February 16, 2002
By Raffique Shah
In the face of the current crisis in sugar. Several persons request the republishing of this article. The article was first published in the Independent in Febriary 2001.
(Raffique Shah has been involved in the sugar industry as leader of the majority of cane farmers since 1973. He is currently chairman of TICFA. He was a member of the Board of Caroni between 1987-96. He was also a member of the Tripartite Committee (1992) that formulated proposals for re-structuring Caroni )
THE genesis of the current crisis in the sugar industry lies in the inability-or better still, lack of resolve-of successive governments to take decisive action to turn Caroni Limited's fortunes around, or shut down the industry. Because the extensive losses the company has suffered for many years now, but more so over the past three years, leading to last week's strike by sugar workers over not being paid wages and salaries, did not come about overnight. The crisis began more than 25 years ago, and while every government during that period came up with "plans" to rationalise sugar, none has had the guts to implement any of them.
Among the proposals for re-engineering Caroni was the Frank Rampersad Plan (circa 1976). Rampersad, one of the top public servants of his time, was chairman of Caroni, and it was in that capacity that he and a team formulated a plan to re-configure the industry through extensive diversification into crops other than sugar cane and the retrenchment of workers, in order to put it on a financially sound footing. Needless to say, Rampersad was roundly condemned and his plan is probably gathering dust somewhere in the archives.
After Rampersad's plan was shot down, there were many other proposals, some of which government paid considerable sums of money to have developed. Eric St Cyr, a UWI lecturer, had his own vision. And so they went-the Winston Dookeran Plan, the Vishnu Ramlogan Plan, the Ranjit Singh Plan (the latter two were chairmen of the company's board), and in 1992, the Tripartite Report, which had been commissioned by the Patrick Manning Government. Among those who sat on that committee, signed the Report and agreed to its implementation were Basdeo Panday and myself.
I had argued during discussions for the cane growing function to be exclusively in the hands of independent farmers. At the time, Caroni grew about 53 per cent of canes produced and farmers 47 per cent. My reasoning was simple: at the time, farmers were paid less than half of what it cost Caroni to produce a tonne of canes. Today, farmers are paid $170 a tonne while it costs the estate (Caroni) almost $500 a tonne.
Panday and most other members of the committee, including company and government representatives, vehemently opposed my suggestion. Panday saw it as a move to decimate his union's membership, since it would have meant the elimination of cultivation workers or transforming them into farmers. Others asked: what if the farmers decide to withhold their canes? My response: what would they do with it, suck it?
In the end, the Tripartite Report recommended, among other measures, a ratio of farmers' canes to company canes of 60:40 (by the time a strategic plan was developed out of the Report, it had altered the ratio to 75:25). It took into consideration capital expenditure required to upgrade the factories, the rum distillery and Caroni's rolling stocks (trucks, cranes, etc.), and focused heavily on its diversification projects like rice, livestock, aqua culture and citrus. There was also a time frame for achieving the goals set. An important consideration at the time was government writing off a $2 billion debenture it held over Caroni's assets for subventions and loans given to the company over a 15-year period. Dr Keith Rowley was the Agriculture Minister who took that proposal to Cabinet, and it was approved.
So Caroni should have started the process of re-engineering its operations from around 1992/3 in order to achieve a break-even position within five years or so. That never happened. Because the "new Caroni" would have meant a reduction in its work force, mainly through attrition and the phased retrenchment of cultivation workers, and because that could have been used by Panday against Patrick Manning in the political arena, the latter failed to act. All the PNM government did between 1991-1995 was to grant subventions to the company to keep it afloat. Some 5,000 acres of canes that were supposed to have gone to farmers remained abandoned-much of it later occupied by squatters. And because government did not have the money needed to meet the terminal benefits the retrenched workers would be entitled to, nor, for that matter, what was required for re-tooling, it simply stuck to giving it subventions, a futile attempt to fill a bottomless pit.
Although Panday was titular head of All Trinidad (the sugar workers union) since 1973/4, he was not active in representing his members from as far back as in the early 1980s. He had devoted himself to politics full time, so it was left to officers like Sam Maharaj and Boysie Moore-Jones to do the union's work. But Panday knew well how to retain the political support of both sugar workers and cane farmers, his original base. They, in turn, felt that the PNM Government (and the NAR) was largely responsible for the dependency syndrome that had characterised Caroni as it degenerated into a kind of "agro-URP". They believed that once Panday got into office, sugar would once more become king, and they would "have it made".
That was not to be. Panday knew that a company that was producing sugar at a cost of between TT$3,000 and $5,000 a tonne, and selling the product on its best market at $3,400 a tonne (European Union, now down to $2,900 due to devaluation of the Euro dollar), was on a sure road to destruction. He knew that hard decisions had to be made if there was to be any turnaround. But he never told the sugar workers and cane farmers that-at least not until he assumed office as Prime Minister, at which time he controlled the Treasury. It was the acme of irony that the first time people in the industry started getting payments late was three years ago, shortly after Panday came to power. That had never happened before, or if it did, it was never as bad as it has been since 1998.
Over the past few years, the stakeholders in the industry who suffered most for payment were the cane farmers. And they are the ones who need timely payments most, since they have to pay cane cutters and people who transport their canes from the fields to the scales or factories. Whenever Caroni did not have sufficient funds to meet its fortnightly requirements, it paid sugar workers and monthly staff first, and left farmers to stew for weeks, sometimes for more than a month.
Last year, on one occasion when I was forced to take farmers to Brechin Castle to protest late payments, sugar workers were also outside the factory awaiting word on their fortnight's pay. The All Trinidad represented went to Rienzi, got his officers to call the PM (who apparently ordered the release of funds to pay them), and returned to BC to give his members the "good news". I asked him: "Any word on payment to farmers?" He replied with undisguised arrogance: "I doh care about farmers!"
It was only a matter of time before the late payments spread from farmers and transport contractors (the worst treated in the industry) to the workers. When it did come last month, many couldn't believe that their old "PG", Basdeo Panday, was shafting them. But they still did not take action, since their union did not want to embarrass "de bossman". When the strike did come in the first week in February, it was through the initiative of the Ste Madeleine factory workers who resisted attempts by their union to send them back to work. And even as their brothers in the South were standing up for bread (if not butter), BC workers continued to work without being paid. It was only when the situation reached crisis proportions that the union's general council met and voted to strike.
Caroni's problems will not be solved by government paying wages, salaries and sums due to cane farmers and others involved in the industry on a fortnightly basis, as happened last week Friday. A cancer that has been allowed to grow for more than 20 years will kill the patient unless radical surgery is done. Minister Mervyn Assam is correct when he says that Caroni's problems must be tackled urgently and in a holistic manner. That does not necessarily mean closure of the industry, or even wholesale privatisation. It means making tough decisions that ought to have been made years ago-like taking away the cane growing function from Caroni, making the factories more efficient, reducing cost of production to levels lower than what we sell the end products for. Currently, Caroni is the highest cost producer among sugar producing countries in the Caribbean, and one of the highest in the world.
There is a school of thought that Caroni should be privatised if it is to make money-much the way the Divestment Secretariat is insisting that the distillery should be sold for a song because it is not a profitable operation at this stage. That view is not only myopic, but it's insensitive. One cannot put close to 20,000 people on the breadline, matters not what you pay them by way of terminal benefits. If the industry is shut down, what happens to the 6,000-odd farmers who grow 1.4 million tonnes of cane? Will they roll over and die, or will they turn to growing marijuana in order to feed their families? And if government, with all its resources, cannot get Caroni on a sound financial footing, what private company would be interested in it except for its vast and valuable land holdings?
In any event, Panday may not want to go down in history as the man who emerged in politics through sugar, and went on to drive the final nails in the industry's coffin. It's not as if there aren't solutions to the company's many problems. What is lacking is the will, the capacity to embrace change once the latter is based on a sound business plan. This is the challenge that faces Caroni, the Government and all stakeholders in the troubled industry.
CARONI'S FACTS SHEET
*The company employs 9,697 persons. Of these, 7,754 are in sugar operations (5,511 in cultivation, 1,940 in factories/processing), 1,131 in administration and 812 in non-sugar operations (citrus, rice, etc).
*Just over 6,000 cane farmers grow and supply canes to Caroni. Most of this is on private holdings while some is on lands tenanted from Caroni or private landowners.
*Caroni owns about 60,000 acres of land, of which just under 30,000 acres are under sugar cultivation. Over the past 10 years or so, the company has sold/leased/donated a substantial acreage of its holdings to government and agencies like Plipdeco.
*Average cane production over the past few years is just under 1.3 million tonnes. Of that, the company grows about 45 per cent and the farmers 55 per cent.
CARONI'S CANE/SUGAR PRODUCTION
1998: 1.056m tonnes cane/80,235 tonnes sugar (froghopper infestation in 1997)
1999: 1.255m tonnes cane/91,915 tonnes sugar
2000: 1.373m tonnes cane/114,366 tonnes sugar
2001: 1.4m tonnes cane/118,000 tonnes sugar (projected)
COMPARATIVE COST OF SUGAR PRODUCTION (US cents per pound)
Belize: 15.63; Guyana: 20.37; Barbados: 38.30; Jamaica: 39.67; St Kitts: 41.98; Trinidad: 56.40
COMPARATIVE TONNES OF SUGAR PER HECTARE
Belize: 5.23; Guyana: 5.85; Barbados: 5.86; Jamaica: 5.21; St. Kitts: 6.55; Trinidad: 2.94
GOVERNMENT SUBVENTIONS (approx):
2001: $90M (committed); $250M requested
CARONI'S MARKETS/PRICES FOR SUGAR
Market Description / Tonnes / Price/tonne (TT$)
European Union (raws) / 47,000 / $3,400 (down to $2,900-devaluation of EU$)
SPS (EU) raws / 7,500 / $2,800 (down to $2,300)
Local raws / 30,000 / $2,700
Refined sugar / 57,000 / $2,400 (weighted average)
Copyright © Raffique Shah