GuySuCo to spend $19.4B to revive sugar under new strategy

- fifth ratoon canes to be eliminated

Over the course of the next four years, the Guyana Sugar Corporation will spend a total of $19.45 billion in an attempt to revive the struggling sugar industry.  This is according to GuySuCo’s long-awaited 2013-2017 Strategic Plan  – still to be released to the public – which addresses what should be done to correct the mistakes of the past and bring the struggling state-owned corporation from out of its current $5.2 billion deficit.

The previous plan has been described as a failure. While the new plan addresses various criticisms, including concerns of the political opposition and the Guyana Agricul-tural and General Workers’ Union (GAWU), it doesn’t provide details on how any issues will actually be addressed, particularly in the light of the slumping production.

“Lack of cash and financing to invest in capital programmes necessary to achieve these targets,” was stated as being the major issue in over seven of the company’s 17 main objectives for the course of the Strategic Plan. The lack of cash and financing was not addressed in the plan and particularly absent was any mention of the $31.1 billion that was handed over through budgetary support by the European Union for the ailing sugar industry since 2006.

The plan included a revised side-by-side comparison of the 2013 plan, the reality of estimates to date, the revised strategy and the reason why the various strategies were not achieved. The plan stated that $11 billion was invested over the course of 2010 to 2013 as capital investment however revenue generated had to be reinvested in the capital expenditure and the current loans needed to be “considered and negotiated with the Government of Guyana” although no agreement has been reached as yet. Moreover, it says that “conversion of the Skeldon Sugar Modernisation Pro-ject (SSMP) debt to equity with dividend payment when the corporation becomes cash positive,” was not accomplished by the end of 2013 and there is no new revised agreement for 2017 in terms of debt to equity.

With the debt conversion to equity still uncertain, GuySuCo’s cash position is a $5.2 billion deficit. GuySuCo and the sugar sector are primed to receive an additional $6.5 billion from the EU, however land conversion was cited as being a key factor in unlocking funding. The strategic plan outlines the need to accelerate the conversion of cane fields to handle mechanical harvesting. Earlier in 2013, GuySuCo projected that 18,000 hectares of land would be converted for mechanization, however, only 14,724 hectares have actually been converted. The plan states that by 2017, an additional 10,000 hectares should be converted, and that currently 26 percent of all fields are converted. But even with an additional 10,000 hec-tares converted, GuySuCo will still be under 50 percent full land conversion.

Once again the top reason cited for the lack of field conversion was the high capital investment as well as the fact that funding had to not only be sourced locally but through foreign institutions. GuySuCo has accepted that an increase to its fleet will be mandatory. Head of GAWU Komal Chand has spoken about the need to invest in a larger number of machines that are lighter than the current harvesters and loaders when GuySuCo was advertising the plan in July 2013 was just a draft.

According to GuySuCo one hectare of land conversion costs over US$1200; the corporation has plan-ned the conversion of 2,000 hectares in 2013 to be done and an additional 2000 hectares in 2014, which would cost almost $1 billion. If the current projections are to be believed GuySuCo’s ‘surplus’ of $1.62 billion, due to no change in creditor arrangements, would be eaten up by land conversion.

GuySuCo’s plan states that in order for conversion to occur, “It is therefore essential that the capital expenditure plan contained in this document be approved and funding for the mechanization programme be made available.”

It also states that “GuySuCo plans to acquire 10 tractors and 12 excavators during the period 1st July, 2013 to 30th June, 2014 to support its mechanization programme in land conversion… 13 mec-hanical harvesters and associated [equipment] were budgeted for over the period of the plan.”

The plan also points out that an increase of private cane farmers’ partnerships will be needed to further grow the industry and to bring it out of the red. The state owned corporation is planning that by 2017 over 16 percent of total land will be owned and operated by private cane farmers – an increase of six percent from the current situation. GuySuCo also dedicated a section of the plan to returning to “best practices,” which the plan says “involve practices such as elimination of all canes in their fifth ratoons and over and flood and legume fallowing.”

The corporation currently has over 30 per cent of cultivation past the fourth ratoon state. It stated that the yields are not as high and the situation has become “uneconomical” to supply gaps in ratoon fields. Tied to best practices is the need to fund the agriculture research de-partment of the corporation. While GuySuCo outlines that “the objectives of the agriculture research department are to conduct research and development to facilitate agriculture mechanization, conserve soil and water through land development and efficient irrigation and drainage equipment, disseminate information in technology transfer through training, demonstration, and prototype production and supply,” there is no fiscal amount attached to the preceding strategies. GuySuCo has attached $1.07 billion to “other” expense, but out of that only $20 million was outlined as agriculture re-search.

Several commentators have complained about the poor state of GuySuCo’s fields and the reduced replanting for much of this year.

Looking over the de-tailed capital expenditure, GuySuCo will need to spend over $5 billion to get all factories up to standard and will spend an additional $13 billion on agriculture development.