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Bitter sweet realities of Guyana’s sugar industry and working towards a better future

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All must appreciate that it is not business as usual for Guyana’s sugar industry.  And frankly speaking, to resist adjustments for its betterment is to say that you desire to see the demise of this industry.

 

With that said, Government has shown an abundance of interest in the sector as for 2016 alone it made a $9B allocation for GUYSUCO. The $9B was geared towards assisting the industry in its recovery and modernization programme and for budgetary support to this corporation.

 

Since it won the elections last year, the Coalition government has made major changes in the management of the sugar industry. After years of failing to reach its target, GUYSUCO met its target in 2015.This must be attributed to the implementation of good management measures.

 

And according to Agriculture Minister, Noel Holder, for the past two decades GUYSUCO’s former Board and the past regime were warned that the sugar industry needed to address its cost structure if it is to survive and be viable.

 

He said that sadly, these warnings were ignored.  He said that the culture of cutting the industry’s capital expenditure and different kinds of bailouts were instead preferred.

 

Holder opined that such bailouts included the former Government obtaining lands from GuySuCo and only paying for some of it; subventions from the Ministry of Finance; and the very unusual act of disposing the Skeldon cogeneration plant to the GPL/SEI.

 

In the absence of any program to rationalize the Corporation’s debt structure, Holder said that these knee jerk actions served as mere palliatives as the sugar industry’s financial deficit escalated at an alarming rate.

 

Holder stated, “The Government has inherited an industry which, from a financial standpoint, is in its death throes and, from an economic perspective, would require increasing levels of bailouts to support its economic role.  This Economic role can only be sustained if the industry is reorganized, costs re-engineered and operating deficits are reduced.  It cannot be business as usual, which is what some are asking for.”

 

He said that the Government is committed to securing the future of the 17,000 people employed in the sugar industry and their dependents.  He said that this cannot be done by sustaining the industry in its present shape.

 

He opined that to maintain the status quo would spell disaster for the industry and its employees sooner than most people think.

 

“The future lies in an industry that is more than sugar.  The financial woes of sugar are so grave, the needs of the economy are so great, that the transformation of sugar cannot be done gradually.  Time is of the essence.  The process has to start immediately and while there will be some initial redundancies; opportunities for reemployment will be created in a relatively short period of time.  Some current workers may find themselves becoming entrepreneurs in the near future,” the Agriculture Minister expressed.

 

He said that Wales estate is the beginning of this process.  In addition to this, he opined that GuySuCo would not have been in the abysmal position it currently finds itself in, had it not been for several actions. Addressing some of these, he said that the local component of the new Skeldon development should have been funded through the sale of land but this turned out not to be the case since lands were taken from GuySuCo without compensation such as prime real estate at Liliendaal and Turkeyen. He noted too that lands were given to the Central Housing and Planning Authority without compensation while the Ogle airstrip was given to the former Government as a gift. Holder also expressed disappointment that European Union funds were not given to GuySuCo except for US$12M for the packaging plant. The Agriculture Minister said that simply put, “The Goose was being systematically killed.”

 

Regarding the future of the industry, Holder said that sugar production for 2016 is projected to be 242,287 tonnes – a five percent increase over 2015’s production.

 

He said that this year will see a marked decline in the cost of production at the East Demerara Estates as the proper integration of LBI and Enmore is completed. Holder noted that a concerted effort is being made to reinforce the technical skill levels with the assistance of very experienced former technical staff of GuySuCo.

 

Additionally, he noted that the sale of lands which are considered surplus to the industry’s requirements will recommence with the proceeds applied to reducing the Corporation’s indebtedness to the banking system.

 

The Agriculture Minister expressed that the Skeldon cogeneration plant will be returned to GuySuCo and an increase in the tariff per KWh negotiated. He disclosed that the cost of services to third parties, including drainage and irrigation, will be recovered. Meanwhile, value added production will be increased at Blairmont and Enmore factories.

 

He said, too, that each sugar estate will continue to keep its expenditure, yields, recoveries and other related indicators under the microscope to ensure production and unit costs are significantly improved.

 

The Minister said that the Sugar Industry Mechanization Project allocation was increased to the sum of $400M. This is a two year project to inter alia purchase machinery and equipment for semi-mechanical planting, mechanical harvesting and land preparation.

 

Holder admitted that based on all that he and his Government have seen, it is unlikely that the sugar business would become profitable in the foreseeable future.

 

It is hoped however that while sugar may be making losses, albeit at a much reduced level, the other activities  such as co-generation and other forms of diversification would be so profitable, that when their results are consolidated with that of sugar, the business would show a profit and become cash positive.  The Board and management feel that this is possible.

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