Price fixing racket at GuySuCo… Internal audit report recommended Bhim sacked

Jun 09, 2019 News

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The operations of the Guyana Sugar Corporation (GuySuCo) over the years have been a major battle ground between the government of the day and the opposition.

Up to 2015, the workers were over 16,000 for the industry.
The corporation at 2015, when the Coalition Government took office, had been falling steadily in production despite a number of measures, including more lands for production and the US$200M Skeldon modernisation project.
Both failed to jumpstart despite the billions also annually pumped into GuySuCo via bailouts by consecutive Governments.
There is evidence emerging now that the poor performance was not only blamed on ageing factories, weather, and poor canes, but rather on the actual sale price of sugar to local and overseas buyers.
According to an internal audit document, there were recommendations for GuySuCo to part ways with its former Chief Executive, Paul Bhim, who is now second in command at the state-owned company.
This was after indications that the decision who to sell to and at what rates may not have been above board.
In fact, on May 3, 2018, in the internal document titled “Corporate Observations”, it was noted that prior to 2016, there was a robust local sales procedure for the award of bagged sugar to potential customers. The maximum quota allowed was 200 bags weekly.
There is a ready local market for sugar with significant profits to be made once a steady supply can be acquired from GuySuCo.
However, auditors found that the system was manipulated and ignored by senior management of GuySuCo on several occasion.
Auditors found that in early 2011, Bhim as Chief Executive (Ag) awarded a quota of 200 bags of sugar to Bhir and Sons Distribution Services, in contravention of the system in place.
“A directive was simply handed down to the DCEO and the Marketing Manager for the quota to be awarded. This can be deemed the first breach.”
According to that May 2018 report, in August 2011, Bhim instructed the Marketing Manager to award a quota of 100 bags of sugar weekly to Boodram Basdeo, in what was another breach.
Bhim resigned from GuySuCo in 2014, before being rehired by the Coalition Government.
With regards to the pricing at various markets, it was explained that that the decision to determine these was supposed to be done by the Marketing Director and Marketing Manager using intelligence sources of sugar futures.
The report said under the arrangements, the team members inclusive of the Chief Executive, Finance Director, Marketing Director and Marketing Manager would all make the decisions for the price for a specific market.
The mechanism was put into place to reduce corruption.
It was disclosed that during the negotiations, major customers would be invited to Guyana.
They would include Tate and Lyle, from Europe; Gopaul Company from Trinidad; Combe Market of Suriname; the Demerara Distillers Limited and West Indies Rum Distillery of Barbados.
To strengthen the system, GuySuCo’s sugar brokers, Czarnikow, was supposed to visit Guyana annually and brief local sugar officials in Guyana on the forecast for the global situation.
According to GuySuCo’s internal correspondence, calling for action, recent transactions have caused alarm and have the potential for significant harm to the industry.
Officials at GuySuCo are very clear about how prices are supposed to be set.
It was disclosed that last year, the price for sugar sold to Gopaul and Company Limited of Trinidad and Tobago was unilaterally reduced from US$530 per metric tonne to US$485, Freight On Board (FOB).This contract locked Guyana down for the period April 19 to June 19, 2018.
The internal report said that the price reduction appeared to have been undertaken without any due diligence done in the market to determine the veracity of the customer’s request.
“In the present construct only CE (ag) is involved with the setting of prices with the company’s buyers. This action can certainly cause significant harm to the industry. He is completely aware of the best practice of collective price setting but ignores same. This is dangerous,” the internal audit document said.
The document warned that should the prices have held, GuySuCo would have lost US$90,000.
“During periods of chance and uncertainty vigilance if required. As such, the continuation with the present CEO (Ag) is now untenable,” the document said.
Government through its investment arm, the National Industrial and Commercial Investments Limited (NICIL), has borrowed $30B (US$150M) via a bond financing.
GuySuCo barely made it to 100,000 tonnes last year with only three sugar estates remaining and with over 10,000 workers.
They badly want to draw down on the financing, which is not tied to GuySuCo’s production.
NICIL has complained that it is under pressure to explain to the bondholders and trustees what GuySuCo did with the money it received.
On Friday, President David Granger paid a surprise visit to Albion estate, Berbice, where he again assured that Government is fighting to keep GuySuCo sustainable.

 

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