Has sugar lost its sweetness?

Jul 14, 2021 Letters

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Dear Editor,

I have been following the exchanges between Dr. Vishnu Bisram and Mr. D.C. Daly on the challenges faced by the sugar industry. Dr. Vishnu has provided data to support a model based on the granting of sugar lands to ex-cane farmers/workers and allowing the government or private company to run the factory; market the sugar; and provide technical services. Mr. Daly questioned the validity of data cited by Dr. Vishnu as well as the rationale for the sugar subsidy. He (Daly) suggested that those funds (subsidies) could have been utilised to develop projects elsewhere, such as road construction.
There has been a litany of conflicting and inconsistent positions on the sugar industry. A common perception is that the sugar industry is linked primarily to Indians. Of the 5,160 dismissed sugar workers, 26.8 percent were Africans, while 63.4 percent were Indians. The average experience of workers was 26 years, but their skills-set would have been specific to that industry which made labour mobility difficult. And the ranking members of the APNU+AFC coalition, for example, stated during their 2015 election campaign, “sugar is too big to fail,” and that they would give sugar workers a 20 percent pay hike. They (coalition) have recanted on that position and denied the critical importance of sugar and its vital role in Guyana’s economy and history.
Upon taking up office in 2015, the PNC/R coalition government exclaimed that sugar has become a heavy drain on the country’s treasury and that they could not continue to grant subsidies (amounting to an average of G$7 billion annually during the 2016-2019 period). The sugar industry began to incur huge losses since 2006 when the EU’s (European Union) preferential treatment ended with the price of sugar falling immediately by 34 percent. The EU neutralised the impact by granting Guyana G$32 billion over the period 2007 to 2013. (I have not been able to determine how much of that money was invested in sugar). Combined with production decline, the economic impact on the industry was harsh: in 2011 sugar earnings were US$123 million, in 2017 it was US$49 million, and it plummeted to $27.7 million in 2019. Another measure of sugar’s rapid decline was that in 1996 sugar’s contribution to GDP was 14.7 percent but that slumped to 2.8 percent in 2014.
These figures give critics enough currency to make calls for the closure of the industry. But in their enthusiasm, they overlook the devastating impact such closure would have on the sugar communities and on the country, as also have failed to note that the CoI (Commission of Inquiry) recommended a 3-year turn-around time for sugar to attain economic viability. The recent ILO study highlights the plight of the lives and livelihoods of the dismissed sugar workers: rising poverty, rising alcohol consumption, escalating crime rates, and high unemployment particularly at Wales (60 percent) and at Enmore (55 percent).
Certain strategic industries like sugar and bauxite are “community-centred” industries that are inextricably bound up with workers’ history, social relations, and culture. The recent ILO study points to “the sheer dominance of the sugar estate in the economy of the communities that surrounded each estate.” Government’s policy therefore must be based not only on financial consideration (cost benefit analysis) but also on an interplay among financial, social, historical, and strategic factors. To this end, the PPP/C Government has invested about G$10.5 billion since August 2020 in the sugar industry. The bulk (75 percent) of the investment is for re-capitalisation.
Historical factors in policymaking are important. When sugar was profitable (during the 1960s-1990s), over G$92 billion in sugar levy were collected and not invested back into the sugar industry but were utilised to prop up other sectors of the economy. In 1992, sugar levy constituted 25 percent of government’s revenue, says GAWU. The PPP/C had asserted that the decision to close the sugar estates was political. Reinforced by the coalition government’s refusal to conduct a socio-economic study, they (PPP/C) claimed its (closure) was designed to rupture their political base in the sugar estates.
With a current labour force of 7,414, GuySuCo is working to reverse the decline in production and productivity. They have moved production from 50MT per hectare during 2015-2019 to 61MT per hectare in 2021. Their goal is to reach 70-80MT per hectare. Improvements are expected to be gradual but continuous. This approach has allowed GuySuCo to double its revenues from the sale of sugar by focusing on packaging rather than on bulk marketing. Bulk sugar is being sold on the world market between US$320-US$350 per MT, compared now with US$700 MT for packaged sugar. GuySuCo’s CEO, Sase Singh, believes that a proper sales mix combined with other measures will restore economic viability to the industry within the next four years.
Other than sales mix, there are additional positive signs pointing in this direction. For example, although there was a shortfall of production by 12,959MT during the first half of 2021, the company has still been able to earn G$5.9 billion, thus exceeding its sales target by G$734 million. It paid G$700 million to its creditors (including GAWU, NIS, trade creditors) over the past nine months. And as part of the rationalisation process, GuySuCo has reduced the management payroll by an estimated US$175 million.
What should not be ignored is the “multiplier” effect of these sugar subsidies, which lead to economic activities several times the amount of subsidies. GAWU estimates that the loss of wages totalling G$11.94 billion to sugar workers because of estates’ closure, has created collateral loss of G$10.15 billion to “shop keepers, market vendors, fisher folk, transportation providers, etc.” Additionally, GAWU argues by, “using the income multiplier formula, a further G$70 billion have been removed from the economy.”
Sugar has not lost its sweetness. Some critics have lost their taste for sugar. GuySuCo could tap further into the huge CARICOM market (of 400,000MT per annum (200,000 brown and 200,000 white). Better methods of cane cultivation, including better varieties of cane, diversification, re-imagining, co-generation, ethanol production, value-added like white sugar, and innovative marketing strategies would lead to success.

Yours faithfully
Dr. Tara Singh

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