GuySuCo’s strategic plan is a disaster

Oct 02, 2008 Letters

DEAR EDITOR,
I refer to the diatribe written by Mr. Nick Jackson which was published in Kaieteur News of September 28th 2008.

Since Mr. Jackson has decided to get personal with me and has now called me a nihilist in his letter, he will not get away with it; I will now have to conclude that Tate is complicit is this disaster.

He did come to the parliament and he did give evidence to our Economics Services Committee, but I am one Guyanese who did not accept what the GuySuCo team was saying. A lot of it raised more questions than it gave me answers and I am not speaking for the committee.

The PNCR One G had made five charges that pointed to poor judgement/management by GuySuCo in its 1998-2008 strategic plan.

1. We said that there was a refusal to accept that the preferential price for sugar would not be guaranteed since the EU had expressed a clear intention to remove it.

But incredibly, even though GuySuCo was adamant that the EU markets were guaranteed and had enshrined that concept in its strategic plan, Mr. Jackson now says that he was still tooling up for “adding value to the core product by retail packaging of branded sugars, refined sugars, etc.”

I am saying that having made this monstrous mistake, they are now trying to hide the magnitude of the lapse in judgement by putting in place, only now, alternatives which may not help much.

Let’s see how successful GuySuCo was at doing this. Last year GuySuCo sold to international markets the following tonnages: to the European Union they sold 156,728 tons under the [now 13.8% reduced] protocol at a price of G$114,886 a ton.

Under the second EU quota, they sold 44,651 tons at G$117,122 per ton and this accounted for a total of 201,379 tons of the 266,499 tons the industry produced last year.

Mr. Jackson’s CARICOM markets which he claims that his master plan has prompted him to seek out since he thought he might lose his European preferential prices earned him 36%/ton less than what the EU is paying him!

Mr. Jackson also sold only 2165 tons of Guyana gold sugar to CARICOM for G$105,294 a ton. In other words, after eight years of this Demerara gold promotion and production we are only selling around 2000 tons of it!

As far as refined white sugar was concerned, we exported 18 tons last year; like everywhere else GuySuCo is failing in these projects.

Mr Editor, the European Union’s prices are expected to decline in the following manner starting from our normal access price of 520.73 Euros/ton up to June 2006. After June 26, 2006, it was made 4.5 % less/ton up to September 2008, then was reduced by a further 9.2 %/ton or 448.80 Euros/ton up to October 2009, then the final reduction of 21.8 % or Euros 335.20/ton from October 2009 onwards.

So even at the reduced rate of 13.8% from the EU last year, Mr. Jackson’s progress in marketing Guyana’s sugar in CARICOM and his packaging and refining achievements can only be described as pathetic.

Therefore, his statement that “supplying the CARICOM market with brown and refined sugar is moving us forward” means this: had we sold all of the sugar we sold to the EU last year [201,379 tons @115,381 a ton] to CARICOM, we would not have made 23.235 billion dollars from it; rather, he would have made G$15.059 B from it!

In other words we would have made an additional loss of 8.176 billion in the industry which would have to be added to whatever loss Mr Jackson and his team made at GuySuCo last year.

2. We said that there is wide spread labour shortages in the industry today, leading to dire consequences to the industry since high rainfall, especially in Berbice, has hampered mechanisation.

Mr. Jackson now confirms that this is true, due [he says] mainly to the massive migration of the workers; I hope that the house to house registration reflects this massive and large scale migration of the sugar workers into the Caribbean and the US.

He, however, declines to mention that GuySuCo was boasting of their increased efficiencies in their 2001 review of the 1998-2008 strategic plan of having reduced the workforce by 10,000 workers by 2001. He is now saying that he did not reduce it deliberately, as his own review of the strategic plan stated.

He is now saying that they migrated and he took credit for it at first; but now that the migration continues creating a huge shortage of labour in the industry, he is crying that he does not have the labour to do the work of the corporation.

Faced with massive migration 10 years ago, how could Tate not see that they had to stem the flow, or contract the industry, or end up in the dire situation they have to face now?

3. He agrees that the weather pattern is changing and that it is hampering the progress of the Skeldon project.

Indeed he says the last three years were the wettest years between 2001 and 2007! Mr. Jackson and his team should book their passages for the UK tomorrow, since apparently without conducting a serious examination into our rainfall pattern for at least the last 30-40 years he and his company committed this nation to this expensive and dicey project, armed only with rainfall from the recent past, when we knew that we were not getting the typical rainfall for this country for the years 1992 to 2004 as I have pointed out to the public on numerous occasions over the past four years and that is why when the rains came in 2004 we were totally unprepared for it.

Mr Jackson can quote me: we will have relatively high rainfall for at least the next eight years. This alone is a serious incitement against him and his managers since, on such inadequate and shaky data, they allowed this country to commit these huge funds for this expansion based not on the traditional historical rainfall of the country, but only the rainfall from the recent past which were El Nino years.

I don’t need to say more about this. Mr. Jackson is not a Guyanese and whilst my children and I will have to pay for this mess, he and his will not.

4. We said that the private farmers at Skeldon will not be able to find 50 million US dollars to expand their cultivations to 10,000 acres in three years, which is essential to the Skeldon project.

I said that they have currently planted around 400 acres. Mr. Jackson said that they have in fact planted 1000 acres. We’ll see.

They will have to plant 10,000 acres Mr. Jackson! And I want to know where they will get loans to the tune of 10 billion Guyana dollars to do it?

Mr. Editor, I am using GuySuCo’s own estimate for a 10,000 acre field expansion [double the normal Skeldon cultivation before this expansion].

They said that this project will cost US$181 million: $131M US for the Factory, and US$50 million or 10 billion Guyana dollars for the expansion of the cultivation by 10,000 acres.

Mr Jackson now says that he has to buy additional machines since the opportunity days have shrunk from 120 to 60 days. I also want to know which farmer will be able to reap his canes mechanically since it would be impossible to reap this farmer expansion by hand.

5. Does anyone know what Mr. Jackson is saying in this huge section of this response occupying one third width of an entire page length of the newspaper? In 2007, didn’t Albion ask for G$528.6 million to do its capital works and was only given G$183.2 million?

Didn’t Rose Hall ask for $413.6 million and was only given 193.4 million Guyana dollars? If this is not correct, could Mr. Jackson tell us what was asked for and what was actually given? Could he tell us what the other estates asked for in capital expenditure and what they actually received?

Now that Tate has decided to get involved in this matter even though I was trying to keep them out of it, I want them to tell me how they can accept a 350,000 pound sterling a year fixed salary fee and an additional 100-136 thousand pounds as bonuses depending on how much sugar the industry makes [whether the corporation makes a profit or not] and produce such shambles for us to unravel sometime in the not so distant future.

GuySuCo have now told us that they have started the old Skeldon factory and that they will have a bumper crop, Mr. Editor, last year Skeldon started their crop in June/July.

This year, the alleged bumper crop will commence in September; in other words, with canes which are already past their ripening period of 12 months and are turning to cork. Bumper indeed!

What is clear, and Mr. Winston Murray questioned Minister Robert Persaud closely on the matter, is that the industry is not run on purely business criteria.

For the purpose of comparison, here is how the industry fared over the past six years, 2001-2006. In 2001 they made a loss of G$869 million; in 2002 they made a loss of – 274 million; in 2003 they made a loss of – 4.3 billion; in 2004 they made a profit of +261 million; in 2005 they made a loss of -1.866 billion; in 2006 they made a profit of +476 million.

So in the last six operating years, during the height of their strategic plan, GuySuCo lost a total of – 6.577 billion dollars. In the previous six years, when the strategic plan was not yet implemented, they made the following profits.

In 1994 the industry made +3.719 billion dollars; in 1995 they made +3.220 billion dollars; in 1996 they made +4.865 billion; 1997 they made +2,228 billion; in 1998 they made +2.271 billion; in 1999 they made +3.058 billion.

So in the six-year period 1994-1999, immediately prior to the GuySuCo strategic plan being implemented in full, the industry made a total profit of 19.361 billion and in the six-year period after that, 2001-2006, they made a loss of – 6.577 billion! That is some strategic plan Mr. Jackson! What was your strategy?

The GuySuCo’s strategic plan is already a disaster. The plan took a company which was making money and turned it into an economic basket case so far. We just have to wait for the full effect of the Skeldon disaster to manifest itself.

But any fool can see that the expansion has had a most deleterious effect on the entire economics of our sugar industry, since GuySuCo is financing more than 30% of it from within GuySuCo with their own funds which they do not have, and it is affecting the profitability and performance of the industry. That is what I said and the figures above prove it.

This year we had to subvent nearly 800 million to GuySuCo from the consolidated fund.
Anthony J. Vieira, MS MP