sold to Tate & Lyle could earn an additional US$60.00 per tonne sugar as Fair Trade premium.
Mr. Speaker,
With the pre-financing resources, the SCJ Holdings will undertake the planting of an additional 3,200 hectares of cane on the three (3) estates, continue with the upgrading of irrigation systems and prepare fields and factories for another timely start of the sugar harvest. Significantly, Mr. Speaker, we will be able to preserve some 2,900 jobs, and this without recourse to the public purse.
Mr. Speaker,
The incremental improvements to the Frome, Monymusk and Bernard Lodge estates made possible by the Eridania Agreement, and to be continued under the Agreement with Tate & Lyle, will continue to enhance the attractiveness of these assets to prospective investors. In respect to the divestment process, pursuant to Cabinet Decision, the SCJ Holdings invited new Expressions of Interest on the basis of a revised Information Memorandum in March 2010. I am pleased to advise this Honourable House that some eight (8) Expressions of Interest were returned at the designated deadline of May 25, 2010. Of the eight (8) Expressions, two (2) are from Europe, two (2) from the United States of America, one (1) from China and three (3) local. The SCJ Holdings has scheduled discussions with these interests, and negotiation will ensue. The Government remains optimistic at the prospects of divesting these assets. The Agreement with Tate & Lyle is structured to be terminated at the end of the first year if the estates are divested within the upcoming crop year.
Mr. Speaker,
Consistent with our optimism for the industry, the Government continues to provide support to cane farmers through the Cane Expansion Fund supported by the EU resources under the Accompanying Measures. This year we are projecting to inject another J$200 Million, following an allocation of J$210 Million so far.
June 1, 2010
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