October 27,2016 Source

When it comes to the future of the sugar industry, it appears that the coalition Government will be in for

Finance Minister, Winston Jordan

quite a balancing act.
On one hand, Government is saddled with the Guyana Sugar Corporation (GuySuCo), a state entity managing a sector that gobbles up in no time, its annual budgetary allocations before the end of the fiscal year.
As such, GuySuCo is constantly stretching its hand for more tax dollars. For political and social reasons, the Government grants the requests for bailouts.
On the other hand, the Government must satisfy the International Monetary Fund (IMF). The administration promised the IMF that bailouts to the sector would be reduced.The IMF documented this in its Article IV Consultation report in March, last. The report said that according to the authorities in Guyana, planned budget transfers for the sugar industry have been substantially reduced for 2016 and are expected to steadily decline and eventually cease over the medium term.The IMF also noted that transfers to the loss-making state-owned sugar company (GuySuCo) remain a drag on fiscal performance.In its report, it noted that transfers to GuySuCo were equivalent to 1.8 percent of GDP in 2015 and are budgeted at about 1. 3 percent of GDP for 2016.IMF Staff urged the local authorities to adopt a restructuring plan for the sector that will improve cost efficiency, productivity, and alternative revenues streams, drawing upon the reforms proposed by the Commission of Inquiry into GuySuCo. It said, too, that the scope and pace of reform should take into account social implications.

BAILOUT
In spite of receiving a whopping $9B at the start of the year, GuySuCo recently appealed to the Government for a further $3.5B.At today’s sitting of the National Assembly , Members of Parliament are expected to consider Financial Paper No. 3/2016 – Supplementary Estimates (Current and Capital) totaling $9,518,122,347. It is expected to be presented by Finance Minister, Winston Jordan. Of that $9B, Government is expected to be giving GuySuCo some $2B. Further, the Corporation has projected a cash deficit in 2017 and will be seeking a cash injection of $18.59 Billion from the government if the status quo remains.

HARD ROCK, DEEP SEA

Agriculture Minister, Noel Holder

Prime Minister, Moses Nagamootoo told this newspaper last night that the Government has perhaps found itself between ‘a hard rock and a deep sea.’The First Vice President said, “We will not allow the sugar industry to perish even though we have inherited it critically afflicted with the disease of mismanagement and indebtedness.”Nagamootoo added, “We understand that bailouts to the industry are unsustainable but until and unless a viable and definitive alternative is found, periodic intervention to keep the industry afloat is necessary even on the humanitarian grounds of preventing sugar workers from going on the breadline as has happened in many countries.”
The Prime Minister said that for the time being, he would not comment on the promise made to the IMF. “But Government is hurting; Guyana is hurting from this drain of public monies into the sugar industry. We need to have a critical understanding of when the former president Bharrat Jagdeo said that without Skeledon, sugar is dead.“US$200M later and what we have now is a white elephant.”
Nagamootoo said that Government is essentially carrying Jagdeo’s burden. He said that it is the Government’s hope, that the sugar workers and their unions would understand that and not make the situation worse.
“Being a labour person and coming out of the struggles of sugar workers, it is difficult and it is hard; (Government) is between a hard rock and a deep sea. We are trying to bite the bullet not withstanding that we are courting trouble. But sugar is too important to abandon at this time,” the Prime Minister added.Finance Minister, Winston Jordan said that he is awaiting the presentation of a paper by the Minister of Agriculture, Noel Holder to Cabinet. He said that the paper is based on the realignment of the sugar industry.

DISAPPOINTING PERFORMANCE
According to statistics from the Ministry of Finance for the first half of the year, the Guyana Sugar Corporation recorded an operating surplus of $2.9 billion, down from an operating surplus of $3.0 billion for the same period last year. This surplus it said was inflated by a $9 billion transfer from the Central Government to finance operations.

Prime Minister,
Moses Nagamootoo

Without this transfer, the Ministry of Finance noted that GuySuCo’s true position would be a deficit of $6 billion.In the future, the Finance Ministry said that all Central Government transfers will be shown as financing, instead of being included as part of revenues.Furthermore, it was noted that by the end of the first half of this year, GuySuCo’s production was 56,645 tonnes. This was recorded as a reduction of 23,624 tonnes from the budgeted 80,269 tonnes and also down from 2015’s half year production of 81,143 tonnes.The Ministry of Finance said that this shortfall was reflected in a decline in export sales, from a budgeted amount of 58,272 tonnes to an actual of 49,278 tonnes, compared with 77,000 tonnes realised in the same period last year.It noted that the El Niño weather phenomenon, which resulted in stunted cane growth and a decline in cane yields from 57.45 tonnes cane per hectare (tc/ha) in the first crop of 2015 to 45.2 tc/ha in 2016, as well as delays in tillage, planting, and crop husbandry operations, were some of the factors that contributed to this state of affairs.
Significantly, the Ministry of Finance said that sales to Caricom and the European Union (EU) of bagged sugar as well as sales to Caricom of Packaged Gold sugar were the most affected.It said that the industry continues to be plagued by many problems, including an increase in the prices of several inputs such as fertilizers, and these have had a negative effect on the company’s ability to realise sufficient cash to cover its operating costs.
The Ministry stated, “GuySuCo has taken several steps to address some of its challenges, including negotiating with Tate and Lyle for better prices for sales to the EU market; pursuing studies to inform diversification into areas such as other crops, fruits, aquaculture, rice, dairy and livestock to reduce dependence on sugar; and rationalizing its operations for increased efficiency and productivity.”
Additionally, various stakeholders within the industry recently gathered for an important meeting which saw discussions on the worrying financial future of the sugar industry.The stakeholders included a high level team from GuySuCo as well as representatives from the Guyana Agricultural and General Workers Union (GAWU), the National Association of Agricultural, Commercial and Industrial Employees (NAACIE) and the Guyana Labour Union (GLU).
Kaieteur News understands that a comprehensive presentation was done by the GuySuCo team, where the 47 representatives were provided with production and financial data from 2010 to year 2025.
The information presented indicated a very discouraging future for the sugar industry, where the Corporation is projecting losses of approximately $14.195 Billion in 2016 and further losses of $13.758 Billion in 2017.
The participants were advised that this situation was unsustainable and re-organization of the sugar industry was inevitable and absolutely necessary at this time.The Unions representatives were encouraged to submit their thoughts on how the industry could secure the future well-being of the approximately 17,000 employees and their families as well as ensuring the profitability of the business.It was subsequently agreed that a team comprising representatives from the three Unions would meet with a team from GuySuCo to get a deeper appreciation of the financial and other data which were provided.