GuySuCo: The Debate, The Facts

by Jermaine Grant

FACT: Sugar accounts for 20% of GDP and 40% in Agricultural GDP

GuySuCo in 1992:  GuySuCo made a profit before taxes and levy of $5.4 billion, with the  total labour costs for the sugar industry being $4.9 billion – C.  Kenrick Hunte [Stabroek News, December 2010]

GuySuCo TODAY:

Recent government bailouts and investments at the expense of taxpayers:

May 2011 – Severance for Diamond sugar workers: $300M

May 2011 – Sugar Packaging facility: US$12M

February 2011 – government payout to service corporation debt: $1B

December 2010 – 5% across increase for sugar workers:  $720M

December 2010 – GuySuCo land sale to the government: $4B

August 2009 – commissioning of the now malfunctioning Skeldon Sugar Factory: US$200M

Debts:

A  debt of US$4M (G$800M) to ING Bank of the Netherlands and an overdraft  of G$3.2 billion at local commercial banks [Guyana Chronicle, December  2010]

Profitability?!:

• Profits  during President Jagan’s period in office (1992-1997) averaged $3.6  billion per year before taxes and levy, with an average wage cost of  $7.8 billion per year.
• After President’s Jagan’s death profits turned to  losses, averaging $0.4 billion per year, with average wage cost  increasing from $7.8 billion to $14.6 billion per year during the period  1998-2009 – C. Kenrick Hunte [Stabroek News, December 2010]

• The  Guyana Sugar Corporation (GuySuCo) recorded an operating profit of $85  million in 2009 compared to the $4.5 billion operating loss it recorded  the previous year, while cutting its loss before tax to $1.9 billion  against the $6.2 billion loss recorded in 2008. [Stabroek News, August  2010]

• Headlined by a whopping loss of $4.08b,  GuySuCo’s Annual Report for 2008 lays bare the enormous challenge that  sugar faces in coming to grips with the fundamental changes in the  European market and the re-jigging of the local sugar industry vis-a-vis  the new Skeldon factory.
•  The 2008 loss was the second highest in the  last decade, the largest being the $4.3b in 2003. [Stabroek News, August  2009]

RECENT CHALLENGES & MALAISE

Dwindling of Preference and markets/Trade Liberalization:

• WTO-compatible  Economic Partnership Agreement (EPA) that provides for substantial  liberalization of market access for both goods and services and replaces  the non-reciprocal preferential trade arrangements which existed  previously under the LOME and Cotonou Conventions with ACP/CARIFORUM  inclusive of Guyana. [WTO 2009]

• Elimination of  sugar duty and quotas (2009–15): The CARIFORUM-EU Economic Partnership  Agreement (EPA) concluded in October 2008 ensures that sugar will be  duty and quota free, starting in October 2009. A transitional safeguard  mechanism would apply for the next 6 years, which would limit exports  from Guyana in the event of a risk of serious damage to the EU sugar  industry. [IMF 2010]

Unable to meet local and regional demands:

• GuySuCo  has imported about 14, 000 tonnes of sugar from Guatemala at a cost of  US$450 per tonne (from January to October 2009) – Paul Bhim, Finance  Director [Stabroek News, October 2009]

Constant costly workers strikes:

• 249  strikes without notice hit the industry (in 2010), a total of 96,790  man hours lost; for every week that you have the strike $1billion is  almost lost – N. Gopal [GINA, December 2010]

Corruption and Excesses:

• General  Manager of the Skeldon Sugar Factory resigned amidst allegations of  misappropriation of property belonging to the Guyana Sugar Corporation  (GuySuCo). Air condition units, among other things, were found at his  Turkeyen home, East Coast Demerara. The units were said to belong to the  estate. Additionally, there were swirling questions over a tractor  belonging to the estate that was sold for $3M but reflected on receipts  as $30,000. There were also questions over furniture that was purchased  for the estate but instead were allegedly sent elsewhere. [Kaieteur  News, September 2010]

• GuySuCo fired its  Materials Manager Aasrodeen Shaw after it was alleged he was found  guilty of breaching the corporation’s procurement procedures in  purchasing electrodes. This had resulted in a halt in the Corporation’s  operations section – Nanda Gopal [Stabroek News, May 2010]

• (Former)  Chief Executive Officer of Guyana Sugar Corporation, Errol Hanoman,  earns a salary of some $2.5 million per month [Kaieteur News, December  2009]

• An Engineer and expatriate at the Guyana  Sugar Corporation is being paid salary and allowances amounting to $2.5M  monthly in addition to what could be considered perks, thus taking his  monthly earnings beyond $3 million per month [Kaieteur News, December  2009]

Politicization of corporation:

Chairman  of the Board is Dr. Nanda Gopaul, who is also Chairman of the Public  Service Commission and Chairman of the Board of Director of the New  Building Society.

Other members include

GAWU President and Central  Executive Committee member of PPP, Mr. Komal Chand and

 Ms. Geeta  Singh-Knight, of the Clico collapse infamy,

Donald Ramotar, General  Secretary and Presidential candidate of PPP [Stabroek News Letter, April  2011]

OPINION:

In diversification  GuySuCo needs to address production cost in challenges identified and  expedite mechanization to done away with costly manual labour that  hamstring the industry especially with constant go-slow and workers’  protest. With mechanization the cost of production will decrease, the  cost of the commodity will decrease and the sector will become globally  competition to secure markets as preferences are phased out.

On  corruption, it is believed with privatization this can be address since  government will not be directly engaged in the day-to-day management of  the company in politicization and in that we can see a brew of  professional attitudes in the company that would complement staff  productivity and efficiency in the sector. If not privatized government  needs to be removed totally from the day-to-day management of the  corporation by recruiting professionals competent on the sector or a  firm with the know-how in sugar management that is cost effective. This  does not recuse a role for government in having shares or input in the  business of the sector to ensure national interest is not compromised in  a NEW GuySuCo.

In all of this what will happen to the  sugar workers? Well, I believe as estates of past have closed many had  contended to collect their severances and go their own way. So, this can  be rationalize for some employees complemented with land for former  cane-cutters who may have interest in subsistence farming (in  agricultural development) and even form cooperatives to purchase old  estate lands to harvest sugar cane (in expanding sugar privatization).  Thus, we see empowerment of the cane-cutters from a labourer to the land  to ownership of lands. For other employees that remain in the sector  they can be trained for a NEW GuySuCo that should be totally mechanized  to man equipment and other technical development to sustain the sector.

GuySuCo  is already in some sense on a path of diversification but still  operating in losses and deficit. At the heart of this is the high cost  of production being operational cost in paying employees and loss of  production due to constant protest that hamstring the industry.

NB:  On the PNC and sugar it is important to note that it was under the  Forbes Burnham administration that the industry was nationalized (in  1973) to avoid capital flight and neo-colonialist and imperialist  tendencies in Guyana.

Further, it was under his administration that  Guyana negotiated and secured guarantee markets and preferences for  sugar in the context of the African Caribbean and Pacific (ACP) bloc  under the Lome Conventions.

Markets were also secured in CARICOM in the  context of regional integration with a common market initiative now  single market.

Burnham was one of the four founding fathers of CARICOM. 

Thus, arguments that proposal by the PNC is callous to the sector and  sugar workers can be deemed fallible noting its history to defend sugar  and sugar workers and safe guard the industry.