NAMILCO Baking Seminar…Increasing production costs, non passage of AML/CFT affect business

Jun 05, 2014 News

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NAMILCO (National Milling Company of Guyana Inc.) held its 2014 Baking seminar yesterday at the Parc Rayne which

saw local bakers benefiting from the expertise of renowned baking specialists on the necessary baking procedures from the mixing of ingredients, to the ferment and preferment structures used in baking to more importantly good manufacturing practices and sanitization.
Speaking at the forum was the Managing Director of NAMILCO, Roopnarine Bert Sukhai, who said that the seminar was a way of giving back to the bakers.
Underscoring the tone of the event was Sukhai’s reflection on the investment climate of doing business in Guyana against the backdrop of increasing costs of production, political deadlock and non passage of the Anti Money Laundering and Countering the Financing of Terrorism Bill (AML/CFT).
He said that in light of what is happening at this time, “I am certain that you would like to know if you would be affected by increasing cost of flour while I am not certain I wish to touch on three areas.”
According to the General Manager, a few years ago Guyana Power and Light (GPL) indicated that in order to stay on the grid NAMICLO had to convert the plant from 50 to 60 hertz. Certain deadlines were set.
He said that at that point in time talks were ongoing for hydro power and positive movements were being made in that direction and with the idea that hydro power would be a viable alternative for cheaper energy, Sukhai said that the company decided to keep the current plant at 50 hertz and build a new 60 hertz plant that would benefit from the intended cheaper energy that was promised with the Amaila Falls Hydro electric plant.
“We are now off the grid except for lights and air condition, producing our own power but with the prospect of hydro power getting dimmer you can now understand our dilemma and disappointment. We are in the process of preparing the plans for a new mill but with prospects of not benefiting from that source of power,” the GM outlined.
He said that they will have to include in their plans new generating sets to run at 60 hertz to cater for frequent power outages that we will continue to suffer from.
Sukhai said that this is a living example of how Guyana’s situation is affecting local businesses, “We could no longer engage in long term plans, we need to have a competitive edge and with the cost of energy being over 35 percent of our production cost what should we do?, this is our US $10 M question as that was the sum we budgeted for our new mill.
“Should we keep our mill running on 50 hertz indefinitely or should we convert to 60 hertz and face the prospect of a larger expensive power supply?”
The second area he highlighted, was the cost of buying the US dollar to pay for wheat, spares and other raw materials and packaging.
According to Sukhai from August 2013, “we were paying between $204 and $206 per US dollar. Today we are paying between $210 and $213 for that same dollar. This means that our local cost for wheat and raw materials has risen very steeply a cost we will be forced to pass on when we can’t bear it in the long term.”
The General Manager said that he would leave it to the experts to tell Guyana whether the non passage of the Anti Money Laundering Bill is related to the cost of acquiring US dollars.
“What I can say is that the exchange rate kept climbing as the debate continued on the AML.”
“As Guyana stands to be sanctioned I am hoping that acquiring US dollars will not become a hassle and result in delays in payments for our raw materials, as this could have serious repercussions not only for us but for everyone,” said Sukhai.
He noted that the shipping and discharging of wheat was the third major cost.  “We constantly try to dredge our wharf for our vessels. Larger vessels cannot enter the Demerara Harbour because of draft restrictions so smaller vessels have to be used and the freight cost per metric ton is higher.”
Those two factors, he said, send up Namilco costs by as much as three times to take wheat to other mills in the CARICOM (Caribbean Community) region from the same source.
Despite the constraints, Sukhai said that NAMILCO manages to sell flour cheaper than in other countries. “The only reason they enter our market is because they sell their flour to Guyana cheaper than they sell it in their own countries and they engage here in predatory pricing.”
This, he said, would allow foreign competitors to get a stronger footing in the market and once the local business is forced out the foreign companies would have the monopoly to increase their prices exponentially.
He said that the authorities have been asked to investigate these practices.
Sukhai added, “We have to balance the cost of a stable food item against the rising cost of producing it.”
He provided his assurance that NAMILCO would continue to do whatever it takes to keep the price of flour stable.
Guest speaker of the baking seminar, Minister of Agriculture, Dr. Leslie Ramsammy, affirmed that it is true that Guyana, Barbados and Antigua and Barbuda pay the highest electricity rates.
Dr. Ramsammy said that Guyana has no options but to pursue alternative energy sources, “Guyana must have a new energy dispensation and that dispensation must include Hydro electricity and any such position that delays or derail that new dispensation is inimical to business, inimical to Guyana and we must reject it.”
Speaking to the increase cost of buying the United States dollar, Ramsammy said that it was linked to Guyana being blacklisted.
He said that the “truth is that upward movement on the Guyana dollar began when we missed the first deadline for the Anti Money Laundering Bill last year in June. In the midst of clear evidence that people are impacted, it is unconscionable for anybody to say it will not affect Guyana we are already seeing it happening”.
The seminar saw also presentations by two international baking specialists; Mr. Miguel Galdos based in Chile, South America and Mr. Keith Clemens from the USA.

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