Sugar Scrutiny

Aug 31, 2008 Features / Columnists, Ravi Dev

Faced with declining production in the sugar industry, especially in the last three years, the Government of Guyana, the owner of GuySuCo – has requested bids for a review of the corporation’s financial, management and production performance.

The review would also have to “Recommend appropriate corrective actions to be taken by the corporation to meet long term production forecasts.”

This review comes in the midst of a strike by the workers across the country in protest of what they consider to be an unrealistic wage offer of 4.5 percent following last year’s 14 % inflation rate and this year’s continued steep rise in consumer prices. The forces that have compelled the review are not unrelated to those precipitating the strike.

This writer has been commenting on the sugar industry and its problems in a sustained manner since 1998, when the corporation announced a strategic ten-year plan to revitalise its operations and to place it on “secure foundations” for the future.

One noteworthy feature of the plan was the almost total lack of consultation in its formulation with the stakeholders within the industry and those in the wider society – since the corporation was putatively ultimately owned by the people of Guyana. Another was its faith on “special preferences” from Europe on prices and quotas.

Dominated by the Booker Tate foreign management team that had financial incentives based on production, it was not surprising that the plan proposed a massive increase in production while ignoring massive structural hurdles in making that increase sustainable.

The first hurdle was the World Bank. Because the government (PNC) was already locked in to the Bank’s conditionalities after signing on to the Structural Adjustment Program in 1989, they (PPP) had to persuade it in 1995 firstly that privatisation of GuySuCo was not necessary.

Secondly for the Bank to assist with funding of the Skeldon expansion, the cornerstone of the Strategic Plan, they had to agree to further conditionalities in the running of the industry that in many instances were contradictory to the stated goals of the plan.

Take the Demerara Plantations that were the most vulnerable in the industry compared to Berbice for several reasons: the wet season lasted more than a month than in Berbice; the soils were less suitable; the acreage was more constrained because of the narrower coastal depth; the factories were all older; and finally and most importantly, the workers had more options for alternative work because of the greater economic development of Demerara. As a result, the average cost of production in Demerara was far above that of Berbice.

Yet in 2001 the government signed an agreement with the World Bank that committed the corporation not to consider its profitability as a unit overall but to break out the Demerara costs separately and not “cross subsidise” them.

Yet it was OK to permit the corporation to accept the high “special prices” of the EU for a specified quota and “cross subsidise” its overall profit and not, for instance, apply it to the high-cost Demerara production.

The World Bank also mandated that no new investments of any consequence be made in the Demerara factories and that the demanded reduction of production costs would have to come from improved agricultural practices – even as the industry as a whole had to reduce labour costs on an average of 5 percent annually.

These conditionalities were tantamount to giving the Demerara plantations basket to fetch water. The latter operations were only able to match the productivity of the Berbice plantations in the fifties on account of intensive labour utilisation in agricultural practices (including heavy additives to the soil) which were now prohibited by the agreement to cut labour and operating costs. We concluded that it was the Bank’s intention that GuySuCo shut down its Demerara operations.

From the onset, our concern was that Strategic Plan assumptions on labour were not only unrealistic but also misguided.

The projected mechanisation in the industry was always going to be partial in the Demerara plantations because of the nature of their soils and their easier compaction and degradation.

But even including the Berbice production (which was going to be forbidden because of the prohibition of “cross subsidies), the need to bring down production costs to twelve US cents per pound of sugar from twenty cents per pound meant imposing unremitting hardships on the sugar workers, not to mention the retention of degrading social relations in the industry.

The new South African owners of Booker Tate that manage our industry are used to cheap, seasonal labourers in Swaziland, for instance, who have no unions or benefits and who return to their homelands in the “out of crop” season to work on their farms, etc.

In Guyana, while during the season the special incentives may enable the sugar workers to earn what may be seen as an acceptable wage, the take from the four-day “out of crop” work is a mere pittance.

It is not surprising that when available, workers are opting for steadier job opportunities and leaving the industry, especially in Demerara, with an endemic labour shortage comparable with that of the early nineties.

We hope that the review of the operations of GuySuCo, which does not include corruption that has reached epidemic proportions, is not a pretext for merely closing the Demerara Plantations either piecemeal – as of LBI that has been hinted – or in toto. There are other options that are available.

In the meantime, the striking workers will have to maintain solidarity in their demand for a living wage. It is scandalous that one hundred and seventy four years after slavery, no non-managerial sugar worker can afford to build a house, feed and clothe their families – much less own a car – on their wages from their backbreaking labour.