The government will be supplying potential sugar estate owners with billions in subsidies

Dear Editor,

The GAWU, through reports that appeared in several sections of the press, was, to say the least, surprised to learn that the state-owned NICIL Special Purpose Unit (SPU), according to Finance Minister Winston Jordan, was seeking financing in the region of $10billion to $15billion in order to resume operations at East Demerara and Skeldon Estates. By any yardstick, this is a huge sum and we initially thought that the Minister maybe was misquoted. This, however, turned out not to be the case. Minister Jordan said that the SPU was close to finalizing the financing through an arrangement with a consortium of local banks. Our union, on this score, cannot help but wonder about the collateral that would have to be put up or the interest rates that would be demanded, among the other conditions that the banks would impose. Just some food for thought!

Aside from those important considerations we are perplexed by the need for such a large sum. We recall that GuySuCo, with seven factories under its fold, had required lesser financing from the Treasury and, therefore, we are at a loss to figure out why the need for the significant sum. Moreover, if the Minister’s comments are anything to go by, it seems that hardly any of the monies being sought would be going to the workers. The Minister, according to a Demerara Waves report, was quoted to have said “…it would have been more expensive to keep them [the estates] opening especially in the areas of staffing and costs”. Therefore, it seems that workers’ remuneration would be kept to the barest which in itself will present its own problems. Minister Jordan, who is described in the Demerara Waves report as a career economist, ought to be very au fait with the theory of labour supply and thus he would well know there is a point (wage rate) that workers would rather stay home and starve than work and starve.

It seems that that the sums being sought would be utilized towards meeting capital expenditure. If this is factual, then the figures, from our point of view, seem high. We recall that the Sugar CoI has estimated that capital expenditure for the period 2016 to 2020 for East Demerara and Skeldon would be $2.57billion and $1.151billion respectively. With those investments, the CoI concluded that two estates would have produced 39,615 and 61,744 tonnes sugar respectively by 2020. Should the additional sums be used to fund the sugar diversification projects recommended by the Sugar CoI and endorsed by our union, then, we believe, it would be shortsighted to sell rehabilitated and improved estates to allow the private owners to cream off the massive profits that could be realized from the implementation of these initiatives.

Whatever is the case, we believe, it would be difficult for NICIL to fully recover its entire investment. Therefore, in other words, the unrecovered portion of the investments being contemplated would amount to a state subsidy to the new owners apart from the other fiscal concessions that the private owners would obviously demand. It appears that the best approach would be for the state to retain ownership.

The Finance Minister, according to the Newsroom report, reportedly said in reference to resumption at East Demerara Estate, that it would operate “…for producing molasses.” We do not think that this is the best approach, especially given the possibilities of utilizing the estate’s packaging plant. The direct consumption sugar which is produced fetches a high premium. In fact, the Sugar CoI report had disclosed that this was GuySuCo’s highest priced sugar and had recommended that the plant be maximally utilized.

Also, it should not be forgotten that molasses is a remnant of sugar production. However, if it is that no sugar would be produced, as can be gleaned from the Finance Minister’s comments, it would mean that the molasses of East Demerara would be of a very high quality. This, we understand, would lend to more alcohol being produced. Disturbingly, in spite of this very positive characteristic, it would not yield any higher prices as molasses is sold by the tonne irrespective of its quality. Again this amounts to a state subsidy to the buyer of the molasses.

We also learnt that Minister Jordan expects that sale of the estates identified for privatisation would be

completed, according to a NCN report, “…in another six to nine months”. The Minister’s statement is in vast contrast to SPU privatization specialist Mr Shawn Persaud. We recall Mr Persaud is quoted in a January 26, 2018 Demerara Waves report titled ‘Enmore estate likely to remain open’,  to have said that the “…authorities could not wait two years for the estates to be sold.”  Is it nine months or two years? But the Minister added to the confusion when he said, according to NCN, that the loan the SPU is hoping to secure would be repaid in three to five years. In effect, the Finance Minister is saying that the SPU would have long disposed of the assets from which it would have derived the revenue to repay the loan it is now seeking. No prudent banker, in their rightful senses, would approve such a loan unless it is guaranteed by the government. If this is so, then this amounts to a further subsidy by the state down the road. Or, maybe it is that the Minister misspoke or is in a state of obvious confusion.

At this time too, we recognise there is a deafening silence regarding Rose Hall Estate where the people are very hard pressed and are contending with several challenges and difficulties. The GAWU noted that SPU spokesperson, Mr Alex Graham is reported in the February 19, 2018 Guyana Times as saying that if certain conditions are present at Rose Hall that the estate would also operate. Mr Graham, the Guyana Times reported, said that the availability of canes was one of those conditions. We are aware that Rose Hall has canes available for harvest. A booklet prepared by the SPU and which was shared with our union during our January 19, 2018 engagement with the government advised that Rose Hall has the possibility of producing 5,740 tonnes of sugar in the first crop and a further 8,545 tonnes during the second crop. We would be eager to know of the other conditions, using Mr Graham’s term, that East Demerara and Skeldon have satisfied and Rose Hall has not.

From the developments that are taking place, it seems to us, there is no clear, coherent plan to deal with the terrible situation brought about by the closure of sugar estates. The GAWU wishes to reiterate that the government has not truly and fully considered all the ramifications of its decisions to close estates and put thousands on the breadline. This, as we see, is clearly illustrated by the confusion that we are now seeing. While government has belaboured the support the state provided to the sugar industry, we see, in effect, possibly billions of state subsidies being provided to the potential owners and the industry’s customers. The best approach it seems was to keep the estates open and invest the billions being paid as severance to improve production and productivity, as the GAWU suggested and reiterated time and time again. This would be the least costly option before the administration than the foolhardy approach to close the estates and then, like Rip Van Winkle, wake up to the realization that the estates should have remained operable.

Yours faithfully,

Seepaul Narine

General Secretary

GAWU

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