Clarke explains closure of Hampden factory
published: Friday | December 13, 2002
ROGER CLARKE, Minister of Agriculture, yesterday described as "unfortunate", Wednesday's statement by the All-Island Jamaica Cane Farmers' Association (AIJCFA) that Government's decision to close Hampden sugar factory in Trelawny was a "betrayal of trust."
The AIJCFA had expressed "total disagreement" with the decision, announced by Mr Clarke in the House of Representatives on Tuesday, and termed the decision "a serious betrayal of trust."
Mr. Clarke in a statement yesterday responded:
"I have seen the response of the All-Island Cane Farmers' Associa-tion to the closure of the milling operation at the Hampden Sugar Estate, published in the Thursday, December 12, 2002 edition of The Gleaner, and I have noted its contents.
"I believe that some of the comments made were unfortunate and I, therefore, wish to state the facts as they are for the public record.
"Hampden Sugar Estate has been privately owned and operated since it was built in the 1930s. The estate began to experience financial difficulties more than a decade ago, and despite Government's intervention through the Development Bank of Jamaica, with a capital injection of $185 million, the situation continued to deteriorate, to the extent that the estate went into receivership on December 21, 1999. This, however, did not halt the deterioration and Government, through the Sugar Company of Jamaica, took over the running of the estate on April 19, 2002.
"Government's decision to close the factory was informed by the following:
"Between 1997 and 2002, Hampden Estate had incurred financial losses to the tune of $458 million. Since April of this year, $100 million has been spent to keep the operation afloat. In reviewing the overall situation with sugar production in the parish of Trelawny, it became evident that it was not viable to continue manufacturing sugar at both Hampden and Long Pond. An analysis of the factory operations showed that it would require an investment of approximately $370 million to $400 million over the next three years, to make the necessary repairs to the factory, in order to bring it to minimum efficiency levels.
"The factory is in an advanced stage of deterioration, with a 90-year-old boiler, a 62-year-old clarifier, among other things. Hampden, which has the capacity to produce 15,000 tonnes of sugar per crop, and was producing to capacity in the late '70s and '80s, in the 2001/2002 crop year, produced only 5,000 tonnes of sugar. Hampden's total indebtedness was $1.663 billion, as at April of this year, when the Government took over its operations.
Estimated operational losses for the 2001/2002 crop year, have been calculated at $66 million for Hampden and $67 million for Long Pond, with the continued operation of both factories. Added to this, the Government would be obliged to pump another $100 million to put Hampden in a position to effectively process next year's cane crop. With the consolidation of the milling operations of both factories, the estimated operational losses have been calculated at a total of $44 million for both factories.
"Based on the facts, as outlined above, Government took the decision to close the sugar processing plant at Hampden, and to send the cane cultivated there to Long Pond, which is being upgraded to process all the cane produced in Trelawny.
"As far as the proposed construction of a new factory is concerned, Government is prepared to support any reasonable proposition, but it must be made clear that the Government at this time is in no position to invest in the proposed plant, or to provide a sovereign guarantee for its construction.
"The decision to rationalise the operations of the two factories in Trelawny will result in improved efficiency in the overall milling operations, based on the higher throughput to the single factory. In addition, the closure will allow for greater focus to be placed on the operations of the distillery, which is currently being upgraded to facilitate enhanced efficiency in Hampden's rum manufacturing enterprise, given that there is a ready and lucrative market to be exploited in this area.
"In making the decision to close Hampden, Government took into consideration the extra costs that farmers would incur in transporting their cane to Long Pond. Arrangements will, therefore, be put in place for the estate to absorb these costs. All the factory workers who will be displaced by the closure of the plant will receive compensation by way of redundancy payments.
"Finally, I wish to emphasise that the Government's decision to consolidate the cane milling operation at Long Pond was difficult, but necessary. We were faced with two choices: either to continue to operate both Long Pond and Hampden Estates with continuing losses of taxpayers' money; or to merge the operations to effect cost reduction and efficiency, in the shortest possible time.