Govt. should announce end to raw bulk sugar production for export – GuySuCo Chairman

Jan 16, 2016 News

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From an economic standpoint, Chairman of the Guyana Sugar Corporation (GuySuCo), Dr Clive Thomas,  has said that the financial prospects of the sector would remain depressing if certain critical changes aren’t made and soon at that.

He said that given the daunting conditions of the sugar industry, Government should start making the announcement of firm decisions at least by this year. He said that for 2016, Government should make known the end of the production of raw bulk sugar for export.
Outlining the daunting conditions of the sector, Dr Thomas said that with regard to the financial environment, GuySuCo can be easily described as a “low grade, poor quality, high risk, commercial borrower.”
The economist said that from the perspective of the geo-physical environment, the sector is one which sits significantly below sea-level and below low-tide level “risks”. He said that it is also prone to weather variability; and climate change and this puts enormous pressure on hydraulic capabilities.
The GuySuCo Chairman said that when one considers the infrastructural deficits facing the sugar industry, it is found that a 30-year continuous infrastructure deterioration has been taking place especially as it pertains to sea defences; water conservancies; outlets to sea and river; supplementary canals-system (due to village incursions, roads, scrubland); and other crops water usage.
Dr. Thomas said, however, that the social-political environment carries enormous weight in planning a way forward.
He added, “GuySuCo and the sugar industry have been treated separately by the recently concluded Commission of Inquiry. These two however, should not be placed in watertight compartments. The industry is wide. It includes peasant operators, service providers, and the communities. GuySuCo is a “state corporation”, only as a legal construct.
“But it represents much more in the socio-political environment. Rightfully or wrongly, sugar workers, their families, and the communities in which GuySuCo operates see it as the main provider of their livelihoods and a life-line support for their communities. Therefore, all recommendations for the way forward should embrace this reality.”
“In these circumstances what GuySuCo “gives and takes” from the communities will have to be synchronized with what the community “gives and expects to get back” from GuySuCo. One must understand that GuySuCo faces a severe price-cost squeeze at the heart of its financial collapse.
For several years, it has been costing more (both in total and unit terms), even as it produces less sugar. And, more worryingly… several producing estates exceed unit sales price. In effect losses increase with increased sugar output, and Guyana is subsidizing European Union consumers.”
Dr. Thomas said that this position was also presented to Cabinet during his economic presentation on the sector. He said that calamitously, in recent years, revenue earned by GuySuCo just covered the cost of labour.
Meanwhile, the economist said that recent data cast a sharper image on GuySuCo’s indebtedness. He explained that the total indebtedness of the corporation stands at G$82.4 billion, of which three-quarters is long-term debt and loans and the remainder, is short-term debt. He noted too that losses for 2014 were $17.4B and $11.7B in 2013.
Based on the financial and economic analyses he conducted, Dr. Thomas said that the rational conclusion to be drawn is that the Government needs to decide whether it can afford to continue      funding GuySuCo from the National Budget, repeatedly while it remains a producer/exporter of raw bulk sugar beyond 2018. He said that repeating such “bailouts”, expecting improved results is not recommended.
By latest, early this year, the GuySuCo Chairman said that the Government should announce its ending of the production of raw bulk sugar for export.
He said that simultaneously, the Government should announce related strategic decisions to be in effect starting this year. Dr. Thomas said, too, that the establishment of a Holding Company, to “hold” shares of Subsidiaries/Business Units/Other Revenue Streams, created out of GuySuCo operations is also recommended.
Given the impressive production achievements of the sugar industry, Dr. Thomas had said that he is hoping to raise the bar a little higher for 2016.
The economist said that GuySuCo is hoping to increase its production target by five percent over the 2015 figure. For last year GuySuCo achieved 231,145 tonnes. This was 3,702 more than its projected target of 227,443.
The Chairman said, “I am really happy about this. I am not here for more than six months and this has happened but I could not have done it without the effort that was put in by all. It is proof that the removal of political interference has tremendous benefits. I know that we can do better than this come next year.”
Dr. Thomas said that while the recommendations for the industry are “extreme”, he cautioned that those working in the sector should not be worried for one bit whether the sector would be closing shop.
“Indeed the changes that are coming will be radical but it is necessary because you cannot expect to be doing the same thing every year and getting different results. But we aren’t closing shop. We are concerned about the survival of this industry but more importantly bringing it to good health. We are trying to move towards value added products coming out of the sugar assets…we are trying to use the assets of the industry in a more creative way.”
The GuySuCo Chairman explained that high on the entity’s list of priorities is moving towards the diversification of the sugar industry especially as it regards refined sugar.
He noted that GuySuCo is still working to achieve a breakthrough with a new upgraded sugar called, “Enmore Crystals.”
“This product will help to give us some leverage to sell our sugar for more. This packaged sugar is only being done in small quantities for the markets in Canada, USA and Britain.”
The GuySuCo Chairman said that the Board and Management believe that the packaged sugar will do better than “the ordinary sugar sold in the transparent plastic bag.” He noted that samples are already being taken to the three markets he outlined, among other places where contacts are made.
Dr. Thomas said, “We are trying to penetrate the market with small quantities and build up as time goes. We are basically doing this to see how we can get a higher price for our sugar. And so far, it has been receiving favourable reviews from our international contacts, so we are looking to see how this works out but there are other plans in the pipeline for the diversification of this product and bringing the industry back to good health.”

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