GUYSUCO -A BILLION DOLLAR BABY

July 6, 2016 wrealtalk333 No comments exist

Guysuco pic

                                                      The spending of billions of dollars yearly by Government to plug holes in the failing Guyana sugar corporation (Guysuco) is like a mother spending billions of dollars to keep her dead son in the morgue hoping that he will one day rise again. The sugar industry in Guyana is dead and is being kept on ice by having billions upon billions of Government revenue pumped into its accounts to keep it alive. Sugar in Guyana is dead and most be buried with dignity.

The Guyana sugar corporation has not turn a profit in more than 10 years, the last time being in the year 2000. Sugar has become an economic burden to the state reckoning billions of dollars in loses each year. Which has resulted in it accumulating a debt of nearly G83 billion dollars as of September, 2015.

Guysuco directly and indirectly employs over 16,000 thousand persons and is a major foreign currency earner. However, due to high production cost, sugar’s days as king is in our rear view mirror.

In 1992 Guysuco employed over 24,000 workers, but by 2000 it drop to a whopping 18000. Furthermore, Guysuco produces sugar at a price that is far above market prices -according to the recent report by the Parvatan commission inquire into Guysuco.

Sugar take a turn for the worst when the EU withdrew favorable prices and tax concessions to the commodity twelve years ago. These concessions were on sugar imported to Europe from Caribbean countries. The Europeans did however extend monetary compensation to the affected countries most of who saw it as a window of opportunity to get out of the industry scorch free. Many of our sister CARICOM states did just that: got out scorch free. Trinidad and Tobago, Barbados, Antigua, Jamaica; who to a small extent is still producing sugar on a smaller scale, and some ACP Countries have stop producing sugar.

Beginning in 2006 the European Union [EU] had started paying the development fund to Guyana which was our compensation for the loss of the preferential price for sugar in the EU markets. This money was supposed to be used to make the industry more efficient and competitive and that a substantial part of it should have been used to start the expensive process of converting the land for mechanical harvesting, on all estates, to offset the loss of workers. This money was however never released to Guysuco. According to documented evidence we have seen the total amount paid to the Government was $24.7 billion but there is no evidence showing that GuySuCo received any.

Guyana chose to continue in sugar production despite numerous red flags which questioned its economically viable. A colossal miscalculation was made by the then GuySuCo’s board in its 2001 strategic review of the corporation, in which it noted that “the Sugar Protocol is of indefinite duration and cannot be changed unilaterally and is likely to remain a secure access”.
Then the Sugar Protocol governing the trade of sugar between the African, Caribbean and Pacific Countries (ACP) that includes Guyana and the European Union was announced in 2006 with a phase out period ending 2009. The benefit to Guyana that the Sugar Protocol afforded was the preferential pricing for sugar which has now been poised to be replaced by the Economic Partnership Agreement, which allows for duty free access to the European market but void of the preferential prices. Meaning they will be facing tariffs.

According to one of Guyana’s leading experts on sugar Anthony Vieira “embedded in the company’s strategic plan for 1998 to 2008 was the wrong assumption by the Board of Directors for the company where they sought to believe that the sugar protocols and the preferential price for sugar could not be removed by the European Union. This was the first mistake in the Skeldon Sugar Expansion Project since it was based almost completely on this false assumption,” opined the Mr. Vieira.
Then President Bharrat Jagdeo did voiced his opposition for the EPA, given the negative effects it will have on the lives and well being of thousands of families and workers who depends on the industry for a livelihood.

Visioning a solution, the then PPP/C Government went ahead and constructed the Sheldon Modernization Factory which was to be a flag ship project that was to produce electricity at a cheaper cost to the national grid. Sadly, grinding at a rate of 196 tons cane an hour when in fact it was designed to operate efficiently at 350 tons an hour, the Skeldon factory turned out to be a very bad investment.
So much so that a ton of cane to make a ton of sugar in 2012 at Skeldon was 16.29 whilst just next door at Albion (a not so modern factory) only took 10.52 tons of cane to make a ton of sugar. Skeldon therefore took 64.6% more cane to make a ton of sugar than Albion according to statistics. Another major problem that plagues the industry is the fact that there were huge wage increases which were given to the sugar workers during the period 1990-2006, “increases which GuySuCo could not pay and be competitive in international markets, even with a preferential price, and so they were forced to reduce the workforce by 10,000 workers 1998 – 2008. Something that former Chairman of GuySuCo Harold Davis did warned the Government about, stating that: “that employment costs were now so high that the viability of the industry is threatened and if nothing is done to stop this escalating cost of employment, the industry will be brought to its knees.” That was in 2001, by 2006 the industry’s wage bill was $16.6B in 2006, some 63 percent of total costs.

The economy of Guyana is too venerable to continue being the milking cow of Guysuco. The industry receives nearly 20 billion dollars in bailout annually from Government an amount that is socially and economically burdensome to tax payers.

The PPP/C Government’s stance on Guysuco and the sugar industry has always been one of appease and preserve at all cost. The reasons for this approach has to do more with political loyalty more than anything else, has history will show.

However the then PPP/C government’s policy as to the way forward for the sugar industry can be summarize by this statement made by former-finance Minister, Dr. Ashni Singh:

“Government’s position on the sugar industry is clear and unequivocal. The industry is still of sufficient systemic importance to the national economy and to the livelihoods of so many rural communities and has such deep forward and backward linkages with suppliers and distributors nationwide and that no effort must be spared to ensure its long term viability, competitiveness, and profitability.”

The world market price for sugar continues to fluctuate between US$0.16 a pound and US$0.19 a pound since 2013. But according to Professor Clive Thomas Guysuco produces sugar at US$0.57 per pound, meaning that taxpayers are consistently bail the industry out by subsidizing a loss of US$0.38 to produce a pound of sugar. If that sounds unbelievable? Wait till you hear how much is owed in debts to banks – both local and foreign, suppliers, the Guyana Revenue Authority, the National Insurance Scheme (NIS) and the Sugar Industry Labour Welfare Fund Committee (SILWFC).

Written by:

Shane A. Rahaman

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