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1.0 Purpose To inform Parliament about the outcome of the divestment of the Government-owned Sugar Estates and in particular, details related to the debts, expenses and proceeds related to the said divestment exercise. 2.0 Background In 2003, Brazil, Thailand and Australia submitted a complaint to the World Trade Organization (WTO) that challenged the legality of subsidies applied to European Community sugar. Arising from the WTO's ruling in favour of the three countries, the European Union agreed to a programme of reform to its sugar regime which was expected to reduce the price paid for sugar exported by ACP countries by a total of 360/0 by the year 2009.

Following a number of studies and a wide stakeholder consultation process in 2005, the Government developed "The Jamaica Country Strategy for the Adaptation of the Sugar Industry: 2006-2015" in order to deal with the impact of the reform. The strategic objectives were to: • Develop a Sustainable Private Sector-Led Sugar Cane Industry; • Strengthen the Economic Diversification, Social Resilience and Environmental Sustainability of Sugar­ Dependent Areas; and • Maintain Progress toward Macro-Economic Goals. The essential feature of the fJIst objective of the Strategy entailed the transformation of the sugar industry to a sugar cane industry based on the production of multiple products, such as sugar, molasses, rum, ethanol and cogeneration. It 1

was proposed that this transfonnation be driven essentially by . private investment. In this regard, the Government took the decision to divest its sugar assets.

3.0 The Divestment Process Consistent with its Sugar Adaptation Strategy, the Government commenced the divestment of the five (5) Government owned sugar factories and estate lands in November 2005. The Sugar Divestment Exercise was completed in August 2011, after three (3) rounds as follows: • Round (1) : On 27 June 2008, following upon negotiations with the sole bidder InfInity Bio-Energy, a Heads of Agreement was signed with the expectation that GOJ would hand over the sugar assets in October 2008. Mter extending the period for completion of the deal with Infinity Bio-Energy twice, it emerged that the impact of the global financial crisis would prevent the company from closing the sugar divestment deal. • Round (2) : In June 2009 two agreements for Sale and Purchase of the assets of two (2) public sector estates, St. Thomas Sugar and Trelawny Sugar estates were finalized. The assets of St. Thomas Sugar estate were sold to a consortium of Fred M. Jones Estates Limited and Seprod Limited operating as Golden Grove Sugar Company Limited with possession on July 16, 2009. The factory lands (10.5 Hectares) and the assets were purchased at a price of US$500,000, while the sugar lands were leased for a period of fifty (50) years renewable for another twenty-five years at US$53.00 per hectare per annum with provision for an annual increase of 4 %. The assets of Trelawny Sugar estate, including the Hampden Distillery and Great Houses, and the factory lands (33.8 hectares) were sold for a total of US$1.5 million to Everglades Farms Limited with possession on July 20 2009. The sugar lands were leased on the same 2

conditions as for St. Thomas Sugar except that the annual lease is US$40.00 per hectare. • Round (3) : On 30 th July 2010, the agreements which initiated the divestment of the three remaining GOJ estates, namely Frome, Monymusk and Bernard Lodge to COMPLANT International Sugar Industry Company were signed. The divestment agreement between GOJ and COMPLANT provided for the payment of US$9M for the factories and factory lands at Frome, Monymusk, and Bernard Lodge, and US$35/ha/yr to lease an estimated 30,000 Hectares of land. 4.0 Accumulated Debts of the Government-Owned Sugar Estates As at 31 st January 2012, the total debt assumed by the Government of Jamaica for liabilities of Sugar Company of Jamaica Limited, St. Thomas Sugar Company Limited and Trelawny Sugar Company Limited (Hampden/ Long Pond) was J$3S.58B. The debts in question were accumulated since 1999, when the Government of Jamaica assumed responsibility for Frome, Monymusk and Bernard Lodge estates, consequent on the failure of the previous sugar divestment to Wray & Nephew, Manufacturers Merchant Bank and Booker Tate Group in 1994. Subsequently, the Government of Jamaica assumed responsibility for the operations of Tropicana Sugar Company in 2000 and Trelawny Sugar Company (Hampden/Long Pond) in 2002. The nature of the debts assumed by the Government is as follows: (a) Subsequent settlement of outstanding liabilities for the three entities which existed at the at the time when they were taken over ­ J$4.4B; . 3

(b) Providing working capital and operational support to keep these entities going through various guarantees which the Government of Jamaica subsequently assumed. These funding arrangements included loans from DBJ, Petro-Caribe Fund, NCB & BNS 足 J$27.5B; (c)

Assumption by the Government and/or write off of statutory obligations due to the Government - J$3.1B;

(d) HEART and property tax liabilities - J$0.58B. The $35.58B referred to above relate to debts of the GOJ Sugar Estates all of which were incurred prior the sale of St. Thomas Sugar and Trelawny Sugar Company in July 2009 and the takeover of the operations of Frome, Monymusk and Bernard Lodge by the Sugar Company of Jamaica Holdings Limited (Sugar Divestment enterprise) in August 2009.

5.0 Divestment-Related Expenses The expenditure incurred by the Government to support sugar divestment-related activities was as follows: a. Notice pay and Severance to redundant sugar workers: J$2.50B; b. Compensation to Mr. Aubyn Hill for privatisation services in Round 3: J$ 16,180,812.50 (US$190,362.50). In addition, some J$28,255,878.01 was paid by the Ministry of Agriculture and Fisheries for Round 2. b. Legal Fees: J$106,119,728.00; c. Titling-related: J$14,61 7 ,286.00; d. Transfers to SCJ Holdings for operations: J$683,308,011.50; e. Sundry: J$209,997,086.00; 4




6.0 Operational Expenses of SCJ Holdings Limited Prior to Divestment In addition to the assumed debt of J$35.58B and the privatisation expenses of J$3.56B, the Government of Jamaica provided some $3.28B to SCJH for the operations of Frome, Monymusk and Bernard Lodge between 2009 and August 2011, when these Estates were handed over to new owners. These included transfers from the Sugar Transformation Unit and the proceeds from privatisation, as well as J$992M in loans from the PetroCaribe Fund. The funds from PetroCaribe will be repaid from the anticipated lease payments from the sugar lands for 12 years. Some J$665.0M of the transfers to SCJH covered social services such as water, electricity, operations of Estate schools and clinics. 7.0 Proceeds of the Divestment The Government has so far realized a total of J$I,030,466,910.00 (US $12,123,140.12) from the sugar divestment process. This includes: • St. Thomas Sugar Estate: Total: J$67,065,766.70 (US $789,009.02). This includes J$42,500,000.00 (US $500,000.00) for the factory and J$24,565,766.70 (US $289,009.02) in lease payments. • Trelawny Sugar Estate: Total: J$127,500,000.00 (US $1, 500,000.00). This J$127,500,000.00 represents the proceeds from the sale of the factory, as lease payments have been deferred until July 2012. • Frome, l\!onymusk and Bernard Lodge: Total: J$835,901,143.50 (US $9,834,131.10). This includes J$765,000,000.00 (US $9,000,000.00) for the factory and J$70,901,143.50 (US $834, 131.10) in lease payments. 5

8. Post-Divestment Operations The total expenditure so far by the new owners of the five (5) former GOJ Sugar Estates is estimated at J$10.7B. The breakout of this amount is as follows: - Golden Grove Sugar Company - J$1.6B;

- Everglades Farms Limited - J$2.8B;

- Pan -Caribbean Sugar Company - J$6.3B.

In respect of lands planted to sugar cane by the new owners, the figures are as follows: - Golden Grove Sugar Company- 284 Hectares; - Everglades Farms Limited - 426 Hectares; and, - Pan-Caribbean Sugar Company - 949 Hectares. The following are the current numbers of full-time and seasonal employees of the former GOJ Sugar Estates: - Golden Grove Sugar Company - 580 persons; - Everglades Farms Limited -783 persons; - Pan-Caribbean Sugar Company - 1,850 persons. The Sugar Privatisation Exercise is showing encouraging results given the to-date performance of the divested Estates:

Golden Grove, St. Thomas: Since divestment of St. Thomas Sugar Estate to Golden Grove Sugar Company Limited in 2009, cane production has increased by 10.85 percent from 163,000 tonnes to 181,000 tonnes. Sugar production has increased by 28.1 percent from 12,587 tonnes to 16,123 tonnes. Everglades Although there was an unfortunate mishap that caused the factory to be closed for rehabilitation in the 2010/ 11 crop, the new owners have spent significant funds and the factory will re-open for this crop. This will stimulate expansion of cane production by farmers in that area.





Having handed over the factories to COMPLANT in August 2011, the Government is satisfied with the level of investment by their operating subsidiary Pan-Caribbean Sugar Company in Frome, Monymusk and Bernard Lodge Sugar Estates. Pan足 Caribbean has procured over fifty (50) pieces of new equipment for use on the Estates and they have committed themselves to putting up a new factory at Monymusk by 2016. The total investment contemplated by Pan-Caribbean Sugar is about J$10.9B (US $127.0M).

Cane Farmers: Having seen the level of investments in field and factory by the new owners of the divested estates, cane farmers have planted and replanted close to 2,000 hectares of cane using concessionary loans from the Cane Expansion Fund. To date, J$858.0M has been injected by the Ministry into the Fund. 9.0 An Enabling Policy Environment tor the Sugar Cane Sector Although the Government is no longer participating in the commercial operations of the industry, it continues to play an important role in policy and regulation. Pan-Caribbean Sugar for instance, has requested a license from the Sugar Industry Authority (SIA) to market their own sugar in accordance with the Sugar Industry Control Act and the terms of their Sale and Purchase Agreement. This is being facilitated. The Government of Jamaica will continue in the new dispensation to insist on the adherence by all manufacturers to the Cane Payment System which guarantees transparency and provides confidence to farmers that they are getting their fair share of proceeds. This Government accepts the fmdings of the Wint Commission in respect of the restructuring of the institutional and regulatory framework, and the Cane Payment System to take into account our new realities. The Government of Jamaica will not abandon its social responsibilities to the many workers and farmers displaced in the privatization process. 7


In this regard, in the fmancial year 2012/2013 the Government of Jamaica with support from the European Union's Accompanying Measures for Sugar Programme will spend over J$1.0B in relocating residents of the Sugar Barracks, upgrading sporting facilities, and the execution of critical small community infrastructur~ projects. Additionally, in order to ensure that our cane farmers continue to maintain a stake in the sugar sector, the Government of Jamaica will increase the capital of the Cane Expansion Fund to J$1.7B, fast track rehabilitation of critical cane roads, and establish a number of ~ugar Dependent Areas.


Honourable Roger Clarke Minister of Agriculture and Fisheries March 5, 2012


705_Ministry Paper 20 - 2012  

MINISTRY PAPER 20/1 2.. 1.0 Purpose To inform Parliament about the outcome of the divestment of the Government-owned Sugar Estates and in pa...

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