GuySuCo’s return to profitability…Improved production must be linked to incentives – former director

Jun 24, 2015 News

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– employment cost 65% of total operating expense in 2014
For the sugar industry to return to profitability, the new Government may seriously have to think about offering incentives for key operations in order to raise production levels.

Former Human Resources Director of the Guyana Sugar Corporation (GuySuCo), Jairam Petam, in a letter to the editor published yesterday, stressed that the biggest problem facing the state-owned company is its huge employment cost, which as at end of 2014 was 65 percent of total operating expense.
Of this, the Guyana Agricultural and General Workers Union (GAWU) bargaining unit accounts for 80 percent of the total employment costs, and more than 75 percent paid to piece rated workers, the majority of which is payable to cane harvesters.
Some one percent of wages/salaries work out to approximately $200M. Recently GAWU has submitted a claim for 9% increase in wages for 2015, which if agreed to is equivalent to $1.8 billion; thereby taking employment cost to 69% of total operating expense. This is not a sustainable ratio, said Petam, who retired a few months ago and is now based overseas.
Petam’s comments would come at a time when a new Government has taken helm of the country and with questions about the future of the industry which has been operating with major losses in recent years.
Billions have been poured into the industry annually from the Treasury, but production has fallen to a two-decades low, with GuySuCo left with very little cash reserves for capital works.
There have been calls for closure of the industry, but one that none of the political parties want to take a decision on.
The former executive agreed with criticisms that the current circumstance of the company producing sugar at US$0.40 per pound and selling at US$0.13 is certainly not sustainable to warrant perpetual bailouts.

“Guyana is too poor a nation to perpetually provide billions of dollars of bailouts each year. The immediate past CEO (Chief Executive Officer Dr Rajendra Singh) had estimated $16B as a short-term bailout this year, and early last year, management indicated to the Economic Services Commission that GuySuCo had incurred $58B in debt. Imagine what this amount of money could do towards the improvement of the health and education sectors of a nation with a population of just under 800,000.”
Petam believes that for GuySuCo to become a sustainable entity, free from Government bailouts, it would have to relook at all agriculture practices, from a labour perspective, incentivising key operations, so that productivity could be enhanced.
“New productivity indices will have to be determined for all key field operations. There is no way that the current establishment of field workers in general, and cane harvesters, in particular, could be improved; because cane harvesting and planting (two key field operations) are no longer considered attractive for employment.”
The company has to improve on the current field incentives to not only retain those in its employ, but more importantly to increase current productivity rates.
“There must be a balance between the levels of mechanisation and labour-reliant operations, because the vagaries of the weather must be taken into consideration. Skeldon is a good example that illustrates the exposed vulnerability of mechanisation. Whenever it rains harvesting operation is literally grounded to a halt on this estate.”
Petam urged for more research and development in higher yielding and more robust cane varieties to be intensified. Part of the plans will also have to be in more efficient use of herbicides to bring dramatic improvement in the high-cost area of weed control.
“Optimum establishment on human resource will have to be worked out for each operation and department from labour to management and support staff, and those superfluous to the needs will have to be severed, invoking the legal procedures as adumbrated by the Termination of Employment and Severance Pay Act.”
Petam believes that GuySuCo would need to start from a zero-based position.
“It is all the more important that new collective labour agreements would have to be ironed out; replacing the current which have outlived their usefulness, including agreements on annual and weekly incentives.”
Petam said that engagements with the unions must now be based on productivity bargaining, rather than the age-old haggling on pay increase, without any bearing on productivity.
“There is need for a broader based committee far beyond the scope of the existing Interim Management Committee, which is seemingly a band aid intervention, to not only chart the way forward, but more importantly to implement initiatives that will enhance the survival and viability of the company.”
The former Human Resources Director, who over the years has been a point man in negotiations for benefits and pay, said that there must be the political will to agree to the philosophy that GuySuCo cannot be business as usual.
“For too long, political interventions and interferences have stymied management responsibilities in not only managing the business, but in strategically charting the way forward on labour relations, in particular.”
Petam warned that the sugar entity cannot be about sustaining labour for political expediency and anachronistic customs and practices, but “more so about saving an entire industry”.
The previous administration of the People’s Progressive Party/Civic (PPP/C) had promised to sink some $20B ($100M) into the industry over the next five years to help GuySuCo recover.
The new David Granger-led administration recently fired the entire Board of Directors and CEO, replacing them with an Interim Management Committee (IMC). Former CEOs, Paul Bhim, and Errol Hanoman, were both brought back to be part of the IMC, which is expected to be in place for the next six months until a more permanent solution is found.

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