Sugar: A disastrous performance
MAY 20, 2013 · BY ·
GuySuCo’s first crop production of around 48,000 tonnes of sugar must shock the corporation and the government into action. This first crop figure is so bad that archivists will have to go tumbling around dusty records from decades ago to match these figures. The nadir that is often cited – and certainly by the then opposition PPP – is the output of 129,000 tonnes in 1990 when even the PNC would have admitted that the industry had been neglected, that the sugar levy had taken an incalculable toll on its ability to re-tool and expert management was needed. A turnaround was engineered via a management contract with Booker-Tate which saw annual production reaching around 325,000 tonnes at one point.
With the termination of the contract and a series of problems, production is veering towards the lows of the early 90s. With a first crop production of 48,000 tonnes the corporation would need 81,000 tonnes to surpass the low of 1990 and given the current performance meeting this target could be a real challenge.
If this first crop was a blip in an otherwise stellar and consistent performance then it would not have been worth remarking on. It is however representative of the quality of performance in recent years. While output tells one story the others are just as dismal: field and factory performance, worker attendance, the cost to the industry of sugar production, the increasing difficulty in sourcing crop financing and the monumental problems with the new Skeldon factory constructed by the Chinese company CNTIC.
One would have thought that given the alarming results that warning bells would have been sounded. Aside from being a major employer, sugar is an important source of foreign exchange to the country and therefore stability of the currency. Guyana’s European Union quota – its most important market – could be difficult to meet which could well mean that sugar for domestic consumption has to be imported from elsewhere. It is also vital for GuySuCo to service its Caribbean and US markets. The dire state of the corporation’s finances and annual losses mean that an extra burden is also being placed on the economy through subventions.
Given all of this, one would have expected that the government would have acted swiftly to publicise short and medium-term plans for recovery and consolidation. There has been no sign of this, save for mutterings and muted promises of improvements. One rather suspects that one of the reasons for the unwillingness to acknowledge the scale of the problem is that two persons who have had a longstanding association with the sugar sector will have a lot of explaining to do. The first is President Ramotar who was a director of the sugar corporation from 1992 up to the point of his election in 2011 – and who aside from his general lack of engagement since becoming President – has said very little about the sugar problem and has not elevated it to the top of the agenda. The other person is former President Jagdeo who during all 12 years of his presidency was heavily involved in sugar and the ultimate decision for the trouble-plagued Skeldon Sugar Modernisation Project and who it is widely believed retains significant influence in government.
The poor results of the sugar industry and the direction it has been headed in have been spoken about for years by economists and others knowledgeable about the industry. The government has not taken sufficient heed. The vital role that sugar has played in the economy of pre and post-independent Guyana is undeniable and the threat it now faces requires careful analysis followed by judicious decisions.
On July 24, 2011, in one of his magisterial pieces in the Sunday Stabroek, economist Dr Clive Thomas had pointed to the Tonnes Sugar Per Hectare (TS/HA) indicator of the industry since 1990. According to figures he gleaned from various GuySuCo reports, the TS/HA for the disastrous year of 1990 was 3.46 and this measurement of yield improved to 7.29 in 2002 but fell significantly to 4.93 in 2009. As an aside, he pointed out that even higher yields had been attained in 1960 of around 8.4. Field performance had obviously been a problem and more and more cane each year was being used up to produce a tonne of valuable sugar and consequently the cost of producing went up.
In another of his pieces in the Sunday Stabroek of November 18, 2012, Dr Thomas had referenced an unnamed document which analysed the industry in the early 2000s and which made dire findings to the effect that GuySuCo was 1) “spending more to produce less”; 2) the direct costs of sugar production were rising alarmingly; and 3) the same is true for administration/ marketing/distribution costs. The document had further warned that “In order for Guysuco to breakeven … assuming a production range of 300-330,000 tons, it would have to achieve a truly miraculous turnaround given the fact that it has not been able to reach a breakeven position even with the Sugar Protocol prices over the last four years consistently.”
It then made the dire prognosis that: “From whichever angle we approach the problem of achieving a viable result, all the various simulations/scenarios demonstrate that GuySuCo is heading inexorably towards financial disaster and ruin.”
Dr Thomas had this to say about the prognosis “This is an extremely harsh prediction. A decade later, however, the basic position of GuySuCo has not improved. Despite taxpayers’ bailout funds and EU donor support for sugar (conscience money) after its unilateral denunciation of the (Sugar Protocol), the tide has not been turned. I therefore continue to question the folly of throwing good money after bad. In the interest of all Guyanese, GuySuCo cannot continue to be treated as a sacred cow, beyond rational debate.”
Other valuable inputs on the state of the industry have been made by Mr Anthony Vieira who worked in sugar for some time. In a letter to this newspaper on March 22, 2013 on the performance of the industry last year, Mr Vieira noted that the total industry production for the year 2012 was 218,069 tons, the lowest in over two decades. The production of the Skeldon factory, the centrepiece of massive expenditure by the Jagdeo administration, was a total of 33,309 tonnes of sugar. Albion for comparison sake produced 54,022 tons. “By this time, according to all of GuySuCo’s projections, Skeldon should be producing 100,000 tons of sugar”, he noted.
“The disaster that is the Skeldon Sugar Modernisation Project [SSMP] continues and the time has come to ask if it is viable? At the very least a commission of enquiry should be set up to examine what has happened? and what is the way forward if in fact there is one”, Mr Vieira said. He provided figures to show that both factory and field data for Skeldon were deplorable and for the industry as a whole below what was competitive globally.
He disclosed that the yield per hectare of sugar at Skeldon was 2.81 tonnes, the lowest in the industry. Albion by comparison yielded 5.35 tonnes sugar per hectare in 2012 while the recent 30 years average was 6.17 tons sugar per hectare.
If one were to revisit Chapter Nine of Guyana’s shelved National Development Strategy on sugar which had its beginnings in 1997 one could see the cautionary tales and bright spots embedded within a larger framework which was dependent on a series of comprehensive changes in the way the entire industry from Demerara to Berbice was operated. It appeared to be a well thought out plan which is what is needed for industries like sugar which are at the mercy of vagaries both here and abroad. Whether it would have worked is certainly debatable but it had the feel of a plan which relegated politicians and political decisions to distant realms. Political intrusions and the unwillingness to make difficult choices may well be part of the reason for the present state of the industry.
The parlous state of sugar requires urgent attention. It is for the government and Parliament to seriously grapple with it. What is the right size of the industry and where is the cost of production so prohibitive and output so low it isn’t worth continuing? Are workers migrating from the industry and not being replaced by a new generation which doesn’t see a future in sugar? What can be done about the disastrous performance of the Skeldon factory and why hasn’t there been an attempt to recover the drastic losses from the contractor? Is the financial plight of GuySuCo leading to decisions which will further undermine the industry like less expenditure on fertilizers and maintenance of fields? How will the labour cost to the industry be addressed? How can field and factory performance be improved? How will the recurring problem of insufficient cane in the field and factory be tackled?
President Ramotar has a special responsibility in addressing the sugar industry and the public awaits a statement setting out a policy for the short and medium term which will form the basis of a new blueprint for GuySuCo.
