The political will to save sugar was missing

Jan 11, 2018 Features / Columnists, Peeping Tom

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The sugar industry –not just the Guyana Sugar Corporation –could have been saved. But there was never an interest in saving the sugar industry.

Lincoln Lewis, a top official of the Guyana Trades Union Congress (GTUC) in a contribution in the newspapers, noted sugar contribution to the economy which included the provision of drainage services to almost all of the coastal villages.

The sugar company was for 20 years releasing lands for housing and not being adequately compensated at market values. In fact, it was the failure of the company to sell lands, to cover its equity in the Skeldon Sugar Factory that was primarily responsible for the liquidity problems which the corporation faced.

If the value of those services and the market values of its released lands are quantified and aggregated, and if the communities and the government had to pay for those services, the monies would be available to help tidy the sugar company over its present woes.

It is true that in draining the villages, the sugar company also is removing excess water from its own lands. But what if a private company had to be paid to do that? The private company would have charged both the sugar company and every single homeowner and coastal farmer who benefits from those services. The private company would have been receiving billions of dollars each year if rents were charged for the services provided.

City Hall alone, if it charges $200 per week to collect one barrel of garbage per household, can rake in at least $300M per year in revenues from this tariff. Imagine how much money the sugar corporation could earn annually if it was allowed to charge farmers and households for drainage services which it provides to coastland.

But those who have made the decision about the future of sugar are not interested in those calculations. Neither have they factored in the social costs associated with the downsizing of the industry.

For every $1 slide in our exchange rate, it costs our economy hundreds of millions of dollars extra because businessmen and those who have to use foreign currency have to pay a higher rate. This effect is multiplied throughout the economy since producers and consumers also have to pay more whenever there is a depreciation of the dollar. And they pass on these increased costs.

The government has only been looking at the balance sheet of the sugar company. It has not considered sufficiently the impact on the balance sheet of the country. The sugar company is still a contributor to the foreign exchange earnings in the country. Its cost of production may be higher than the export price it earns but without the foreign exchange earnings of sugar, the dollar will come under depreciation pressures and even a marginal decline in the value of our dollar will result in higher costs to consumers and producers. When this is aggregated throughout the economy, it will run into hundreds of millions of dollars.

Then, of course, there are the social costs resulting from the loss of employment, the problems for rural businesses. A great many rural communities are going to be reduced to ghost towns. Social decay will set in. There is going to be increased urban migration. This will increase the pressures on land and the provision of social services, the costs of which are, even today, still relatively prohibitive. In the long-term, it would have been more economical to save a loss-making industry than simply to downsize it to the point where it makes no sense even having it.

An economy like Guyana’s which is small and export-oriented needs large industries to support employment. The APNU, better than anyone else, ought to have known this. It brought the bauxite industry to its knees. It knew that in order for Linden to survive a large industry was needed. The PNCR, the major partners in the APNU had hoped that Omai Gold Mines would have compensated for the loss of employment within the bauxite industry. But this never happened.

In the case of sugar, the situation is dire because there is no major industry to absorb the displaced sugar workers. And you cannot realistically ask sugar workers assigned to one estate to work at another estate.

When housing and farming were being developed in colonial Guyana, the sugar barons knew that if they were to ensure an adequate supply of labour for the industry they had to house persons near to where they would work.

At the moment, there is no industry that can provide employment for the sugar industry. There is nothing in the pipeline also. The government had hinted at converting Guysuco into an agricultural corporation rather than a sugar corporation. But this was just talk as so much of the government’s plans are.

Sugar could have been saved. But the political will to do so was missing.

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