CUT TO THE CHASE – IS THE CASH FLOW SILLY?
SUGAR was the largest corporate employer in 1966 and today in 2015, it still is; nothing much has really changed with respect to how important sugar is to Guyana. Now that we have a chance to chart a sensible course, we must expect “nuff things” would go wrong, but we have to stay the course. Challenges there will be, but if we proactively and decisively manage these challenges in a cash-neutral manner, that is all that matters right now. As I said before, telling us that GuySuCo owes G$80 billion or a G$100 billion is silly, since that cannot change the price of cheese; what have we proactively done about this challenge, going forward is what really matters. It is time to put on our solutions cap.

It was Jawaharlal Nehru who said, “Life is like a game of cards. The hand you are dealt is determinism; the way you play it is free will.

GuySuCo has five major challenges – manpower issues (still stuck at human cane cutters rather than mechanised cane harvesters), marketing the wrong products (raw vs. value added), quality of cane arriving at the factory gate (because of poor husbandry practices), efficiency of factory (especially that Skeldon Factory) and financial leadership (too much political interference).  Any turnaround plan has to be focused on improving productivity and securing better value for money spent by using out-of-the-box ideas driven by turnaround specialists.

The recommended structure
As a grand strategy, some estates have to be merged and Skeldon has to be isolated and treated as a special case. The end product should look more like four estates – Albion/Rose Hall, Blairmont, East Demerara at Enmore and West Demerara at Wales. Skeldon should be shaved from the books of GuySuCo and managed on contract by an international firm from India or Brazil on commercial terms. The primary focus of these mergers should be to improve efficiency and save jobs. The Treasury should contribute partially to the factory repairs using a pre-defined formula, but the company, Skeldon Sugar Corporation, shall be responsible for its entire value chain from planting to marketing. This way, jobs will be preserved and more focus will be placed on cost and unbundling the top-heavy structure in the company.

Financial Leadership
Telling the nation that all estates are loss-making again exposes an “old school kind of thinking” that is stuck in the problem, rather than taking responsibility for extracting the solutions and this is a BIG problem. This remains a big problem since many of these people who are “stuck in this rut” are in positions to make a difference.
First we have to unbundle the cost structure. GuySuCo carries cost on its books that cannot be removed unless we want to create major disruption to national life, such as its flood-control costs. These have to be fully funded by central government and the burden has to be removed from GuySuCo’s books. Once those debts are paid, some estates like the newly merged Albion/Rose Hall will shine; I am positively certain of this.

However, this does not prevent the turnaround team from understanding where the cash is going.  For us to identify the real problem in the company, we have to follow the money.  It seems that even GuySuCo insiders are not sure where all this money is going. What is vital now is to understand what resources we have at our disposal to effect this financial turnaround.

We need to ask ourselves three fundamental questions:
1. Does GuySuCo have a viable core business in today’s market place? (Not really, since raw sugar is in a coma, thus the need to rapidly move upstream to value added, sugar-based products such as packaged sugar, agro-energy and ethanol)
2. Does the company have access to short-term finance? (YES – The Treasury)
3. Does the company have adequate resources and talent on board to effect this turnaround? (Certainly not)

First off, and with immediate effect, the bleeding has to stop. Cash remains king for GuySuCo and it must operate as if it is a private business in distress. That translates to having a daily cash-flow model in place that tracks and reports on all cash inflows and outflows centrally, but with the power to drill down to each estate. That information must be shared with each of the newly minted Turnaround Estate Administrators.

This tool is essential to forecast the cash flow over a 26-week period and to model the cash flows. The devil remains in the details. Such financial data can empower the leadership to renegotiate the timing and quantum of payments for the most significant cash commitments – fertilisers, fuel, agro-chemicals, the banks, etc.

This model has to be shared with the sugar unions to earn their buy-in on a wage freeze in the industry for at least a two-year period. GAWU and NACCIE are responsible unions and they have the desire, like most other stakeholders, to preserve the industry.  Therefore, the board and senior management have no other choice but to level with the unions on the state of the cash flows.

All non-value added expenditure has to be sliced in full from the industry temporarily.  There should be a one-year hold on all expenditures on non-factory buildings and road vehicles.  All local contracts should be re-negotiated with a view to ensuring that deliverables match payments and are independently verified.  An independent Inspector General Department that reports only to the Audit Committee of the Board should be resourced and empowered to conduct spot checks on all procurement of services and goods and to verify if we are securing value for money, or the same old financial skullduggery continues. Greater scrutiny has to be brought to bear on the estate management to ensure that they increase their productivity and cut costs as the model below postulates.

We shall continue next week on this financial question.

Comments can be sent to sasesin1@yahoo.com