During my tenure as the executive chairman of the Fiji Sugar Corporation from January 2011 to October 2016, together with the team at FSC, a key target was to return FSC to profitability within two years following a loss of approximately $174 million.
This was achieved by reporting a profit of $1.6m and profitability was maintained.
All figures provided can be verified through publicly available information.
Improved farmer returns
One of the most important measures of success and sustainability was increasing payment to cane farmers.
Cane payment increased from approximately $45 per tonne to: $65.67 in 2012; $81.83 in 2013; $88.49 in 2014; and $81.10 in 2015.
This was an additional over $206m paid to farmers.
These improvements provided greater returns to growers and supported rural communities dependent on the sugar industry.
Operational efficiency
Tonnes cane to tonnes sugar (TCTS) improved steadily from 13.5 to: 12.6 in 2012; 10.0 in 2013; 9.0 in 2014; and 8.1 in 2015.
This reflected significant gains in milling efficiency across FSC’s operation.
Increased sugar production
Raw sugar production increased from approximately 113,000 tonnes to: 167,000 tonnes in 2012; 155,000 tonnes in 2013; 179,000 tonnes in 2014; and 227,000 in 2015.
These outcomes (saved adverse weather at times) exceeded performance targets and demonstrated improved factory and industry productivities.
Reduced operating costs
The cost of producing sugar was reduced from approximately $439 per tonne of cane to: $405 in 2012; $396 in 2013; $315 in 2014; and $309 in 2015.
This represented a substantial improvement in operational efficiency and industry sustainability.
Reduced reliance on
government funds
Government’s financial support to FSC was reduced from approximately $110m in 2011 to: $45m in 2012; and nil in years 2013, 2014 and 2015.
This was an important indicator of FSC’s improving financial position during the period.
Expansion of export markets
FSC successfully diversified its customer base beyond traditional markets and secured sales to countries including, United State, Spain, South Korea and Austria.
Strategic investments
and diversification
As part of sustainability of the industry, several initiatives were advanced to support this critical objective, including;
r Commissioning a consumable sugar packaging plant;
r Commenced construction of 25,000 tonne sugar refinery in Labasa;
r Construction and commissioning of 10-megawatt cogeneration plant at Labasa Mill;
r Development works to detailed design for cogeneration project at Rarawai Mill;
r Design of ethanol production from molasses;
r Development of syrup mill at Penang Mill site;
r Establishment of FSC-owned sugar plantation on 1100 acres in Seaqaqa Labasa;
r Secured funding with Exim Bank of India for all major capital projects;
r Restarting programs for apprentices, interns and for all technical and managerial staff; and
r Preliminary works in transfer stations to six-tonne rail wagons to significantly increase rail usage and reduce congestions on main highways.
Cyclone Winston recovery
Following Cyclone Winston, FSC successfully negotiated an insurance settlement of approximately $37m. This provided much needed critical funding for repairs and effectively restoring the three mills ready for the following cane harvest season.
The results in 2016 are testimonial to this successful restoration program.
Many are aware that any successful settlement subject to policy of like-for-like replacement is based on recommendation provided by the insurers’ assessors and FSC assessors. Although we did not discount our as-new replacement recommendation for obvious reasons taking into account the age of the damaged equipment, we internally valued this restoration would cost at least $25m.
Remuneration
Since my departure from FSC in 2016, my remuneration as executive chairman has remained a recurring topic of public debate and media commentary.
While opinions on executive remuneration may differ, any fair assessment should consider not only what was paid, but also what was expected and ultimately achieved.
I, therefore, believe it is important to place the discussion in its proper context by outlining the circumstances of my appointment, the agreed performance targets, and the results delivered during my tenure.
Background
I was first appointed to the FSC board in 2005.
Following the events of 2006, a number of directors including myself were terminated.
I was again appointed in 2010 as a non-executive director and in January 2011, was appointed interim executive chairman while the board undertook an international search for a chief executive through KPMG.
Two potential candidates were identified with remuneration expectations of around $1.8m and base salary of $1.1m per annum.
In the interim, the board together with the executive team started an extensive recovery program aimed at restoring FSC’s financial performance and sustainability of the Fiji’s sugar industry.
In July 2011, after considering the available options, the board and Government of the day decided to confirm my appointment as executive chairman.
The appointment included an agreed remuneration and a clear set of challenging performance targets designed to measure FSC’s recovery and progress towards long-term sugar industry’s sustainability.
My package
My remuneration package consisted of: base salary of $NZ25,000 per month, net of tax, paid in equivalent Fijian currency; rental subsidy of $F3100 per month; and company vehicle and cell phone.
It is worth noting that: no performance bonus was received, despite it being made available to me; no FNPF contribution was paid by FSC or myself; and all other income as my directors’ fees for other directorships were paid directly to FSC.
Like many executive appointments, remuneration was linked to the expectation that agreed performance objectives would be delivered and measured.
I exceeded every target.
FICAC investigations
It is reassuring that the thorough investigations conducted by FICAC vindicated me and found no truth in the malicious accusations.
Following more recent investigation on insurance settlement, I was comforted by the good understanding of FICAC on how navigating insurance pay-out and policy implements can be highly complex.
The conclusion was that there was no wrongdoing in reaching the settlement.
Acknowledgement
While leadership is important, these achievements were not the work of me alone.
Such excellent achievements were made possible through the dedication and commitment of FSC staff, farmers, contractors, industry stakeholders, the board and directors, and Government support.
The progress achieved during this period reflected a collective effort to strengthen an industry that remains vital to many Fijian families and communities.
Looking forward
The sugar industry continues to face challenges, although somewhat different, but present results show that performance is very similar to what we encountered in 2011.
However, I am confident that the sector can continue to play an important role in Fiji’s economy if there is strong collaboration within all stakeholders, clear strategies and disciplined execution.
Moving forward, I believe several fundamentals remain important.
These being:
u A clear and aligned Statement of Corporate Intent between Government and FSC;
u A practical recovery plan supported by a longer-term industry strategy;
u Strong governance and accountability across the sector; and
u A shared commitment to ensuring that Government, landowners, farmers, FSC and other stakeholders all receive sustainable benefits from the industry.
Public discussions regarding remuneration are understandable.
However, the more important consideration is whether values were delivered to the organisation or industry stakeholders.
Our results during my tenure provide an important context for that discussion.
n Abdul Khan is the former executive chairman of the Fiji Sugar Corporation. The views expressed in this article belongs to the author and does not necessarily reflect the views of this newspaper.
