Private sugar estates run efficient operations in wake of Gov't divestment

Mark Titus, Staff Reporter

THE YEAR 1965 stands as Jamaica's biggest in sugar production to date, when 506,000 tonnes of the sweetener was churned from the 18 factories that existed at the time.

While this should have been the start of bigger things to come for the oldest continually operating industry in Jamaica, the years that followed would tell a tale of rapid decline.

Indeed, it was not until 1971 that Jamaica, the one-time kingpin of sugar production, managed to go anywhere close to the results of 1965, when it realised an output of 379,000 tonnes.

Sugar production in the '80s was a story of woe, with the government repur-chasing the Sugar Com-pany of Jamaica (SCJ) in 1998 to avoid its collapse, after it found itself in a loss-making position which was blamed on the high inflation of 1994 and 1997, and the revaluation of the dollar in 1996.

The one-time sugar kingpin's share of world production today is just 0.1 per cent, a study conducted by the United Nations and presented in Geneva last March revealed, slumping from the high of the 1960s to 124,206 tonnes in 2005, while the contribution to export earnings has fallen from 49 per cent in 1952 to 1.8 per cent in 2006. In addition, the contribution to GDP has fallen from nine per cent in 1953 to 0.8 per cent in 2006.

Many have blamed the Government for the decline, but Allan Rickards, chairman of the All-Island Jamaica Cane Farmers Association, does not agree.

"I am hesitant to blame the Government, because I don't think they wanted to be managing the factories, but had to step in when owners walked away and left it, whether for good reason or bad."

The assets were last in private hands under a deal in 1993 that gave 51 per cent control to a Wray & Nephew-led consortium that acquired control of the SCJ. The other partners were Cliff Cameron's Manufacturers Investment Limited and Booker Tate Limited of the United Kingdom. Each private partner held 17 per cent whereas the Jamaican Government retained a minority 49 per cent.

Gov't not to blame

Rickards continued: "To be certain, there were some managerial practices that were not good, but the fact is that the factories did not start to go bad under government. My personal feeling is that it started from the time the foreign owners took a decision they were going to leave."

The McConnells' Worthy Park and the famous Appleton Estates have demonstrated efficiency, producing sugar around 10 cents per pound cheaper than what the government-owned factories produced for years.

The public estates were very dilapidated and operated with obsolete machinery dating back to the 1960s, and calls for the shutdown of the industry in its current form have been ignored by successive governments, which instead chose to subsidise the struggling sector at an accumulated cost of $20 billion in financial losses.

Serious financial problems

The Hampden Estate and Long Pond factory in Trelawny figured prominently in the heyday of sugar production in Jamaica, but have seen a steady decline over the last two decades, with both facilities producing a combined 20,000 tonnes of the sweetener during the 2000-2001 crop.

The Hampden factory by itself had the capacity to produce 15,000 tonnes of sugar, but made only 5,000 tonnes in 1998.

Despite the availability of approximately 1,284 hectares of land for planting cane, only 676 hectares was used. This was not helped by the serious financial problems experienced by the estate over the years of operation, sustaining losses of more than $45 million during the period 1997-2002, which saw it being placed into receivership because it was incapable of paying its creditors. In 2002, the government brought the curtains down on full-scale activities at Hampden, leaving more than 200 workers jobless.

The decision to place the future of the sweetener into private hands has never been deemed a stroke of political brilliance, but rather the desperation of a government determined to rid itself of the loss-making entities while attempting to prevent the social disorder that would occur with the loss of most of more than 35,000 jobs, should there be closure.

"A lot of people don't remember that the sugar industry is a major employer of persons and they tend to regard the industry by the lowest common denominator," Rickards argues. "If manufacturers did not think it can be viable we would not have a Worthy Park or an Appleton Estate ... or you would not have recent entrants like at St Thomas or Trelawny."

Worthy Park and Appleton Estate continue to run efficient operations, and in the first crop under the ownership of Golden Grove Sugar Company - a Seprod Limited/Fred M. Jones Estate consortium - the former Duckenfield Sugar Estate has demonstrated that good management will result in positive results. The efforts of the St Thomas facility were not hurt by the vast knowledge and expertise that Dr Richard Jones brings to the partnership.

It has been a challenging first crop for Everglades Farm, owned by the Hussey family, which is more renowned in the hospitality industry. The expectation had been that the management style used to place Terra Nova All-Suite hotel among the leading facilities in the region would serve to bring viability to Long Pond and Hampden estates. However, many agree that the first-crop difficulties that have plagued the new owners might serve as an inspiration for big things.

mark.titus@gleanerjm.com