The way forward for sugar
Part 1
Introduction
In this column and next week’s, I shall undertake the final task in this series on Guyana’s sugar industry. I shall present, as succinctly as I can, my recommendation for a way forward. While I believe this recommendation is workable, it is vital nonetheless for readers to keep in mind the context in which it is framed. This context has four defining features.
First, all the preceding columns in the series have sought to establish how deep and complex is the crisis confronting the industry. Despite statements emanating from industry spokespersons, this series was never designed as an “attack” on the industry or those responsible for its policy-making and management. The driving consideration has always been to make readers aware that, to the best of my professional judgement, the sugar industry, as presently configured, has been so badly beaten down that it can no longer be reasonably expected to play a transformative role in Guyana’s agricultural, rural, or economy-wide development.
Having said that however, I remain firmly convinced that, the assets under the control of GuySuCo, if properly utilized, have the potential to play a transformative role in the creation of new business enterprises producing diversified and value-added foodstuffs and beverages; recreation and leisure activities; agricultural tourism; housing and settlements; as well as some residual raw sugar.
Second, GuySuCo’s beaten-down status, which has been arrived at during recent decades should not be underestimated. This is revealed in 1) the current abysmal production lows (less than 200,000 tonnes last year); 2) huge indebtedness (about $90 billion); 3) loss making of the order of $4-6 billion annually; and 4) dependence on government and European Union (EU) bailouts (the latter to the tune of €92 million).
Further, if one carefully examines the industry’s Strategic Plan (2013-17), it can be seen that its major targets are unlikely to be achieved. Thus sugar output is improbably projected at 251,000 tonnes for this year; 313,000 tonnes for next year (2015); and, reaching as much as 350,000 tonnes by 2017! Furthermore, unit costs of producing raw sugar are projected at 35 US cents per lb this year; falling to 28 US cents by 2017; while GuySuCo’s indebtedness is projected to remain at $90 billion right up to 2017.
Spokespersons for the industry spend an enormous amount of public time and resources ‘spinning’ this grim reality and criticizing those whom they label as “critics” of the industry, because they have a lot of bad things to hide.
Third, in my earlier presentation of what I have labelled as “other proposals for sugar reform” I indicated that this was partly designed to emphasize that my proposal should not be confused with those considered under that heading, that is, closure, privatization, devaluation (of the Guyana dollar relative to other currencies), or placing GuySuCo under a foreign management contract.
The final feature to observe is that I have been at pains to stress there are two preconditions firmly attached to my proposal. These are the calls for a forensic audit of GuySuCo and the establishment of a national task force on sugar. The latter would be tasked with examining all available proposals; consulting with the industry stakeholders; and, drafting a long-term strategic vision for the industry (20-25 years).
Proposal
My proposal for sugar’s way forward has been made before and based on that experience it is perhaps best understood if viewed as constructed around six interlocking steps. I shall present these in sequence in this and next week’s column.
Step 1: Deconstructing GuySuCo’s assets for sale
As we have noted, a crucial dimension of GuySuco is its culmination of a centuries-old process of agricultural and rural consolidation in the hands of a state-owned corporation established as far back as 1976. This centralized model of state ownership and control has outlived its usefulness. In the present competitive and flexible market environment it has become dysfunctional. Furthermore, as we saw this model is susceptible to outside political manipulation, and therefore is a fertile environment for festering corruption and nepotism.
The first task in my proposal therefore, is to deconstruct GuySuCo of properties and assets, while concurrently striving to re-assemble this into several flexible innovative and dynamic business profiles, clusters, bundles, and units, which are then put up for sale locally, regionally, and worldwide.
These business profiles should be prepared by experts and also be investor friendly. Prospective purchasers should, however, be permitted to pursue other options than those embodied in what is put up for sale, since on purchase, the assets become the investors’ property. This means that if, for example, it is desired by the investor(s) that the assets purchased should continue in sugar production this would be approved.
The primary goal of Step 1 therefore, is to be creative in utilizing GuySuCo’s assets as the basis for having them transformed and diversified into income, employment and business activities, with the emphasis placed on promoting entrepreneurial innovation.
Step 2: Creating new asset bases
Step 2 follows after Step I. This requires the construction by the authorities of a detailed portfolio of the asset bundles referred to above. In practice achieving this would require careful spatial, economic, and logistical demarcation of the separate estates seen essentially as an assemblage of property in land, micro settlements, population, physical assets, income, savings, and wealth opportunities. The portfolio of opportunities derived from this should strive to indicate a wide and diversified range of potential business ventures, which would provide a kick-start to broad-based development in Guyana.
It is important to stress that, the detailed portfolio of business proposals arrived based on GuySuCo’s assets, should not be viewed as final and unalterable. As presented here, Step 2 the portfolio, is principally aimed at initiating dialogue with prospective investors. However, in order to avoid wastage and losses from the sale of these assets, potential investors should be screened, particularly in regard to their financial resources and entrepreneurial skills.
Next week I shall present the remaining steps and bring this series of columns on the state of the sugar industry to a close.
