…workers to get lands for agriculture

THE future of the sugar industry here lies in a smaller sector, with reduced losses and cash deficits but coupled with a separate and profitable diversified enterprise, which would ensure a viable future, Agriculture Minister, Noel Holder stated.

Holder made the comments as he unveiled Government’s White Paper on the Future of the Sugar Industry at the commencement of 64th Sitting of the National Assembly on Monday. He said the plan, dubbed, ‘State Paper on the Future of the Sugar Industry’, will focus on the poorly-performing estates and have them shift from sugar to diversification.

“The proposed courses of action are to amalgamate [merge] Wales Estate with Uitvlugt Estate and reassign its cane to the Uitvlugt factory, since the estate is operating at 50 percent capacity. Sixty percent of its drainage and irrigation infrastructure is in a dilapidated condition. The corporation furthermore seeks to divest itself of the Skeldon Estate. The estates of Albion and Rose Hall are to be amalgamated and the factory at Rose Hall is to be closed.”

Three estates
Holder said GuySuCo would then consist of three estates and three sugar factories. The estates would be Blairmont on the West Bank Berbice, Albion-Rose Hall in East Berbice and the Uitvlugt-Wales estate in West Demerara. The three estates will be complete with factories and will have cane supplied from all five locations. By virtue of the amalgamation, the Enmore, East Coast Demerara (ECD) and Rose Hall, Berbice factories will be closed by year-end. In the case of Enmore, that factory will be closed at the end of the year when all cane would have been harvested and the East Coast Estates would be earmarked for diversification.

“The process will result in improving the relationship with some cane cutters, estate staff and about 1,710 private cane farmers. These adjustments mean that GuySuCo would be scaled-down into a more efficient entity that focuses on producing sugar to satisfy the domestic and foreign markets that provide preferential access to our sugar. This entails taking advantage of the opportunity to merge better performing lands to operate factories more efficiently,” Holder said.

But even as there will be a major restructuring of the industry, GuySuCo is required to retain many of its workers for all operations on the merged estates or factories and those employees are to receive leased lands from the sugar company to engage in crops to be decided by both GuySuCo and the Ministry of Agriculture. Additionally, the Minister said GuySuCo plans, apart from restructuring the estates and factories, to transfer to the state charges for the drainage and irrigation and health services that it provides to the communities, and around the estates.

The recovery of drainage and irrigation charges will be made from the Government of Guyana, he said, while stating that GuySuCo has from the inception been assisting with the drainage and irrigation of surrounding communities which had allowed for approximately 40 per cent of GuySuCo’s annual drainage and irrigation costs.

The Agriculture Minister said too, that as part of the sugar company’s social corporate responsibility, it operated a number of health centers and dispensaries in the Berbice and Demerara regions. “The options available to the Corporation are the transferal of such health centers and dispensaries to the government or the recovery of costs from the government,” Holder told Parliamentarians.

GuySuCo also proposes to surrender land for lease to employees for them to engage in agricultural production. “The resources that exist under the “Green economy” and “Regional Food Self-Sufficiency” drive would support their efforts,” Holder said, while noting that government will invite sugar workers and cane farmers to undertake agro-based activities on lands to be made available to them.

Contraction of sugar
The Government proposes that sugar production should be contracted to approximately 147,000 tonnes of sugar annually produced from Albion, Blairmont and Uitvlugt Estates, to satisfy the demand in the local markets (25,000 tonnes pa), CARICOM and regional (50,000 – 60,000 tonnes pa) USA (12,500 tonnes pa) and the World Market (50,000) tonnes. Focus would be on producing for direct consumption, value-added sugars and providing electricity to the national grid (co-generation).

Additionally, it is proposed that Skeldon Estate should be divested. “Significant investment has been made in the new Skeldon Factory which, to date, has experienced numerous technical problems. It has failed to achieve its potential, thereby failing to generate returns on the investment. The Corporation does not have the resources required to correct the technical problems. It owes in excess of G$29 billion in loans due for the Skeldon Sugar Modernisation Project.”

Funds generated from the divestment of Skeldon Estate will go towards reducing GuySuCo’s debt and support and supporting its capital programmes for both sugar and the diversification initiatives.
Government, he said, intends to invite ‘expressions of interest’ for the divestment and pending action on same, GUYSUCO will proceed with a series of actions aimed at reducing the financial burden of the corporation. GuySuCo has proposed pending action on divestment, to proceed with a number of actions aimed at reducing the financial burden of the corporation and intends to take account of the experiences of other countries in light of intended action.

Meanwhile, the Government of Guyana, the sole investor in the industry, has for years experienced many challenges. But despite those challenges, the sugar company has been able to average a sugar output of 328,000 tonnes up to 1992. From 1996 to 2005, the company produced an annual average of 2,966,591 tonnes of cane and 264, 983 tonnes of sugar and saw an annual average cane output of 2, 548, 294 tonnes, while sugar reached 208, 718 tonnes during the decade 2006 to 2015.

“The change in averages between the two time periods represented a 14 per cent decline in cane output and a 21 per cent decline in sugar output.”

Holder noted that GuySuCo started to display “chronic problems,” which included the migration of skilled and experienced managers, exhaustion of its cash reserves, deteriorating field infrastructure and factories and an unstable and adversarial industrial climate.

Not keeping pace
Moreover, the Minister noted that the industry’s contribution to the Gross Domestic Product (GDP) changed between 2006 and 2015. “The industry has not been able to keep a pace with the changes that have occurred in the economy since 2006.” The sugar company incurred $40B losses with sales of $230B from 2008 to 2015. By 2015, management of the company had accumulated a mere $11B in internal equity and had decreased working capital by $25B. It meant it spent eight cents of every $1 of sales to build its long-term investment base, while generating only five cents of internal equity to do so.

“GuySuCo was forced to finance its long-term investment by borrowing money and by relying on subsidies through the national treasury, even though all the internal equity was being put back in the business,” the Minister related, as he noted that the sugar industry currently lags behind mining, construction and rice in its contribution to the local economy. “The contribution of the industry is no longer as distinguishable as it was before. Sugar, as a result now finds itself competing with other agricultural crops and forestry in its contribution to the economy,” Holder added.