Dear Editor,
The Guyana Agricultural and General Workers Union (GAWU), through reports that appeared in several sections of the press, was — to say the least — surprised to learn that the state-owned NICIL Special Purpose Unit (SPU), according to Finance Minister Winston Jordan, was seeking financing in the region of $10 billion to $15 billion in order to resume operations at the East Demerara and Skeldon estates.
By any yardstick, this is a huge sum, and we initially thought that the minister was maybe misquoted. This, however, turned out not to be the case. Minister Jordan has said the SPU was close to finalizing the financing through an arrangement with a consortium of local banks.
Our Union, on this score, cannot help but wonder about the collateral that would have to be put up, or the interest rates that would be demanded, among the other conditions that the banks would impose. Just some food for thought!
Sum of investment
Aside from those important considerations, we are perplexed by the need for such a large sum. We recall that GuySuCo, with seven (7) factories under its fold, had required less financing from the Treasury; and therefore we are at a loss to figure out why the need for this significant sum.
Moreover, if the minister’s comments are anything to go by, it seems that hardly any of the money being sought would be going to the workers. The minister, according to a one report, was quoted as saying, “…it would have been more expensive to keep them [the estates] open, especially in the areas of staffing and costs”. Therefore, it seems that workers’ remuneration would be kept to the barest, which in itself would present its own problems.
It seems that the sums being sought would be utilized towards meeting capital expenditure. If this is factual, then the figures, from our point of view, seem high. We recall that the Sugar CoI has estimated that capital expenditure for the period 2016 to 2020 for East Demerara and Skeldon would be $2.57 billion and $1.151 billion respectively. With those investments, the CoI concluded, the two (2) estates would have produced 39,615 tonnes and 61,744 tonnes sugar respectively by 2020.
Should the additional sums be used to fund the sugar diversification projects recommended by the Sugar CoI and endorsed by our Union, then, we believe, it would be shortsighted to sell rehabilitated and improved estates to allow the private owners to cream off the massive profits that could be realized from the implementation of these initiatives.
Whatever is the case, we believe it would be difficult for NICIL to fully recover its entire investment. Therefore, the unrecovered portion of the investments being contemplated would amount to a State subsidy to the new owners, apart from the other fiscal concessions that the private owners would obviously demand.
It appears that the best approach would be for the State to retain ownership.
Timeline for sale
We also learnt that Minister Jordan expects that sale of the estates identified for privatisation would be completed, according to another section of the media where he was quoted as saying, “…in another six to nine months”. The Minister’s statement is in vast contrast to SPU privatization specialist Shawn Persaud. We recall Mr Persaud as being quoted in a January 26, 2018 Das saying“…authorities could not wait two years for the estates to be sold…”.
Is it nine months or two years? But the minister added to the confusion when he said, according to NCN, that the loan the SPU is hoping to secure would be repaid in three to five years. In effect, the Finance Minister is saying that the SPU would have long disposed of the assets from which it would have derived the revenue to repay the loan it is now seeking. No prudent banker in their rightful sense would approve such a loan, unless it is guaranteed by the Government. If this is so, then this amounts to a further subsidy by the State down the road.
Or maybe it is that the Minister misspoke, or is in a state of obvious confusion.
Yours faithfully,
Seepaul Narine
General Secretary,
GAWU
