GuySuCo will recover! This year will mark a turning point in the performance of the industry! How many times have we heard these mantras, from the mouth of the industry’s hopeful? But instead have been faced with the reality of another dismal performance of the Guyana Sugar Corporation, another failing production season.
Prime Minister Moses Nagamootoo best described the industry at the National Cane Farmers’ Conference at the Arthur Chung Convention Centre, on August 14, when he said, “In the old days, it was called “King Sugar”…but today, sugar is no longer king. It has been reduced to the state of a pauper, a beggar that lives off handouts from the state.”
But now the industry is faced with the reality, that possibly, there may be a beginning anew.
Silver lining on the horizon?
After the many loud noises, for the first time in years, it is looking as if GuySuCo will reach its annual production target. The sugar company’s current production stands at over 215,000 tonnes, at the time of writing, with just over 12,000 tonnes needed to be produced to meet the set 2015 target.
The last time the industry achieved its production target was in 2004 when it produced 325,317 tonnes of sugar, and this is despite the sugar company over the years, consistently lowering its set targets.
Given that the pressing issues that affect the industry still persist today, and are even more, how then has GuySuCo lifted its performance? What has made the difference for this crop compared to previous crops?
Too big to fail
In the past two decades, many of the pressing issues affecting the industry were not addressed and gradually King Sugar lost his ‘throne’ as the top foreign exchange earner for the country.
But as Prime Minister Nagamootoo pointed out, the coalition has always been well aware of the sugar industry’s importance. “There should be no discussion or debate regarding the importance of the sugar industry to Guyana’s economy… in fact we have said this on a number of occasions, that this Government sees sugar as too big to fail.”
He said this, “has been our position in Opposition, and this continues to be our position as Government. The industry and workers remain important to us, and we are working to ensure that we have a modern industry,” the PM declared at the National Cane Farmers’ conference.
In keeping with this pronouncement, within days of the coalition government taking office, it gave the sugar industry a $4 billion bail-out after it was discovered that GuySuCo was unable to pay wages. An additional $8.2 billion was granted in Budget 2015 to help the industry.
A failed and tried solution
But if GuySuCo’s problems could have been solved solely with annual cash injections, then the industry would not have been almost to its knees today. Over the years, the previous government injected billions of tax-payers’ dollars into the industry for what it described as “the shoring up of the sugar industry operation,” yet every single attempt made to rescue the industry from its dire state, appear to have failed. In fact, in the last two years, GuySuCo’s performance can be best described as disastrous. The 2013 production was a lowly 186,770 tonnes, and only a modest target of 215,910 tonnes was set for 2014, this despite the industry receiving bailouts.
Going back five years, the Government has injected the following sums into GuySuCo; $659M in 2011, $4Billion in 2012, $5.36 Billion in 2013, $6Billion in 2014 and $12Billion in 2015.
It is logical to conclude then that the annual injection of cash was not the answer, instead it was just, a short -term resolution to the industry’s crisis.
Restructuring of the industry was therefore an essential pre-requisite for reversing its fate. Recognising this, one of the first orders of the new Government was to ensure better management. In this line, major changes were made in management and a new board of directors created.
A commission of inquiry was also appointed, into the operations of GuySuCo, to help find answers that could help move the industry forward. Thus far, the commission has presented an interim report to the Ministry of Agriculture, and at the time of writing was being examined at a Cabinet retreat. Government also set up an Interim Management Committee to examine the operations of the failing Skeldon Sugar Factory.
Perhaps the fact that the industry is within reach of its annual target, after years of failing to do so, is because the industry has been given a fresh start from the top to efficiently and competently manage, which also resulted in a resurgence of energies in the workers.
According to GuySuCo’s Chief Executive Officer, Errol Hanoman, this year’s industry has witnessed improved attendance, good managerial and workers’ performance, good team spirit and a high level of motivation. These, he explained, were measured by the increased performance in the factories (recovery and efficiency) which resulted in the achievement of weekly targets on a more consistent basis this year.
Long road ahead
Though there is some glimmer of hope, the industry still has a long road ahead, as the crisis is much more than finances and management. The company’s total liabilities as at July, 2015 were pegged at $82 billion. This debt is largely due to declining production, increase in production costs and the recent decline in the European Union (EU) sugar prices.
GySuCo today is producing 100,000 tonnes less sugar than it was producing 13 years ago.Its performance from 2002 to 2014 is as follows: 2002 – 331,052 tonnes; 2003- 302,379 tonnes; 2004- 325,317 tonnes; 2005 – 246,071 tonnes; 2006-259,549 tonnes; 2007- 266,482 tonnes; 2008- 226, 267 tonnes; 2009 -233,736 tonnes; 2010- 220,818 tonnes; 2011- 236, 505 tonnes; 2012- 218,068 tonnes; 2013- 186,745 tonnes and 2014 -216,350 tonnes.
The removal of preferential prices which African, Caribbean and Pacific (ACP) countries like Guyana enjoyed from the EU, have only served to exacerbate GuySuCo’s problems as now the industry has to compete in a volatile sugar market, where market prices continue to plummet. Further, the removal of the preferential market, now dictates that GuySuCo has to be more efficient, to remain competitive, therefore problems of lost man-days and equipment being down only add to the industry’s problems.
An enormous sum of money has been made available by the EU to ease the pain of adjusting to the radical reform of the EU sugar regime, but to date the question remains as to whether all of the funds were applied to preparing the sugar industry for the post-EU era, and whether the money has been properly channelled and results produced.
President of the Guyana Agricultural and General Workers Union (AWU), Komal Chand told the Stabroek News that the union was interested to know how much the EU actually provided over the years because he noted that the money was handed down as a result of the meeting of various indicators. Chand said that “all the money that comes for sugar must go to sugar. I can only make a statement like that. I don’t have the details to say how much has come, how much ought to come, how much they didn’t get because there were failures in the indicators and how much was transmitted to the industry, I can’t say,” Chand was quoted as saying.
Indeed, these are difficult times for the industry, which must also face the reality of new circumstances such as global weather, dwindling labour pool, shortage of skilled personnel and a factory in which so much was invested (Skeldon), performing below par.
GuySuco’s labour force has dwindled from a high of 20,204 to its lowest of 16,725.
The sum of $30 billion of the company’s total debt is still unpaid loans for the Skeldon sugar factory and since its commissioning in 2008; the factory has only this year seen its best output with production to date of 37,648 tonnes thus far. It’s important to remember that government injected new management at this factory, soon after taking office.
In 2009, Skeldon produced 25,727 tonnes, in 2010, 33,250 tonnes; 2011, 29,410 tonnes; 2012, 33,309 tonnes; 2013, 25, 544 tonnes and 2014, 35,890 tonnes.
Wages and salaries against production costs
It should be noted that in addition to rising production cost, there is also the issue of wages and salaries that impact significantly on the sugar company’s operating cost. The latter equates to 65 percent of the corporation’s operating cost and over the past two years has been close to 100 percent of total revenue.
Further, despite the fact that the corporation has been making losses from 2008 to date, it also has to bear the cost of annual wages and salary increases. The fact is that sugar workers’ remuneration and benefits far exceed those of most other sectors in Guyana. Further the workers also benefit from Annual Production Incentive (API) as negotiated each year between GuySuCo and GAWU. It is a bonus that is awarded to the workers for the year’s performance, whether the target is achieved or not. This is in addition to Weekly Production Incentive (WPI) and Personal Performance Incentive (PPI.)
In 2002, the minimum wage was $903.37 (6% increase) at a time when the industry produced 331,052 tonnes. The workforce then was 20,227. In 2014, the new minimum wage was $1985.31 (4 % increase) when 216,350 tonnes were produced with a workforce of 16,725.
So, going forward, the road to the industry’s recovery will not be without pitfalls and setbacks; however this government is committed to making the industry work.
This was emphatically stated by Prime Minister Moses Nagamootoo at the National Cane Farmers conference when he said: “the focus is to make sugar work. We have too many workers who stand to lose with the collapse of the industry; so it is no question that we have to make it work.”
As Government works to help put the almost crippled industry on its feet, it needs the support of all stakeholders more so as it is on the verge of achieving its annual target for the first time in many years. The possibility exists too for it to surpass the target of 227,443 tonnes.
Given the recognised difficulties the industry currently faces, it needs every ounce of sugar it can produce. It was pointed out recently by CEO Hanoman, that were it not for the previous three- day strike in October, and the man-days lost, the set production target would have been achieved this week (November 28), according to GuySuCo’s calculations. The achievement of the annual target too was set back by a further strike that ended on Thursday.