The outlook for Guyana’s sugar industry continues to look grim, with Guyana Sugar Corporation (GuySuCo) officials declaring that, funds injected into sugar industry at this time will be funds “wasted.”The industry has received criticisms from all levels; however, the latest was included in a report which was presented to the Parliamentary Economic Services Committee on Friday by GuySuCo’s top officials, Chairman, Clive Thomas and Chief Executive Officer (CEO), Errol Hanoman.
With a debt of $77.3B and consecutive losses, officials are advising that the industry is one not worth investing in unless plans for the reorganisation, restructuring and diversification of the industry are present. Figures based on 2015 audited accounts show, GuySuCo recorded a profit once in the past six years, which was recorded in 2013 due to the tax adjustment.
Thus, “radical reorganisation, contraction of sugar and major diversification are urgently required for better predictability and planning,” stated the report.
Need is high for these interventions because the industry is faced with many challenges, one of those being the fact that the cost of production is US 36 cents per pound while it is only sold at US 16 cents per pound.
In essence, this revealed that the incurred cost of employment at GuySuCo, totaled at “101 percent” of Corporation’s revenue, with 16,937 employees being recorded in 2015.
Added to that, the Corporation’s performance deteriorated after having invested its own funds in the SSMP project (2005 onwards) which did not yield returns as expected, causing cash flow difficulties (coupled with declining sugar prices and increased costs, particularly employment costs) affecting capital and maintenance projects required to sustain and improve production levels.
Therefore, it was recommended that African, Caribbean and Pacific (ACP) countries should assess opportunities to diversify away from sugar where the industries are unsustainable at their current size. According to the study, Guyana’s exposure to the EU market is high and finding alternative markets for the quantities and types of sugar produced is challenging.
Thus, it was recommended that ACP countries should assess opportunities to diversify away from sugar where the industries are unsustainable at their current size and create a supportive policy environment to encourage diversification within the sugar sector.
THREE ESTATES
However, before those recommendations are taken into consideration, it was stated that there needs to be validation of GuySuCo’s head office/ central services; with the proposed plan of retaining only three estates, Albion, Blairmont and Uitvlugt.
It was suggested that GuySuCo’s agriculture research centre be delinked and merged with the national research centre being developed with IDB funding. And, the corporation’s training centre be developed as an independent technical school.
But, according to the report, in order to rationalise the sugar industry from seven estates, it requires specialist expertise because the sugar industry lacks skills and experience.
The report indicated that GuySuCo’s state of affairs must not remain the same because time is of the essence and decisions need to be made. $18B would be required in 2017 and a further $21B in 2018, will be required to run GuySuCo. And, in order to reduce this, it was highlighted that the government must use the opportunity to access funds needed to keep sugar operational.
“GuySuCo’s cost structure is too high and sugar prices are too low…we must work towards reducing the required headcount and diversifying the industry,” the report indicated.
The backlash, the report stated will come if continued investment is made to the Skeldon factory, because significant funds need to be invested in order to ensure it is sustained. As such, it was recommended that Skeldon be divested and the government advertises for the sale of the estate.
Apart from that, they will also look towards diversifying Rosehall, Providence. Wales and the East Demerara estates.