With GuySuCo’s production cost rising to close to US$0.40 per pound, Chairman of the Commission of Inquiry (CoI) into the sugar industry Vibert Parvatan says swift “corrective action” will need to be taken to reduce losses as they could prove catastrophic for the current planning to make the corporation viable.
Following a meeting yesterday with the major sugar unions GAWU and NAACIE at the Ministry of Agriculture, Parvatan told Stabroek News that planning for the next three years with the current level of annual losses would be “a very, very catastrophic situation” and emphasise the need for action.
Currently, GuySuCo produces sugar at nearly US$0.40 per pound but is selling at US$0.16 per pound to its biggest buyer Tate and Lyle. “The worst has happened. The GuySuCo cost of production has climbed. Now it is closer now to US$0.40… some levels of efficiency will bring down the cost but the gap at this time is extremely wide… some of the recommendations will bring down the cost, like the supervision, better management, better quality of work, cost consciousness, not dumping fertiliser, you know, will bring it down but there is a very wide gap. That is why we adjourned so we can now get our heads together without damaging our skulls and come up with something because I would like to find harmony,” he said.
“Some corrective action will have to be taken early to reduce the level of loss being experienced now annually,” Parvatan added.
The meeting comes days after members of the CoI met with officials from Tate and Lyle, who also emphasised that the production cost must be lowered to make the corporation competitive as the end of the sugar quota looms. The officials also said they were willing to provide technical advice to the troubled corporation.
Tate and Lyle’s Allan Wood, Global Head of Commodity Trading, Duncan Tate, Vice-President (Trading) and Mac McLachlan, Vice-President (International Relations), who met with members of the commission last week, noted that even in countries that are major producers of cane sugar, some factories have been closing. They further cited countries like India, which is subsidising sugar production. “Given these circumstances, they deemed the sugar market very complicated with too many variables to attempt predicting sugar prices. They emphasised that the cost of production must be brought down to be competitive,” the CoI said in a statement after last week’s meeting.
According to Parvatan, divestment is a last resort. “If the unions can agree to some of the things we are looking at—I am not saying to accept that but let us look at it… Let us look at improving things as they are, let’s look at diversification, but let us have an open mind to the possibility of any divestment, partial or anyway,” he said yesterday.
Given the current state of the industry, he said that he was pleased with the presentation by head of the Guyana Agricultural and General Workers’ Union (GAWU) Komal Chand, although he noted that was some disagreement on privatisation. The sugar union stated that given the historical context of privatisation, it would not want to return to an era that was “painful, bloody, brutal and ruthless.”
Parvatan, however, differed.
“I differed from that, fundamentally. I made the observations that it is true historically, but the industry went beyond that,” he said, while noting that under the management of Booker Tate programmes were initiated to have Guyanese workers placed in management capacities, with succession planning being fundamental.
“Before the meeting with these folks today, we talked along similar lines, we talked about the organisational structure comparative to previous years, to what we have now and recognising that the old structure was far more effective,” he further added.
He said concerns raised by GAWU encapsulated many of the deficiencies. Chand and Parvatan noted that the union’s presentation focused on the shortcomings of management, with GAWU highlighting malpractices that result from a lack of supervision and a lack of commitment paired with bad attitudes.
Chand has in the past raised concerns over bad husbandry practices. During his presentation, the union leader outlined the union’s various concerns that have long gone unaddressed, including how the over €114 million ($31.1b) in funding by the European Union on accompanying measures was spent.
He told Stabroek News that the unions will continue their presentation on Saturday as there was more information that needed to be presented to the CoI. Chand said that the main goal of GAWU was to work along with the other stakeholders in the industry to get production back over 200,000 plus tonnes of sugar that the industry has been struggling to meet.
Parvatan said the current challenge is how to take corrective action in an environment where there is a lack of resources.
“Some of the shortcomings on the estates relate to not being able to fund things. They have talked about modernisation of factories. We all agree some of that is necessary but again it comes back to reality of funding. On Saturday we hope to go back to talking about sourcing of funds,” he added.
According to the CoI statement issued last Friday after the meeting with the Tate and Lyle officials, Parvatan sought to find out: What are some of the factors which would impact on sugar prices over the next three years; What is the probability of the levelling off of prices and what factors would influence such a move, given the current world market price at US11.3 cents per pound and the current EU price for GuySuCo in the region of US15 cents; How did Tate and Lyle view its relationship with GuySuCo?; How was this relationship seen in the future? Whether the company would consider investing in the sugar industry?; And given the challenges facing GuySuCo’s sugar, what can Tate and Lyle do to assist GuySuCo?
“The Tate and Lyle officials reflected on their long productive association with Guyana and stated their continued interest in buying Guyana sugar. However, recent developments in Europe have made the sugar market very volatile and that the primary consideration is market price,” the statement said.
“With the removal of preferential prices which ACP [African, Caribbean and Pacific] countries like Guyana enjoyed, the developing situation dictates that producers have to be more efficient and that demands disciplined management.
They noted that the price situation will become even more complex for Guyana when the cap on beet sugar production is deregulated,” it added, while noting that the officials advised that the European Union (EU) will be dominated by beet and cane sugar will have to compete with beet.
