Skeldon factory is a ticking time bomb – GuySuCo Chairman

Nov 09, 2016 News

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-Says, “PPP just wrecked the sugar sector from top to bottom”
By Kiana Wilburg
The infrastructural problems plaguing the US$200M Skeldon Sugar Factory have left some viewing it as a ticking time bomb that will detonate soon; unless tough but necessary decisions are taken.

Sharing this opinion recently was Chairman of the Guyana Sugar Corporation (GuySuCo), Dr. Clive Thomas.
Dr. Thomas was reminded that Skeldon’s sugar production of 39,158 tonnes in 2015 surpassed 2014’s and is now the highest production since the new factory was commissioned in 2009.
According to GuySuCo’s annual report for 2015, the factory performance has improved considerably. In fact it has shown a15% improvement in the sugar recoveries.
Dr. Thomas acknowledged that while this may be the case, he said that it is still not enough to make Skeldon competitive.
Members of Cabinet have since been informed that the best solution to the disaster that is Skeldon is to make quick moves to put an end to its production of sugar and seek to use it for diversification purposes.
Dr. Thomas concurred that he does not believe that it is wise for Skeldon to continue with the production of bulk sugar.
A DISASTER!
To further cement his point regarding Skeldon, Dr Thomas shared that there are disturbing infrastructural problems within the $200M factory.
“If you only knew the cost to refurbish the factory, it would blow your mind,” added the GuySuCo Chairman.
Asked to say whether he agrees with suggestions to divest Skeldon, Dr Thomas answered in the affirmative.
He said, “Skeldon needs to be divested. We thought it would have been saved or salvaged by a mechanization project and that was not helpful. Then to get the costs down to competitive levels, moves were made to involve private cane farmers in supplying cane to Skeldon. That, too, did not work. The reality before us is that the factory has lots of faults; it is badly designed and poorly constructed.”
The economist added, “The factory is deteriorating. New steel is needed, some of the furnaces don’t work, some of the boilers don’t work…, The factory is just not properly built. The cost for the repairs needed is about if not over US$60M ($12B). It is that big of a disaster.”
Just recently the sugar sector received a whopping $2B in assistance from the national purse. This $2B financial support is to help meet routine expenditure and is in relation to the second crop for the sector. The cost to repair Skeldon alone would be six times that bailout.
The amount needed to fix the problems facing Skeldon is also more than the $11B ploughed into the sugar industry for the entire year.
The GuySuCo Chairman also revealed that an international firm was hired recently to do an assessment on the Skeldon Sugar Estate. He said that the firm in its report documented the troubling state of the factory.
“The company said that that serious action has to be taken where Skeldon is concerned. The team, too, suggested that it has to be divested if not, the whole thing will eventually collapse on our hands and we won’t be able to produce any sugar. We have to make a decision. We either divest or watch it collapse.
“The PPP just wrecked the sector from top to bottom and we are trying to salvage what we can,” expressed the economist.
He continued, “We are trying to find a way out but that is like trying to find a way out of a minefield. That is what the PPP left us with. Everything is in a nerve-wracking state. The sugar industry is a minefield and a crumbling edifice. But it must be made known that we don’t want to put people on the breadline. The Skeldon factory alone employs 1,789 workers. Hence we are working on finding the best possible solution to turning the factory and the sector around.”
PRODUCTION
According to statistics from the Ministry of Finance for the first half of the year, the Guyana Sugar Corporation recorded an operating surplus of $2.9 billion, down from an operating surplus of $3 billion for the same period last year.
This surplus, it said, was inflated by a $9 billion transfer from the Central Government to finance operations.
Without this transfer, the Ministry of Finance noted that GuySuCo’s true position would be a deficit of $6 billion.
In the future, the Finance Ministry said that all Central Government transfers will be shown as financing, instead of being included as part of revenues.
Furthermore, it was noted that by the end of the first half of this year, GuySuCo’s production was 56,645 tonnes. This was recorded as a reduction of 23,624 tonnes from the budgeted 80,269 tonnes and also down from 2015’s half-year production of 81,143 tonnes.
The Ministry of Finance said that this shortfall was reflected in a decline in export sales, from a budgeted amount of 58,272 tonnes to an actual of 49,278 tonnes, compared with 77,000 tonnes realized in the same period last year.
It noted that the El Niño weather phenomenon, which resulted in stunted cane growth and a decline in cane yields from 57.45 tonnes cane per hectare (tc/ha) in the first crop of 2015 to 45.2 tc/ha in 2016, as well as delays in tillage, planting, and crop husbandry operations, were some of the factors that contributed to this state of affairs.
Significantly, the Ministry of Finance said that sales to Caricom and the European Union (EU), of bagged sugar, as well as sales to Caricom of Packaged Gold sugar, were the most affected.
It said that the industry continues to be plagued by many problems, including an increase in the prices of several inputs such as fertilizers, and these have had a negative effect on the company’s ability to realize sufficient cash to cover its operating costs.
The Ministry stated, “GuySuCo has taken several steps to address some of its challenges, including negotiating with Tate and Lyle for better prices for sales to the EU market; pursuing studies to inform diversification into areas such as other crops, fruits, aquaculture, rice, dairy and livestock to reduce dependence on sugar; and rationalizing its operations for increased efficiency and productivity.”
Additionally, various stakeholders within the industry recently gathered for an important meeting which saw discussions on the worrying financial future of the sugar industry.
The stakeholders included a high level team from GuySuCo as well as representatives from the Guyana Agricultural and General Workers Union, the National Association of Agricultural, Commercial and Industrial Employees and the Guyana Labour Union.
Kaieteur News understands that a comprehensive presentation was done by the GuySuCo team, where the 47 representatives were provided with production and financial data from 2010 to 2025.
The information presented indicated a very discouraging future for the sugar industry, where the Corporation is projecting losses of approximately $14.195 Billion in 2016 and further losses of $13.758 Billion in 2017.
The Unions’ representatives were encouraged to submit their thoughts on how the industry could secure the future well-being of the approximately 17,000 employees and their families, as well as ensuring the profitability of the business.
It was subsequently agreed that a team comprising representatives from the three Unions would meet with a team from GuySuCo to get a deeper appreciation of the financial and other data which were provided.

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