I should like to say a few words on this motion. It is a significant one as it is the first debate the Oireachtas have had on a report from the Joint Committee on State-Sponsored Bodies. We can all recall that for many years Members of the Oireachtas felt a great sense of frustration at the inability of the Oireachtas to become involved in this particular sector of Irish life. The practice grew that when questions were asked in relation to State-sponsored companies for the Minister to say they were autonomous and that he had no responsibility.
Members of the Oireachtas were annoyed that bodies, which were in receipt of large amounts of State funds by way of capital or subventions, apparently were being excluded from overview by the Oireachtas. The eventual setting up of the committee was very welcome. It is significant that the work of the committee is brought to the floor of the House and that we now have the opportunity to debate for the first time in detail the activities of an important company in the State-sponsored sector.
The view, unfortunately, that the members of the committee have had to form with regard to the various companies has been, if not universally gloomy, very nearly so, because they are all beset with various problems, which chiefly have to do with the imbalance of the financial structure which now prevails in most of the corporations concerned. I can only think of one of them which is profitable in the commercial sense, yet those companies or their managements. There may be some exceptions to that, on which a report has yet to come. In fairness to the companies it is only right to say that.
Those of us who have given them their brief have been confused about the precise nature of their brief. We have given them a mixture of a social and a commercial brief but it is not spelt out clearly what precisely their responsibilities are in regard to each area. We have expected them to discharge a social obligation while providing them with commercial funds. This is very evident in the report on the Sugar Company. It will be seen that much of their activity has been to provide employment in areas of the country which might not have had any industry if it were not for the setting up by the Sugar Company of their plants in those areas. With the passage of time, the growing sophistication of Irish industrial and commercial life and the complexity of the world in which the Sugar Company are operating, some of the plants are now clearly to be seen as social only and their commercial future is very limited indeed. In regard to Tuam we were quite blunt in the report. Tuam does not appear to have a commercial future.
We suggested in the report that the time has now come for the Government to differentiate with regard to the Sugar Company as to what role they want the Sugar Company to play. If the Sugar Company are to play a social role, in fairness to those who are working in the company this should be spelt out clearly. If the role is to be a social one funds should be made available for the company to discharge their social obligations. It is not fair to allow a company such as this to be put in a position that when their annual report is published a loss is shown, because the people reading the papers just notice the loss. The amount of publicity the report gets might not be very great or the attention paid by the casual reader sufficiently detailed to appreciate that the factors going into making up that loss are not purely commercial ones but that it is compounded by the social role we have forced on to those State-sponsored companies.
It is damaging to the morale of the people who work in those companies if they feel that they are being blamed for losses which are commercially unavoidable because of factors which are totally outside their control. The Sugar Company find themselves with a crazy debt equity ratio at the moment. Over the years the funds which would normally have been available for reinvestment were carrying losses in one of their divisions. It was clear for a long time that that was an unprofitable division. I do not believe any Government could have tolerated the thought of doing what a commercial enterprise would have done, excising the loss-making area totally. It was an expectation that the Sugar Company would carry this particular division and in fact they did so. The upshot of that policy was that the finances of the company went completely out of control. They have now to make a large amount of further investment if the company are to continue profitably on the sugar side alone. The sugar side was consistently profitable over the years but, unfortunately, it is now falling into an unprofitable state.
The Sugar Company have asked for a considerable amount of equity to remedy this state of affairs but there are other problems in the company besides the question of more equity. They have constraints now in that whole area arising from our membership of the European Community. There is difficulty with their growers and there is a certain lack of morale among the farming community which may reflect itself in deliveries of supplies. Even if the investment were to be made and the plants modernised those areas still have to be tackled.
There is also evidence that the company are suffering from the fundamental malaise of the Irish industrial sector generally, low productivity or bad workmanship. The throughput in the factory per worker is significantly lower than in the UK which does not stand very high in the reputation of having an energetic work-force either. There are obviously some basic problems which have to be tackled before we can look on the Sugar Company with the optimism we would like to look on them and before we can say that this company, which were profitable for so many years in the past, will, with an injection of capital and new management plans, suddenly become profitable again.
There are many difficulties. However, we are impressed in the committee that there is management expertise within the company to overcome these difficulties. This management expertise needs the support of the Government by way of encouragement and, more importantly, by way of extra equity. I am pessimistic about the capacity of the Exchequer to supply the equity needed. We cannot send the company down the borrowing road because to do so is only to compound the imbalance of their balance sheet.
Because of our position on the committee, we have been able to get an over-view of the capital requirements of the whole State-sponsored sector. The amount of money needed to make that sector viable commercially is frighteningly large and beyond the capacity of the Exchequer to supply it even within a reasonable time. Nervertheless, for a company such as this, every effort should be made within the constraints on the Exchequer to supply the capital needed by this company.
In our report we were gloomy on the question of the food division of the Sugar Company. Undoubtedly they have been beset with problems for years. There is no simple answer to these problems or to improving the situation. If one were to be entirely commercial, obviously the future would be bleak and short. One cannot be commercial with regard to the food processing industry in a country like Ireland. When we consider the staggeringly high amounts of vegetables imported into this country, we must stand back and have a look at ourselves, and ask ourselves are we crazy, in that we cannot so organise our own affairs as to provide those vegetables ourselves. The figures are quite staggering.
The vehicle we will have to use to improve that situation is probably the food division of the Sugar Company. It is readymade to some extent, but obviously it will require a fair amount of reorganisation. There is the point, too, that the home market is comparatively small. While the amounts being imported are high, nevertheless in terms of total market, they are quite small. That division will have to be able to export as well if it is to be viable commercially.
The problems of the Sugar Company are many. They are problems shared by other State-sponsored companies. Our examination of the company and our confrontation, as it were — and I do not use that word in any adversary sense — our meeting with representatives of the company entitle us to give grounds for optimism for their future. The management expertise is there. The energy on the part of those in charge is high. I suppose the provision of money can be arranged.
The morale within the company is an important matter. One way in which that can be kept high is by a clear brief from the Government and the Oireachtas as to what is expected from the company. If some parts of their operations are social and political, as an expansion in the vegetable area might be at this stage, this should be clearly spelled out. It should be indicated to the company that the Government's expectations take into account that there are unusual commercial difficulties in the way of commercial success as judged by the normal criterion of a good bottom line.
This is a problem not only in regard to this company but also other companies in the State-sponsored sector. We are not clear in our own minds what we expect from them. Some type of an accounting mechanism should be devised pointing out clearly to the public that where they have a clear commercial role they are successful but where it is clouded by a social role a differentiation has to be made. In fairness to those operating the company, this is necessary.
One must congratulate the company on their years of success. Speaking in terms of success having regard to the bottom line, the success has been significant in a very vital area. The company operated where the private sector was unable or unwilling to do so at the time of our national development. It is only right that we should recognise that and indicate to the company that their efforts are appreciated, their present difficulties are understood, and that in this report from a committee representative of the two Houses there is an understanding of their problems and a willingness to assist in whatever way possible towards their solution.
