The government yesterday announced plans to “scale down” the Guyana Sugar Corporation (GuySuCo) to three estates with three factories that would produce sugar for domestic needs and foreign markets, while divesting the company’s remaining assets, including the troubled Skeldon Estate.
Reading from the ‘State Paper on the Future of the Sugar Industry,’ Minister of Agriculture Noel Holder told the National Assembly that under the plan, GuySuCo would aim to produce 147,000 tonnes of sugar annually from the Albion-Rose Hall, Blairmont and Uitvlugt-Wales estates. He noted that the Enmore factory will be closed at the end of 2017 when all cane would be harvested and the East Coast estates would be earmarked for diversification.
Holder presented the paper to the House even as workers from the Wales estate and their families protested in front of the National Assembly to press their demands for severance payments.
Under the planned amalgamation of existing estates, which has already been set in motion, cane from Wales would be reassigned to the Uitvlugt factory. The Wales Estate was closed at the end of the crop in December 2016. Also, cultivation at the Albion and Rose Hall estates would be merged, but the Rose Hall factory would be closed at the end of this year. Some lands will be made available for diversification purposes.
Holder noted that the merging of estates would see improved relationships with some cane cutters, estate staff and about 1,710 private cane farmers as well as an opportunity to merge better performing lands to operate factories more efficiently.
“Given the financial and technical evidence, it is, therefore, feasible to amalgamate estates and factories where appropriate for the better utilisation of the country’s resources,” he said.
Holder noted that GuySuCo will retain as many workers needed for all operations on the merged estates/factories and that workers are also to be leased land by GuySuCo to engage in the cultivation of crops as part of the diversification drive. Up to 2015, GuySuCo’s labour force was pegged at over 16,000 workers.
Of the 147,000 tonnes of sugar that the government hopes to produce annually, 25,000 tonnes would go towards the local market, 50,000 to 60,000 tonnes to the Caricom and the regional market, 12,500 tonnes to the USA and 50,000 tonnes for the world market. The focus would also be on producing value-added sugars for direct consumption, and for providing electricity to the national grid (co-generation), it was noted.
The plans for the restructuring of the estates come as no surprise.
Dr Clive Thomas, Chairman of the Board of GuySuCo, had previously told this newspaper that the company was “thinking about marginalising Rose Hall” or they would “certainly have to diversify it.”
Rose Hall has over 2,400 workers and many have expressed fears about being displaced amid reports of the restructuring of the company. Like the workers of the now defunct Wales estate, they have held many picketing exercises, voicing their displeasure about the closure.
During last year the government said it would consolidate the LBI and Enmore estates. The LBI workers were not happy and protested the move.
In the face of earlier signs of plans to close factories, both the main sugar workers’ union, GAWU, and the opposition PPP/C had called for the government to conduct a social impact assessment.
Divestment
The restructuring of the estates is among the plans to be supported by GuySuCo’s divestment initiative and a corporate vehicle is to be established to manage the process on a full-time basis, Holder announced. The initiative would include the divestment of the Skeldon Estate.
Holder said significant investment has been made in the new Skeldon factory, which remains beset by numerous technical problems. “It has failed to achieve its potential thereby failing to generate returns on the investment,” he said, before adding that GuySuCo does not have the resources required to correct the technical problems. Over $29 billion in loans are due for the Skeldon Sugar Modernization Project, he noted.
According to Holder, funds generated from the divestment of Skeldon Estate will go towards reducing GuySuCo’s debt and supporting its capital programmes for both sugar and the diversification initiatives.
Apart from restructuring estates and factories, Holder said GuySuCo also plans to transfer to the state charges for the drainage and irrigation and health services that it provides to the communities, and around the estates.
It was noted that GuySuCo has been assisting with drainage and irrigation in surrounding communities, which accounts for approximately 40 per cent of its annual cost. Government would be recovering the charges. GuySuCo also operates a number of health centres and dispensaries in the Berbice and Demerara regions and it now has the option to either transfer them to government or seek to recover costs from the government.
Holder sought to contextualize the plans by highlighting GuySuCo’s dire financial situation. “The sugar industry is in crisis,” he said, while noting that the management of GuySuCo estimated that the government would have to provide annual subsidies averaging $17 billion over the next four years to keep the estates open and operating.
He said the government will be hard pressed to justify such expenditure since the opportunity cost of keeping GuySuCo as a going concern in its present state is too high. “GuySuCo’s situation requires emergency action,” he added.
He explained that the Commission of Inquiry into the industry that was set up by the APNU+AFC government had recommended that the corporation should be privatised within three years and that a “serious evaluation of all the diversification options” be conducted to avoid total reliance on sugar workers for GuySuCo’s revenues.
He noted government had to decide whether to maintain control of the industry in whole or in part or whether to diversify its operations or sell it to a private investor or investors.
Holder said the government was cognizant of the invaluable contribution of the sugar industry over the years and would not allow GuySuCo “to die from preventable causes. The government, however, cannot let GuySuCo continue to utilise a business model that is based on waste, inefficiency and hopelessness, ultimately leading to its undoing.”
He added that the downfall of the industry is that it faced economic challenges over the years. It also “began to display chronic problems, including migration of skilled and experienced managers, exhaustion of its cash reserves, deteriorating field infrastructure and factories and an unstable and adversarial industrial relations climate.”
Reading from the paper, Holder also said, “GuySuCo incurred total losses of $40 billion with sales of $230 billion from 2008 to 2015. By 2015 the management of the company had accumulated a mere $11 billion in internal equity and had decreased working capital by $25 billion.”
He pointed out that the employment costs accounted for 48 per cent of the total costs from 2010 to 2015, thereby absorbing 73 per cent of the revenue earned by GuySuCo during that period. “The dire revenue situation coincided with the loss of preferential markets and prices that the company enjoyed from 1976 to 2009,” he added.
