BY 2015, when the A Partnership for National Unity + Alliance For Change (APNU+AFC) Government came into office, the Guyana Sugar Corporation (GuySuCo) had amassed a debt of more than $82 billion. But how did sugar, which was once king, become such a strain on the public purse, draining billions of dollars from the national budget in bailouts and subsidies from 2015 to 2017 alone, totalling approximately $32 billion?
This week on Government in Action, we will take an in-depth look at how opportunities to address the well-being of thousands of sugar workers were squandered after the European Union (EU) announced the removal of preferential prices since 2006. We will also look at the deep concern the current administration has for the growing number of displaced workers and what is being done to help prepare them for a future beyond the fields and the mills.
Evolution of the sugar industry
At the start of the 20th century, there were 11 estates located in Leonora, Uitvlugt, Wales, Diamond, Enmore, La Bonne Intention, Ogle, Albion, Blairmont, Rose Hall and Skeldon. The sugar industry remained at the heart of the economy and accounted for more than 63 per cent of agricultural output and more than 20 per cent of the gross domestic product in 1976. GuySuCo was producing 337,776 tonnes of sugar and had a workforce of 28,406 persons at that time.
Over the last decade, the sugar industry has had to be propped up by bailouts at the expense of the provision of better quality education and social services for the people of Guyana. GuySuCo incurred total losses of $40 billion with sales of $230 billion from 2008 to 2015. By 2015, the management of the company had accumulated a mere $11 billion in internal equity and had decreased working capital by $25 billion. Minister of Agriculture, Mr. Noel Holder, while delivering his 2018 Budget Speech said production of the sweetener is expected to fall to 152,000 tonnes this year, a 17.2 per cent decline over last year’s output.
“GuySuCo is the single, oldest and continuous industry in Guyana and it is haemorrhaging. Government cannot afford to keep on bailing it out. There has to be change, the very nature of the change is something that is still to be decided, but the model that we inherited and the plantation model that we have used for three and a half centuries has failed. The sugar corporation is costing us billions; if I can put that money into the school system, the public health system, the University of Guyana, you would have seen a transformation,” President David Granger said on the Ministry of the Presidency’s Public Interest Programme on November 4, 2016.
According to the “State Paper on the Future of the Sugar Industry”, which was presented to the National Assembly by Minister Holder, the sugar industry lags behind mining, construction and the rice industry in its contribution to the national economy. The State Paper noted that other industries such as the wholesale and distribution trade, transportation and storage and information and communication technology also contribute more than the sugar industry to the output of the country.
The sugar industry had for many years been operating in a largely protected market from 1959 to 2009, since Guyana was among nine countries that benefitted from the Commonwealth Sugar Agreement. Secondly, along with other African, Caribbean and Pacific (ACP) states, it benefitted from the Sugar Protocol under the ACP-EU Preferential system. Preferential sales to the EU market accounted for 50 per cent of the company’s sugar output and 70 per cent of its revenues. In 2005, the European Agriculture Council took a decision to reduce the guaranteed price for sugar by 36 per cent over a four-year period that began in 2006. The EU was forced to withdraw the preferential treatment because of global pressures to liberalise trade.
As a result, the EU allocated more than €1.2 billion for the restructuring and diversification in the 18 countries that would have been affected. These funds allowed countries to invest and add to the value of their product as in the case of Mauritius, or diversify their industry as was done by Trinidad and Tobago. The EU provided a total of GYD$348.5 billion from since 2006 in budgetary support to compensate for the 36 per cent cut in the preferential price. It was not clear how much of an impact those funds had in terms of preparing the local sugar industry for the inevitable and there are questions about the previous administrations’ decision to plug $47 billion dollars into the failed Skeldon Sugar Modernisation Project.
Little was done to stop the slide and today the management of GuySuCo estimates that the Government of Guyana would have to provide annual subsidies averaging $17 billion over the next four years to keep the estates open and operating, an expense that the economy cannot bear.
What’s next?
The Government has issued a ‘White Paper’ which outlines its plans to modernise, contract and diversify the sector. A small but profitable sector will serve Guyana better than a cumbersome and faltering industry, which has lost its profitability. Minister Holder in his Budget presentation pointed out as much, noting that the industry cannot function in its current state.
“The country’s framework for governing the sugar industry has to evolve. It must become more in tune with reducing vulnerabilities, resolving institutional and legacy issues and diversifying away from sugar to more industries. Mr. Speaker, despite the magnitude of subsidies there will be no positive impact on the financial state of GuySuCo. The economy simply cannot afford it,” he told the National Assembly.
Before any decision could be made, though, the Government installed an Interim Management Team to manage the company’s affairs in June 2015. In that same year, the corporation sold the Skeldon Co-Generation Plant and the portion of land under its control for $5.1 billion. Those proceeds were used to meet operating costs and a part of the capital expenditure. Further, an urgent injection of $12 billion was needed to reap the crop in season and Government was forced to provide a bailout.
“Since taking office the Government has supported GuySuCo with $32 billion with a $6.3 billion allocation in 2018 and another $2.3 billion estimated for 2019. Capital investment at $12 billion will be required over the next three years to ensure that the sugar production targets are met,” Minister Holder said.
With the near-bankrupt position of the corporation being recognised by the Government, a Commission of Inquiry (COI) was established by the administration in 2015 to examine the situation in the sugar industry and determine what needed to be done to make it viable again. Government believes that the sugar industry is too important to the people of Guyana and to the country’s economy to be treated like a political football. A consultative approach to decision-making, which included all stakeholders, is the guiding policy of the administration.
“Being faced with these realities, which we inherited as a Government, we made a decision that this important national institution and the largest single employer in Guyana, needed a closer look at it and a carefully considered policy to ensure its survival and a return to viability. This was clear to us because besides the reports, writings, political ‘back and forth’, statistics, numbers and technical arguments, we were dealing with lives, real human situations that translated into day-to-day’ bread and butter issues. We, therefore, took the prudent decision to appoint a Commission of Inquiry into the Guyana Sugar Corporation in July 2015 to make recommendations on charting the way forward and returning the industry to financial viability,” Minister of State, Mr. Joseph Harmon said.
The Government, therefore, embarked on discussions with the Opposition, GuySuCo, the Guyana Agricultural and Workers’ Union (GAWU) and the National Association of Agricultural, Commercial and Industrial Employees (NAACIE) to determine the course of action for the future of the corporation in the interest of all stakeholders. That the Opposition and Unions came together with the Government to brainstorm a solution and a way forward is testament that the gravity of the situation was realised by all parties.
At the first meeting held in January 2018, President David Granger noted that it is the time for all stakeholders to come together, putting aside all prejudices and partisan interests and work for the national good.
“This is a national matter. It is not a partisan one. It involves human beings, households and families. We are conscious of the foresighted nature and we cannot ignore the context of the issue that we face. We cannot continue something that is not competitive. We are bailing out the industry at $1B per month and that is simply not sustainable. If workers have to go home then we all lose, as it will have an impact on the economic growth of the country. Government will not win; the Unions will not win and the workers will not win if the industry is crippled. We will all lose. Nobody is against the sugar industry. The Government and the unions should engage until the issue is resolved. Let us use this opportunity to show flexibility and ensure that livelihoods are saved,” the President said.
At that time, Head of GAWU, Mr. Komal Chand had said that he is pleased with the outcome of the meeting, as he noted that the Union is now committed to working with the administration to draft feasible solutions.
“We have listened and we are satisfied that you are concerned with the issues. We are ready to work along with the Government to explore the options and we are going to give our best to see the situation out. You are right that there are no winners in this and we are willing… We are certainly pleased with this meeting. This is the first meeting [for the year] we have been able to have with the Government and we believe that the meeting took place in a positive atmosphere and we recognise that the Government itself pays attention and I think that it is a good beginning. That is certainly an important ground rule that we dialogue, that we talk and try to find an answer for the way forward. We are pleased. From GAWU, we are very pleased and it spells out that the future engagements are in the interest of the workers, the industry and the country,” he said.
Through this evidence-based approach to policymaking, which saw consultations with the unions and other stakeholders, Minister Harmon said that the Commission made several important recommendations among which were that the corporation should be privatised within three years; a serious evaluation of all diversification options be conducted to avoid total reliance on sugar for GuySuCo’s revenues; an evaluation of the options for GuySuCo should be done; an amalgamation of the Wales and Uitvlugt estates and assigning all their cane to the Uitvlugt factory which was operating at 50 per cent capacity and the corporation should divest itself of the Skeldon estate.
Despite these recommendations by the Commission, the Government opted to ask GuySuCo to come up with a Plan of Action based on these recommendations and how the issues identified will be dealt with.
“After many weeks, GuySuCo came up with a Plan of Action on how they will deal with these issues. The Plan was aggressively interrogated by the Cabinet and eventually, a document was put out. That document in itself became the basis of Government’s position, which was laid on the table with the unions, with the political Opposition, with the representatives of the estates. That is what we called putting the issues on the table. GAWU put their issues on the table. NAACIE, in fact, said that they concurred with the position of GAWU. The political Opposition said they needed to have a study done. They never put anything on the table. So what we had on the table was the position by the Government and the position by GAWU. The Government then looked at these positions, put them together, extracted the main issues out of them together and prepared a State paper, which was laid in the National Assembly. Apart from what GAWU has put on the table, there is nothing else coming from anybody else except for letters in the newspapers,” Minister Harmon said.
Severance
As part of its plan to return the industry to profitability, Government ordered the closure of the Wales Estate and reduced the workforce at other under-producing estates in order to bring down operating costs. Government has indicated too that it is focusing on the creating of three large estates; Blairmont located in the West Bank of Berbice, Albion located in Rose Hall in East Berbice and Uitvlugt in Wales, West Bank Demerara.
“Guyana is trying to preserve its industry. That is why there will be a Blairmont and that is why there is going to be an Albion and we will preserve as many of our plantations and estates as possible. Uitvlugt will remain but we have to deal with the problems of cost,” President Granger said at the opening of the Mahaica-Berbice (Region Five) Chamber of Industry and Commerce’s Expo and Trade Fair at the Bath Settlement Community Ground, West Coast Berbice in April this year.
As a result of the closure of the estates, the Government was forced to provide over $5B for the payment of severance for retrenched sugar workers. Workers who are owed $400,000 and below were paid their severance in full in the first quarter of the year. This represented approximately 46 per cent of the workers affected. The 54 per cent of workers were paid 50 per cent of their severance in the first quarter of the year and the other 50 per cent was paid in the first week in December. The severance paid in December also attracted interest and this too was paid in full.
With regard to Uitvlugt estate, Minister Holder explained, “there were 345 workers who were offered jobs at Uitvlugt and about 170 accepted; the remainder did not.”
The workers expressed gratitude to the Government for honouring its promise of the severance payments. Mr. Andrew George said that he “felt good” having received his payments while Satrohan Singh, who has worked on the estate for 13 years, remarked that he is “glad to know that I’m taking home what I have been working for all these years”.
Another worker, Mr. Alvin Bradford remarked that he is happy to receive his payments and thanked the administration. “I am so relieved because we waited so long for this moment and today is the day for us. I thank President Granger and Prime Minister Nagamootoo for what they did for us today. I’m grateful for it on behalf of myself and all the other cane harvesters,” he said.
The Government’s efforts aimed at consolidating the sugar industry has paid dividends. On December 12, GuySuCo announced that it is poised to achieve its production target for the year 2018 which is 103, 000 tonnes of sugar as on that date, 100,485 tonnes of sugar had been produced for the year. This is in excess of 12,000 tonnes more than what was achieved for the entire year, 2017, from the three estates – Albion, Blairmont and Uitvlugt.
Thus far, the three estates have collectively surpassed their weekly targets on 26 occasions for the year, which translates to payment of the Weekly Production Incentive (WPI). The qualified employees will, therefore, receive a bonus for the year 2018, as a reward for their performance, the value of which would be dependent on the final production, the entity said.
Micro Financing and Skills training
Severance is not the end, however, for the retrenched workers. President Granger has given the assurance that the Government will be working through its various Ministries and agencies to provide support, particularly in the areas of micro-financing, skills training and even through the provision of lands for farming to the workers.
“We are also going to work with the unions to make sure that the workers who cannot find employment on the estates are given a soft landing, that is, we will try to provide employment opportunities so that nobody has to suffer,” President Granger said.
Minister of Social Protection, Ms. Amna Ally also said that the Ministry is deeply concerned with the realities of the current situation facing GuySuCo and the affected workers and as such, stands ready to provide any assistance that it can.
In this regard, she noted that the Board of Industrial Training (BIT), as well as the Port Mourant Training Centre, will be utilised to train and upgrade the skills of the workers. Additionally, she noted that the service of the Micro Credit Unit at the Ministry is available to lend assistance, as there are funds available for small start-up projects.
“We are cognisant that many workers will now have to explore the idea of entering a new realm of employment and already we have given great consideration in a number of areas to go forward. The public health facilities in various locations will still be of service to persons working in those areas. The Board of Industrial Training has been conducting training in several areas such as engineering, building and masonry, carpentry, information and communication technology, forestry, home economics and health services. This certainly will provide opportunities for alternative skills by equipping persons with the necessary knowledge, skills and training relevant for employment. These types of training will be continuous. In addition to that, we will collaborate with the Ministry of Natural Resources to provide additional training opportunities with an oil and gas focus and the Port Mourant Training Centre will be utilised for this purpose,” she said.
Further, at the 2018 Presidential Press Conference in September, the Head of State had announced that a State Lands Sales Commission will be established to ensure there is rational and transparent disposal of lands, which will no longer fall under GuySuCo, taking into consideration, the dismissed sugar workers, Ministries and agencies.
“Now, as far as the closures are concerned, once an estate has been closed, the lands will now be subject to the jurisdiction of, first of all, a State Land Sales Commission, of which the SPU, the Special Purpose Unit under NICIL, will have representation. The idea is that we won’t sell off the family jewels. We’ll make sure that the lands, which are being taken out of sugar, are placed to the benefit of the people of Guyana as a whole. Now, several anomalies and several contradictions may emerge. For example, the Ministry of Agriculture may need some lands in order to settle sugar workers who are interested in settling,” he said.
In addition to this, Mr. Komal Singh, Chief Executive Officer of GAICO Construction and General Services Incorporated has publicly committed to hiring approximately 100 retrenched sugar workers when the company opens its modern wharf facility in 2019.
“We are in the process now of developing a wharf facility and we are also in the process of developing a hazardous waste management facility. Our plan is to have a hazardous waste management facility where we bring in waste oil, process it and reuse it. We hope by the end of 2019 we can have that facility up and running. We are hoping to create at least 100 jobs by June/July when we finish the first phase of the construction of that facility. Our priority is to give the jobs to those who would have lost jobs from GuySuCo,” Mr. Singh said.
Apart from all of this, the Government under the SPU has commenced efforts to privatise the sector. It is clear, therefore, that the Government is working to ensure that the sector is not only made secured and protected from market volatilities, but livelihoods and communities can also be safeguarded.
