The Government of Jamaica (GOJ) has overseen the divestment of several government assets which are currently underperforming. These include Wallenford Coffee Company, most of the sugar estates, some of which are now shuttered, assets acquired by bauxite company JISCO, and some assets owned by another bauxite entity, Rusal.

The main privatisation arm of the GOJ has its offices at the Development Bank of Jamaica (DBJ) where guidance is offered in divestment processes.

The DBJ, in a recent assessment of divested assets which continue to under perform, told the Jamaica Observer that it fulfilled its obligations in choosing buyers in line with government guidelines.

In a response sent to the Business Observer the DBJ commented: “It is important to understand how the Government makes decisions to divest assets and the process employed to undertake the same.”

The State agency said that the Government of Jamaica’s Policy Framework and Procedure Manual for Privatisation of Government Assets October, 2012 (Revised 2017) guides the underlying principles of the privatisation programme. According to the DBJ, “Note that the GOJ will seek to divest/privatise an asset due to a number of reasons, which may include:

1) The asset does not form part of the core service obligations of the Government;

2) The asset is not currently being used for the provision of social goods and services but whose value can be used to enable the Government to fulfil core service obligations;

3) The asset can be more effectively developed and operated with private capital and under private management;

4) Where the asset constitutes an unnecessary burden on taxpayers;

5) The asset is needed for provision of public services, but can be more efficiently operated by private firms to supply services under contract to government

The DBJ outlined, “When assets are prepared for divestment, the relevant data gathering on the asset is conducted by the Government which informs its decision on the structure of the sale. Once the opportunity is advertised and the tender process is initiated, potential investors in turn independently assess the viability of the investment opportunity based on the available information and will conduct their due diligence on the asset/operation (which will invariably include an assessment of the market/sector). They then make an informed investment decision to bid to acquire the asset/operation.”

The State agency said that this privatisation process was employed in both the Wallenford Coffee Company and sugar industry assets divestments. Most of the sugar entities are now comprised of rusting machinery and shuttered operations.

Liabilities discharged

The DBJ said, “It is important to note that prior to divestment Wallenford Coffee Company and the sugar estates were under performing, and they were experiencing significant losses which created fiscal liabilities for the GOJ each year. In line with the objectives noted above, the decision to sell was made by the Government.

“In terms of the Wallenford Coffee Company and sugar industry asset divestments, we are of the view that the Government’s decision to divest and the divestment process undertaken were in alignment with government policy and the objectives of the divestment.”

In other words, even though the coffee sector and sugar continue to underperform and are far from recovery, the Government has been spared growing liabilities in each sector.

As to challenges noted in the bauxite sector the DBJ told the Business Observer that it was not involved in these divestment activities relating to JISCO and did not lead on the Windalco sale to UC Rusal but played a facilitatory/supporting role with Jamaica Bauxite Mining Limited.

Noting the continued challenges facing coffee and in particular the Government’s former major produce, Wallenford, the DBJ’s divestment unit noted, “There can be many factors that can impact the performance of a company and in that regard we are unable to comment.”

The DBJ suggested that the Ministry of Agriculture and Fisheries and their relevant agencies/authorities which have responsibility for the sugar and coffee industries, “would be better placed to comment on any systemic factors which would have possibly impacted the viability of the coffee and sugar industries post-privatisation and contributed to under performance”.