Minister of Finance, Winston Jordan, yesterday said that hard decisions would need to be made urgently as it relates to the sugar industry, however these will await the findings of the ongoing Commission of Inquiry (COI).
During his maiden budget address Jordan said “Whatever path the industry takes, it is vital for the sake of the national economy that it remains viable and able to compete in an increasingly competitive and volatile global market. Time is of the essence.”
He added that the COI report was crucial to any decision-making process.
As it stands the government has committed some $12B to the Guyana Sugar Corporation for 2015. The Minister said the new administration “averted a crisis by injecting $3.8 billion into the industry and plans to transfer an additional $8.2 billion for the remainder of the year.”
Jordan echoed sentiments long heard before by both APNU and the AFC while in opposition as well as the former PPP/C government that these bailouts were not sustainable. “This stop-gap measure is neither sustainable nor meant to be a substitute for, or postponing of, the hard decisions that need to be made.”
He called the industry an “uncompetitive producer,” that is “frightening” for the future of the sugar sector.
Jordan noted that sugar receipts fell by 22.9% in 2014, earning US$88M, pointing out that “an 18.3 percent increase in export volume, to 189,565 tonnes, was insufficient to compensate for the 34.8 percent decline in prices, to US$464.30 per tonne.”
The minister adverted to the need for technological innovation to improve the sector. He said that “in the economy of today, knowledge and intellectual property are drivers of economic value, alongside the traditional factors of production. In other nation states, traditional sectors such as agriculture, forestry and mining, as well as those such as shipping, transport and logistics, have been transformed from relatively low-skilled, labour-intensive operations into high-technology, knowledge-driven industries.”
Jordan stated that the industry has long been in decline and reiterated that the sector and by extension GuySuCo’s unsustainable production costs of US$0.4 per pound of sugar were detrimental to the entire economy. The minister stated that “The economic well-being of the sugar industry is critical to the protection of jobs and growth of the economy, as well as the contribution it makes to GDP, exports and foreign exchange.”
He lambasted the previous administration for not being proactive noting with sarcasm that the PPP/C administration operated as though “they did not know that sugar was broke.” When the new APNU+AFC government entered office it was faced with a $16b bailout request from GuySuCo.
The minister said for 2015 the industry was likely to see marginal growth with a more realistic annual target. He noted that the sugar sector was expected to see a marginal increase of 1.7 percent in output from last year. Under an Interim Management Committee, GuySuCo’s annual production target was reduced to 227,000 tonnes, down by almost 15,000 tonnes from the original 2015 target of 241,503 tonnes.
Speaking of the relief that was required immediately after the May 11 General and Regional Elections inclusive of the $4B injection into GuySuCo, Jordan stated that “I had to take a moment to review the realities of the previous year before proceeding to set out what can now be realistically expected for this year.”
He spoke about the government’s concerns at the fall in commodity prices inclusive of sugar as well as rice noting that GuySuCo has had sub-par performances since the mid 2000’s.
“Between 2008-2013, annual sugar production, which averaged 220,362 tonnes, was considerably below the average production level of 286,084 tonnes for the preceding period 2000-2007. Following its disastrous performance in 2013, when a lowly 186,770 tonnes were produced, a modest target of 215,910 tonnes was set for 2014. The final outturn for 2014 was 216,186 tonnes,” Jordan noted.
The COI has 90 days from July 1, to complete its recommendations for the sugar industry. Under the terms of References the COI has put divestment on the table as a possible outcome. Currently GuySuCo is highly indebted to the tune of $60Billion. The troubled Skeldon factory also poses a major dilemma.
