…facing closure as finances dry up

The Guyana Sugar Corporation Inc (GuySuCo) is facing the prospect of closure having exhausted its finances, Guyana Agricultural and General Workers Union (GAWU), disclosed on Tuesday. The ailing sugar corporation is desperately in need of financial support from the Government.

In a letter to President David Granger on May 15, close to a month ago, Chairman of GuySuCo’s Board of Directors, John Dow said the sugar corporation was in a “dire financial crisis” with billions in debt, and insufficient finances to execute critical factory maintenance.
“Despite improvements in the productivity of cane, GuySuCo’s sugar production for the last two crops has fallen short of expectations and the current COVID-19 pandemic has exacerbated the problems experienced in meeting the 1st Crop 2020 production targets…As a result of the cash generated from operations cannot meet the outgoings particularly when external funding has been difficult to obtain,” Down said as he painted a vivid picture of the financial challenges facing the Sugar Industry.

At the time of the letter, GuySuCo was only able to offset labour and fuel expenses. The corporation’s Financial Department had estimated that it would be out of cash by this week (the second week of June). “Cash will not be available to meet any outgoings for spares and materials for the mid-year Out-of-Crop maintenance of our factories. This inability to purchase spares and materials is likely to result in factory performance in the 2nd Crop 2020 being adversely affected with increased factory downtime, reduced sucrose extraction at the milling plant and low sugar and molasses production,” the Board Chair informed the Head of State.

Further to that, he disclosed that there was a backlog of G$2.1B owed to creditors. Due to the corporation’s inability to pay creditors on time, many of its experienced contractors have become unwilling to tender for GuySuCo projectors, and creditors have been demanding large upfront payments before supplying goods. However, given its financial woes, it is unlikely, Dow said, that the creditors will grant further credit.

“If some of the crucial creditors are paid, GuySuCo would be out of cast before the 2nd week of June,” he noted.

He noted that the GuySuCo’s business plan calls for investments in critical equipment and infrastructure works to secure the future of the Corporation, however, these cannot be sourced from cash generated from operations. “To date, GuySuCo has expended G$9.639B from the NICIL/SPU Bond…Recent interaction (GuySuCo/NICIL/SPU) indicates that little or no further funds are likely from this source in the near future,” Dow told the President.
Providing a background, Dow pointed to the fact that the condition of three Estates – Albion, Blairmont and Uitvlugt – in 2015 was such that considerable sums of money were required to fix the deteriorated infrastructure in the field, such as brides, dams and revetment. Some equipment in both field and factory required replacement. “Considerable sums were, and still are, required as a result of the neglect to provide routine capital required for many years prior to 2015. This lack of Capital investment was well documents in the 2015 report of the Commission of Inquiry into the Sugar Industry,” the Board Chair reminded.

It was noted too that the plan for GuySuCo in 2017 consequent to the laying of the State Paper in Parliament was premised on the 4,650 acres of commercial land being sold and the funds being made available for the rehabilitation of infrastructural and the necessary capital for factor and agricultural equipment. And though the Special Purpose Unit (SPU) of NICIL successfully secured a Bond of G$30B, only G$17B has reportedly been raised to date. “It must be noted that GuySuCo was not consulted nor agreed to this Bond that was raised by NICIL for the stated purpose ‘To fund long-term projects and capital expenditure.’
Dow told the President that notwithstanding the purpose of the Bond, the proceeds from the sale of commercial lands were not remitted to the Corporation and apart from sales income, the Bond has been the only source of funding for the Industry’s priority programme.

“GuySuCo has, since January 2019, been urging NICIL/SPU to change the purpose (“caveats”) of the Bond to be in line with our requirements. To date, NICIL/SPU has been unwilling or unable to get this done,” Dow complained.

He added: “The Bondholders, without a change of caveats, have apparently been insisting that no further disbursements be made from the Bond as GuySuCo’s request do not fit the stated purpose on which the bond was raised.”

Further, he disclosed that NICIL/SPU has been in the business of selling the corporation’s assets from the closed Estates – scrap iron, tractors, and punts among others, and though, GuySuCo has requested to be granted first refusal on the sale of those assets, it has not been afforded the opportunity. Added to that, the corporation has not received any accounting of the sale of its assets, though requests were made.

To compound the situation, GuySuCo did not receive a subvention in 2019. Due to the No Confidence Motion, which was moved against the A Partnership for National Unity + Alliance For Change (APNU+AFC) Administration in December, 2018, there was no National Budget approved for 2020. At the time of the motion, the budget for 2019 had already pass.