The Sugar Industry in Jamaica
1
SUGAR MANUFACTURING CORPORATION OF JAMAICA
PRESENTATION TO THE WINT COMMISSION OF
ENQUIRY
JUNE/JULY 2010
The Jamaican Sugar Industry today
2
 Continuing decline (25%) in production in the past decade
 Prices no longer EU-subsidised
 Government unable to continue subsidising the State held
Estates and Farms

Must divest holdings as agreed with EU to access budget support funding
through EU accompanying measures grants
 Only 6 sugar factories now operating; cane growing now
includes about 5,000 independent farmers delivering 505,910
tons in 2009 (around 38% of the total grown)
 Sugar industry still the second largest employer with 38,000
direct employees* and 228,000 dependents
 Industry’s bureaucracy structured for the realities of the past
and requiring review to meet a private sector led future.
* 2005 Jamaica Country Strategy
The Stakeholders of the Sugar Industry
3
 Manufacturers
 Cane growers
 Employees, and their dependents
 Unions
 Contractors
 Consumers
 Overseas buyers
 Local buyers
Manufacturers (i.e., local industrial users)
 Individual consumers

 Government
The importance of the Sugar Industry
4
 Direct Employment
 Indirect Employment
 Economic stability of much of rural Jamaica
 Foreign Exchange earnings and/or substitution
 Government revenues/(costs)
 Taxation/Duties
The requirements of the Sugar Industry
5
 Government facilitation






“Sensitive industry” status
Importation of sugar – raw and refined
Adequate national infrastructure
Making land available for growing of more cane to optimize factory capacity
Equality of treatment of all industry players, both manufacturers and
growers.
Other measures
 Profitability / Cost Containment
 Price Stability
 Sustainability
 Efficiency
 Review of Accompanying Measures
 Review of taxation and duty regimes affecting Sugar Industry
Sugar production
6
 Both cane growing and sugar manufacturing involve very high fixed
costs.
 The sugar industry in Jamaica needs to maximise efficiencies especially
in view of its relatively small size; this involves modernization and
capital expenditure to stimulate increased productivity.
 The industry has no output GCT tax against which to offset GCT input
tax; it therefore seeks relief from this and other duties on imported
equipment for cane farming and milling, as well as other necessary
inputs, reversing taxes imposed in 2004.
 Relief from taxes and duties on fuel oil and lubricants consistent with
relief given to other industries (bauxite, tourism)
Sugar Industry administration
7
 Sugar produced owned by the factory.
 Current system of cane farmer registration to individual
factories should continue.
 The Regulations dealing with cane analysis should be
revised to take account of new technology.
 Current arrangements for pooling of sugar should continue,
provided that all 96° raw sugar, locally produced molasses
and all imported sugar are marketed through the Marketing
Committee.
 Provision in Sugar Industry Control Act for payment of
surpluses from sale of raw sugar into Consolidated Fund
should be deleted in view of industry privatization.
The responsibilities of the industry’s associations
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 There are three essential functions that must be
managed for the health and wealth of the industry
overall:
 Regulation
 Marketing
 Research and Development
 The private sector manufacturers and growers are
aware of their responsibilities.
9
The current
structure of
the Sugar
Industry
SIA
24 staff
$126M cost
SIRI
70 staff
$204M cost
CPC
0 staff
0.5M cost
JCPS
13 staff
$60M cost
SMCJ/
SPF
6 staff
23M cost
TOTAL 113 staff
$414M cost
Sugar Industry
Authority
Sugar Industry
Research Institute
Cane Prices
Committee
Sugar Manufacturing
Corporation of Jamaica
Sugar Producers
Federation
Jamaica Cane Products
Sales
Regulatory and Administrative overheads
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 SMCJ believes that the dual imperatives of greater
efficiencies and reduced costs must be applied to the
industry’s administration and regulation.
 Indirect overheads should be reduced to
approximately one third the present expenditure.
 Direct overheads are not susceptible to such
reductions but the possibility of any and all cost
savings should to be addressed.
The Sugar
Industry’s
overheads
(amended)
The Sugar
Industry’s
overheads
11
US$M/% of Gross
Revenue
US$k/% of Gross
Direct
costs
Revenue
(JCPS)
Direct costs
Indirect
(JCPS) costs
(JCPS/SIA/SIRI/Core)
Indirect costs
(JCPS/SIA/SIRI/Core)
1991
2000
2009
1991
7,876
8.0%
7,876
1,600
8.0%
1.7%
1,600
1.7%
2000
18,981
15.7%
18,981
6,040
15.7%
5.0%
6,040
5.0%
2009
42,396
35.8%
15,082
4,420
12.62%
8.0%
4,420
8.0%
In the original.
•US$M should be US$k.
• Direct costs incorrectly included the cost of imported sugar
amounting to US$k 27,314
Regulation
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 Where appropriate, there should be self regulation at
the individual enterprise and association level.
 However, the overall and formal regulation
(establishment and preservation of equity) of the
total industry should remain with government.
 The regulatory body should include representatives
of the industry’s producers; its functions should be
legislative and judicial in nature; it should have NO
executive function.
 At this time, sugar manufacturers agree the already
established Cane Price Formula should continue.
Cane Grower v. Miller incentive
13
Increase in GROWER
revenue from 10%
increase in sucrose
content
Increase in MILLER
revenue from 10%
increase in sucrose
content
Australia
15%
29%
Brazil
15%
20%
India
0%
46%
Mexico
10%
24%
U.S. (Florida)
10%
20%
Jamaica
16%
16%
Sugar Industry Authority
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 The Minister will appoint the Board of the
Authority, in accordance with the Act, comprising
seven members who by training or experience
appear to him to be suitable for appointment, with
ability in law, finance, economics and matters
related to the sugar industry, as follows:





Chairman (Independent)
2 SMCJ Manufacturer Representatives
1 Jamaica Estate Cane Growers’ Association Representative
1 AIJCFA Representative
2 of Lawyer, accountant, economist
Marketing
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 The SIA should appoint a Sugar Marketing Committee with balanced
representation from the Growers and Manufacturers, as well as
Independents, as follows:
 Chairman (Independent)
 2 SMCJ Manufacturer Representatives
 1 Jamaica Estate Cane Growers’ Association Representative
 1 AIJCFA Representative
 2 Independents
 This committee should be responsible for the marketing, sale and
distribution of the product to the buyers.
 Costs of the Committee should be taken from sugar sale proceeds.
Local Marketing
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 Appropriate taxation and imported sugar duty regimes




should be put in place to enable local market requirements
to be satisfied and administered by the Jamaican sugar
industry.
The Sugar Marketing Committee (as agent of the SIA)
should be the sole importer of raw and refined sugar into
Jamaica.
It should market ONLY sugar, not other commodities such
as fertilizer or chemicals.
It should not make loans
Revise existing White Sugar Import Regime to encourage
and accommodate locally produced white and brown sugar.
Cane Prices Committee
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 The SIA should appoint a Cane Prices Committee,
funded by way of SIA cess and with Terms of
Reference as set out in the Mills Commission, with
balanced representation from the Growers and
Manufacturers, as well as Independents (1 each) and
a Chairperson, as follows:




Chairman (Independent)
1 SMCJ Manufacturer Representatives
1 AIJCFA Representative
1 Independent
Research and Development Committee
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 The SIA should appoint an R&D Committee with
balanced representation from the Growers and
Manufacturers, as well as Independents (two each)
and a Chairperson, as follows:





Chairman (Independent)
2 SMCJ Manufacturer Representatives
1 Jamaica Estate Cane Growers’ Association Representative
1 AIJCFA Representative
2 Independents
 Research costs should be shared between the
producers, i.e. the growers of cane and the
manufacturers of sugar and levied by way of SIA cess.
Research & Development Committee
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 Factory Division

Continue



Core sampling
Discontinue

 Agricultural Division
All other services
Continue
Variety development
 Plant pathology and
entomology
 Lab analysis for sugar and
molasses
 Leaf and soil sampling


Discontinue
Extension services
 Economics
 Engineering
 All other services

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The proposed
structure of
the Sugar
Industry
SIA
Sugar Industry
Authority
4 staff
$40M cost
Marketing 6 staff
Committee $20M cost
Cane Prices 0 staff
Committee $0.5M cost
R&D
15 staff
Committee $108M cost
Sugar
Manufacturing
Corporation of
Jamaica
Marketing
Committee
Cane Prices
Committee
SMCJ/SPF 6 staff
$20M cost
TOTAL 31 staff
$188M cost
All-Island Cane
Farmers Assoc.
Executive operations
Regulatory authority
R&D
Committee