The Guyana Sugar Corporation is currently $58 billion in debt with $22.4 billion (US$112M) stemming from loans needed to build and operate the beleaguered Skeldon Sugar Factory.
GuySuCo’s current debt was made public during a meeting of the corporation with the Economic Services Committee (ESC) of Parliament yesterday, the second in less than a week. The company’s Finance Director Paul Bhim stated that currently GuySuCo’s short-term debt was $19.4 billion which meant payments needed to be serviced on a monthly basis.
Bhim revealed that the company was behind on payments to the National Insurance Scheme (NIS) by over $729 million. He noted that the sum did not include the interest that is supposed to be surcharged. In fact, Bhim stated that there has been no interest incurred over the course of the four months that GuySuCo has fallen behind on payments to the NIS.
He did state that just this week GuySuCo was able to repay one third of the amount owing to the NIS. As it stands, however, the state-owned company‘s finances are far worse than expected. Bhim stated that the company owned $2.7 billion to the Government of Guyana inclusive of payments to the Guyana Revenue Authority (GRA) and PAYE income tax.
Making for an even more dire situation, GuySuCo was forced to take out a US$15 million loan from the National Commercial Bank of Jamaica to cover the operating costs of the company. The loan is to be paid back in a year. Bhim revealed that while GuySuCo has been able to repay the seven commercial banks in Guyana $800 million, there is an outstanding debt of $2.2 billion.
Neither GuySuCo’s Finance Director nor the Chief Executive Officer, Rajendra Singh could tell the committee just how the company would be repaying these loans considering that it owes in excess of $3 billion in corporation taxes.
GuySuCo’s debt of $58B is equivalent to 31.6% of this year’s budget before cuts by the opposition or 26.3% of the original presentation by Finance Minister Dr Ashni Singh. GuySuCo’s production has slumped over the last decade and international market conditions have not been attractive.
The corporation has also been buffeted by higher expenses, the underperforming Skeldon factory, industrial relations issues and severe weather.
Chairman of the ESC, APNU MP Carl Greenidge was stunned at the size of GuySuCo’s debt. He referred to the situation involving the amount owed to the GRA, NIS, PAYE and in corporate tax beyond worrying.
When asked about their plans to repay the debts, Bhim stated that in relation to PAYE it was not feasible for the company to be up-to-date due to the world market prices for sugar. Greenidge however remarked that the current low market price was the reality of the situation and moving forward the company needed to address the fact that sugar prices were not going anywhere and that preferential pricing was coming to an end very shortly.
Skeldon
The troubled Skeldon factory continues to be problematic. The US$200 million project has been rife with problems since it was commissioned in 2009, never delivering on production promises. It has proved to be a financial drain on the industry. The factory was supposed to have the capacity to produce 110,000 tonnes of sugar annually with the ability to grind 350 tonnes of cane per hour. Instead, the grinding capacity has never exceeded 250 tonnes an hour and in 2013 Skeldon produced less than 25,000 tonnes of sugar.
Bhim stated that long-term debts were all directly related to the Skeldon Modernization Project including US$56 million owed to the World Bank, US$32 million owed to the Export-Import Bank of China, and US$24 million owed to the Caribbean Development Bank for agriculture expansion.
With the corporation struggling to service short-term debt there was very little to be said on the tackling of long-term debt. Greenidge stated that when the ESC meets again in October, GuySuCo would need to be prepared to answer on the cost of production and the long-term measures to be in place to cut the massive debt.
Subventions
He stated that GuySuCo had to accept the reality of the current world sugar price which hovers around US$0.16 per pound and production costs needed to be cut. Greenidge said that GuySuCo had to make firm commitments and it needed to be reminded that subventions from the treasury were not permanent options for the industry and the company needed to address how they would be repaying that as well.
Bhim was asked to break down how the state-owned company utilized the $10 billion given to it via subventions in 2013 and 2014. He said that of the $6 billion approved in 2014, none went to operating expenditure. Instead the money went directly to capital expenditure: $1.2 billion for infrastructure including land conversion, $1 billion for machinery, $1.1 billion in factory maintenance, just under $1 billion for tillage and the replanting programme, $350 million to factor spares, $270 million to rehabilitate cane punts and $100 million to service the fleet of generators.
For 2013, Bhim revealed that $1.5 billion was directed toward improving drainage and irrigation, $437 million went into land conversion. Bhim noted that the weather held up land conversion last year and the company did plan on converting more land for mechanization however it was not possible. He noted that $250 million was spent on field machinery and an additional $231 million was spent specifically on cane punts.
During the meeting of the ESC, the company was once again told to be prepared to showcase just how production costs will be adjusted to facilitate the turnaround of the industry. This is the second time GuySuCo was brought before the committee in recent days, the last being on Friday when it was found that the company was not prepared for a presentation on the 2013-2017 Strategic Plan.
Yesterday’s meeting was revealing and members of the committee stated that with this new information they would be better equipped to formulate specific questions including how mechanization will work in conjunction with the dwindling labour force.
