#BTColumn – Where is the Privatization Programme for the Sugar Industry?

Disclaimer: The views and opinions expressed by the author(s) do not represent the official position of Barbados TODAY.

By Anthony Wood

As a former sugar-dominated agrarian economy, Barbados has benefited tremendously from the sugar industry. As recently as the 1950s, the country produced over 200, 000 tonnes of sugar annually, which was sold as bulk sugar predominately to Tate and Lyle in the United Kingdom. At that time, there were multiple sugar factories in operation and vast tracts of plantation and individually owned lands were used for sugar cane cultivation.

Following the prescription for the development of Caribbean economies recommended by Nobel Laureate in Economics, the late St. Lucian distinguished Professor of Economics Sir Arthur Lewis, there was a shift in economic focus from agriculture to other sectors. Professor Lewis, in his classic paper in the early 1950s entitled ”Economic Development with Unlimited Supplies of Labour,” explained that the absorptive capacity of labour by the agricultural sector and the marginal returns to labour in that sector were declining. Hence, new areas of economic activity with higher returns to labour were needed to absorb labour and to foster the development of Caribbean economies.

In the case of Barbados, there was the emergence of the manufacturing and tourism sectors followed by the International Business sector. With these new sectors gaining prominence, there was a significant decline in agriculture’s contribution to the Barbadian economy in terms of employment, output, and foreign exchange generation.

With regard to the sugar industry, there has been a steep decline in sugar production over the last 70 years. Production levels declined from over 200, 000 tonnes annually in the 1950s to around 40, 000 tonnes annually in the 1990s and 5, 000 tonnes in 2022. The sugar cane harvest this year is expected to produce a paltry 5,229 tonnes of sugar.

The material changes in the sugar industry over the last 70 years include rationalization of the factory operations with a single factory in operation today, and removal of significant acreage of land from sugar cane cultivation. Another important development was declining revenues from the sale of sugar with the introduction of the Everything but Arms initiative by the World Trade Organization (WTO) which ended the preferential price arrangement in the Lomé Convention enjoyed by African, Caribbean and Pacific (ACP) States supplying sugar to the European Community.

Notwithstanding the slender contribution of the sugar industry to the economy, successive governments have continued to provide substantial financial resources to keep the industry afloat. This considerable financial assistance has been argued on the following grounds: agronomic benefits, multifunctional character of the sugar industry, generation of foreign exchange, employment retention, and molasses production for the rum industry.

However, the time has long passed for the Government to seriously reconsider its continued involvement in the sugar industry. Despite the recent statements of exuberance in some circles about producing 5, 229 tonnes of sugar in 2023 and “penetrating” the United States of America market with 2, 500 tonnes of packaged sugar for a return of $4.2 million, the sugar industry remains a major financial burden on the taxpayers. 

No financially conscious citizen should be satisfied that the Government in a financially constrained environment and pursuing another economic programme with the International Monetary Fund (IMF), should be providing annual budget support in excess of $40 million to the Barbados Agricultural Management Company (BAMC) for an industry making less than $10 million annually from the sale of sugar. It is simply an inefficient and imprudent use of limited financial resources.

Against this reality, Barbadians welcomed the announcement by Prime Minister Mia Mottley in her mini-budget in July 2018 that the sugar industry would transition to a new private sector management and financing arrangement. Given the importance of achieving such a highly desired change in order to reduce the sugar industry’s heavy reliance on public funds, Barbadians were hoping that the privatization model for the sugar industry would have been completed by the end of the financial year March 31, 2019 (or soon thereafter).

However, as we approach the end of another financial year (March 31, 2023), the promised privatization of the sugar industry has not materialized. Barbadians are left to speculate about the reasons for the lengthy delay and why an update on the privatization plan for the sugar industry was not provided by the representative of the Ministry of Agriculture, Food and Nutrition Security during the debate on the Estimates for the 2023-2024 financial year.

It is known that a consultant was engaged by BAMC in 2019 to help with preparing a privatization framework for the sugar industry. However, despite this effort and the periodic announcements about the privatization of the industry by Prime Minister Mottley and the Minister of Agriculture, Food and Nutrition Security, Mr. Indar Weir, the question must be asked: “Where is the privatization programme for the sugar industry?”

Anthony Wood is a senior economist, former lecturer in Economics, Banking and Finance at the University of the West Indies, Cave Hill Campus. He is also a former Cabinet minister. 

This column was offered as a Letter to the Editor.