Parliament today agreed to provide government guarantees
of a $110m loan to the Fiji Development Bank
and $120m loan to Fiji Sugar Corporation.
Of concern to the taxpayer is the fact that neither of these
institutions has released its annual reports for the past three years.
FDB’s last report was published in 2012 for the financial year ending 30 June.
FDB as a financial institution is required to publish its annual accounts. The Reserve Bank of Fiji has oversight over FDB and should have taken steps to get FDB to publish its annual reports and audited accounts on time.
FSC’s annual report has not been available since the last one issued in 2011. Since then, the financially troubled FSC has been forced to withdraw from the South Pacific Stock Exchange. It has merely been surviving on huge loans guaranteed by government because no banking institution would lend a dime to the Corporation without government guarantees.
The timing of the government guarantee makes it obvious that the Corporation needs money to make the 4th cane payment to growers due before the end of May, although Finance Minister Aiyaz Khaiyum claimed FSC’s cash flow position had improved significantly.
He told Parliament FSC posted a $5.9m profit for the 2014 financial year. But the Opposition raised serious concern at the Corporation’s failure to release its annual reports since 2011. As a result, its true state of affairs was not known.
Concern was also raised at the fact that no substantive CEO has yet been appointed to head FSC. Its affairs were being overseen by the executive chairman thus compromising the independence of the Board.
Much was made by Khaiyum of the new direction FSC was taking to improve its income stream. He pointed to the cogeneration project to be undertaken at the Rarawai Mill with the help of a $75m line of credit extended by the Indian Government.
The truth of the matter is that FSC has been in the cogeneration business for decades in its Rarawai and Labasa mills, selling surplus electricity generated during the crushing season to FEA.
So cogeneration is not a new activity for FSC. However, all income earned from it is pocketed by FSC without it being shared with the farmers, the bagasse from whose cane fires the boilers from which electricity is generated.
Another matter of serious concern here is whether it has been established by FSC or the sugar industry that none of FSC’s Board members of any other senior executive has a conflict of interest influencing it to invest heavily in the Energy sector (using borrowed money), knowing well that the sustainability of the industry itself is in serious doubt.
The latest statistics we have been able to obtain shows that as at 31 October 2014, the world market sugar price was USD 312 (FJD624) per tonne whereas FSC’s cost of production was USD441 (FJD 882) per tonne – a potential loss of USD129 (FJD258) per tonne.
Given that the world market price is projected to remain around that level, at least until 2025, it is any one’s guess where FSC is heading!
FSC is likely to remain in debt in perpetuity. Its liabilities far exceed its assets and its misadventures with more borrowed money projects will be the quicksand which will usher in its eventual demise.