Sugar as scapegoat

With the Commission of Inquiry into the travails of sugar, a former Chairman of GuySuCo, Vic Oudit has been the most recent of many to take pot shots at the modernising of the sugar industry. And he will not be the last: there has been a plethora of criticism ranging from why was the particular contractor selected – as Mr Oudit complained – to why modernisation was considered necessary in the first place.

But what they will not say, especially those from the then Opposition benches, is when the Strategic Plan was released in 1998 and proposed the modernisation beginning with Skeldon and continuing with Albion and Blairmont, no one in the Opposition said a word. And Moses Nagamootoo and Khemraj Ramjattan who were in the PPP at the time were fulsome in their praise: Berbice, the centre of the sugar expansion that would include co-generation, a sugar refinery and a distillery, was their backyard.

While it has been said hindsight is always 20/20, the questions generally ignore the situation as it was in 1998. We must not only take this plan into consideration as a matter of historical clarification, but as a practical exercise that might shed some light on a path for the industry going forward.

The goal of the plan was to increase production of sugar from the 350,000+ tonnes that the industry would achieve the following year, to a new plateau approaching 500,000 tonnes annually. The major justification for this decision was that the European Union had signed the Lome Protocol which guaranteed Guyana a market for at least 167,000 tonnes at a price far above the world market levels. And this agreement was promised to exist “in perpetuity”.

With hindsight, one can assert that “nothing lasts forever”, but at the time, no one could believe that the Europeans would unilaterally walk away from a contract signed when the price was very attractive to them and secondly, which benefited their very powerful beet sugar producers. Also, at that time, sugar markets were dominated by agreements exemplified by Lome and the world market’s very low price was actually a residual price that bore very little relation to fundamental supply and demand for the commodity.

But even with the attractive European price, it was conceded that Guyana was a high-cost sugar producer and needed to lower those costs to generate even higher profits. Efficiencies of scale were one way to bring down production costs while focusing the expansion in Berbice, which historically had always been the lowest-cost production region because of more optimum soils and shorter periods of rainfall. Albion at that time was the most efficient and modern factory, while the 1998 Strategic Plan considered its expansion, there were insufficient available new lands to provide canes for any expansion.

Skeldon, on the other hand, had the oldest factory that in any event would soon need to be replaced and additionally, was surrounded by large swathes of suitable land. More to the point, the land was going to be in private hands which satisfied the World Bank’s demand that at least 30 per cent of the canes for the expanded production come from this source and that monies were not to be spent on the other factories. And this, in a nutshell, was the reason for the Skeldon Modernisation Project. The present critics completely ignore the fact that the World Bank signed off on the Project.

While the Opposition has been very vocal in its criticisms of the Project, it was completely mute even after implementation kicked off in 2004. By that time, the Economic Services Committee, in which the Opposition alternated the chair with the Government, grilled executives of GuySuCo on several occasions. It was also mute on the concessional financing by China Ex-Im Bank which led to the selection of CNTIC as the Skeldon Contractor.

The fundamentals of the Project were sound and we should not scapegoat sugar because of cheap politics.