… high production costs, low staff turnout hampered industry
IN 1996, the authorities were told that if by the end of the 1997 cane-harvesting cycle the Wales Sugar Estate was not able to reduce its production costs, the estate should be closed after that crop.
Additionally, the situation at the Uitvlugt and Enmore sugar estates faced an evaluation which also hinged on production costs, with the aim of making them viable by the year 2000, or phasing them out if they proved otherwise.
Such was the concerns over the state of the industry back then that the National Development Strategy (NDS) of 1996 took aim at making substantial moves, including estate closures, to make the sugar industry more viable.
The report, which was crafted by 23 working groups, placed emphasis on the high rate at which the cost of sugar production was “escalating” at the time.
“There is need for radical review of the industry’s cost structure as the industry has emphasised on a number of occasions. This is perhaps the most daunting challenge faced by the sector,” the report said at the time.
In 2017, the APNU+AFC government announced the closure of several sugar estates; initially the Wales sugar estate was named as the first to be closed one year after it was announced for closure. The move by the government triggered protests led by pro-People’s Progressive Party (PPP) leaders on the West Demerara and later in the city.
Later several other estates in the Berbice belt were closed and these were also cited as being too costly to run. The opposition protested the move once more although the government made it clear that annual multi-billion dollar bailouts to the Guyana Sugar Corporation (GuySuCo) were hurting the economy.
FORECASTED IN NDS
But the move by the David Granger-government was an undertaking forecasted and made known to the PPP-government way back in 1996 when the gloomy future of the sugar industry was written in black and white.
According to the draft National Development Strategy (NDS) of 1996, steps were urgently needed to be put into action and downsizing of the industry was suggested so that its sales could have been made profitable.
The undertaking, the NDS said, included the elimination of GuySuCo’s “least efficient components and relocate the labour force in more productive lines of work”. This effectively meant the closure of estates which were hampering the industry and the relocation of the labour force.
According to the 1996 report, the strategy proposed was an indirect response to trends in Guyana’s economy at the time. According to the report, they were needed in response to signals of reductions in labour turn-out for some of the Demerara estates.
“So it also is an acceleration of a natural process, undertaken for the sake of making the industry more competitive as soon as possible and also to avoid greater pressure on the public sector finances,” the report stated at the time.
Fast forward to the years after 2000, the PPP commenced the bailout process, with hefty sums to keep the industry afloat, the rising cost of production being the critical factor in the billions of taxpayers’ funds being turned over to GuySuCo.
BAILOUTS AND DECLINED PRODUCTION
This publication has reported that sugar production fell from an average 320,000 tonnes between 2002 and 2004 to below 250,000 tonnes in subsequent years.
In 2003, production fell to its lowest since 1940, with only 186,000 tonnes being produced.
At the same time, due to several factors including interference, the industry’s cost of production rose much higher than the market price for sugar, totalling over $50B in losses between 2010 and 2014.Then the bailouts from the Bharrat Jagdeo-government were put into high gear in order to save the industry.
Production costs rose sharply from $14.5B in 2010 to $20.5B in 2014, an increase of $6.3B or 43 per cent. In order to meet these costs, the government at the time was forced to divert sizeable sums of taxpayers’ money to bail out the industry and prevent collapse that would have brought ruin to the 16,000-plus sugar workers.
In the 1996 report, it was noted that Guyana’s sugar is fundamentally an export industry, but after that year, its export earnings were not expected to grow, but rather to shrink gradually, since, according to the report, it could not expand by selling more on the world market without incurring losses.
The report stated that an industry-planning exercise carried out early in 1995 suggested that profits before levy and taxes were expected to decline by about three-fourths in real terms between 1995 and 1999.This was attributed mainly to not only the “expected downward trend in sugar prices, but also because production costs are increasing”.
Said the report, “It faces an urgent need to make substantial investments in rehabilitation of factories and to otherwise move toward competitiveness in world markets, in order to be prepared for possibly more drastic reductions in real prices after the year 2000.”
The NDS report stated that observations of the industry back then in 1996 were so fundamental to strategic planning for the sector that they were worth amplifying.
The report stated that in 1996, three sugar estates were going to lose money, and in 1997, a fourth one was forecasted to join them.
“All four of these estates are in the Demerara region, while the ones located in the Berbice region are profitable,” the report stated at the time. The PPP-government subsequently closed the La Bonne Intention (LBI) and Diamond sugar estates as production costs rose continually over time.
FACTORS BESIDE PRODUCTION COSTS
Aside from high production costs, several other factors were hindering the industry and were expected to impact its future, the 1996 report stated.
According to the report, there was a shortage of managerial and technical skills in “every major area of activity” at GuySuCo.
At the time, the report said that an aggressive recruitment drive was in place, and there has been some success in attracting young graduates, however, remuneration packages at the time were inadequate to bring aboard the more experienced and qualified to the extent that they were going to be available.
Labour turnout was also seen as a determining factor cited in the industry’s future. The 1996 report stated that in September 1995, the labour force at GuySuCo was 24,000, but reducing labour turnout was experienced at Enmore, LBI and Wales estates. “This could emerge as one of the more intractable problems facing the business, given the Coldingen industrial development and the emergence of other new businesses as the economy opens up,” the report said.
It was noted at the time that competition for labour were forecasted to drive labour rates up and further undermine the viability of the industry.
At the moment, Guyana’s sugar industry is being restructured so that it can be revived, and as President David Granger assured workers at the Albion Sugar Estate in Berbice during a visit earlier this year, the sector is going to recover from the difficulties it is facing.
The President made a commitment to engage with the unions representing sugar workers in order to chart a course forward for the industry’s development.