$$Billions more lost in sugar industry–GuySuCo
-State company to appeal to Govt. for $3.5B bailout again before December
By Kiana Wilburg
An increase in debt is what Government will be harvesting from the Guyana Sugar Corporation (GuySuCo) although it ploughed a whopping $21 Billion into the sector since assuming office.
GuySuCo Chairman,
Dr. Clive Thomas
According to members of the GuySuCo Board, the entity is projected to make a loss of over $10B this year.
In fact, the company is once again in dire need of millions in bailout before the end of the year. It is expected to approach the Government for some $3.5B to stay afloat. Board members expressed deep worry yesterday, stating that the Government at this time seems unwilling to do so.
Kaieteur News understands that GuySuCo had approached the Government even before the end of the first half of the year for extra funds as it had exhausted its budgetary sum of $9B. But the administration did not give in.
GuySuCo officials are worried about what Government’s response will be this time around. “We need the bailout now more than ever,” one prominent Board Member expressed.
IMF WARNING
The Government, however, appears to be taking a rather cautious approach to its bailouts to the sector especially since it was warned earlier this year by the International Monetary Fund (IMF) to be cautious about its financing to certain sectors.
With particular reference to the Guyana Sugar Corporation, Executive Members of the IMF said they were pleased to learn from authorities here that budget transfers are expected to steadily decline and eventually cease over the medium term.
Finance Minister, Winston Jordan
The officials found that transfers to GuySuCo were equivalent to 1.8 percent of the nation’s Gross Domestic Product (GDP) in 2015 and are budgeted at about 1.3 percent of GDP for 2016.
The IMF Executive Members urged the Government however 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 (CoI) into the state entity.
They said that while the initial steps taken in that direction are welcomed, scope and pace of reform should take into account social implications.
POOR PRODUCTION
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.
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 2016, 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 realized in the same period last year.
IMF Head, Christine Lagarde
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 realize sufficient cash to cover its operating costs.
The Ministry said, “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.”
WORRIED STAKEHOLDERS
Various stakeholders within the industry gathered for an important meeting yesterday 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 Corporation’s 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.
In addition to a $12Billion subsidy received from the government in 2015 and $ 9Billion in 2016, the Corporation said it is seeking an additional subsidy of $3.5Billion for this year. Further, the Corporation has projected a cash deficit in 2017 and will be seeking a cash injection of $18.59 Billion for 2017 from the government if the status quo remains.
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.
It was also agreed that a committee which was established some years ago, comprising representatives of the workers and management on each estate would be re-established to address constraints to production.
It is expected that the process which started yesterday would continue with a view to the parties committing themselves to finding solutions to the challenges which lie ahead.