The Problem at GuySuCo is the PPP Government

Aug 28, 2011 AFC Column, Features / Columnists

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Minister of Agriculture, Robert Persaud, has finally acknowledged that the Skeldon Sugar Factory investment is a failure. This investment amounted to about US$200 million in an economy with an annual GDP of about US$1.2 billion. As a percent of GDP this investment amounts to about 17% of GDP. This makes it the largest single investment failure since Guyana’s independence in 1966. Even the PNC did not accomplish a failure this gigantic.
The PPP Government is hustling to exonerate itself from blame, fixing same on a hapless GuySuCo Board and Management. Guyanese must not be fooled by this false claim. The entire lot should bow out in shame if they have any sense of honour and decency.
The first cause of failure was the mis-advised grant of the contract for construction to the firm, China National Technical Import and Export Corporation (CNTIC), which had no experience in sugar factory building. The other failings included the acceptance of the factory as complete before the Chinese firm had proven to GuySuCo that it was fully complete and operational; the non-training of  locals to operate the factory after the Chinese would have left; the stifling political interference which resulted in experienced, qualified and senior staff including agro-engineers and agronomists being forced out and being replaced by friends and supporters of the Government; the ill-preparedness in not expanding cane cultivation to feed the factory; and, the disrespect for sugar workers which has resulted in massive migration away from work in the Estate.
To solve this problem the PPP Government plans to enter another management contract with either an Indian or Chinese company. Minister Persaud is quoted as saying that the Government was currently evaluating two proposals to manage the said factory.
The AFC sees this development as a grand opportunity for massive corruption. There is no record that any management contract was ever put to a public tender. Moreover, the AFC is aware that taxpayers’ dollars of nearly US$2.5M would have to be paid to the contract manager per month.
More significantly, the AFC has come by reliable information that the Chinese company identified is the selfsame CNTIC, the same company that built the third rate, very high cost Skeldon factory, where the exploded boiler has not yet been properly fixed, the new cane dumper cannot function, and numerous other problems caused by poor quality components are being experienced every day. The maker of this defect-riddled 8,400 tons cane per day grinding capacity factory, which has not yet achieved even half that amount for one day, is being evaluated as a potential contract manager.
Also, the Indian company being evaluated is none other than Surendra Engineering which has the contract for the US$10M Enmore Demerara Gold sugar packaging plant, which plant recently exploded and killed a worker. That specific equipment has not yet been fixed and, in addition, the massive internal work on the factory upgrade to supply the bagging plant has not yet been completed. GuySuCo’s technical managers have refused to accept this work despite political pressure to do so.
This same Surendra Engineering, obviously specially favoured, was awarded by the Ministry of Agriculture a contract for the recently tendered 8 big drainage pumps despite the fact that it does not make pumps at all! Surendra Engineering through another Dubai-based front Company, Salim al Midah, was given the consultancy contract valued approx US$500,000 to provide the plan to upgrade Enmore and Blairmont factories. There is every indication of an unholy alliance between Surendra Engineering and key GuySuCo managers, directors, and politicos to huff all of GuySuCo’s engineering projects including the one now to manage Skeldon, a task Surendra Engineering, like CNTIC, is incapable of doing, both not having the history, experience and managerial capacity in running sugar factories.
The AFC is aware of very experienced and well known Indian and Brazilian consortiums which ought to be invited to give proposals to manage the Skeldon Factory and possibly to procure finances from their respective  Governments to assist in doing so.
The AFC has crafted an alternative vision for GuySuCo that will assure simultaneous accounting and social profits for the people. The AFC proposes to reconfigure the sector to retain its survival and sustainability by investing in Fuel Ethanol and Electricity cogeneration. We have even spoken to certain investors about these proposals.
Two Ethanol plants of capacity 100,000 litres per day, operating at least 300 days per annum, can be built adjacent to the existing sugar factories at Enmore, and Wales. The sugar cane from both the Enmore and LBI/Diamond/Houston cultivation would be transported by punts to the re-configured Enmore sugar factory for milling and extraction. Similarly, sugar cane from West Demerara farmers, Wales and Uitvlugt Estates can be combined and be sent to a new Wales factory.
In order to provide the necessary steam and electricity needed at these factories at Enmore and Wales, new steam and electricity cogeneration plants will be built at both these sites.
The expected total investment of these Ethanol Plants, Ethanol Storage, and cogeneration Units is to be approximately US$50M. The field area comprising a total of 40,000 acres, which would be modified over a period of 5 years to accommodate mechanical harvesters, would provide for 1,600,000MT of ripe sugar cane per annum.
1) There would be no significant loss of jobs in the field cultivation areas. In any case, as 20% of the acreage is being modified each year to accept mechanical harvesters, more jobs for tractor and excavator operators would be created, while the reduction in the cane cutters pool would continue on the basis of attrition and aging of the current workforce.
2) The economic activity on the East Coast Demerara and West Bank/Coast Demerara area would see no net loss of major jobs caused by the conversion, and we are likely to see increased commercial activities in the adjacent communities.
3) The two investments would meet with the approval of the World Bank and IFIs which are constantly pushing the Government of Guyana to see either the closure of the Demerara estates or make them produce raw sugar at a competitive world market price, with the latter challenge being impossible to achieve.
The AFC wants to make it clear that an AFC Government will not be fettered by the contractual terms of any management agreement entered into by the PPP/C Government and either CNTIC or Surendra Engineering.
A management contract ought not be entered into now but ought to await until after the elections.

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