Frustrated dairy board CEO quits over financing

Avia Collinder, Business Writer

Less than one year after the appointment of a new board to direct the affairs of the Jamaica Dairy Development Board, the man at the helm since 1999, Dr Paul Jennings, has thrown in the towel and will demit office later this week.

Jennings cited what he described as "intolerable frustration" in the attempt to cobble together financing for the activities of the board, which is expected to operate as a statutory body creating an internationally competitive domestic milk-producing sector.

But dairy board Chairman Dr Paul Lowe said funding was now available by way of a cess recently imposed on the farm-gate price of milk set by the board each year.

The cess, which was approved for implementation in May last year, was levied at one per cent of the farm-gate milk price and is expected to raise about J$64 million to finance projects to help resuscitate the island's struggling dairy industry.

Lowe said this week that the cess, which was signed on November 30 and gazetted in December, took effect as of January 1 and will now be available for the financing required.

The dairy industry, the focus of revitalisation efforts since 2008, has suffered repeated cuts in budgetary allocations from central government and extended delays in the implementation of the cess, which was devised as an alternative source of income for its programmes, outgoing CEO Jennings told Wednesday Business.

An original promise by the Government to allot $140 million to fund an ambitious programme of capacity building to triple milk production and increase the ability of local producers to compete with imported sources was never honoured.

Jennings, whose last day on the job will be Friday, said the sum of J$140 million initially allocated in fiscal year 2008-09 was subsequently revised in the supplementary budget that year to J$80 million.

This was followed by a J$60-million allocation in 2009-10 and a drastically reduced budget of J$20 million for the current financial year, which closes March 2011.

Making up the shortfall

The delayed cess was meant to make up the shortfall.

"Much to my chagrin, it took more than five months to have the requisite ministerial order drafted to give effect to a Cabinet decision re the cess dating back to May 25, 2010," said Jennings.

"This has been a source of intolerable frustration and perhaps the single most important factor in my decision not to seek a renewal of my contract which ends on January 7, 2011."

Lowe said the board of directors had been equally frustrated by the process, but expressed confidence that the money to be garnered as of this month will be enough to support sector-boosting activities.

"We have had an opportunity cost in the time lost. We are very sure now that the policy guidelines are set and that all stakeholders are in agreement," he said.

"Now that the cess is in place, the projects which have been earmarked will go forward."

The cess is applied to both domestically produced and imported milk and milk equivalents.

The objectives of the revitalisation programme, first crafted in 2008 and further honed into a medium-term strategy in 2010, include increasing milk production from a 2007 level of 14 million litres to 31 million litres by 2013, 55 million litres by 2018 and 56 million litres by 2020.

There is also to be an improvement of efficiencies through increased productivity of pastures, the development of the Jamaica Hope cattle breed as the major contributor to herd expansion, and providing opportunities for greater small-farmer participation in the sector.

A concessionary loan facility for pasture and herd improvement has also been mooted, as well as the establishment of an investment fund to facilitate the Government's equity participation in viable commercial ventures.

The local milk-producing sector has suffered a current 64 per cent decline in output from peak milk production of 38.8 million litres in 1992. The dairy board has identified low adoption of available technologies and heavy dependence on imported inputs as reasons for the decline.

In 2009 and 2010, the industry was also negatively affected by the decision taken by bauxite company UC Rusal in March 2009 to suspend operations indefinitely, a factor compounded by a prolonged drought of 2009.

According to a 2010 report from the dairy board, turnover by the dairy industry in 2008 was estimated at J$14.15 billion - in aggregate a three per cent decline on the sector's contribution to gross domestic product in 2008.

At an average farm-gate price of J$46.33, gross farm-gate returns in 2009 were said to be J$611.6 million, a mere 4.3 per cent of total industry turnover.

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