Five “massive failures of judgement and performance” in the sugar industry are combining to produce what appears to be one of the biggest economic disasters in this country’s history, the PNCR said yesterday.
In a statement read at its weekly press briefing, the main opposition party said that neither the strikes by sugar workers nor the teething problems in the start up of the new US$181 million Skeldon factory could be blamed for the industry’s current predicament.
Nor can any blame be attached to Booker Tate on the matter of high wages, it contended, adding that the blame game gives the sugar corporation an excuse to buy time.
The PNCR statement was read by MP Anthony Vieira at Congress Place.
The first failure, the party said, was that GuySuCo’s strategic plan wrongly assumed that the European Union (EU) could not remove the sugar protocols and the preferential price of sugar. The second major problem, the PNCR said, was that huge wage increases were given to sugar workers, forcing a reduction of the labour force, as the corporation could not sustain it. The other three issues were changing weather patterns, which hindered the expansion of cane cultivation; private cane farmers not getting on board as expected; and GuySuCo depriving other estates of funding to complete the Skeldon expansion and modernization programme.
The GuySuCo 1998-2008 strategic plan, the statement said, expanded the industry “with money we did not have” while Trinidad and Tobago, Jamaica and other African, Caribbean and Pacific (ACP) countries were diversifying and minimising their sugar industries.
The party quoted the plan as stating, “The sugar protocol is of indefinite duration and cannot be changed unilaterally and is likely to remain a secure access… The assumption made in this review is that the SPS (Special Preferential Sugar) agreement will be renewed.” The EU has since unilaterally and controversially repudiated the Sugar Protocol, which gave ACP countries sugar markets at preferential prices. It ends on September 30, 2009.
Wages
Between 1990 and 2006, the PNCR said, huge wage increases were given to the sugar workers, which “GuySuCo could not pay and be competitive in international markets, even with a preferential price.” This forced GuySuCo to reduce the workforce by 10,000 workers between 1998 and 2008, but in reducing the workforce so drastically and rapidly, the party said, the corporation created a large-scale shortage of labour in the industry, which is plaguing it today. “What is incredible is that even though they reduced the workforce from 28,000 in 1992 to around 14,000 now, with an estimated 4000 casual workers, the wage bill still keeps rising drastically whilst the price of sugar is falling,” the party said.
The PNCR said that in 1990 the sugar industry’s wages was $980 million, but after contracting Booker Tate to run the company and to counter the effects of then president Desmond Hoyte’s Economic Recovery Programme (ERP), salaries went up to $2.7 billion in 1991, a nearly 300 per cent increase. In 1992, salaries were hiked significantly again by Booker Tate to $4.8 billion. After taking office and not understanding that the sugar workers salaries were already adjusted for the ERP, the government continued the increases, which raised the sugar industry’s wage bill to $12 billion dollars by 2000, “a completely irresponsible act,” the statement said.
The PNCR said that in 2002, the previous chairman of the board Vic Oditt had said that employment costs were now so high the viability of the industry was threatened, but the escalation of the wages bill has not stopped. In 2006, the wages bill was $6.6 billion. Since 2001 the sugar industry’s wage bill amounted to over 63 per cent of total costs, the party said.
However, the strategic plan said, “efficiencies have improved immensely and, although overall employment has reduced from 28,000 to 18,000 the increased output means that an annual employee productivity, measured in terms of tonnes sugar per employee has improved from under 6 [tonnes per employee] to nearer 17 tonnes [per employee] in 1999. The corporation intends to continue this improvement in performance through the strategy outlined in the following pages,“ clearly therefore they knowingly and deliberately reduced the workforce by 10,000 employees, the PNCR said.
Weather
The changing weather pattern is now a huge hindrance to the expansion, especially the mechanisation aspects of the expansion of the cane cultivation necessary to supply the new 350-tonne per hour factory with cane, the PNCR said, adding that it did not think people really understood what the bigger factory meant in real terms.
Explaining the situation as the party views it, Vieira said the current loading at Skeldon today is around 310 punts or around 1,800 tonnes a day. The old Skeldon factory can grind at around 93 tonnes an hour and to grind continuously it requires 2,232 tonnes a day. The new factory would have the capacity to grind at 350 tonnes an hour and it would require 8,400 tonnes a day.
Last year, he said, the Skeldon Factory, according to GuySuCo’s own figures, ground around 64% of the time available to it during the two crop seasons owing to shortage of labour and bad weather, which prevented the machines from reaping and loading the canes, causing most of the stoppages. The bad weather also hampered field expansion and planting. This year, Berbice was budgeted to plough 2,500 acres it only ploughed around 700 acres.
Vieira said even Minister of Agriculture Robert Persaud and GuySuCo have now agreed that the weather was not allowing them to proceed with the expansion plans. At present, he said, there was not enough sugarcane for that new factory to operate successfully.
Even if the new factory had started on time, he said, it would only be able to grind around 20 weeks a year. The PNCR-1G, he said, was amused at the claim that the Skeldon factory would be co-generating power, because it would only be giving power for about 20 weeks a year, and if the labour shortages continued with high rainfall preventing the machines from harvesting the canes, there would be no continuous grinding and as a consequence very little surplus power for supplying electrical power to the consumers of the Guyana Power and Light (GPL).
Vieira said farmers did not take up the challenge of planting 10,000 acres, which is equal to the size of the entire Skeldon cultivation prior to the expansion, because the price of sugar was reduced owing to the loss of the European protocols. They have planted less than 400 acres.
“This entire project is looking more and more like the biggest economic disaster this nation has ever experienced,” he said.
The party statement said too, that in 2005, when the Albion estate asked for $529 million for its capital works, it was given $183 million and when the Rose Hall estate asked for $414 million, it was given $193 million to keep the industry competitive. At the same time, the statement noted, the country was told that industry had to produce at 12 cents a pound to be competitive.
However, at present Skeldon produces at 30 cents per pound; Albion at 19 cents; Rose Hall at 19 cents; Blairmont at 18 cents; Enmore, 17 cents; LBI, 26 cents; Wales ,23 cents; and ICBU 41 cents.
It noted that contrary to GuySuCo’s projections, the Enmore estate has the lowest cost per tonne in the industry.
Depressing
Amid the start-up fiasco with the new Skeldon sugar factory, Agriculture Minister Robert Persaud recently told Stabroek News that the latest industry output figures were depressing and the excuses being offered by GuySuCo are not good enough.
The non-commissioning of the new US$181 million Skeldon sugar factory which initially had been due to grind sugar for the first and second crops this year is seen as the major factor in the revision of this year’s sugar projection from an ambitious 350,000 tonnes to 285,000 tonnes. With the ongoing woes in the industry even this figure is not likely to be met.
The government in August announced that a review of the sugar industry would be commissioned for the period 1997-2008 in light of falling production. There have also been increasing questions about the stewardship of GuySuCo which has been under the management of Booker Tate since the early 1990s.
Though he did not give any figures, Minister Persaud told Stabroek News on Saturday that the excuse of industrial action including strikes could not account for the significant drop in production and the consequent loss of much needed revenue at a time when sugar prices are being slashed on the European market.
The new Skeldon factory, built by the CNTIC of China, has not been commissioned because of technical failures – not deemed to be major by the Guysuco administration but still important enough to delay production and cause the loss of substantial revenue for which liquidated damages in the sum of US$5 million could be imposed on the contractors.
Initially the Guyana Sugar Corporation (GuySuCo) had set a production target of 350,000 tonnes for 2008 on the expectation that the new Skeldon factory would have been up and running in time for the harvesting of the first crop earlier this year. When this was not achievable the figures were revised.
The Berbice estates, including Skeldon, were expected to account for 181,953 tonnes and the Demerara estates, 102,861 tonnes.
The Alliance For Change also expressed grave concern two weeks ago over the Skeldon project.
