A gambit that has to be made

Dec 20, 2013 Features / Columnists, Peeping Tom

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Diversification of state agriculture has failed in Guyana. This failure is best exemplified by the disastrous attempt of the Forbes Burnham administration to convert some sugar fields into other crops, and also by the failed attempt of the GNS to venture into large scale cotton and beans cultivation.
Guyana has simply not been able to move agriculture production by the State away from the mono-crop production. It is within this context that one must examine the idea that that the rearing of fish would be far more profitable for GuySuco than the planting of sugar.
On paper the idea of GuySuCo diversifying into fish farming sounds quite attractive. But the reality remains that plantation-style diversification has been tried before and failed. And unfortunately there are enough grounds for optimism that anything will be different this time around, especially when it comes to converting cane fields into fish farms.
For one, the economics do not make sense. Even though sugar production is steeply collapsing, it still makes business sense for the sugar corporation to incur losses in maintaining its assets rather than allowing these assets to disintegrate or be subjected to forced sale.
With the debts that GuySuCo has accrued, debts which are backed by its considerable assets, it would be financially catastrophic for the sugar corporation to simply allow its factory assets to be put on the auction block where there is every guarantee that it will not fetch anywhere near good prices. The wholesale movement away from sugar will entail the disposal of factory assets and this will inevitably worsen the debt situation for the sugar corporation which is backed by these assets.
Secondly, the level of investment that will be needed for conversion to fish farming is simply not available and will not be available unless the sugar industry enjoys a turnaround. And if the fortunes of the industry change for the better, the incentive for increased diversification will disappear.
An alternative means of securing the investments for diversification would be through limited privatization of sugar lands. But GuySuCo is already enjoying prime rates for lands which are being sold for housing purposes. So why would it then want to privatize these lands for agricultural diversification. Another means of attracting investment for diversification would be for sugar lands to be rented or leased, but this too will not bring the desired returns that can impact appreciably on the financial health of the corporation.
Thirdly, and perhaps the most important consideration for not moving towards fish farming concerns markets. GuySuCo has assured markets for sugar. These markets may be depressed, but there are available. There is no market, on the scale of sugar markets, available for freshwater fish. If there were, private mega farms in Guyana would have already captured those markets.
In Guyana there are mega freshwater fish farms and almost all of the production from these farms is ploughed into the domestic market, instead of being exported.  It would be risky and dangerous for GuySuCo to embark on a major diversification of its lands away from the desired levels of production required to ensure increased global competitiveness without any guarantees of a stable, long term and secure market for fish.
The management of GuySuCo understands these realities. There has been a lot beating-up of the management of the corporation, but historically, the sugar corporation has always had the best managers in Guyana. There are a great many experts outside of the industry who like to advise the corporation on what needs to be done, but the sugar corporation has never been short of competent management, and more so management that understands the sugar industry.
Markets for fish, like those for sugar, cannot be manufactured out of thin air. The markets for agricultural production are littered with impediments, including phytosanitary obstacles. Try exporting fish to the Caribbean and see the problems that you will encounter getting your exports through the health authorities!
The fish markets internationally are dominated by large firms and while it is possible to enjoy some niche markets such as those enjoyed by fish exporters in Guyana, these markets will never be sufficient to turn GuySuCo around.
The sugar industry in Guyana is at present going through one of its many downward cycles. It will recover from this cycle because the sugar corporation has the management capability to allow it to eventually turn the industry around.
While sugar has been losing billions, there has been impressive work taking place as regards mechanization of the industry, which also has been a costly investment. Today more than 20% of the total acreage of the sugar industry has been reconfigured for mechanical cultivation. That is a fantastic achievement given all the constraints, including physical constraints in the fields.
The sugar industry has had its setbacks but there is a significant sunken investment aimed at reducing the cost of production and increasing production to peak at 450,000 tonnes. That plan has had its problems and has justifiably led to questions being raised about the viability of continuing in sugar. But without a feasible alternative, continuing in sugar remains GuySuCo’s only bet, a gambit that has to be made.

 

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