Guyana halts large scale sugar production: Terrifying consequences ahead

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Sugar was first cultivated on a plantation-scale in Guyana in the 1630s, that is, nearly 400 years ago. This sweet sector was one of Guyana’s most rewarding sectors back then as it served as one of the strongest pillars of the economy. In fact, sugar was one of the reasons why Guyana was able to attract the interest of many international donors and investors, as the sector was deemed to be robust and profitable.

Today, this sector, which has an employment base of nearly 17,000 workers, is about to face a huge scale-down in production.

In the eyes of the A Partnership for National Unity + Alliance For Change (APNU+AFC) Coalition Administration, keeping sugar alive on a large scale would be tantamount to allowing a cancer to eat away daily at limited resources which could be used for the development of other sectors.

The Government’s decision to end sugar production has not been taken lightly by those within the sector, as well as the political opposition, the People’s Progressive Party (PPP). There have been protest actions this year which amounted to the loss of close to 30,000 hours of labour. This will no doubt affect the end of year production of the sector. But even in the face of this action, the Government is holding its ground.

 

FINANCIAL IMPACT

 

The Sugar Industry is the only sector in Guyana that bled the nation of over $40 Billion in less than five years. This is even before the new administration came into power. Before the APNU+AFC took over, they promised that they would bring an end to this practice; the practice of bailing out a sector whose production costs and employment costs far exceed the revenue that it brings in. But even the new government was hard pressed to bail out the industry as well. In 2015, the Government noted that the Guyana Sugar Corporation (GuySuCo) was unable to make payments to its employees and needed cash fast to repair a number of estates. This resulted in the Government doling out $12 Billion in its first year in office. That amount was intended to help the sugar industry clear some of its debt but it only ended up clearing owed wages and salaries for that year. The following year saw a cash injection of $11 Billion. And for 2017, the administration had no choice but to grant the state-owned entity, GuySuCo, some $9 Billion to take care of fixed expenses. In three years, the Government has expended $32 Billion in this sector. This amounts to $72 Billion in less than 10 years, which would have been taken from the national purse to keep a dying industry alive. If large scale production is not cut back now, GuySuCo would need close to $10 Billion every year to stay afloat.

 

GUYSUCO’S DEBT

 

The situation gets worse when one considers the amount of debt that the sugar industry is drowning in. Statistics show that GuySuCo has failed to make a profit since 2005 and even suffered losses to the tune of $67.8 Billion by 2009.

By the time the PPP left office, GuySuCo’s debt burden was $80 Billion.

According to Dr. Clive Thomas, GuySuCo’s Chairman, the state-owned entity owes $1.7 Billion to the National Insurance Scheme (NIS); $7.6 Billion to the Guyana Revenue Authority; $226 Million to the Guyana Agricultural Workers Union (GAWU); $665 Million to the Pension Fund; $1 Billion to foreign creditors; $2.8 Billion to local banks; $829 Million for a Caribbean Development Bank (CDB) loan; and $29.3 Billion in loans for the Skeldon Sugar Factory. In order to clear some of the debt, GuySuCo’s top executives have agreed with the Government that it should engage in the sale of some of its lands. This process has already started.

THE STATE OF SKELDON

 

The Government’s decision to scale back on the production of sugar by year end is not only influenced by GuySuCo’s debt as well as its financial impact on the national coffers. It is also influenced by the poor state of the sugar estates in Guyana.

During the 1970’s, Guyana had 11 sugar plantations. These were stationed at Leonora, Uitvlugt, Wales, Diamond, Enmore, La Bonne Intention, Ogle, Albion, Blairmont, Rose Hall and Skeldon. With a number of factors influencing sugar production over the years, this was reduced to six.

Today, the Government has moved to merge the Wales Estate with Uitvlugt Estate. This decision was taken since an evaluation report showed that Wales was operating at less than 60 percent capacity, coupled with its deteriorating drainage and irrigation systems.

Albion Estate will also be merged with one at Rose Hall. This brings the total to three: Blairmont in West Bank Berbice, Albion-Rose Hall in East Berbice and the Uitvlugt-Wales in West Demerara.

The declining production figures of the aforementioned estates along with their dilapidating state is what moved the previous administration to commission the establishment of a state of the art sugar estate. The Skeldon sugar estate was built to the tune of US$200 Million. It was, and still is, one of Guyana’s most costly projects. The estate was built by the Chinese. It was expected to rescue the sugar industry.

Instead, the Skeldon Sugar Estate became the sugar sector’s worse nightmare. Bit by bit, the world class facility started to fall apart, until it was deemed unsafe for employees and left Government with no choice but to shut shop earlier this year. The Government has pumped more than $20 Billion into trying to repair this one estate. And it is still saddled with repaying the loans which supported its establishment. The current administration is now in the process of selling this lost cause.

 

PROMISE TO THE IMF

 

The Government’s move to bring an end to large-scale sugar production is also in keeping with a commitment it made to the International Monetary Fund (IMF). The IMF is a global donor agency which also monitors the financial health of its members.

The IMF warned that it would be in keeping with prudent financial management practices for Guyana to rid itself of continuous bailouts to the sugar sector unless its intention is to nurture an economy that is riddled with debt and lopsided in growth.

Since this cautionary statement, the Government has been, on an annual basis, reducing its bailout to the sector. While the industry enjoyed a $9 Billion cash injection for 2017, it will only receive $6 Billion for 2018 and no more.

 

THE SOCIAL IMPACT

 

While the IMF did warn the Government to take certain fiscal measures when it comes to sugar, it did warn that this should also be done in consideration of the social implications that would result.

The Government has not done a single study on how its move would affect the sugar workers. What it has done was launch a Commission of Inquiry into the sugar sector, and it continues to follow the recommendations which speak to cutting losses.

It is yet to tell the nation what are its plans to support over 10,000 workers and their families which will be displaced for the Christmas season and months to follow.

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