Dire sugar news

Given the enormous failures at GuySuCo, particularly in the last five years, one would have expected radical changes this year in the management and leadership of the corporation accompanied by a new plan to rescue it.

Puzzlingly, there is no sign of the fundamental revamping of GuySuCo which would have signalled to the workers of this pivotal state company and to the people of the country that the government had accepted the extent of the danger facing the industry.

When sugar hit rock bottom in 1990 after several years of declining production, the then PNC government realised that it had no option but to seek an out-of-the box solution. This led to the recruitment of Booker Tate management which presided over the recovery of sugar production until it began slipping again from 2005 onwards.

No doubt stunned by the convergence of numerous problems such as slumping production, unfavourable marketing terms, the failing Skeldon factory project, bad weather, diminishing labour pools, inadequate husbandry of cane fields and the risks surrounding the conversion of beds for manual harvesting, the government appears wholly ill-equipped to take decisions.

This it must, however, do given the litany of woes facing the industry. In two appearances in less than a week before the Economic Services Committee of Parliament, the government and GuySuCo top brass could provide no hint of a feasible plan in place to begin improving some of the unfavourable conditions besetting the industry. GuySuCo is operating on a 2013-17 plan which was prepared by some of the architects of the previous failed blueprint and which has already comprehensively failed to meet targets in 2013 and 2014.

In the meanwhile, the financials of the business make it unsustainable. GuySuCo is producing sugar at more than double the world market price. This is the price that it will increasingly be benchmarked to given the impending changes in the preferential European Union market. Even if 70% of its costs are fixed there are clearly areas that are within the ambit of the government – which is making all the decisions for the industry – to address such as rationalising output on the most productive estates and ending the haemorrhaging of financing in the disastrous Skeldon project. There is no sign of any such thinking.

Given the political hot potato that sugar is, the safest and easiest thing for President Ramotar to do would be continue with the band aid approach and the pretence that the industry is improving. That would be unfortunate and would do more harm to sugar in the long term. What the President has to do is to declare an emergency, summon as many experts that he can and brainstorm on a way to immediately begin upping production while at the same time lowering the cost of doing so.

Annual reports of GuySuCo are still to be laid in Parliament for the last few years and it is unclear what its accumulated losses are. However, Thursday’s hearing before the Economic Services Committee was told that GuySuCo was in debt to the staggering sum of $58B. A large portion of this, $22.4B was attributable to loans associated with the calamitous Skeldon project. Further, its Finance Director, Mr Paul Bhim said that GuySuCo’s short-term debt was $19.4 billion and needed to be serviced on a monthly basis. The corporation was shockingly behind on payments to the National Insurance Scheme by over $729 million. A larger sum was owed to the government and the Guyana Revenue Authority. All of this had forced the corporation to seek a loan from a Jamaican bank of US$15M as it had a huge outstanding debt to several local banks.

It is hard to believe that the situation could get worse than this in terms of production, market prospects and also its financials. Sugar is now at a point where urgent and sweeping steps have to be considered. No doubt, all options would have to be on the table and the stakeholders in the industry will have to be a part of the decision-making process.

Taxpayers’ money cannot be expended in a cavalier and carefree manner. This year’s $6B state subvention to aid the industry is a perfect example of the scale of the problems facing sugar. The government cannot continue these bailouts without underpinning them with a sensible recovery plan.

President Ramotar has shown no inclination to take hard decisions in the interest of the people. He has however exhibited great leanings towards decisions meant solely to preserve his government and the ruling party as in the withholding of local government elections. He should be aware that applying these same strategies to the plight of the sugar industry will do more harm, perhaps irreversibly so.