Nazir Mohamed not au fait with sugar industry  

Dear Editor,
MR Nazir Mohamed, from his letter appearing in the March 22, 2017 Kaieteur News, seems to be not au fait with the sugar industry and thus arrived at a number of incorrect conclusions.
The industry’s cost of production is not where it should be, but we need to examine why this is so. A high proportion of the industry’s costs are fixed, around 70 per cent. A first-year accounts or economics student would tell us that higher output translates to lower unit costs, given the significance of fixed costs to overall costs.
Certainly, last year’s production of about 183,000 tonnes would equate to high unit costs. To correct the cost imbalance in sugar, the answer is simple – the industry must produce in keeping with its capacity. Were 300,000 tonnes sugar being produced, there would be no debate about costs.
The letter writer also says that Guysuco is receiving US12 cents per pound of sugar. Again, he is sadly misinformed. The corporation in its lowest price market is receiving US21.5 cents a pound. If the corporation had produced 300,000 tonnes and sold all its sugar at that price, sugar sales would have yielded $29.5B and that sum taken together with molasses, revenues would have seen the industry at least breaking even.
The author then goes on to label the Skeldon factory as ‘scrap iron.’ But how does he explain the ready, and according to the Government, unsolicited expressions to purchase the factory. Mr Mohamed may be interested to know that the Indian investor, introduced by the PM’s son-in-law, advised that with some changes, they can make the ‘scrap iron’ profitable in the short term.
At this time, globally, there is a move away from non-sugar sweeteners and back to natural sugar on account of health risks. We see major companies such as Pepsi are embracing this movement and having their products marketed as made from real sugar. This is no doubt playing a role in the consistent rise in sugar demand over the last few years.
Mr Mohamed’s view that re-capitalisation would entail large sums is also misplaced and it speaks possibly to his lack of knowledge. The Sugar Commission of Inquiry pointed out that the industry, for critical capital, requires around $14B in the years leading up to 2020.
Clearly, the situation painted by the author is far from the reality that prevails. Ironically, the industry is refusing assistance for capital works as evidenced by its decision not to accept a CDB loan to further mechanisation.
Seemingly, the author is confused about the industry’s ratooning system when he says that as a result of incidents in the 70s and 80s, the entire system was in disequilibrium and is a contributing factor to today’s state of affairs. He seems to forget that the industry produced nearly a million tonnes of sugar between 2002 and 2004, and a proper ratooning system would be an integral element in reaching such feats.
The author then calls to attention the ethnic composition of the industry’s hierarchy. On this score, he is urged to become acquainted with the ethnic composition of the industry’s recent departures and recruits. His experience will be an eye opener. He also may want to enlighten the public as to what EU preferential market GuySuCo failed to take advantage of.
Mr Mohamed then makes reference to the quality of equipment used at Skeldon. Here he is urged to ask his leaders why is it they have employed a CEO who took responsibility for the factory in 2009 without any successful performance trial being completed.
Was it a case of the CEO being beholden to his former employers, who were paid extravagant sums to ensure that the factory was properly built and the right equipment was supplied and installed properly? The author goes on to assert that Guysuco should have insisted on market value for its assets.  But had the sugar corporation steadfastly held on to that notion, many poor, ordinary, working-class Guyanese would have been denied an opportunity to own a home.
It seems that Mr Mohamed is living in a fool’s paradise when he intimates that sugar workers are overpaid. Then again he is guided by the misinformation spouted by his leaders. It is his leaders and the GuySuCo ‘new’ recruits who are enjoying the fruits of the workers’ labour.
The author’s swipe about the workers willing to give their lives is unfounded. Mr Mohamed may want to walk a day in their shoes, especially at this time, when there is grave uncertainty and a bleak future for them and their families. GuySuCo can overcome its challenges and have a viable future through the production of higher-value products such as electricity and white sugar, among other things.
Yours truly,
Patricia Persaud

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