Sugar’s downward spiral

May 30, 2012 Editorial

The news from the sugar front is not too sweet: in fact it is rather sour. After producing only 236,000 tonnes (which was a 7% increase over the previous year) GuySuCo quite optimistically projected that they would deliver 250,000 this year – 101,800 tonnes were going to be delivered in the first crop that traditionally ends in May. As late as mid-March, new Agriculture Minister Leslie Ramsammy promised that even in view of ‘strike action’ and adverse weather, the corporation would still achieve its target.
This week, GuySuCo announced that only 70,000 tonnes of the 101,800-tonne target has been met. And most predictably, fingers are being pointed in all directions. GuySuCo blames the workers and their allegedly irrational compulsion to strike, along with the now obligatory “inclement weather”. The main sugar union, GAWU, blames management for not getting a grip of the challenges confronting the industry. There is no question they have a point. And the almost reckless optimism of the Minister in holding onto a most unrealistic production projection buttresses that point: management had to have advised him on the statement.
This newspaper has consistently warned that the sugar industry should not be made into a political football, because of its still critical role in the economy. But for that same reason it cannot be made into an untethered balloon to float wherever it may. Somebody has to take charge.
A year or so ago, the then president had warned that unless GuySuCo’s management delivered better results after all the funds and support the administration was pouring into the industry, he would have to step into the picture. That president has since departed, but with the continued deterioration of production, somebody had better step in to stop the bleeding.
We have had a Sugar Modernisation plan unfolding since 1998. In the fourteen years since, in excess of US$200 million has been sunk into the Skeldon Expansion – factory and new lands; production at Diamond has been abandoned; LBI factory has been closed but yet rather than production heading upwards it has been stuck on a downward trajectory. GuySuCo’s present management is well advised to remember that Bookers had achieved 395,000 tonnes of sugar in 1971 – without the Skeldon land expansion, much less a new factory.
To those that would note the 1990 drop to 130,000 tonnes; this had recovered to 321,000 by 1999. Most alarmingly, even in the face of billions provided by the EU to compensate for its draconian price cuts ($93 billion since 2006) and sales of assets (mainly land) the government has had to inject increasing amounts of subsidies into GuySuCo. The corporation seems to be on permanent life support.
The corporation needs to make some strategic decisions. The first question it must answer is whether it has the resources to deliver the 500,000 tonnes the industry was supposed to produce at below 12 cents per pound. A decision must be made on the Skeldon plant after the next round of rehabilitation scheduled for the next two months. We cannot keep throwing good money after bad: right now Skeldon is skewing the entire industry’s unit cost of production into the stratosphere.
Then there are the human resource challenges. Even the kindest analyst of the industry must concede that the present crop of managers is in way over their heads. We can do worse than start at the top: in an industry facing a production crisis – especially in the fields, is a financial man the most suitable to turn things around?
The field constraint was presented a decade ago to management. “It is unlikely that cane-cutting can be mechanised. (The ubiquitous drains in the fields) in combination with the high moisture and clay content of the soil, does not lend itself to the use of heavy cutting machinery. The unusually high water table in Guyana has also been cited as a possible constraint on the overall productivity of the industry since saturated soils can severely damage cane root structures.”
Crunch time is here and management has to step up to bat.

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Sugar’s downward spiral

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