Dear Editor
Recent letters and statements in the press on the condition and possible fate of GuySuCo, encouraged me to participate in a recent Moray House seminar on the sugar industry. For the record, these were the key points of my presentation, which was entitled: “Returning ‘GuySuCo to profitability.’
In summary, I concluded that:
- a) The cost of production must be drastically reduced while revenue must be significantly increased, by the measures outlined below.
- b) The sale of additional cogenerated power to GPL must be actively pursued.
- c) The future sales of GuySuCo lands must be at commercial values.
- d) Debt: Note that of the $82 billion debt that was recently highlighted, $25 billion is for the Skeldon project and $26 billion is an accounting provision for the payment of pensions when employees reach the age of 60. GuySuCo should not be categorized as bankrupt, since its convertible assets are far greater than its debt.
- e) GuySuCo must be run as the business it is, free from political interference, by a fully staffed management team and a supportive Board.
- As an introduction, GuySuCo’s 16,942 employees and its socio-economic and financial contributions to the communities it serves (community centres, dispensaries, drainage and irrigation) and to Guyana (foreign exchange, Port Mourant Training Centre, past annual sugar levy payments), were highlighted.
- To return it to viability, the objective must be to increase the 3 inter-related Ps, production, productivity and profitability.
- Human resource strategies must be emphasized, with the objective of reducing labour costs from 60% to 40% of total operational costs within 5 years. To achieve this, a compact must be agreed with the trade unions to review current customary practices, to identify those considered ‘obsolete’ or which detract from the 3P’s and secure their ‘buy-in’ for amendment or removal.
Available human resources must be audited to identify performance and competency gaps at the individual, functional and group levels and to develop approaches/mechanisms/programmes to adequately address these.
Employee morale and commitment must be rebuilt through the necessary orientation, coaching, rotation, and training programmes.
The organization structure, job evaluation, performance appraisal and compensation systems must be reviewed.
- Agriculture strategies are critical for the 3 Ps.
The focus must be on improving sugar yields in the field. The adage: “Sugar is produced in the field, the factory only extracts it” is still very much applicable. 2014 yields were 50-60% of yields achieved 10 years ago. The mantra must be, back to basics.
The cane breeding programme must be resuscitated to produce high-yielding varieties
The organizational structure has to be regularized at the senior level.
Privatization-based husbandry systems must be introduced, whereby gangs of workers self-manage plots and are paid incentives according to the increased yields. This system was successfully tried at Uitvlugt in 2001-2002, when 10 workers were allocated 100 hectares and production increased by 30% while cost of production was reduced by 50%. It should be tried in all estates and implemented asap, once similar results are realized.
- The factories are in relatively good condition, despite the shortage of capital.
Management must work closely with the Human Resource Department for skills, knowledge training and work ethic improvements.
Also, management should work closely with field staff to ensure minimum burning to grinding time, maximum poll in cane, maximum utilization of factory capacity, all of which result in minimum tonnes cane to tonnes sugar (TC/TS) conversion.
The production and packaging of high-value specialty sugars must be supported.
- In finance, the capital programme must be completed within the budgeted year.
A full-time team, which includes field and factory personnel, must monitor cost control and ensure rolling cost forecasts are strictly adhered to.
Cost-effective procurement and improved control of inventory and services must be implemented. These measures will save billions annually.
- In marketing, relations with our main customers must be improved by timely supply and improvements in sugar and molasses quality.
Additional value-added sugar products should be pursued to complement the Demerara Gold brand. Mauritius produces 10 value added sugar products.
Revenue stream can be improved by converting more bagged sugar to packaged sugar, which has a minimum net premium of US$100 per tonne.
The Demerara Gold trademark registration must be pursued for North America.
Branding and cobranding must be done with hotels and supermarkets, locally and regionally.
GuySuCo must use its geographical location to acquire more regional markets, since it can ship smaller tonnages on a regular basis, at a premium, as opposed to the large tonnages to be ordered to get the world market price.
8.Cogeneration of power from bagasse can be a major profit centre for GuySuCo. The Government of India or/and CDB should be approached to finance the acquisition and installation of cogeneration units (high pressure boilers and turbines) for GuySuCo’s factories, by May-June 2016. Dr Warren Smith did indicate recently that grant funds are available for alternative energy projects, such as these.
In India and many other sugar producing countries, sugar is now a by-product of the factories, since their main source of revenue is selling power to the grid.
GuySuCo has the unique advantage of having 2 crops per year and its factories are well located to link to the grid. As such, GuySuCo’s factories can export over 50 MW of continuous power to GPL’s grid from cogeneration, thus earning significant revenue while saving foreign exchange.
- Topical issues
Diversification: GuySuCo occupies less than 10% of our coastal arable lands. Any proposed alternative crop should be initially evaluated on non-sugar lands before any decision is taken to convert sugar lands. Letter writers, kindly note this point.
Closure: World sugar market prices are currently low, as are those of many internationally traded commodities, eg, oil, ethanol, copper, rice, gold. These prices are cyclical and we need to adopt strategies for sustainability at this time. It must also be recognized that international sugar consumption is increasing exponentially.
Poor performance: The 3 Ps have declined due to flawed political policies, political interference and mismanagement. Cost of production during 2002-04 was US$0.16 per lb, while production averaged 320,000 MT.
Land transfers: GoG has transferred thousands of acres of prime GuySuCo lands on EBD and ECD to developers who are making billions while GuySuCo gets nothing.
The financial support from GoG should be treated as a separate fund, either to increase share capital or to be converted into a loan to be repaid over 20 years. Note that GuySuCo paid a sugar levy of approximately $5 billion a year during 1976-1998, a significant percentage of the national budget during that time.
Yours faithfully,
V Oditt
GuySuCo Chairman 1993-2003
