GuySuCo has passed ‘point of no return’
– economist warns of continued bailouts
Days after closing off with its worst performance in over two decades, there are now beliefs that the sugar industry has passed the point of no return.
Writing in his Sunday column in the Stabroek News, economist Dr. Clive Thomas, was more than convinced that the crisis in the sugar industry has passed its tipping-point or point of no return. “This means that all hopes for a rational, considered and ordered reform and reconstruction of the industry are lost.”
Economist,
Dr. Clive Thomas
His column was entitled, “The Guyana Sugar Industry: The Point of No Return”.
Last year, the industry recorded a 23-year-low of 186,807, below its reduced 190,000 tonnes target. At the end of the year, the Guyana Sugar Corporation owed suppliers and banks in excess of $10B.
With over $5B in bailout monies to the industry last year, Dr. Thomas, who has been analyzing GuySuCo situation in several of the columns, expressed alarm.
“…the present configuration of the industry is leading it to produce less and less sugar at a higher and higher cost! Given the inevitably resultant losses, this is clearly an unsustainable commercial dynamic for GuySuCo’s operations. 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, Thomas said. “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.”
The economist argued that as a rule, all industries and businesses go through life cycle changes. GuySuCo and the wider sugar industry are at the industrial life cycle stage of post maturity and long-term secular decline he said.
“As presently configured the country’s sugar business can no longer go forward as a viable commercial endeavour.”
Thomas pointed to several of his articles, one of which focused on how deep-seated the defects and deficiencies in the present sugar industry are.
He warned that the sugar industry, as it is now, has serious implications for the country’s economic structure.
“Here the limitations of the sugar sector are clearly revealed. Over the decades, sugar’s contribution to GDP, export earnings, and tax revenue has fallen well behind that of other traditional commodity sectors such as gold, rice, and bauxite, as well as the services sector.”
Regarding the huge sums of money that had been allocated to the sugar industry by the European Union (EU), Dr. Thomas urged that they must be seen in the light of the additional massive bailouts provided by the Government of Guyana to GuySuCo in recent years.
Government has remained largely quiet on its plans for the industry this year. Already, there have been calls for parts of the industry to be privatized, including the flagship Skeldon factory.
Government has not held anyone accountable for the poorly run industry and despite indications from President Donald Ramotar that he would have started making changes last year, commencing with the Board of Directors, there has been no such movements.
The Skeldon project, to the tune of US$200M, has been a major embarrassment, with a number of defects affecting performance. While it had targeted 43,482 tonnes at the beginning of 2013, actual production at December 21 was a miserly 25,380 tonnes.
GuySuCo, with over 16,000 workers, had been looking for foreign management, discarding UK-based Tate and Lyle and now experimenting with a number of Indian experts at its Enmore factory.
Last month, the National Assembly approved a $4B bailout to help pay its 16,000-plus workers and meet other critical expenditure.
Once the ‘sweet king’, earning the hog’s share of foreign exchange, sugar has slid to third, behind gold and rice.
The Corporation is facing the squeeze from its suppliers, with a number of them refusing to extend more credit. Hard-hit are supplies of spares and fertilizers.
The main union has blamed agriculture for a large part of the problems with low yields affecting production. The Alliance For Change has called for the immediate sacking of the entire GuySuCo board and replacing of management.
Last month, after days of strike action, GuySuCo agreed to pay its workers their annual production incentive. This will be done in two parts, during the first quarter of this year. The Opposition, during the 2013 National Budget debate, had demanded an updated recovery plan for GuySuCo to be laid in the National Assembly.
