GuySuCo’s massive debt calls for radical surgery

September 29, 2015 By GuyanaTimes

GuySuCo Chairman, Dr Clive Thomas

Sugar industry crisis

…Uitvlugt, LBI and one Berbice Estate face possible closure – CoI leak

The future of the sugar industry in Guyana and more so that of the Guyana Sugar Corporation (GuySuCo) remains murky as the Commission of Inquiry (CoI) inexorably moves to its conclusion.

However, it is no secret that the sugar industry is long past its “splendour and glory” as the Sugar Corporation continues to encounter major financial difficulties and remains mired in seemingly insurmountable debt.

Reports are that GuySuCo is effectively ‘bankrupt’ with its total debt amounting to billions of dollars to date. For a number of years, it has been operating at a loss and has only survived because of the previous Administration’s massive subventions.

Only recently, Chairman of the Board at GuySuCo, Dr Clive Thomas, had proposed to the Administration that the interim management should remain in place until sometime in 2017.

This proposal was as a result of the Chairman’s view that the management should be in place until the end of the sugar markets agreement between Guyana and the European Union and Tate and Lyle.

When the CoI is concluded, its recommendations and findings as it relates to the future of the sugar industry in the country would result in the industry being ‘extremely different’ than it is presently.

From all indications it appears unlikely that the present status quo in GuySuCo or the industry can continue. The only question is how radical the recommendations for restricting the industry will be. It is understood from sources close to the CoI that Uitvlugt Estate on the West Coast of Demerara (WCD), La Bonne Intention (LBI) on the East Coast of Demerara (ECD) and one unnamed estate in Berbice will be closed.

The reason for the massive closure is the inability of the management to bring down the costs to a level where a profit can be made. In fact, the present cost of production means that GuySuCo – meaning Guyana – loses more money the more sugar is shipped.

Guyana Times understands that at present the Sugar Corporation is being smothered under its current debt and that the current cost of production is over 40 US cents per pound while world market prices are one third of that.

This means that the revenue that GuySuCo receives is not enough to cover its operating costs thus resulting in the Corporation suffering huge losses annually.

It was also recently disclosed that the company is running on debt financing.

In this regard, there are also overdrafts from institutions which GuySuCo borrows from, but has not been able to repay; hence, it is not considered a ‘sustainable’ situation and the company can be declared “technically” bankrupt.

The Chairman, Dr Thomas has added his voice to concerns over the level of wages, which amounts to two-thirds of the operating costs, claiming that the company cannot afford to cover its wages and salaries while servicing any of its debts. However, historically, this has always been the percentage of wages to overall costs in the industry which is extremely labour intensive. Mechanisation of operations has been mooted and implemented but the labour costs have not been reduced.

According to reports, Dr Thomas explained that with GuySuCo being technically bankrupt, the only way it can receive loans from institutions would be if the Government guarantees to repay such loans.

However, it is unclear at this time what the A Partnership for National Unity/Alliance For Change (APNU/AFC) Government will do in relation to the future of GuySuCo especially if after the CoI concludes, the estates are closed and the losses still continue to mount. (kristenm@guyanatimesgy.com)

This is why the imperative is yearly summary of performance these state enterprise are a must. This should cover holding companies as NICIL to its subsidiaries ( it should not have subsidiaries after a finite time or it becomes and investment arm of the state) and the government itself. Otherwise, why do we have a department of statistics? One cannot find what the hell those people do because they either do nothing or what they do is classified.

It is beyond irresponsible for a state to progressively run a ruinous project as this and never even pause to consider its ill effects on the state. They should have cut back a long time. A for profit private enterprise would have since it could not burden others with its debt load. This is complete mismanagement of the PPP of this industry. Now we suffer and pass the blame.

Topics

GuySuCo’s massive debt calls for radical surgery

Sugar industry crisis

…Uitvlugt, LBI and one Berbice Estate face possible closure – CoI leak

The future of the sugar industry in Guyana and more so that of the Guyana Sugar Corporation (GuySuCo) remains murky as the Commission of Inquiry (CoI) inexorably moves to its conclusion.

However, it is no secret that the sugar industry is long past its “splendour and glory” as the Sugar Corporation continues to encounter major financial difficulties and remains mired in seemingly insurmountable debt.

Reports are that GuySuCo is effectively ‘bankrupt’ with its total debt amounting to billions of dollars to date. For a number of years, it has been operating at a loss and has only survived because of the previous Administration’s massive subventions.

Only recently, Chairman of the Board at GuySuCo, Dr Clive Thomas, had proposed to the Administration that the interim management should remain in place until sometime in 2017.

This proposal was as a result of the Chairman’s view that the management should be in place until the end of the sugar markets agreement between Guyana and the European Union and Tate and Lyle.

When the CoI is concluded, its recommendations and findings as it relates to the future of the sugar industry in the country would result in the industry being ‘extremely different’ than it is presently.

The reason for the massive closure is the inability of the management to bring down the costs to a level where a profit can be made. In fact, the present cost of production means that GuySuCo – meaning Guyana – loses more money the more sugar is shipped.

Guyana Times understands that at present the Sugar Corporation is being smothered under its current debt and that the current cost of production is over 40 US cents per pound while world market prices are one third of that.

This means that the revenue that GuySuCo receives is not enough to cover its operating costs thus resulting in the Corporation suffering huge losses annually.

It was also recently disclosed that the company is running on debt financing.

In this regard, there are also overdrafts from institutions which GuySuCo borrows from, but has not been able to repay; hence, it is not considered a ‘sustainable’ situation and the company can be declared “technically” bankrupt.

According to reports, Dr Thomas explained that with GuySuCo being technically bankrupt, the only way it can receive loans from institutions would be if the Government guarantees to repay such loans.

However, it is unclear at this time what the A Partnership for National Unity/Alliance For Change (APNU/AFC) Government will do in relation to the future of GuySuCo especially if after the CoI concludes, the estates are closed and the losses still continue to mount. (kristenm@guyanatimesgy.com)