Introduction: one-off
As I have done over the past several years, I had intended, some time much later in the year, to devote a few columns to an update on the state of Guyana’s sugar industry. A number of readers, however, have been repeatedly urging me to express my view on the intended closure of the Wales estate, scheduled to commence at the beginning of 2017. Today I respond to this request.
However, this will be done in a one-off column. I plan to return to deal with the sugar industry more substantially, after completion of the ongoing series focusing on Guyana’s external dependence on extractive industries; the likely impacts of future oil and gas production; and related developmental concerns, which dominate present day discussions of small poor commodity producing/exporting nations at the present global conjuncture.
The greater good
There are four categoric statements/ observations, which I would like to share with readers.
First, as Chairman of GuySuCo I state, without qualification that, in the case of the intended Wales estate closure, the GuySuCo Board and its management team have exercised “their bounden duty” and responsibility to secure a better future for the industry, without any outside instruction or direction, whatsoever. In deciding to close the Wales estate in 2017, our aim is to promote the greater long-term good of the entire workforce, the industry, and all its stakeholders, taking into account fully, the “dire straits”, in which GuySuCo has found itself in during recent decades.
GAWU
Second, regrettably, GAWU’s representatives were absent from Board meetings where this issue has been discussed. It would have been most desirable if they were there, to share their views on this matter. For the record though, it should be stated that the closure of Wales was specified in GuySuCo’s Interim Management Committee’s submission, for discussion, to the deliberations of the Commission of Inquiry into the Sugar Industry (CoI). GAWU was represented on that body and participated fully.
Dire straits
Third, I referred to the “dire straits” of GuySuCo above and will briefly expand on this in this section. To be frank: 1) GuySuCo’s unit cost of production last year was above US45 cents/lb, 2) the raw sugar price it obtained that year averaged less than one-third of its unit cost of production, and 3) its accumulated debt in 2015 was over G$80 billion. In effect the company was bankrupt; dependent on government bailouts and handouts; and 3) businesses did not want to have commercial dealings with it, as these were considered too risky.
On top of this financial situation, GuySuCo’s total employment cost last year was alone equal to its sales revenue! The survival of the entire sugar industry became dependent on: the speedy rationalization of its cost structure (including lowering unit cost); the introduction of value-added activities; the refurbishing of the better performing estates; as well as timely selective diversification into profitable alternatives designed to improve its product mix and to secure better prices.
It would be no surprise therefore for readers to note that 1) banks and financial institutions had become unwilling to provide loans to GuySuCo, without cast-iron guarantees; 2) suppliers had become unwilling to supply goods and services on ordinary commercial credit terms; and 3) even international institutions were reluctant to provide project soft loans/grants to GuySuCo because of doubts about its viability and survival.
As matters stand, different estates are in different states of disrepair. Rather than spread limited resources too thinly over all estates, the board and the management team have sought to make those limited resources much more efficient in their use, hence the decision on Wales. Relatively, Wales is hopelessly rundown; and, if its situation is to be corrected, it would absorb large amounts of GuySuCo’s resources. Projected expenditure to keep it operational, yet still not returning it to profitability, is of the order of G$2 billion, so serious is its run-down state.
The CoI specifically reports that cultivation at Wales is poor, and the factory so old that it is in need of substantial investment to recondition/refurbish it. Further-more, about three-quarters of the bridges in the community are in a dangerous state and just short of two-thirds of its drainage and irrigation infrastructure can be considered as run down. The CoI also recognized that, in order to keep Wales going, it would mean significant diversion of GuySuCo’s resources to support income generation in a location which has no realizable prospect of being self-sustaining or turning a profit.
Distribution of the burden
Fourth, the GuySuCo Board and management team are fully committed to their responsibility to lead in the reshaping of GuySuCo and the sugar industry. Further, in so doing, they will undertake the fullest effort to ensure that such reshaping does not disproportionately heap burdens primarily on the poor and the powerless, thereby deliberately leaving them behind. All are committed to avoid the uncaring fallout, which has traditionally haunted industrial/organizational reshaping in Guyana.
Thus the closure of Wales is immediately linked to the commencement of diversification programmes envisaged to begin in October coming this year. Some of these programmes involve lands for workers to engage in peasant cane farming and lands for their farming other crops as well. There are also programmes to seek to determine the commercial feasibility of alcohol production and aquaculture by GuySuCo at Wales.
The expectation is that farmers’ cane from Wales will be taken to Uitvlugt. And already the mapping of transport for the canes is underway; engagement with potential cane farmers has started; and logistics are being developed. Discussions are also afoot to see how many workers (and where) can be absorbed at Uitvlugt.
Dr Clive Thomas is Chairman of the Board of GuySuCo.
