Diversification and divestment in the sugar industry long overdue

Mar 22, 2017 Letters

---

Dear Editor,
In the past the economic performance from sugar used to make us proud. The industry was always regarded as an integral part of our tri-sectoral approach to development. Today the fortunes of this industry have changed so dramatically that the treasury is severely depleted in sustaining it. As a result the time has now come to diversify and/or divest it. Here are the reasons.
1. Like many other cost of production in Guyana the cost of producing sugar is way too high whereas it earns revenue at twelve cents per pound we have to pay double to produce it. This is creating a balance of payments deficit and simultaneously robbing other areas of developmental funds. It is taking scarce resources and putting it in an area where the prospects are weak. This is totally unfair to the loyal taxpayers (and not big tax dodgers).
2. The Skeldon flagship investment, the largest in Guyana so far, more than two hundred million U.S., was undertaken to bring the cost of production to a level of viability in the industry where cost of production would be rationalised. This however, was the biggest let down. The cost situation was exacerbated as this assembly of scrap iron turned up defect after defect with tremendous remedial cost. It is doubtful that even today normalcy would have been savaged.
3. That the future of the sugar Industry is bleak is demonstrated by the substitutability by the product. Beet sugar and other sweeteners have now become highly commercialised. Many have embarked on expansion which results in economies of scale and further reduction in cost of production. Juxtaposed this situation with Guyana’s reality would signal our exit from this activity.
4. A lot of the technology used in the industry is antiquated with high levels of cost of production. Re: capitalisation would cost a lot of money. Benefits of the opportunity cost of investment would direct entrepreneurial activity in other undertakings.
5. In the past politicians have used the industry as a bargaining chip in pursuit of their nefarious activities. Moreover, some politicians have the belief that if they are not in power everything must be done to bring down the economy. Due to this we have seen the burning of young cane, the farmers 125 days of strike where civil servants, who were called to help in the harvesting cut the cane in such a way that the ratooning system was destroyed thereby greatly affecting the level of production of future crops. The accumulated results of such act are today responsible for the almost irretrievable position of the industry.
6. The quality of employees you have would determine the organisational efficiency and hence the profitability. In the recruitment drive nepotism and ethnic consideration seem to be the order of the day. The result is that many persons who are functionally illiterate seem to have been given key positions. The consequence of this is many poor decisions costing millions of dollars are made. For example some time ago the E.U offered a market with preferential prices; this offer was not taken up for a better market which never came. Skeldon Estate should have had cheaper and better technology from India and Brazil two renowned producers. Instead billions of dollars were lost through poor decision making by doing business with China.
7. During the twenty three years of P.P.P rule, corruption has become institutionalised. From fixtures and fittings to capital items lots of state items have become the personal property of private individuals, and I daresay that many of the parties are people with immunity. Not too long ago a set of fertilizers belonging to Guysuco was found on the premises of a rice farmer. These leakages over a period of time have acted as a strangle hold to the industry.
8. Assets, especially land, belonging to Guysuco have been sold to preferred individuals at far below the market price. All the finance acquired from these giveaway deals might not have been properly made available so that these proceeds could have been used to put the industry in a better shape. I hope SOCU will pay some attention in this area.
9. Finally the pay structure of Guysuco needs to be looked at. For an entity which has been continually in the red, one would have thought that the wage rate would have some correlation with economic performance. This seems not to be the case. What is had for many categories of workers in this industry far exceeds the rewards for those in similar capacities in other sectors of the economy.
If a cash cow like GTT shares has been divested with what seems to be a five million give away on the deal then why continue with Guysuco which seems to have become a perennial burden on the tax payers? However, because of the percentage of the economy it occupies it should be done in a phased manner. This has been happening under the P.P.P and must continue under the present regime. After all, it has now come down to economies rather than emotional considerations.
Government will be highly unfair if it does not give G.A.W.U the first opportunity to buy part of the industry. Here you have the workers so much in love with their union that they are prepared to give their life, carry out strike actions at whims and fancy of their leader, and in my opinion maintain a leader Komal Chand, who hardly does anything constructive for the benefit of them yet show a high level of loyalty. With this morale they will work wonders in turning around the industry.
Nazir Mohamed,
Region 2
AFC

---

---