The interim management of the beleaguered Guyana Sugar Corporation is focused on the immediate future such as preparing for the next crop as the government simultaneously pushes ahead with its Commission of Inquiry (COI) into the industry.
Director of Finance of the Interim Management Committee, Paul Bhim in a recent interview told Stabroek News that the corporation was working to ensure that the factories were in working order to produce the reworked 2015 annual target. The industry is now in the out-of-crop period during which factories are readied for the second crop and field work is done.
Bhim refrained from stating the year-end expectation of the corporation only saying that it was higher than last year’s production which was 216,142 tonnes of sugar. For the first crop GuySuCo missed its 86,201 target and finished at 81,194 tonnes of sugar. The corporation had disclosed, prior to the recent dismissal of CEO Dr Rajendra Singh that the 2015 annual production target was 241,503 tonnes with the second crop targeted for 155,302 tonnes of sugar.
Bhim said that assessing and reworking the corporation’s 2015 production was ongoing. He noted that the second crop was the immediate focus of the IMC, which former CEO Errol Hanoman heads.
Bhim said the corporation was looking at long term capital expenditure as opposed to immediate spending which was not plausible given the current financial situation. He said the out-of-crop season needed attention to ensure that the canes on the ground were being looked at.
He stated that the out-of-crop season could not be neglected, alluding to the fact that the company has been able to negotiate with suppliers for much needed fertiliser to ensure the quality and growth of the canes. Stabroek News inquired as to the current status of the canes on the ground at which point Bhim said that assessments were ongoing.
He said that GuySuCo, moving forward, had to market its value-added sugar products. He told Stabroek News that getting the factories in line with production capabilities would assist in this process. The Enmore sugar packaging plant has been vastly underutilised because of the low sugar production.
The finance director demurred from entertaining questions related to the future of GuySuCo beyond the six-month IMC, adverting instead to the government-initiated COI and its potential findings.
He said that improving the cash situation and finding ways to save money locally was necessary while utilising the recently announced $3.8 billion bailout approved by cabinet to pay debts and to handle the operating costs.
Analysts have noted that yet another government bailout was just deferring the problem as GuySuCo is well over $60 billion in debt and has to undergo major restructuring before it can hope to be profitable again.
Recently, commentator Christopher Ram called the bailout unsustainable and stated that the corporation was too big to save. “Whatever the eventual bailout number will be, it is likely to be huge. Yet, the Granger Government could not risk a shutdown of the industry. Whether as the sole shareholder in GuySuCo, or as the Government, there had to be some decisive intervention.
That however, does not make the circumstances any more comforting,” Ram said on his blog.
The corporation under the now dismissed Singh had requested a $16 billion bailout – days after the Granger administration took office – and the figure is expected to be approximately $11 billion in three instalments.
Ram said that despite the decision to inject the $3.8 billion into the company, there is no hard information on its current state or the losses it has incurred since 2009 when its last set of financial statements were laid in the National Assembly.
He noted that in July last year, Bhim told the Economic Services Committee of Parliament that GuySuCo’s debt stood at $58 billion, which would no doubt be higher now, even after a $6 billion subvention from the national coffers last year.
“The problems of GuySuCo have been allowed to fester for far too long. The obvious requirement of a restructuring of the company was not only unpalatable, but no politician seeking votes could ever mention the inevitable necessity. And so the corporation has moved from being an irritant, to a problem, to a burden and now a millstone.
“We have been bemused into the mantra that not a job must be lost, even if it means that the workers will never be relieved of the uncertainty about their future employment, that they can never hope to enjoy real earnings increases, that they should not seek other and better opportunities. Or that persisting with that fallacy is at the expense of the rest of the economy,” Ram asserted.
Meanwhile, the government’s planned COI is based on its Manifesto promise of what it intended to do within its first 100 days in office. When Singh and the Board of Directors were fired on June 3, Agriculture Minister, Noel Holder told Stabroek News the COI would look into the operations of the sugar corporation and chart the way forward.
The team comprises: Vibert Parvatan (Chairman), Professor Clive Thomas (Financial and Economic Analysis), Dr Harold Davis and John Piggot (Agronomists), John Dow and Joseph Alfred (Factory Opera-tions), George James (Sugar Processing), Nowrang Persaud (Indus-trial Relations), Claude Housty (Marketing), Seepaul Narine, GAWU Representative and Omadatt Chandan who will serve as the Commission’s Secretary.
The Commission is expected to work closely with the Interim Manage-ment Team of GuySuCo over a three-month period commencing July 1, 2015.
General Secretary of the People’s Progressive Party, Clement Rohee had countered that a new board and a new CEO will be faced with the same challenges that the previous administration was faced with. Speaking on behalf of the party, which held office for 23 years as the industry continued to decline, Rohee said, “I don’t know if it is a changing of the guards to solve the problem. I think it is a systemic and financial problem and that is what they have to grapple with.”
Analysts have suggested that the findings of the COI will most likely call for a complete overhaul of the current structure which will include closure of non-profitable estates as well as privatisation of some aspects of the industry.
Thomas had argued in his 2014 “Sugar beyond the point of no return” series published in the Stabroek News, “In light of this, both the EU’s continuing sugar assistance and government’s bailouts of GuySuCo can be viewed as seeking to rescue the industry from total collapse. Such a situation however represents, in essence, a classic case of throwing good money after bad.
As worldwide experience has shown, while it is hard politically for governments to stop providing unwarranted subsidies to state industries, it is far worse for them to yield to those interests that are driving the need for the subsidies.
The misallocation of national resources implicit in this posture is inevitably bad for everyone economically, but it will eventually also carry a devastating political cost, given the size and configuration of the sugar industry in Guyana’s political economy.”