CONTROVERSIALLY described as an ailing industry over the years, Fiji’s sugar industry — largely being the country’s backbone — has had an interesting rollercoaster ride.
Riddled with challenges ranging from attempts to achieve a satisfactory tonnes cane to tonnes sugar (TCTS) ratio, labour shortages, factory down times, transportation and road access, domestic and external loan commitments, and of late the recent Brexit development, the Fiji Sugar Corporation (FSC) continues to draw and implement strategies targeted at positively impacting the industry.
This year, the FSC chief executive officer, Graham Clark, released its strategic focus of seven key priority areas and 12 goals it aims to achieve.
The strategy focuses on the FSC working to reposition the sugar industry, achieving a viable and sustainable future, and that the corporation will become a credible commercial entity.
Its core business is to establish quality sugarcane production in sustainable volumes.
Below are key highlights of the FSC chief executive officer Graham Clarke’s strategy.
Priority area 1: Financial
Goal 1: To stabilise FSC’s financial outlook, moving to growth by the end of this five-year plan
Strategies:
1. Increase revenue through increased sugarcane tonnage and yield by working towards a TCTS of 8.0 through improved farm productivity
1.1 – This will be done by providing grower support extension services; railway upgrades and maintenance; new land for further cane development; FSC becoming a canegrower with a 10 per cent target of local cane production; providing mechanical and technical support to growers; and factory upgrades
2. Improve liquidity through an acid test ratio target of around 1; and improve trading performance
3. Address solvency issues by conversion of government loan to equity, strengthening equity ownership of the FSC;
3.1 – That will provide a stable framework from which to undertake remedial action such as full government ownership of FSC via acquisition of minority shareholdings, accompanied by conversion of existing government debt to equity
3.2 – This will allow for loan repayments deferment so company can manage its cash flow; provision for working capital funding and cash generation from asset sales; and capital expenditure funding to support the core business;
4. Support legislative reform and accelerating the Sugar Industry Reform Bill and Cane Grower Council Reform Bill to achieve full government ownership of FSC; more effective cane grower representation and cooperation; incorporating the Sugar Research Institute into the FSC; and scientific research and academic activity to transfer to the Ministry of Agriculture or USP.
Priority area 2: Sugar cane production recovery
Goal 2: Growing industry cane production from 2.0 to 4.0 million tonnes a year through improved cane farmer viability
Strategies:
1. Government delegated support to FSC for government support programs for cane growers
1.1 – This to cover cane planting grants; farm machinery and equipment renewal; and fertiliser and herbicide subsidies
2. Establishing a more focused agricultural services division within FSC
2.1 – Absorb the Sugar Research Institute of Fiji technical resources into the FSC structure
2.2 – Establish an agricultural machinery service pool to offer cost effective mechanical applications for land preparation, fertiliser application and weed control
2.3 – And provide disease-free seed cane in adequate volumes to improve germination of new cane planted
3. Redeveloping and planting areas no longer cultivated
4. FSC becoming a master lease holder to overcome the impediment created by non-renewal of land leases
Priority area 3: Harvesting and cane transportation
Goal 3: Production efficiency and volume through mechanisation
Strategies:
1. Government to provide financial support to continue mechanical cane harvester scheme
2. Government to provide further financial incentive for equipment to transport mechanically-harvested cane by road or rail
3. Granting concessions on importation of trucks and trailers to modernise existing equipment
4. Building capital costs for modernisation and upgrading rail transportation system into FSC’s capital plan
Priority area 4: Sugar milling capability
Goal 4: Sufficient maintenance of key plant items and excellent execution of capital projects designed to upgrade factory efficiency, increasing annual sugar production from 200,000 to 480,000 tonnes
Strategies:
1. An engineering survey to determine the milling requirements from present to future to be commissioned by July this year
2. Milling constraints to be tackled in three phases – minimising mill breakdown, capital investment and long-term vision for FSC sugar milling capability from Labasa, Rarawai and Lautoka mills, and from a new factory to be constructed to enable 1.5m tonnes of cane to be crushed in a 280-week season
Goal 5: Sugar production
Strategies:
1. Adopt international quality measures and food safety standards to ensure appropriate product quality
2. Improve staff focus and capability on quality controls of manufactured sugar
3. Proposed investment in
automated process control to guarantee manufacturing specifications
Goal 6: Sugar handling/packaging and logistics
Strategies:
1. Confirm FSC capability for bulk raw sugar production for export destinations
2. Compliance with current and future emerging sugar handling standards
3. Survey of market demand to determine the appropriate range of retail pack sizes
3.1 – This will include investigating the manufacture of sugar cubes and production of sugar sachets to maximise packaged retail offering
3.2 – And seeking external assistance to upgrade performance in the packing plant
4. Bulk sugar logistics including shipping will continue to be handled internally, which will include a review of local and regional market distribution to maximise market penetration
Goal 7: Health, safety and environmental management
Strategies:
1. Align health, safety and environmental management
systems to accepted international standards to provide assurance to international buyers of Fiji sugar
2. Internal safety management systems are being upgraded with key responsibilities defined and allocated
3. Reporting and incident management escalated to the chief operating officer
4. Occupational health is managed via the FSC’s employee medical monitoring system
5. Environmental compliance and management will require the appointment of appropriately qualified staff
Priority area 5: Strategic communications
Goal 8: Marketing
The expiry of the pricing benefits of the EU Preferential Sugar Protocol for ACP / LDC sugar suppliers on September 30 this year marks a watershed event in the marketing of Fiji Sugar. During the life of the EU Sugar Protocol, Fiji was able to supply bulk raw sugar for refining in Europe at guaranteed fixed preferential prices, thus insulating the industry from the volatility of the world sugar market. From October 1 later this year, although Fiji will still be entitled to supply bulk raw sugar ‘duty free’ to the EU, pricing will no longer be fixed but instead will be linked to world market pricing, as the EU opens market access for world market supply. This event will require FSC to reshape its marketing strategy to capture other supply and pricing benefits, available in alternative markets.
Strategies:
1. A fresh marketing strategy focusing on FSC as a reliable supplier based on sugar quality and customer service; strong branding around ‘Sugars of Fiji’; and maintaining fairtrade certification
2. Diversifying the existing product and customer base through market sensitive pack sizes
3. More effective management of the domestic market as a priority market
4. Develop a customer base in the neighbouring Pacific Island market, to include branded packed sugar sales to the islands, New Zealand and parts of Australia
5. Offer container-based bagged sugar for export, priced at a USD premium per tonne
6. Diversify bulk raw sugar sales to include Asian and Far East markets while maintaining a presence in the EU
7. Take advantage of and continue to supply the US market via Fiji’s USA quota entitlement
8. Strengthen in-house marketing skills and forge closer ties with our international sugar brokers to determine and utilise pricing trends and market dynamics
9. Adopt price: risk management techniques to secure and enhance world market-based pricing
10. Capture logistics and supply chain benefits that will emerge in serving the refreshed customer base
11. Enhance financial options to manage export cash flows, including export pre-financing to smooth cash flows and currency hedging where appropriate
Goal 9: Communication and image improvement.
The FSC currently suffers from poor public and stakeholder image, largely brought about by poor communication and uncoordinated media management.
Strategies:
1. Developing a media management strategy to better coordinate interaction with print, radio and television media representatives
2. Public relations and image management, including targeted advertising will be developed utilising skilled staff still to be engaged
3. Promote a climate of inclusion and to help develop pride in FSC as an employer through regular employee updates and briefing
4. Communicate FSC plans to the grower community and to better understand issues faced by growers through frequent direct meetings
5. Formally manage farmer complaints and reporting potential fraud or unethical conduct
6. Direct and regular communication with representative bodies including grower leadership, employee representatives and shareholders including government
Priority area 6: Human capital management.
It is evident that the existing organisational structure within FSC will no longer be appropriate for the future needs of the organisation and industry generally. A thorough review of the future requirements and capability needs is being undertaken to determine appropriate structure and skills required for future success.
Goal 10: Organisational development
Strategies:
1. Restructuring the organisation to reflect results-based and functionally-based operations with clarity around accountabilities and roles
1.1 – This means restructuring senior executive management responsibility; and the existing executive management group reduced in number from 14 to 8
1.2 – Operational management to become functionally based in order to reduce the existing compliment of 92 to 78 positions
1.3 – The number of lower level support staff, tradesmen, clerical staff and general employees will be reviewed, and a targeted compliment reduction of 20-25 per cent will be pursued
Goal 11: Effective human capital management.
Strategies:
1. Reinforcing technical training and skills upliftment through improved management of external training opportunities
2. Introduction of formal talent management and succession planning processes in order to create a depth of skills within FSC, and a clear leadership path for future senior management
3. Human resource administration and management systems will generate accurate payroll inputs, and better controls on overtime and employee benefits
4. Adopt an employee housing policy to encourage employees to own their own homes close to their workplace
Priority area 7: FSC Board structure and governance.
Continue efforts to strengthen independent board representation, to achieve balance and oversight that supports executive management and ensures effective corporate risk management.
Goal 12: Effective and competent board
Strategies:
1. Adopting appropriate board charter and terms of reference to clearly identify key roles and responsibilities of the board and its sub-committees
2. Monitoring executive management performance in relation to budgets, targets, capital project management and strategic plans
3. Reviewing board sub-committee structure and representation to cover risk and governance, finance and audit, and remuneration and nominations.
