Dear Editor
IN 2014, the local European Union (EU) representative confirmed that Guyana received €136 million (G$32 Billion) from 2007 to 2013 under the Accompanying Measures for Sugar Protocol Programme (ASMP). The EU allocated grants to Guyana and 18 other African, Caribbean and Pacific (ACP) countries, having made the decision to discontinue EU preferential sugar prices to the countries. Unless new markets with higher preferential prices were secured, the countries would have to sell sugar at lower world-market prices. The grants were intended to help countries prepare for a future without preferential EU sugar prices.
In 2007, the ASMP G$32 billion grant provided a perfect opportunity for Guyana to make improvements to the sugar industry. The complete loss of EU preferential sugar pricing would not occur for several years and the ASMP grant funding was available to make needed improvements to the sugar industry. The G$32 Billion was never invested in Guyan’s sugar industry and has not been accounted for by the government (current opposition party).
Guyana’s sugar industry cannot be financially viable without lowering agricultural costs which represented 66% of total operating costs by 2014. The industry’s agricultural cost was 26 US cents and 24 US cents per pound of sugar respectively in 2013 and 2014 (2015 COI Report). Best in class agriculture cost is 8 US cents per pound of sugar. Excessive agricultural costs resulted from 1) low cane-cultivation yields 2) low sugar yields i.e. less sugar is produced in Guyana’s sugar factories compared with other sugar producers from the same weight of cane processed and 3) costly farming practices.
The 2015 COI report documented a clear trend of cane-cultivation yields decreasing to 56 tonnes per hectare by 2014 from a consistent 80 tonnes per hectare five decades earlier. Lower cane-cultivation yields meant a larger land area was cultivated than if yields were much higher. Therefore, it was more costly to prepare, cultivate, maintain and harvest the larger land area; also, larger quantities of costly chemicals and fertilisers would have been used. Sugar yields likely cannot improve above historical highs unless new cane varieties are developed by research and development. The 2015 COI report showed alternating periods of historically low sugar yields and periods of historically high sugar yields. Such trending was emblematic of poor or non-existent work processes that ultimately produced inconsistent results. Harold Davis and John Piggott documented in the 2015 COI Field Report, the issues and practices contributing to poor sugar yields.
On the topic of costly farming practices, refer to Tony Vieira’s November 29th, 2019 letter in a local newspaper, discussing mechanised farming and high labour costs in the sugar industry. Many opportunities existed for farming-cost reductions; no successful tactics have been implemented to rein in farming costs.
Instead of placing a priority on improving the key performance factors above contributing to high agricultural cost using ASMP G$32 Billion EU grant, the previous government borrowed US$187 million and built a new Skeldon factory, promoted as the silver bullet to solve the financial woes of Guyana’s sugar industry. The most efficient Skeldon factory cannot lower excessive agricultural costs already accumulated before cane-grinding commenced at the new factory. The new Skeldon factory should never have been a priority over achieving reduced agricultural costs. Compounding the disastrous Skeldon decision was the expanded cultivation of additional lands to provide cane for the new factory. Additionally, cane cultivation at 56-66 tonnes/ hectare (2015 COI report) increased agricultural costs. Had there been a strategy to increase cane-cultivation yields and sugar yields, little or no new land cultivation would have been required and increased costs would have been avoided.
The Skeldon project was a repeat of the same mistake made in Cuba’s sugar industry, i.e., incorrectly assuming a profitable sugar industry was possible by focusing on increasing sugar production without paying attention to accompanying costs. Cuba cut sugar production after a generous Soviet trading agreement ended and ensuing financial losses were not palatable.
The opposition party presided over the sugar industry’s downfall after having at their disposal the resources of the G$32 Billion EU grant and the US $187 million loan to turn the industry around. The coalition government’s record is well known in trying to turnaround the sugar industry. All political parties should express their plans for the sugar industry, so voters can be informed. The presidential candidate of a recently formed political party was quite a straight shooter responding to the opposition party’s presidential candidate, expressing that it made no sense re-opening the worst performing sugar estates. The opposition’s presidential candidate said that his party will re-open the poorest performing sugar estates, re-hire all the workers and the sugar industry will be profitable. Expect government financial support greater than US $110 million per year at current world sugar prices, should the worst performing sugar estates be re-opened.
What should Guyanese citizens expect if the worst performing sugar estates were re-opened? Government spending will be diverted from the important projects that improve their standard of living to subsidise larger sugar industry losses. If in the next five years, your community (especially in Guyana’s interior mining towns and Amerindian communities) needs a health centre or hospital, or school, or paved roads, or reliable water supply, or electricity, or bridge repairs, or street lights, or more police protection, or raising of the sea wall for flood protection, or drainage and irrigation improvements, the project will not be funded. The cash-bleeding sugar industry will receive the priority for government funding i.e. more than half a billion US dollars in the next five years. The Lethem to Georgetown road could have been completed, creating jobs and new economic opportunities for the money spent building the Skeldon factory and subsidising the sugar industry prior to downsizing. Guyanese citizens only need to look at Venezuela and see what happens when politics takes over state-owned companies and not sound economic and financial policy.
Regards
Deryck Daly
