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... competence takes a back seat.
EDITORIAL - Reopen sugar bid
Published: Wednesday | February 4, 2009
The Government's botched and, ultimately, failed effort at selling the Sugar Company of Jamaica (SCJ) has to be among the most inexpertly and ineptly handled negotiation ever by a Jamaican administration.
It took the passage of three deadlines for the Golding administration to realise that Infinity Bio-Energy could not muster the US$25 million to jump-start a deal that would give it such a potentially plum asset as Petrojam Ethanol Limited, thousands of acres of sugar lands and five, admittedly, run-down sugar factories. For even in these hard economic times with relatively illiquid financial markets, US$125 million - the requirement to overhaul the SCJ - is not a stupendous amount of money to be raised by a healthy company of sound fundamentals.
Infinity, clearly, was not a company with either a track record of performance in sugar or ethanol or the cash flow that gave investors confidence that it was a firm in which they wanted to park their cash. These weaknesses were exacerbated by the meltdown in the global financial markets and the onset of the worldwide recession.
Unnecessary burden placed on taxpayers
These things were pointed out to the Government, which unfortunately thought it more prudent to shoot the messenger rather than absorb the reality. And, in clinging vainly to the hope that they could still, contrary to the facts, strike a deal with Infinity, Mr Golding's negotiators lost valuable time that placed Jamaica's current sugar harvest in jeopardy. And, for the sake of politics, the Government imposed an unnecessary burden on taxpayers.
Long past the time when it was obvious that the presence of a Houdini would be required for Infinity to effect the mirage of having the capital to close the deal, the Government proceeded with the myth of making the jobs of several thousand sugar workers redundant. It paid $800 million in lieu of notice. It is to pay out a further $2.1 billion for actual redundancies. Yet, only around 40 per cent of the workers are to lose their jobs. The remainder, at least for now, will still be employed by the Government via the SCJ, except if the administration decides to abandon the sugar sector immediately, which, in the current circumstance, is hardly likely. By this piece of negotiating folly, the administration added unnecessary expenditure to its budget, making it more difficult to keep to its target of a fiscal deficit of 4.7 per cent of GDP.
Economic recovery
Obviously, the Government cannot, over the longer term, continue to carry the sugar industry; certainly not with the erosion of the country's preferential market in the European Union. If the sector is to be viable though, it will rest on something akin to the sugar/ethanol mix that was being pursued with the bungled divestment effort. We would suggest bringing rum into the mix and, possibly, refined sugar, which is hovering in the background, but has again been placed fully on the agenda by Mr Golding. The move to build equity into Jamaican rum brands offers exciting prospects, which will grow with the inevitable economic recovery.
Our suggestion to the Government, therefore, is that it urgently reopens tenders for the industry, or parts thereof - inviting entities other than those that previously qualified to bid, or had made offers. This time it must negotiate quickly, but with competence.
EDITORIAL - Reopen sugar bid
Published: Wednesday | February 4, 2009
The Government's botched and, ultimately, failed effort at selling the Sugar Company of Jamaica (SCJ) has to be among the most inexpertly and ineptly handled negotiation ever by a Jamaican administration.
It took the passage of three deadlines for the Golding administration to realise that Infinity Bio-Energy could not muster the US$25 million to jump-start a deal that would give it such a potentially plum asset as Petrojam Ethanol Limited, thousands of acres of sugar lands and five, admittedly, run-down sugar factories. For even in these hard economic times with relatively illiquid financial markets, US$125 million - the requirement to overhaul the SCJ - is not a stupendous amount of money to be raised by a healthy company of sound fundamentals.
Infinity, clearly, was not a company with either a track record of performance in sugar or ethanol or the cash flow that gave investors confidence that it was a firm in which they wanted to park their cash. These weaknesses were exacerbated by the meltdown in the global financial markets and the onset of the worldwide recession.
Unnecessary burden placed on taxpayers
These things were pointed out to the Government, which unfortunately thought it more prudent to shoot the messenger rather than absorb the reality. And, in clinging vainly to the hope that they could still, contrary to the facts, strike a deal with Infinity, Mr Golding's negotiators lost valuable time that placed Jamaica's current sugar harvest in jeopardy. And, for the sake of politics, the Government imposed an unnecessary burden on taxpayers.
Long past the time when it was obvious that the presence of a Houdini would be required for Infinity to effect the mirage of having the capital to close the deal, the Government proceeded with the myth of making the jobs of several thousand sugar workers redundant. It paid $800 million in lieu of notice. It is to pay out a further $2.1 billion for actual redundancies. Yet, only around 40 per cent of the workers are to lose their jobs. The remainder, at least for now, will still be employed by the Government via the SCJ, except if the administration decides to abandon the sugar sector immediately, which, in the current circumstance, is hardly likely. By this piece of negotiating folly, the administration added unnecessary expenditure to its budget, making it more difficult to keep to its target of a fiscal deficit of 4.7 per cent of GDP.
Economic recovery
Obviously, the Government cannot, over the longer term, continue to carry the sugar industry; certainly not with the erosion of the country's preferential market in the European Union. If the sector is to be viable though, it will rest on something akin to the sugar/ethanol mix that was being pursued with the bungled divestment effort. We would suggest bringing rum into the mix and, possibly, refined sugar, which is hovering in the background, but has again been placed fully on the agenda by Mr Golding. The move to build equity into Jamaican rum brands offers exciting prospects, which will grow with the inevitable economic recovery.
Our suggestion to the Government, therefore, is that it urgently reopens tenders for the industry, or parts thereof - inviting entities other than those that previously qualified to bid, or had made offers. This time it must negotiate quickly, but with competence.
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