Auditor questions GuySuCo’s COI…Current Terms of Reference will not solve fundamental problems- Chris Ram

Jul 19, 2015 News

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The future of GuySuCo and sugar – the Commission of Inquiry

Introduction

My last blog post followed the announcement at the annual Enmore Martyrs Day observance that the Cabinet had approved bailout money for the ailing state-owned Guyana Sugar Corporation (GuySuCo). The announcement of some $3,800 million of bailout money was reported in the Stabroek News of June 17. One week earlier, the Minister of Finance had been reported as stating that Parliament was the body to approve any bailout. Seems bailout was done anyway, without parliamentary approval. And as some have suggested, in violation of article 219 (3) of the Constitution which permits only expenditure on the public services when there have been elections and no budget.

There was at the time an indication that a Commission of Inquiry would be appointed and I welcomed it on what I understood such Commissions of Inquiry to be. Not too long afterwards, consistent with a commitment made in the APNU + AFC Manifesto, the Minister of Agriculture announced such an Inquiry into the operations of the Corporation.

The Commission’s members are: Mr. Vibert Parvattan (Chairman), Prof. Clive Thomas (Financial and Economic Analysis), Dr. Harold Davis and John Piggott (Agronomists), John Dow and Joseph Alfred (Factory Operations), George James (Sugar Processing), Nowrang Persaud (Industrial Relations), Claude Housty (Marketing) and Mr. Seepaul Narine, a representative from the main sugar workers’ union, GAWU.

By my reckoning the majority of the members had some association with GuySuCo and bring relevant experience to the exercise. But even relevant in this case seems inadequate. For starters, it seems both misleading and a misnomer to call the body a Commission of Inquiry. The members were appointed not by the President under the Commission of Inquiry Act but by the Minister of Agriculture as an administrative act. And significantly, the focus is more about GuySuCo than about sugar generally.
Too much caution
In my view, the proposed approach, while consistent with the Manifesto promise, is far too cautious and unlikely to address what I consider to be the four most critical issues:

• Whether Guyana can become competitive in sugar given that its current cost of production is approximately US$0.40 per pound while the world sugar price is approximately $0.14 per pound;
• Whether, how much, and for how long taxpayers should be asked to sustain GuySuCo with subsidies;
• Whether, and to what extent, GuySuCo and Guyana should remain in sugar; and
• If so, whether GuySuCo should remain in state ownership, alone or with private investors.

These issues not only seem beyond the scope of the Commission but appear to have been presumed as answered for them. According to a GINA report, the Commission is required to “develop a 15-year plan which is expected to bring the industry back to profitability and ensure long-term environmental and economic sustainability.”

Sugar in Guyana is more than GuySuCo. There are large private cane farmers in West Demerara, as there are in the Skeldon and Albion areas of Berbice. Not only are these operators not represented among the persons appointed by the Minister of Agriculture but this “Commission of Inquiry” is not required to take evidence. It is almost inevitable then that important voices and views may be excluded. It does not even meet the minimum requirements which leading economist Professor Clive Thomas advocated a mere months ago.

Thomas’ views
Professor Clive Thomas, an acknowledged expert on sugar, both locally and internationally, is a key member of the Commission. He has written extensively on sugar and GuySuCo. In a series he did in 2014 on sugar and GuySuCo he had identified two preconditions for charting the way forward. One was the establishment of a National Task Force leading widespread consultation, and the other, a professionally executed forensic audit.

I recall that Prof. Thomas did not rule out privatisation or ignore downsizing, estate closures and returning to foreign management. Readers will recall that it was Mr. Hoyte who had brought in Booker Tate in the late eighties.

Neither of Thomas’ preconditions has been met nor do the terms of reference – a copy of which I obtained only after dozens of telephone calls – explicitly require the Commission to consider the broad areas which he had identified as options. It would therefore be interesting to see how Thomas’ bold views on the entity and the industry are reflected in the report the Commission is required to produce in seventy days from the commencement of its work.

My own view is that the scope of the Commission of Inquiry, its composition and its methodology are too restrictive to solve the fundamental, existential problems facing the industry. Even if this Commission of Inquiry were to demonstrate out-of-the-box thinking, the more controversial of its recommendations would have to be put to the country for wider discussion. Every day of GuySuCo in its present form costs the taxpayers millions of dollars. There is no luxury of time.

The PPP/C would be chomping at the bit to create discomfort for the Government with their “we told you so” rhetoric as they seek maximum political mileage out of any brave new proposal. It is therefore difficult to understand why the Government did not take a bolder approach involving wider consultation and contributions from all stakeholders, including the PPP/C. Their exclusion allows them to criticise without any responsibility to make and defend their own proposals.

Conclusion
One of the major concerns about sugar and GuySuCo must surely be to break the cycle of subsidies into which the country and taxpayers have been trapped. The country will not move forward if it has to treat economic entities as if they were social services. No taxpayer can or will be happy with an endless flow of subsidies. It seems to me to make more economic sense to spend the money on termination benefits and retraining rather than annual subsidies. The days for treating sugar patronisingly must surely be over by now.

Perhaps because of the approach the Government has adopted, the Commissioners may have chosen to avoid publicity. Some persons (mis) interpret this as secrecy. They are not too far wrong. To get a copy of its Terms of Reference reminded me of the unacceptable difficulties of obtaining information under the last Government. This action is being taken in the name of the people. The subsidies are borne by them. What can be the justification for excluding them from the process, they ask.

Trust and secrecy are seldom good travel companions.

I close with a qualification. A July 13 article on GuySuCo with the strap line “terms of reference” stated that the Commission of Inquiry into the sugar sector has been mandated to address the option of divestment if necessary. I would like to believe that the terms of reference I was able to obtain was accurate. Now I wonder.

I was also explicitly informed that the Commissioners would not be conducting any hearings or receiving submissions. I have since learnt that one person had an extensive engagement with the Commissioners and has been invited for another session. If this is so, then such mixed messages hardly match the seriousness of the matter but I guess there is some good reason.

Note: I had indicated in my last post that I would make proposals for the future of sugar. However, in deference to the Commission, I have decided to await the publication of their report.

The author is a recognized auditor/lawyer and social activist.

(Taken from chrisram.net)

 

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