Fiji Parliament Provides $97 Million Loan Guaranty To Fiji Sugar Corporation

FSC total debt to rise to $285 million

By Nasik Swami

SUVA, Fiji (Fiji Times, May 26, 2017) – Parliament approved an additional $202 million loan guarantee for the profit-starved Fiji Sugar Corporation (FSC) — a lifeline to resurrect the sugar industry but increase the corporation's debts to $595m [US$285 mllion].

Minister for Economy Aiyaz Sayed-Khaiyum filed a motion in Parliament to increase the existing guarantee of $120m [US$57 million] to $322m [US$154] explaining the dire needs of the industry and he was wholly supported.

Government guaranteed loans or its explicit liabilities stood at $761.5m [US$364 million] at the end of January 31 this year, with this additional guarantee it will be $963.5m [US$461 million].

"The sugarcane industry is quite a subject matter of interest, in particular as we get closer to elections," Mr Sayed-Khaiyum said yesterday.

"FSC and the entire sugarcane industry are at a critical crossroad, requiring some decisive actions — it cannot be business as usual."

Mr Sayed-Khaiyum said FSC needed to implement a number of capital projects which were crucial to, and would generate an immediate positive impact on the industry turning around.

He said the projects included:

  • agricultural mechanisation and cane development designed to increase cane production at lower cost;
  • upgrade of the existing rail infrastructure to increase delivery of cane to mills by rail in a cost effective manner as opposed to being heavily dependent on cartage by trucks; and
  • a phased upgrade of the three sugar mills at Lautoka, Rarawai and Labasa to unlock production capacity and improve sugar recoveries.

Mr Sayed-Khaiyum told Parliament that the projects could not be undertaken without the existing government guarantee of $120m [US$57 million] which would expire on 31 May, 2020.

He said the capital projects would be phased over a period of about three to four years.

"Borrowing as at 30 April, 2017 against this guarantee stood at $150.1m [US$71.8 million], in other words, approximately $5m [US$2.4 million] or $4.9m [US$2.3 million] is underutilised.

"The projected debt of FSC as of 31 May, 2017 is $393m [US$188 million], of which $313m (79 per cent) [US$150 million] is local, and $80m (21 per cent) [US$72 millin]is external."

He said the major shares of the local borrowing were from government ($174m) [US$83 million], ANZ ($88m) [US$42 million] and the Fiji Development Bank ($13m) [US$6.2 million].

"It's critical to note that the decline in the sugar industry is primarily attributed to a number of structural factors facing the entire sugarcane industry.

"The large number of land leases not renewed led to significant reduction in the number of active cane growers and loss of confidence."

He said the number of cane farmers declined from over 20,000 in 1997 to 12,000 in 2014.

"Consequently, the average area in the cane declined from over 70,000 hectares to around 41,000 hectares in 2014. As a result of this, sugar production decreased."

Mr Sayed-Khaiyum also informed Parliament that FSCs financial performance had been in a downward trajectory since 2000.

"It is government's responsibility to inject these funds, we are not directly injecting funds, yes, we make direct budgetary support to the FSC in the past number of years.

"This time around, there is ability to be able to provide a guarantee to FSC to be able to go out to the market and to be able to borrow at competitive rates.

"We have some overseas lenders, including the Exim Bank of India that is quite keen to participate."

He also outlined the FSC expected a slight turnaround for the 2018 financial year with an anticipated crop of 2.04m tonnes and sugar makeup of about 240,000 tonnes.

Supporting the motion, National Federation Party (NFP) leader, Professor Biman Prasad cautioned the government that over the last 10 years, FSCs financial performance and production had gone down.

Prof Prasad said with production and profitability being correlated, it was important that government heard the plights of the cane farmers.

"We need this industry, we need to look at this industry as an important industry. We need to bring the farmers back in order," he said.

Prof Prasad said if there were no farmers tomorrow, there was no point upgrading the FSC.

There have been a number of multimillion dollar reforms of the FSC and the industry in the last few years by governments and these have produced sweet and sour results.

Fiji Times Online.
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