Minister of Agriculture and Fisheries, Hon. Dr. Christopher Tufton, has said that the country has received “value for money” in contracting the services of consultancy firm, Corporate Strategies Limited, to assist with the divestment of its five sugar estates.
“So far, the returns have been that the taxpayers have not been called upon by the sugar cane industry,” Dr. Tufton stated.
“In addition, the Government of Jamaica has gotten $200 million, so far, from the divestment of two of the five estates. Those two estates have not been shut down, they are engaged in cane expansion and will be more efficient and, in all likelihood, may engage more workers and, therefore, be more sustainable over time and better for the communities that they are located in,” the Minister related.
He has also pointed out that the contract with Corporate Strategies Limited, was duly approved by both the cabinet and the Ministry of Finance and the Public Service.
Minister of Agriculture and Fisheries, Hon. Dr. Christopher Tufton (centre), is joined by his Permanent Secretary, Donovan Stanberry (left), and Chairman of the Sugar Company of Jamaica (SCJ), Ambassador Derrick Heaven, in preparing himself for Friday’s (October 16) media briefing at the Ministry, Old Hope Road, Kingston. The media was briefed on the issue of payments to consultancy firm, Corporate Strategies Limited, in the divestment of state-run sugar estates.
Dr. Tufton made the statements at a press briefing at his Ministry, Old Hope Road, Kingston, on Friday (October 16), as he sought to clarify media reports regarding monthly payments of just under $2 million to Corporate Strategies, which is headed by former banker, Aubyn Hill.
He noted that the accumulated debts of the Sugar Company of Jamaica (SCJ), which operated the 5 factories, totalled $19 billion at the end of September, 2009, and that Corporate Strategies’ engagement and input in the divestment process, as at June 2008, resulted in the public purse being relieved of subsidizing its operations.
The estates involved are: St. Thomas Sugar Company, St. Thomas; Trelawny Sugar Company, Trelawny; Frome, Westmoreland; Monymusk, Clarendon; and Bernard Lodge, St. Catherine.
The minister said that the facilities cost the country $5.2 billion to maintain in 2008. St. Thomas and Trelawny Sugar were sold earlier this year.
Mr. Hill chaired the Sugar Enterprise Team since its establishment in 2005 to identify the SCJ assets to be privatized, prepare information memoranda for potential investors and request and evaluate bids in respect of the assets.
The process was concluded in June, 2008, with the signing of a Heads of Agreement with Brazilian firm, Infinity Bio Energy (IBE), which fell through, however, in light of IBE’s financing challenges. The Terms of Reference were subsequently revised to facilitate negotiations beyond that Heads of Agreement, resulting in Corporate Strategies being retained to assist with this phase. Approval of the engagement resulted from discussions at the Cabinet level, consequent on talks between the Ministries of Agriculture, and Finance and the Public Service.
In light of the processes involved in concluding the sale of the estates, the Terms of Reference were adjusted, accordingly.
Dr. Tufton said that the team was able to successfully conclude the sale of both St. Thomas and Trelawny sugar companies for just over $200 million.
During the negotiations, an adjustment regarding the operations of the three other estates was made. It became clear that it would not have been possible to conclude divestment of the three remaining estates in time for the next crop, although the Government had already stated that it would not pump any more resources into them.
“So, the choice was to (either) shut down the estates totally, which would have had implications for the thousands of workers who depend on the cane industry to survive; or to negotiate an interim arrangement in order to preserve the activities going into the next crop, while we attempt to conclude the negotiations on final divestment,” he said.
Corporate Strategies was engaged in the process of negotiating interim arrangements pending conclusion of the divestment talks. This resulted in US$15 million in advanced financing arrangements being negotiated with Italian firm, Eridania, in return for 79,000 tonnes of sugar at the end of the next crop.
These efforts also resulted in the preservation of activities on the three remaining estates, a 40% reduction in operational costs and no need to seek budget subsidy compared to last year’s $5 billion.
Dr. Tufton said that Monymusk and Frome are 30 percent and 50 per cent ready, respectively, to commence processing cane in December.
“We anticipate that both factories will be opened on time this year,” he added.
He said that Frome should be ready to start processing at the end of the first week of December, while Monymusk should be ready by the third week of December.
“This is something that has not happened in a long time, again because of limited resources. The delays that have taken place in the past affected the estates’ capacity to deliver. This year, those delays will be corrected,” Dr. Tufton assured.
He said, that consequently, the $27 million paid to Corporate Strategies over the 16 month period, has to be viewed in the context of what are the returns on the expenditure that has taken place so far.
Regarding ongoing negotiations with two “potential entities” for the remaining three factories, Dr. Tufton, said the government was optimistic that they would be in a position, by the end of the current calendar year, to determine whether or not these would be divested.
“At the end of that period, if it doesn’t happen before, we will be re-evaluating our position, as it relates to the contracts that we have in place for all consultants, and certainly including Corporate Strategies. So it is not a definite arrangement,” Dr. Tufton assured.