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Privatising Sugar

Jul 29, 2013 Editorial

At last a spokesperson for the PPP has conceded that privatisation of the sugar industry is “not ruled out”. That this was done just before the party’s upcoming Congress makes the statement even more significant. Before it demitted office in 1992, the PNC government, as part of its Economic Recovery Program crafted by the International Monetary Fund (IMF), had agreed to privatise the industry by 1993.
One of the foundational principles of the neo-liberal regime deployed by the IMF – dubbed the “Washington Consensus” – was that all productive industries must be in the hands of the private sector. Guyana, under the PNC had gone in the opposite direction and the government had expropriated the “commanding heights of the economy, as part of its strategy of “cooperative development”. All of these policies were to be reversed under the ERP.
When the PPP took office, however, while it accepted the IMF’s privatisation medicine for the Bauxite Industry and most other government-owned businesses, it balked at doing the same for sugar. Under the leadership of founder-leader Dr. Cheddi Jagan, they negotiated very hard and convinced the IMF that the social impact of privatisation would be too deleterious and that the industry could be made viable under government ownership.
They accepted the foreign management team of Booker Tate, which had been brought in by the PNC in 1990 and allowed wage levels to be increased significantly. Booker Tate was paid in proportion to the production achieved. The latter rose from a historic low of 130,000 tonnes when they took over to more than double that in a few years. Eventually, production reached the more than 300,000+ tonnes mark set in the colonial days.
The IMF, however, had set ground rules such as reducing allocation for refurbishing the ancient sugar factories which eventually were to set the stage for a reversal in the industries fortunes. The government embarked on the largest investment in Guyana’s history when the decided to expand the industry to produce more than 400,000 tonnes annually. The centrepiece of the expansion was going to be the construction of a “state of the art” sugar factory at Skeldon to produce 100,000+ tonnes annually with the concomitant increase of cultivated lands to supply the factory with sugar canes.
The Chinese, who were providing the loans for funding the expansion, were given the contract – even though they never had the necessary experience. By 2009, when the factory was supposed to get going- two years late – it became obvious that the government had created a white elephant. In a decision that has never been given ownership, the old factory which had been routinely producing 50,000 tonnes annually was dismantled. The new factory has never been able to reach 40,000 tonnes – even at twice the old cost.
Booker Tate was blamed for the failure and summarily dismissed by 2010. By this time, however, other problems had surfaced in the industry, including the inability to attract harvesters and extended periods of rainfall that curtailed field operations. The latter had declined overall due to very poor management decisions which became exacerbated after the departure of Booker Tate.
This year, the first crop was 8,000 tonnes less than the disastrous 1990 first crop and we appear to be on course to do the same for the entire year. While the Finance Minister avoided a definite commitment to privatisation of the sugar industry, respected commentators all agree that this is the only course available in the long term. The Private Sector Commission has suggested that the government could begin the process with a few estates. This newspaper has already suggested that these might be the ones in West Demerara.
Long gone are the days when we should be the slaves of some long dead economists – whether from the right or the left. We have to be pragmatic like Chinese leader Deng Xiaoping who brought economic success with his motto “It doesn’t matter what colour the cat is – once it catches the mice”. We have to test the privatised model in the sugar industry.

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