Staggering Industry – Opinion by NFP Leader

Staggering’ industry

Professor Biman Prasad: The Fiji Times. Monday, November 28, 2016

“MR Deputy Speaker, one of the most remarkable stories of the last few years is the remarkable turnaround of the FSC, Fiji Sugar Corporation. Government funding to the FSC in 2011 and 2012 allowed the organisation to reduce its accumulated loss from $175 million in 2010 to $36.5m in 2011 to finally recording a profit in 2012. The FSC is now able to stand on is own two feet. Government does not need to provide it any direct funding since 2013.” — Prime Minister and Minister for Sugar Voreqe Bainimarama’s Ministerial Statement on sugar in Parliament on February 11, 2015 (Parliamentary Hansard).

Government’s devious plan

It is apparent Government’s last throw of the dice at rescuing FSC are Reform of the Sugarcane Industry Bill and Sugar Cane Growers Fund (Amendment) Bill.

The Reform Bill should be renamed subjugation of canegrowers Bill. Because this is precisely what the Bill intends to do if enacted.

Under it, the Master Award can be changed without the input of legitimate representatives of growers. Instead, those appointed to the SCGC board by Government from the three cane producers associations, two divisional commissioners, an official of the Sugar Ministry and the latest proposal to have a representative from each of the eight canegrowing districts will be consulted.

Since all are government appointees, little if any resistance is expected from them on proposed changes to the award in respect of the current formula of 70/30 in favour of growers in terms of sharing of proceeds from the sale of sugar.

All growers and their legitimate representatives have opposed the Bills.

They have conveyed this message in no uncertain terms to the Parliamentary Select Committee on Economic Affairs which is expected to report to Parliament next February.

If Government thinks making lukewarm changes to the Bill, which it proposed during its July roadshow after witnessing the vociferous opposition to the Bills, and bring growers directly under the control of Government and the FSC, converting its $173m loan into equity, or reducing growers’ share of proceeds, will result in profitability of the corporation, it is sadly mistaken.

Without instilling confidence in growers to achieve the minimum desirable target of 3.5 million tonnes of sugarcane annually and production of 350,000 tonnes of sugar, there is no way the FSC can remain a viable organisation. In other words, without canegrowers and canefarming, there is no sugar industry and no FSC.

Growers losing confidence

The total payment for the 2015 season received by growers will even erode faster the diminishing confidence of growers in terms of making a concerted effort to boost cane production on the face of rising cost of production, harvesting and delivery of cane.

The total payment for 2015 season cane was only $71.86 per tonne inclusive of the $1.38 per tonne top up to the final cane payment of 72 cents to make it $2.10 per tonne. And without this top up, the payment would have been $70.48.

More than 70 per cent of canegrowers numbering over 9000 received $4029 as net income for the 2015 season minus the average cost of production of $45 per tonne. This is almost $1400 less than $5428.80 earned annually by a worker even on the meagre minimum wage of $2.32 per hour.

The FijiFirst Government, FSC and other stakeholders in the industry who are controlled by Government have hoodwinked growers by claiming the total payment is much higher and around $76.66, have included the special payment of $4.80 in their claim.

It must be pointed out the total payment included two special payments totaling $4.80.

The first special payment of $2.80 was made on November 9, 2015 while the second special payment of $2 was made on January 15, 2016. These special payments do not and should not form part of the total payout because canegrowers have repaid $3.80 of the total amount of $4.80 with the remaining $1 to be deducted next year. This was confirmed by the PM and Minister for Sugar in a written answer to my parliamentary question (71/2016).

Canegrowers have already paid this amount in two deductions of $1.40 from the second payment in December 2015 and $2.40 from the fourth payment in May.

Performance should be scrutinised

The total payment for 2015 to growers was $9.14 less than $81 per tonne growers received for the 2014 season.

This raises the question of how effective the former executive chairman was in terms of marketing our sugar because he was solely responsible for this important task that previously was an industry effort inclusive of growers as the most important stakeholders.

Mr Khan (FSC’s Abdul Khan) was allowed to relinquish his position immediately in October, with several questions remaining unanswered about both his and the FSC’s performance and the corporation’s lack of direction during his tenure is unacceptable and against good governance in a organisation in which taxpayers have a stake through majority ownership by Government. This is clear from FSC’s 2015 annual report.

The performance of FSC’s mills, questionable projects and the one-man handling of both FSC and marketing of sugar cannot be tolerated by canegrowers any longer. The industry has now lost every fibre of transparency and accountability. This has now become intolerable. The annual report shows FSC is technically insolvent and is wholly dependent on borrowing worth $359m, guaranteed by Government and taxpayers of Fiji.

In Mr Khan, FSC had a CEO who as executive chairman did not hold the corporation’s AGM for four years until May last year. He was a board member from October 2009 until December 31, 2010. From January 1, 2011 he was FSC’s executive chairman enjoying a hefty salary, perks and privileges while FSC’s debt continued to rise astronomically.

There have been many allegations labelled against Mr Khan especially about his salary, perks and privileges. Appointments have been allegedly not based on merit. The procurement of mill equipment from India is also highly questionable because it is extremely necessary to establish whether tenders were called by FSC.

It is also very important to establish the amounts and types of equipment procured and whether all of it was solely used in the mills. And if not where is the remaining stock of the equipment?

Any shareholder in a company should be concerned, especially if it happens to be the Government, which is the largest shareholder and has pumped in several millions of dollars of taxpayer funds in loans and guarantees into FSC. FSC’s 2015 annual report states Government has lent $173m.

When announcing Mr Khan’s appointment as FSC chairman, the PM and Minister for Sugar credited him for improvements to the industry.

But once again, this Government demonstrated the appointment was to try and save the technically insolvent FSC at the expense of writing off its government loans and subjugating cane growers through the Reform of the Sugar Cane Industry and Sugar Cane Growers Fund (Amendment) Bills, which have been totally rejected by growers.

Furthermore, his recent CEO appointment was seemingly part of FSC’s strategic plan that has never been revealed to the canegrowers who are the largest and the most important stakeholders in the industry.

That is why we reiterate Mr Khan should not have been allowed to quit FSC without an independent investigation. Relinquishing his position immediately with several questions remaining unanswered about both his and the FSC’s performance and the corporation’s lack of direction during his term was unacceptable and against good governance in a organisation in which taxpayers have a stake through majority ownership by Government.

While we acknowledge the Office of the Prime Minister’s announcement to investigate Mr Khan, we still firmly believe that for the sake of accountability, transparency and good governance, we call upon the chairman of FSC to appoint an independent investigation comprising personnel who are experts in financial and forensic accounting and audit to extensively scrutinise all aspects of FSC’s operations and management practices in the past five years.

* Professor Biman Prasad is the leader of the National Federation Party. The views expressed here are his own and not of this newspaper.