Dear Editor,
The Guyana Sugar Corporation is compelled to respond to another political party, this time the PNCR, who along with the AFC is making irresponsible statements on the state of affairs of the sugar industry of Guyana. Whilst GuySuCo has felt the need to correct the misinformation in the press release from the PNCR dated September 25, 2008, the management of GuySuCo will not engage in, or be distracted by, any political rhetoric or political posturing with any political group or party. We will continue to work in the best interests of the corporation to ensure the survival of the industry in these very challenging times. We look forward to constructive and meaningful contributions from all of Guyana.
We consider the continuous barrage of publicity distracting and definitely distressful to our thousands of employees who from day to day toil, labour, review, strategise and effect plans to bolster our industry in difficult times. While we acknowledge that sugar has always been a political football, it ill behoves the PNCR to criticize and condemn with a litany of garbled misinformation aimed at sensationalism and finger-pointing. In particular, we are quite stunned that Mr Anthony Vieira, an old sugar man, decides to play with statistics and can get his ‘facts’ wrong. Mr Vieira heads the Parliamentary Economic Sub-Committee and we have had very open and frank discourse with the members, responding to all the issues raised. GuySuCo left the sub-committee meeting with all questions seemingly adequately answered, yet now Mr Vieira comes back at a different forum with many concerns.
Regardless of the doom and gloom soothsayers and Mr Vieira’s nihilistic tendencies, we wish to assure this nation that we are pressing on and tackling the exogenous challenges in securing the competitiveness of Guyana’s oldest and most vital economic sector. Failing to do so will be a travesty to the economy of this country and the thousands of citizens that rely on the sugar industry for their livelihoods. It is easy to criticize but it is that much more difficult to provide alternative workable alternatives taking into account the myriad of social and economic issues that characterize the sugar industry.
So let us now address these “five (5) massive failures of judgement and performance which are combining to produce the disaster that is yet to become fully understood”. We will apologise in advance if we appear to be less sensational and dramatic than many would expect in this letter, but we find it very difficult to tackle incoherence, illogic and lack of focus as typifies the latest PNCR’s missive and would therefore align our response to the facts.
1. The Board’s assumption that the sugar protocols and the preferential price for sugar could not be removed by the EU and proceeding to expand while other countries were diversifying:
It was indeed the anticipation of changing arrangements for the trade in sugar with the EU that guided the 1998 Strategic Plan and the subsequent revisions in order to secure a competitive industry. Our strategic thinking is enshrined in the Guyana National Action Plan which was viewed by the EU as one of the best plans within the ACP countries for the modernization and ongoing operation of a viable sugarcane industry.
The main pillars of the Strategic Plans are:
* adding value to our core product (retail packaging of branded sugars, refined sugar),
*expanding in cost competitive geographical areas (Berbice), and
*diversification into new sugar based products (cogeneration, ethanol/distillery).
Supplying the Caricom market with brown and refined sugar is a definite element of business going forward in so far that other countries (Trinidad, Barbados and St Kitts) were far less competitive than Guyana and our exports to Caricom were expanding each year (1,750 in 1992 to 91,000 in 2003). Our recent production shortfalls and consequent reduced exports to Caricom confirmed that our policy has been correct. Every country is anxiously awaiting our return to their markets, a reflection of our high quality products and excellent service. In a few years, ‘Demerara Gold’ has found itself on the shelves of supermarkets throughout the Caribbean and is a source of pride to the many Guyanese residing in these countries. And within the next two years, we will expand our branded sugars production more than five-fold with the commissioning of the Enmore Packaging Plant.
The ACP sugar producing states have been dealt serious blows by the EU via the unilateral price cuts and denunciation of the Sugar Protocol. Indeed, we would have been foolhardy to succumb without a fight even as we prepared for the worse outcome. If the PNCR reviews the Revised EU Sugar Regime and even the embattled EPA, it would recognize that the ACP countries are still afforded preferential conditions for sugar via duty-free quota free access and that the price guarantees until 2015 are double the world market price. Further, GuySuCo has renegotiated its EU business with added benefits via partnership arrangements.
We have never been complacent about the industry’s future. If the corporation had stuck to the 1998 Strategic Plan, we are sure that we would have been further accused of running our business in total denial of the global trade and commodity pricing dynamics.
2. Labour Reduction and Wage Bill
We challenge the PNCR to provide evidence of forced reduction of the workforce by GuySuCo. In fact, the opposite is true; low worker turnout is a major challenge we face. Wage increases are a function of inflation and while the corporation’s financial status has been crippled by the production decline, we have to offer competitive wages to secure the workforce. We are significantly affected by the migration of labour to the regional territories and North America and we have recognized that each new generation is less inclined to seek jobs that are highly labour intensive. Hence we are embarking in a major way on mechanization and improving the skill levels of our labour force to support our modernization projects.
3. Changing weather patterns
The size of the factory was determined by the required cane cultivation and will benefit from economies of scale. The cultivation has been expanded by three times the size of the original cultivation and the new factory has four times the capacity of the old factory. This will ensure that it can grind at 350 tonnes/hour, a rate that is consistent with the flow of canes from mechanized harvesting.
The factory at full capacity will grind for 25 weeks to take off the planned 1.1million tonnes of cane (350tc/hr x 22hr/day x 6 days x 25 weeks = 1.15million tonnes of cane).
It was never envisaged that year-round grinding was necessary to boost the energy supply to the national grid. The plant is designed for handling bagasse at any time. Surplus bagasse will be stored during the cropping period to be reclaimed during the out of crop. We are also investigating the commercial aspects of moving bagasse from Rosehall and Albion to Skeldon to ensure an almost year-round supply of power from green sources at Skeldon. The 10MW of installed engine generation will be available for periods when bagasse is exhausted.
It should also be noted that the new factory was not expected to run at full capacity in year one. It is expected to reach full capacity in year three and land preparation and planting is being staggered accordingly. Therefore the operation of the factory at a reduced rate or reduced weeks of operation is expected.
Mechanized chopper harvesters as well as Bell Loaders will supply the bulk of the 350tc/hr. There will still be a small amount of manually cut and loaded cane on the narrow Dutch beds of the existing estate.
Opportunity days have been a problem for the industry in the very recent past and Skeldon has been no different. The weather conditions have been such that we have three of the top five wettest years since 1990 as indicated in the table below.
Rank Year Rainfall (mm)
1 2007 20,432
2 1990 20,409
3 2005 19,875
4 2000 18,785
5 2006 18,290
19 1997 11,159
20 2001 11,004
Skeldon has been very hard hit. Opportunity days have reduced from 120 to 60 with the climatic changes. We are left with little choice but to accelerate the mechanization programme so that the crop can be taken off in as short time as possible
4. Private farmers at Skeldon
The private farmers at Skeldon have so far planted 1,030 acres of land. They are planning to plant a further 1,235 acres giving a total of 2,265 acres under cane by the end of this year. The Link Canal is in place, the farmers have gone to the commercial banks to secure $1.6 billion of funding and they are planting cane.
Whilst they have gotten off to a slower start than we would have liked, they are now moving quickly to take advantage of the new factory.
Other private farmers are not giving up the industry as can be seen by the revival of the National Cane Farming Committee and excellent performances in recent times from the farmers who have been delivering cane to the Wales factory.
5. Starving estates of capital to fund Skeldon
We are quite taken aback by the assertions on the management of our financial resources. We run a business and we have to make timely decisions when we encounter factors beyond our control. Since the great floods in 2005, we have continued to suffer from severe and unusual weather (as shown above) which continues to affect our production and has consequently reduced our revenues.
Other factors have also put pressure on our cash management, such as rising fuel and freight costs, while the price of fertilizers which are essential in agriculture, have in some cases gone up three fold.
In addition, the funding of Skeldon from GuySuCo cash flows was higher than anticipated due to lower than budgeted income from land sales arising from depressed land market in Guyana.
Rising costs of material inputs led to an increase in the project costs from US$168M to US$181M which had to be funded from GuySuCo operating cash.
However, although we have funded a significant amount in the new Skeldon Estate, we have also not forsaken the other aspects of our strategic plan such as the ongoing field conversions, investment in the packaging plant and upgrade of the Enmore factory, implementation of green fallowing, limited tillage and semi-mechanical planting, to name a few.
We have certainly not deprived other estates of capital funding. Expenditure to fund essential replacement in both the fields and the factories is ongoing, albeit in less than desired quantum. GuySuCo has started to phase out tracked machines and replaced them with wheeled tractors for tillage; we have purchased a further 32 Bell Loaders to supplement the 29 we already had. We have been upgrading the steam boilers on the estates to make them more efficient to save bagasse and use it later, rather than use oil. We have installed sophisticated instrument control systems at the Blairmont factory and installed equipment to produce the retail product Demerara Gold. Indeed, our factories have met sugar quality specifications for all our markets and, in the same period, we achieved ISO 9001 2000 quality management system certification at Blairmont.
The corporation has been rigorous in the administration of its capital expenditure programme. We have reinstigated the manufacturing of punts at the central workshop in Albion, saving close to $80,000 per punt. We have relied on the ingenuity and skill of our factory engineers to ensure that we can manage with less capital but still maintain our sugar quality and supply.
These developments are credited to the hard-working people within GuySuCo who have come on board in adopting innovative ideas to save our industry.
We must not lose sight of the fact that GuySuCo is a highly capital and labour intensive industry which leads to a high proportion of our costs being fixed. In any business the unit costs depend on production volumes, and we are no different; as our production has been affected our unit costs have risen. All the efforts of management are focused on increasing the levels of production to where they were in the years prior to the flood in 2005 and in getting back on track with our Agricultural Improvement Plan.
Once again I would like to stress that the management of GuySuCo will not engage in, or be distracted by, any political rhetoric or political posturing with any political group or party. We will continue to work in the best interests of the corporation to ensure the survival of the industry in these very challenging times.
We look forward to constructive and meaningful contributions from all of Guyana.
Yours faithfully,
Nick Jackson
Chief Executive
Guyana Sugar Corporation Inc