Friday 7 August, 2020

Worthy Park calls for integration of Sugar Authority into MICAF

Loop file photo

Loop file photo

The management of sugar manufacturer Worthy Park Estate Limited is urging the Government to consider the integration of services offered by the Sugar Industry Authority (SIA) into the Ministry of Industry, Commerce, Agriculture and Fisheries (MICAF).

Worthy Park principal, Peter McConnell said as losses in the industry continue to climb, the two remaining factories are being forced to shoulder the burden of the SIA.

Within the industry, Seprod has shuttered its sugar manufacturing operations and most recently, Appleton sent home 370 workers as it closed down its own factory.

An industry which once included over 20 factories is now down to two, with Pan Caribbean being the other. 

“The SIA Cess imposed on Worthy Park represents approximately eight per cent of sugar revenue; the SIA Cess has moved from approximately $4,700 per ton sugar in 2015 to an anticipated $7,095 per ton in 2020,” Gordon Clarke, Managing Director & CEO of Worthy Park Estate Ltd said in a statement.

“In other words, as the sugar production has fallen due to manufacturers and farmers exiting the industry, an increasing percentage of the sugar proceeds is being used to fund the SIA budget rather than being paid to the factories and farmers”

He stated, “We also find it unacceptable that our regulator is not only non- responsive to the numerous letters written to them regarding issues faced by the industry players, but they are also dictatorial in their approach. This situation is untenable and unsustainable. The SIA either needs to be dramatically reformed or totally disbanded.”

Clarke explained that Jamaica’s sugar industry was structured around preferential access and pricing into the EU. This was discontinued over 10 years ago and preferential access was discontinued in 2017.

Gordon Clarke, CEO and Managing Director of Worthy Park

Since 2017 the prices to that market have declined by approximately 60 per cent.

As a result the revenues earned by the industry have also declined, and ultimately led to the exit of the Long Pond, Monymusk, Golden Grove, and now the Appleton Factory, Worthy Park noted.

“Currently we think the only markets that are commercially sustainable (for both manufacturers and farmers) are the local market, and if possible, small amounts in to the US and CARICOM markets,” Clarke said.

The Worthy Park CEO said the SIA cess is much higher per tonne sugar because of the reduction in Jamaica’s production of sugar for the reasons mentioned earlier.

Three years ago Jamaica made 80,000 + tonnes and this year just 44,000 tonnes. 

“We have asked for reduced services and bureaucracy from SIA to remove this burden from the Factories and Farmers,” Clarke stated.

Services offered by the SIA include research and laboratory services (Sugar Industry Research Institute); cane entomology programme; monitoring and auditing of the cane payment system and pricing; policing of illicit sugar entering Jamaica and protection from dump priced imports of direct consumption of brown sugar.

Clarke said if the SIA is disbanded, these functions can be carried out by the Ministry of Agriculture and NCRA (National Compliance and Regulatory Agency), and/or Customs and Ministry of Finance.

“Every sugar producing country protects its sugar producers and farmers from dumped prices on the international markets.  This can be achieved without the burdensome costs of the SIA,” Clarke opined.

According to Clarke, the SIA reduced its budget in 2019 and the costs associated with achieving this reduction (some $111 Million in redundancies and other costs) were also funded by cane farmers and sugar manufacturers.

“Unfortunately the reductions are insufficient given the fallout in sugar production, consequent on factory closures, over the last few years. We believe that functions of the SIA which need to be continued can either be outsourced or subsumed into MICAF at a much reduced cost.”

Worthy Park principal, McConnell told Loop News: “Worthy Park believes that it can produce sugar profitable in a sustainable way and be the catalyst for the resurgence of the industry if the GOJ accepts its recommendations to either hand the SIA back into the hands of the industry stakeholders or disband it altogether.”   

Meanwhile, he noted, “the industry does not need to be a cost to Jamaican taxpayers. We [only] support the short term use of transportation subsidies to farmers affected by unexpected factory closures, giving them time to convert their crops.”

iStock image

Worthy Park believes it can produce sugar profitably of the SIA cess is removed.

“To demonstrate this confidence, we have recently invested over $300 million in expanding the supply of sugar cane to our factory and started adding value to our sugar products by installing a bagging facility for both bulk and retail packaging.”

Clarke stated, “There is a viable future for the local sugar industry because the remaining sugar factories can supply the total local demand for brown sugar at economically viable prices to all stakeholders. This viability can be achieved without the need for the Government of Jamaica (GOJ) to provide ongoing subsidies, operate factories or overreach through regulations.”

He opined that the most important role of the government is to ensure that the local market is safeguarded against the illicit sale of sugar and to remove the outdated and obstructive bureaucracy entrenched in the industry.

Sugar is described by MICAF as the country’s single most important crop, contributing just under two per cent to the nation’s GDP and earns approximately US$74.5 million annually

It is the second largest single employer of labour, employing approximately 38,000 persons directly during cropping season and 28,000 persons out of crop. It is estimated that some 200,000 persons (about eight per cent of the population of 2.6 million) derive their income directly and indirectly from the industry. Sugarcane is grown in almost every parish.

It accounts for over 40,000 hectares or 40 per cent of the land under permanent agriculture and about one-half of the population live in sugar dependent parishes.

Appleton in St Elizabeth, Pan Caribbean Sugar Company in Frome, Westmoreland, and Worthy Park Estate produced a combined 43,000 tonnes of the sweetener for the 2019-2020 sugar crop year, with the St Elizabeth-based factory contributing just over 11,000 tonnes.

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