The Fiji Sugar Industry: A Brief History And Overview Of .
The Fiji Sugar Industry : a brief historyand overview of its structure andoperationsRasheed A. Ali and Jai P. NarayanRole of sugar in the Fiji economySugar became the principal export of Fiji fromthe early 1880s. Over the years, the sugar industry has constituted the prime force in thedevelopment of the economy. Despite efforts todiversify the economy, the predominant role ofsugar continues today. Sugar is Fiji's largestsingle export and over the years 1983-87 accounted for between 58 per cent and 65 per centof Fiji's domestic export earnings. By comparison, the second largest export product,gold, accounted for between 10 per cent and 1 6per cent of export earnings.Sugar plays a major role in terms of employment. Over 20 per cent of the economicallyactive population of Fiji is directly employed bythe sugar industry. In addition the industryhas strong multiplier effects. On the basis of1977 inputJoutput tables the sugar multiplieris estimated to be 2.04 at factor cost and 2.23at market prices. This compares favourablywith 1.41 and 1.58 respectively for the touristindustry'. The industry's importance is alsohighlighted by the fact that its import leakageshave been extremely low.Throughout its history, the industry facednumerous mfficulties and challenges that effectively tested its ability to survive. Thesewere in the form of labour shortages in itsearly history, production fluctuations and low-Table 1 Export contribution sugar. molasses and goldReceipts (F 346559625859101011161526312626265 year6891491143601327YearSource: Bureau of Statistics, Current Economics Statistics, Suva.1 Calculations by the Economic Analysis Unit, Ministry of Finance.Contribution (%)SugarGoldandMolassesOthers
14PACIFIC ECONOMIC BULLEIW VOLUME 4 NUMBER zFiji1774r 780179"E18041790 s at various times, and, most recently in1987, political difficulties in the country. Eacht h r e a t e n i n g s i t u a t i o n emphasised t h eresilience and survival characteristics of theindustry.History of sugar in FijiSugar cane first became an important crop inFiji during the 1870s, and, over the years, thirty-four small sugar mills were establishedthroughout the country.With one exception (Nadroga), all the earlydevelopments in sugar took place in the wetareas of Fiji near Suva as it was believed thatwet areas would give higher yields. The caneyield was there but the sugar content in thecane was very poor. As a result all the mills inthe wet zone ceased operations.Wakaya Sugar was first produced in Fiji in1862 on the island of Wakaya. The venture50100kmfailed because Wakaya is a small island andnot suited to growing sugar cane.Suva A small mill was built in the centre ofSuva i n 1872 but soon closed down. Anothermill subsequently set up in Suva also closeddown after a short period of operation. Sugarwas first exported from Suva on 7 November1873.Nausori At least ten mills were establishedin the Rewa Valley. The Colonial Sugar Refining Company (CSR), that was already operating raw sugar mills successfully in Queenslandand New South Wales, became interested inFiji in 1880, and, at the invitation of the Fijigovernment, erected Fiji's first large-scale millat Nausori i n 1882.The mill commenced crushing on 1 7 July1882. In 1884, the Nausori mill was the firstplace in Fiji to be lit by electricity. This millbecame uneconomic to operate mainly because
SUGAR INDUSTRYof the very low sugar content in the cane, andwas closed in 1959.R a r a w a i CSR put up its second mill, inRarawai, in 1886. Railway lines were constructed in 1907 to Tavua and to Lautoka in1910.Vanua Levu Six mills were erected between Labasa and Savu Savu. The most important was the Labasa mill, that began crushingin 1894.Lautoka This mill was built by CSR andstarted crushing in 1903. At the present time,i t is the largest mill in Fiji. The railway wasextended to Nadi in 1905 and to Sigatoka by1912. The Sigatoka bridge over which thetramline passes was built in 1914.Rakiraki The Penang mill was built in1880/81 by the Chalmers brothers and waslater acquired by the Melbourne Trust Company. CSR bought the mill in 1926.After the closure of Nausori mill in 1959,CSR was left with only four sugar mills atLautoka, Rarawai, Labasa and Penang, andthese continue in operation today.In 1962, CSR established its subsidiary,South Pacific Sugar Mills Limited (SPSM) toown and operate its milling business in Fiji. In1964, the SPSM became a public company andalthough shares were offered for sale to thepublic, only 2 per cent of issued capital wasbought by Fiji residents. The Fiji Governmentnow owns 68 per cent of the shares.Smallholder system of f a r m i n gIn the mid 1870s the industry was faced witha n acute shortage of plantation labour as aresult of the decline in the supply of manpowerfrom other Pacific islands. Sir Arthur Gordon,the Governor of the colony at the time, wasdetermined not to interfere with the lifestyle ofindigenous Fijians or their land, but he had tofind a solution to ensure the viability of theindustry. The Governor decided to import Indian labour under a n indentured laboursystem. The arrangement was that they wouldcome under contract for a n initial period of 5years, at the end of which they would be entitled to full passage back to India or given theopportunity to stay in Fiji.15The first Indians arrived in 1879. The importation of Indian labour stopped in 1916 andthe indenture system was discontinued in1920 because of the continuing opposition to itfrom the Indian authorities and from pressuregroups in Fiji. Following the termination of theindenture system, the industry was againfaced with a serious shortage of labour.Under this extreme threat, CSR introduceda system of contract growing of cane by smalltenant farmers. Under this scheme, tenantswere given small parcels of land, averaging 11acres, for the production of cane and othersubsistence crops. The smallholder systemworked extremely well and remains the basison which the agricultural sector of the industryis organized. This system relies on the utilization of growers’ own and family labour. Thisenables cash outflows to be kept to a minimumand growers have the opportunity to improvetheir disposable income by planting other cashor subsistence crops. While there is a movetowards greater employment of hired labour,the small farm system continues to provide aconsiderable buffer during periods of lowproduction and low sugar prices. The followingstatement from the Fiji Employment andDevelopment Mission Report (1984) highlightsthe importance of the small farm system:Not only does it increase the general impactof the industry, by generating strongermultiplier effects, i t creates a structurewhich is more flexible than most large scalefarming systems because of its ability tosubstitute family labour for hired and toswitch gradually into other crops, or eveninto subsistence production, if the price fallsto unmanageable levelsa.C h a n g e of o w n e r s h i pThe decision of CSR to withdraw from Fiji, in1973, after a period of involvement in the industry for almost 100 years, was one of themost important developments in the history ofthe industry. The decision followed disagreement on the terms of a new sugar canecontract.The sugar cane contract in force from 1960was to expire in 1970. When negotiations onthe terms of a new contract failed, the matter2 Fiji Employment and Deuelopment Mission Report, Final Report to the Government offiji, Parliamentary Paper N0.66,1984.
was referred to arbitration. Lord Denning wasappointed arbitrator. The major matter in disp u t e was t h e formula for division of t h eproceeds between the miller and the growers.The growers had, over the years, disputed theshare of the proceeds accruing to them. LordDenning, after a lengthy arbitration, decidedthat the growers would receive 65 per cent ofthe sugar and molasses proceeds with a minimum price of F 7.75 per tonne, and the millerwould receive 35 per cent, or less. This was amajor victory for the growers. They saw theaward as redressing a longstanding grievance.On the other hand, CSR was dissatisfied withthe award and went to great lengths to informthe public that Lord Denning had based hisdecision on incorrect information. They madeit clear t h a t they could not see profitableoperations on the basis of the sharing formulaawarded by Lord Denning. It was clear thatCSR would not continue i n Fiji.The government of newly independent Fiji(independent since 1970) was aware of thecritical implications of CSR’s withdrawal andurged CSR to give the contract a trial periodand then seek a review, if necessary. However,CSR announced that it would continue operations only until 31 March 1973, for three yearsof the contract term.The government, after considering how bestto handle discontinuation of milling operationsby CSR, decided that Fiji should purchase theCSR shares in SPSM. Following negotiationswith CSR, a Share Purchase Agreement and aService Agreement were finalized. The SharePurchase Agreement contained the terms ofsale and payment and the Service Agreementwas to ensure that there would be an orderlyhandover of operations. The Service Agreement also provided for CSR to continue tomarket Fiji sugar and provide engineering andtechnical services for a negotiated time period.The first day of April 1973 marked the end ofCSR’s operations i n Fiji and the takeover ofmilling operations by the Fiji Sugar Corporation Limited (FSC), a public company established by the government to take charge ofsugar milling. “he government is the majorityshareholder in the Corporation, owning 68 percent of the shares. The remaining shares areheld by organizations and individuals in Fiji.The sugar industry structureThere were no changes to the sugar industrystructure when the FSC took over millingoperations from CSR and for many years thereafter. The major existing sugar industryinstitutions were the Independent Chairman’sOffice, a Sugar Board and a Sugar AdvisoryCouncil. Deliberations on industry matters anddecisions rested with these three institutions.However, the growers were persistent in theirdemands that the industry structure should bechanged to give them a greater role i n industrydecisions. These demands finally led to a majorrestructuring of the sugar industry. The newstructure was given legal status by an Act ofParliament i n 1984.The new institutions established under thechanged structure were: the Sugar Commission of Fiji, the Sugar Cane Growers Council,the Mill Area Committees and the Sugar Industry Tribunal.The Sugar Commission of Fiji is the bodyresponsible for the overall coordination of theactivities in the industry. Growers, the FSC,the government and sugar industry unions arerepresented in this body that has a total membership of fifteen. The expenses of this institution are funded from sugar industry proceeds.The Sugar Cane Growers Council was established to represent the cane growers and isfunded by levies imposed on the growers. Ithas a total membership of 111.The Mill Area Committees have been set upto facilitate resolution of operational problemsat the mill level on such matters as harvesting,transport and allocation of cane supply quotas.There is a committee for each mill area and i thas representatives of cane growers, the FSC,the government, and industry unions. The expenses of the Mill Area Committees are fundedfrom sugar industry proceeds.The Sugar Industry Wbunal has wide ranging powers including the determination of disputes in the industry and the preparation of aMaster Award to replace the existing cane contract. Its expenses are funded by the government.The structure of the FSC was not altered inany way i n t h e restructuring exercise. Inreality, however, the changes were designed tocurb t h e FSC’s influence a n d role i n themanagement of industry matters.Sugar cane contractThe relationship between the FSC, the millers,and the cane growers is governed by a sugarcane contract - referred to as a Contract ofGeneral Application. While each farmer has a
FIJI SUGAR INDUSTRYseparate contract with the FSC, the terms ofthe contracts are identical. The contract includes provisions covering the sale andpurchase of cane, harvesting and delivery,burnt cane, crushing operations, advances,storage, marketing and sale of sugar anddivision of proceeds. The contract sets out thebasis for determining the harvest quota foreach farm. The harvest quota is the amount ofcane that will be bought each year from thefarm by the FSC. This regulation of the quantity of cane to be purchased is based on theyield of sugar from cane, milling capacity andmarket commitments. In recent years, harvestquotas have not been imposed as cane andsugar production have not exceeded the limitsof milling capacity and available market outl e t s . The contract also contains penalprovisions for burnt cane supplied to the millsto discourage burning of cane. The sections ondelivery and transport, inter alia, spell out theFSC’s responsibility for the provision of railtransport and all related facilities. The clauseon advances regulates the Corporation’s obligations to make interest free advances to growersfor cost of seed cane required for planting, purchase of fertilizer and harvesting and deliverycosts.Table 2 Distribution of proceeds of ougar males (96)Total sugar producedFSC‘sshareGrowers’shareUp to 325,000 tonnes70.0For every tonne over325,000 up to 360,00072.6For every tonne over 350,000 76.0 where, in order to encourage the growing anddelivery of high quality cane, payments togrowers are based on sugar content3. In thelast three seasons (1986-88) the cane price hasranged from 36 per tonne to 52 per tonne.The Corporation receives and manages theproceeds of sugar and molasses and makespayments to growers at the times specified inthe contract.As the price of cane is not known until allthe season’s sugar has been sold and proceedsreceived, the FSC is required to announce aforecast price per tonne of cane. The forecastprice is based on a number of variables including estimates of cane and sugar production,prices at which sugar will be sold, freight andexchange rates. Payments to growers are paidin four instalments as proceeds are received.The terms of the cane contract, in particularthe formula for division of proceeds, have always been a major bone of contention betweenmillers and growers. Under the provisions ofthe Sugar Industry Act (1984) the cane contract will be replaced by a Master Award, as t a n d a r d document t h a t will govern themutual rights and obligations of cane growersand the FSC. This document, unlike the canecontract, will have a continuing life but withprovisions for review of the terms and conditions if so required. The Master Award is currently being formulated by the Sugar IndustryTribunal and will come into force in the 1990season. Section 64(3) of the Sugar IndustryAct states:30 .O27.625.0Source:The Fiji Sugar Corporation Limited 17 The contract s e t s out the formula fordivision of the total receipts from the sale ofsugar between the FSC and the growers (Table2). The price per tonne of cane payable to eachgrower is derived by dividing the total growers’share of proceeds by the total tonnage of canesupplied by the grower in the season. Paymentto individual growers is based on tonnes ofcane delivered to the mill. This is differentfrom the practice in many other countries,3 The penalty for burnt cane provides some quality incentive.When made, the Master Award shall be finaland conclusive, shall not be challenged,appealed against, reviewed, quashed orcalled into question in any court, and shallnot be subject to prohibition, mandamus orinjunction in any Court.FarmingThere are over 22,000 growers supplying caneto the four sugar mills. The average holding isbetween 4 and 5 hectares. Currently, the totalarea contracted for cane production is 94,000hectares, of which about 70,000 hectares areharvested in any one season. The industry hasbeen expanding.
18PACIFIC ECONOMIC BULLElTN VOLUME 4 NUMBER zIndians have traditionally dominated caneproduction b u t a n increasing number ofFijians have entered the industry since theFSC was established.Harvesting is done manually and because ofits probable effects on employment of a largesector of Fiji's workforce, mechanical harvesting is not likely to be considered in the nearfuture. Cultivation work is slowly beingmechanized. Animal power, used since the industry started, is still widely used.The declining trend i n production was one ofthe major areas of concern to the FSC when ittook control of milling operations. Caneproduction had declined from 2.46 million tonnes in 1973 to 2.08 million tonnes in 1974 andcontinued at this low level in the early years ofthe FSC. Following the Denning award, CSRhad not placed much emphasis on increasingproduction. The announcement of C S R sdecision to withdraw from Fiji also led to feelings of anxiety and uncertainty regarding thefuture of the sugar industry. Rundown offarms, general neglect of cultivation practices,inadequate and untimely fertilizer applicationwere clearly noticeable.The Corporation took on the challenge andcommitted itself to reversing the trend ofdeclining production. Attention was given, inthe first instance, to issuing new contracts foravailable land within the existing cane producing areas. This was the most desirable immediate approach, as it involved minimum cost. Itsoon became apparent that i t was necessary tobring in a very large area of new land undercane, if the required increase in crop was to beobtained.Although several areas were identified, thelargest area of recent development has beenthe 'Seaqaqa Cane Development Scheme'.Seaqaqa, although having third class soil wasidentified as the only remaining large area ofland climatically suited for cane cultivationand within reasonable distance of a sugar mill."he objective was to settle some 800 growers,50 per cent Fijian and 50 per cent Indian, toproduce 200,000 tonnes of cane per season."he Seaqaqa settlement area comprises 16,200hectares of land on the Seaqaqa plateau ofMacuata Province, 40 km west of Labasa between the Dreketi River and the coast ofVanua Levu. A considerable a m o u n t ofdevelopment work was needed to make i tsuitable for cane cultivation as the area wasunder natural vegetation and infrastructurewas virtually non existent. At the time of theinception of t h e S e a q a q a DevelopmentScheme, Fiji was in its fourth year as an independent nation. In view of the many competingdevelopment and other requirements, externalfunding assistance was vital to make the projecta reality. Following a n initial identificationmission, the World Bank carried out a detailedappraisal towards the latter part of 1975 andagreed to finance the foreign exchange component of the project cost. Seaqaqa was theTable 4 Diatribution o f c a n e producers (averagen b l e 6 Seaqaqa cane, sugar and revenue achievementsTable 3 Area under cane cultivation Source: The Fiji Sugar Corporation Ltd. records.1985-87) YearTOM-Indians FijiansOthersTotalProduced per farmu p to 2020-5051-100101-150161-200201-250Over 5816,267547468022,421Source: The Fiji Sugar Corporation Ltd. oduced(bnnes)ResultantSugarsugar(tonnes)revenue(F 609.3912.3016.40Source: The Fiji Sugar Corporation Ltd. records.
19FIJISUGAR JNDUSTRYmost ambitious cane development scheme embarked on in the recent history of the industry.The major objective of the scheme wa
The Fiji Sugar Industry : a brief history and overview of its structure and operations Rasheed A. Ali and Jai P. Narayan Role of sugar in the Fiji economy Sugar became the principal export of Fiji from the early 1880s.Over the years, the sugar in-
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