24 July 2015: Fiji Economy Update: Friday, 24 July 2015 – Social & Economic Development (
Excerpts from the Presentation:
“Ladies and Gentlemen: the deteriorating state of the sugar industry is also largely linked to the problems faced by cane farmers. And the problems of the farmers remain largely unresolved. The SCGC was tinkered with and the legitimate authority usurped, spearheaded by the unlawful sacking of the SCGC Chief Executive Officer soon after the coup of 5th December 2006.”
…”But Ladies and Gentlemen, the official statistics from the i-Taukei Land Trust Board shows otherwise. The statistics show that from 1997 to 2014, 8151 cane leases have expired. A further 1373 leases will expire in the next three years until 2017 bringing the total to 9524. Only 5105 or 53.6% of leases will have been renewed.
Past governments and politics have been blamed for the land lease problem. But between 2007 and 2014, when there was no democracy, 2899 cane leases expired. Out of this 1722 cane leases or 59% have been renewed. Between 1997 and 2006, 5252 cane leases expired. 3001 cane leases or over 57% leases were renewed. And under this government’s stewardship from 2007 to 2018, 4272 leases will expire until 2017. And from 2007 until 2017, 2104 leases will be renewed. This is only 49.25% rate of renewal.”
…”Finally, Ladies and Gentlemen: Last week during the Fiji Economy Update at the USP, the Deputy Governor or the Reserve Bank of Fiji (Ariff Ali) said the sugar industry was no longer a significant part of the economy and that the country could not rely on it anymore. This was reported by the Fiji Times on 16th July.
This is an insult to cane farmers. Even the Prime Minister has stated that the sugar industry is extremely important and that 200,000 people, which is over 20% of our population is directly or indirectly dependent on it. If the country’s Treasury holds such a myopic view of the industry, then God help the farmers.”
The Chair, Fellow Panelists, Ladies and Gentlemen: –
There is little doubt that the sugar industry is at the crossroads. The decisions that the stakeholders and Government will make in the next two years will have a profound impact on the ability of the industry to survive beyond 30th September 2017 following the expiry of the duty-free access of our sugar to the European Union.
Already we are struggling. For more than 100 years the sugar industry has been the mainstay of our economy. The industry weathered many storms and survived. These included natural disasters like hurricanes, cyclones, droughts and even three military coups in 1987 and 2000.
But the industry is in a downward spiral, accelerated by the 4th military coup of 5th December 2006. There is no denying of this sad but unmistakable fact. And the sugarcane and sugar production plus the decline in the number of cane growers proves this decline.
Ladies and Gentlemen: the reality, that is the decline of the industry, is reflected by the following statistics: –
Ladies and Gentlemen: the number of active growers have fallen by more than 5,000 since the coup until 2013. Cane production fell by 1.618 million tonnes from 2006. Sugar production fell by 130,140 tonnes. This is the unmistakable reality.
The extent to which the cane and sugar production has fallen in the last 8 years is best shown by the crushing record of the country’s largest sugar mill at Lautoka. In 1979, Lautoka Mill alone crushed one-million-748 thousand-120 tonnes of cane out of a total of 4.058 million tonnes of cane. In 2012 and 2013, all four mills crushed a total 1.546 million and 1.608 million tonnes respectively. This is well below the 1.748 million crushed by Lautoka mill 36 years ago.
Ladies and Gentlemen: the deteriorating state of the sugar industry is also largely linked to the problems faced by cane farmers. And the problems of the farmers remain largely unresolved. The SCGC was tinkered with and the legitimate authority usurped, spearheaded by the unlawful sacking of the SCGC Chief Executive Officer soon after the coup of 5th December 2006.
Almost three years later in 2009, the SCGC was scrapped, which meant that the last remaining democratically elected institution comprising of elected representatives of the cane growers was abolished.
Farmers, however still continue to pay levy to the SCGC through deduction from their proceeds to fund its operational expenditure. And this is illegal because according to the Sugar Industry Act, the Budget of SCGC has to be approved by the full Council and the Board of Directors, submitted to the Tribunal for certification and then to FSC for deduction of levy. Therefore for the last 6 years farmers have been forced to pay an average of $550,000 as levy each year unlawfully.
The SCGC now is basically like a toothless tiger, unable to effectively raise the concerns of the farmers, let alone find meaningful solutions to their common problems. A very recent example is the so-called consultation being carried out for the review of the Sugar Master Award, which is also an illegal process as the Sugar Industry Act – Sections 64 to 69 state what process to adopt and that too following the agreement of all stakeholders. But we do not have a legitimate Growers Council.
We have the SCGC CEO and the Industrial Commissioner in the Sugar Industry Tribunal demonstrating their bias towards the process instead of being independent. Both have been sitting on the front table listening to submissions this week. The Industrial Commissioner should completely stay out. And the SCGC CEO, if he wants to be present at the hearings, sit with farmers and not with the Consultant who by the way is a sociologist and has little or no experience in sugar industry matters. This is a joke and has further eroded the confidence of farmers.
Some of the basic problems faced by cane farmers are: –
(i) Land tenure. Failure to renew majority of expiring land leases has been a contributing factor to declining cane production. This is a fact contrary to what Government has been saying. As of November last year, Government claimed “6284 land leases had been renewed under Bainimarama leadership”, as stated by the late Permanent Secretary for Sugar Manasa Vaniqi. He said on 4th November 2014 that reforms undertaken by the Bainimarama government in the sugar industry had resulted in the renewal of 6284 sugarcane land leases.
But Ladies and Gentlemen, the official statistics from the i-Taukei Land Trust Board shows otherwise. The statistics show that from 1997 to 2014 8151 cane leases have expired. A further 1373 leases will expire in the next three years until 2017 bringing the total to 9524. Only 5105 or 53.6% of leases will have been renewed.
Past governments and politics have been blamed for the land lease problem. But between 2007 and 2014, when there was no democracy, 2899 cane leases expired. Out of this 1722 cane leases or 59% have been renewed. Between 1997 and 2006, 5252 cane leases expired. 3001 cane leases or over 57% leases were renewed. And under this government’s stewardship from 2007 to 2018, 4272 leases will expire until 2017. And from 2007 until 2017, 2104 leases will be renewed. This is only 49.25% rate of renewal.
(ii) Rising cost of cane production, harvesting and delivery. The average cost of cane production, harvesting and delivery was $45.00 per tonne of cane.
The cost includes hiring of farm labourers and cane cutters during harvesting season, purchase of a 50kg bag of fertilizer at a price of $31.50, weedicides, land preparation for new crop such as ploughing and harrowing, and delivery of cane by lorry due to the state of decay of the rail system. Cane farming has become a non-profitable business for at least 70% of farmers who produce only 30% of the total cane crop while 30% of farmers produce 70% of the crop. For 2013 season farmers received a little less than $89 per tonne. If one removes the cost of production, harvesting and delivery of cane of $45, the nett income that farmers get from a tonne of cane is $44.
70 percent of farmers produce an average of 200 tonnes of cane. No doubt this has fallen to 150 tonnes last year. A little over 13,000 farmers are active growers. That leaves 9200 farmers in this category of average producers.
Their net income at $44 by 200 tonnes is $8800 in a season. And farmers receive this money over a period of 14 months. This is well below the tax threshold of $15,000. No other commercial business can survive on this. Since 2009, Government has pumped in $340 million into the Fiji Sugar Corporation through direct assistance and guarantees. And since 2009, cane farmers have received a meagre $47 million through Government subsidies on fertilizer, cane planting and repair of cane access roads.
In May the audited accounts and annual reports of he FSC were released after a lapse of 4 years. It was revealed that that FSC’s liabilities exceed the Corporation’s assets by $225.4 million. Yet in Parliament on 21st May, the Minister for Finance while seeking parliamentary approval for the extension of a government guarantee of $120 million for FSC said FSC was doing remarkably well and its shares were valued at 10 cents a share. This was disputed by the South Pacific Stock Exchange based in Suva which said FSC was de-listed in 2009 because it was technically insolvent. Therefore we ask, who is telling the truth?
Talking of honesty, transparency and accountability, Government has refused to allow the Opposition to question the salaries being paid to FSC Executive Chairman and senior management saying FSC is a commercial entity. Government owns 68% of shares in FSC. $340 million of taxpayers’ funds has been invested in FSC by this Government either as direct assistance or guarantees. The people of Fiji are therefore entitled to know how much those who manage FSC are paid.
Ladies and Gentlemen; The reality is that the 2006 coup has put the in dustry in a coma. The European Union had earmarked a total of $265 million in planned assistance between 2007 and 2013 to help Fiji adapt to globalization and to lower prices of sugar exports to the EU due to the total withdrawal of preferential prices by 2009.
This grant was lost. It was aimed at economic diversification in the sugar sector and to provide assistance for social impact mitigation measures for displaced farmers who could not meet their increased cane production targets. If the coup hadn’t destroyed democracy, Fiji could have now been producing around 4 million tonnes of cane and manufacturing around 400,000 tonnes of sugar. The sugar industry would have been salvaged.
Fiji and the cane farmers are poorer for the loss of the EU grant.
If that grant is lost, Government needs to invest between $250 -$300 million in the industry, specially targeted at farmers to revitalize the confidence of cane farmers. There is no other way.
The Government is urging farmers to plant more cane but this will not become a reality unless Government injects substantial funding towards our farmers by way of paying premiums to TLTB for land lease renewals or acquisition of new leases. Furthermore, Government must announce in this year’s Budget a 50% subsidy for farmers for the purchase of weedicides and farm inputs. And most importantly, farmers need financial security and a minimum guaranteed price of $85 per tonne would be an ideal way to offer them this security.
This is because the imminent reduction in the price of sugar cane is a hammer-blow to cane growers.
Worst still the fact that the price of sugar on the world market has reduced by more than 30%, according to the Fiji Sugar Corporation Executive Chairman, means the price paid to growers in the 2015 season and beyond will also plummet drastically, making cane farming totally unprofitable and pushing farmers into debt in perpetuity.
However the Prime Minister and Minister for Sugar has shot down this reality by saying, we wanted to politicize the industry and that reforms implemented by his government before the elections, had revived the industry.
The Prime Minister has also rejected calls for a bi-partisan approach to find solutions to revive the industry through a parliamentary select committee on sugar. Such a committee has always been in existence throughout our history of parliamentary democracy but is sorely absent this time around.
The revelation that farmers will suffer financially from this year clearly shows that Government’s reforms, which it arbitrarily imposed is not working. And given such a scenario, it is only prudent that a collective approach is made to find solutions before it is too late.
The establishment of a parliamentary select committee on sugar and the convening of the SCGC elections, which was first cancelled by the interim Cabinet in 2008 based on a recommendation of his then sugar minister, would be an ideal start for the instilling of confidence in cane farmers.
Also the Sugar Ministry has been a separate portfolio in all governments since Independence. But here we see that the Prime Minister is responsible for Sugar. But at the same time the PM’s devotion of time towards the industry is limited because of his hectic schedule and overseas travel. For Government to do justice, Sugar must have a separate ministry.
Finally, Ladies and Gentlemen: Last week during the Fiji Economy Update at the USP, the Deputy Governor or the Reserve Bank of Fiji (Ariff Ali) said the sugar industry was no longer a significant part of the economy and that the country could not rely on it anymore. This was reported by the Fiji Times on 16th July.
This is an insult to cane farmers. Even the Prime Minister has stated that the sugar industry is extremely important and that 200,000 people, which is over 20% of our population is directly or indirectly dependent on it. If the country’s Treasury holds such a myopic view of the industry, then God help the farmers.
A feeling of disenchantment is undoubtedly being felt by the farmers, their families, the cane cutters, lorry operators, lorry drivers, labourers and farm hands. The scandalous performance of the mills is the biggest disincentive for a segment of Fiji’s population who have sacrificed their livelihood and triumphant days to ensure the sugar industry remains the lifeblood of Fiji’s economy for over a 100 years.
And for the last 9 years, they have continued to faithfully perform their duties to the industry and the nation despite the tumultuous times.
They deserve honest answers and all stakeholders in the sugar industry owe it to them to be transparent and accountable.