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A MISMANAGED GUYSUCO
For the last two decades, the sugar industry was kept alive with huge subsidies. Upon taking office in May 2015, the Granger administration realized that GuySuCo was ailing. A temporary solution was to follow in the footsteps of its predecessor and continue to subsidize it with billions of dollars. The reason was that there was no easy solution to salvage the bankrupt GuySuCo.
The Jagdeo administration decided to build the Skeldon sugar factory at a cost of more than US$200 million because as Jagdeo said, the factory would lower the cost of production and make Guyana’s sugar competitive on the world market.
At the time, that was the largest project ever undertaken by the government. However, the factory became a white elephant. It was plagued with problems, which prevented it from realizing its potential.
In the 15 years prior to 2015, the PPP pumped more than $135 billion into GuySuCo with the intent to maintain its political support base among sugar workers. During this period, the cost of production, procurement fraud, corruption, outdated factories, labour unrest and inclement weather increased the cost of producing sugar to more than twice its price on the world market.
In trying to solve GuySuCo’s financial problems and reduce the subsidy, the government in late 2016, made the tough decision to close the Wales sugar factory. And in 2017, it closed the Rose Hall, Enmore and the white elephant Skeldon sugar factories.
The reduction of the staff from 16,000 to 10,000 and a drop in production from 260,000 tons in 2009 to 140,000 tons in 2017, have reduced salaries, wages and allowances but only by $5 billion annually, from $21 billion to $16 billion.
Today, the cash-strapped, smaller-sized GuySuCo and its three estates still pose a number of problems for the government in terms of finances and production. With only three estates in operation, GuySuCo is expected to produce about 100,000 tons of sugar this year, which according to analysts is not enough for local consumption and to meet its quota to the United States, the Caribbean and other markets.
The government is hoping to raise the needed cash from the sale of the four closed estates to make GuySuCo more competitive. Colvin Heath-London, a financial expert with wide management experience, was hired to head NICIL’s SPU, which is overseeing the privatization and divestment process of the four estates.
Meanwhile, the three closed sugar estates—Skeldon, Rose Hall and Enmore have been reopened to attract investors and to produce molasses for Demerara Distillers Limited (DDL), which has expressed an interest to purchase the Enmore estate.
Sugar ceased being a business a few decades ago. It became a political instrument. The factories helped fund the largest sugar, Guyana Agricultural and General Workers’ Union, helped to keep the People’s Progressive Party bank account healthy and above all, ensured a solid political base for the PPP.
Moves to make the sugar industry meaningful are seen as measures to spite the political party but here people refuse to recognize that other sectors in the society needed money. The society needs better health, more modern infrastructure and education facilities.
The interest in the industry at this time is heartening and one wonders why GuySuCo was not privatised a long time ago! The country would have been so much better off.
The coming of oil is about to offer the development that the country has been seeking for decades. But will there be the tendency to spend even more money on sugar? Money that some may now see as disposable income?
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