Home Letters Deeper analysis of realities of sugar industry
The Guyana Sugar Corporation Inc (GuySuCo) would like to respond to Mr Hydar Ally’s letter that was published on December 16, 2016 titled ‘What the sugar industry needs is a higher level of efficiency’.
We would like to invite the author to undertake a deeper analysis of the realities of the Guyana sugar industry so that his contribution to the debate on the best possible solutions can be reflective of a more objective understanding of the issues.
It is important to note that Booker Tate Limited was brought in by the Desmond Hoyte Government to reposition GuySuCo for possible divestment. Its mandate was the “sugar” business.
Contrary to views expressed, GuySuCo was making real progress with its diversification activities through the Other Crops Division, but given the mandate of Booker Tate, this was discontinued.
The management of the Guyanese economy was regulated by the International Monetary Fund (IMF) program that was in place at the time, and Booker Tate, with the support of the then Guyana Government, obtained the approval of the IMF to increase wages up to 75 per cent in order to attract workers back into the Corporation.
What is noteworthy is that the state of GuySuCo’s agricultural infrastructure in 1990 was significantly better than it is at the moment. Also, the cadre of technical skills and experience which obtained in 1990 was significantly greater than that which currently exists.
In order to successfully deliver its mandate, Booker Tate brought in a team of expatriate administrative and technical staff, which peaked at over twenty in number. This team was supported by Booker Tate’s corporate office in the United Kingdom which had some of the best technical expertise in the sugar world.
Fundamental to this review is that GuySuCo and Booker Tate in those years had the benefit of the EU Preferential market. Given the direction in which sugar prices and costs were trending, in particular the latter, the Booker Tate management during the mid-1990s recommended the rationalisation of the industry – fewer factories and the rationalisation of cane hectares – to reduce cost, increase productivity and better secure the future of the industry. However, this strategic plan was not approved.
The dominant criterion was increasing production, while the restructuring of costs was not entertained.
Over the years Booker Tate was required to reduce their numbers. At the same time skilled, experienced Guyanese were leaving – retiring, resigning or migrating.
The local and international environment, within which sugar as a business exists, has been changing over the years, particularly over the past 10 years. During this period, the EU preferential price was lost; there was the loss of skills and experience as a result of the reduction in the number of Booker Tate technical staff, the exodus of Guyanese skills and experience, both of which resulted in the overall weakening of the technical and management team across the industry; the under-capitalisation of the sugar industry was severe; there was the granting of increases in wages and salaries, despite the financial difficulties being experienced by the Corporation; not to be underestimated was the havoc wreaked by the floods of 2005, the effects of which were felt in subsequent years; the escalation of cost of production and financial losses including cash deficits continued.
Additionally, another area which has impacted negatively on the sugar industry is the adversarial industrial relations environment. Man-days lost due to strikes from January 2000 to end September 2016 exceeded 1 million. From 2005 to 2015, there were 2,019 strikes with an average of 150 per year. The number of strikes to October 31, 2016 is 139; as of October 31, 2016 43,693 man-days were lost. This situation continues to have a significant negative impact on the industry’s health.
Cane yields reported on the basis of tonnes cane per hectare (tc/ha) is an important indicator measuring the health of the cultivation. For the period May 1976 to December 1979 the tc/ha was approximately 71.5; from January 1980 to December 1989, it was approximately 71.0; from January 1990 to December 1999 it was approximately 66.8; January 2000 to December 2009 approximately 66.2; and for the period January 2010 to 2016 to date the average yield approximates 57.6 tc/ha.
Finally, it is important to note that significant rationalisation/reorganisation is necessary to become viable. Mr Ally is correct, that higher production will reduce unit cost but this is only to a degree. With the best of marketing strategies the existing preferential markets cater for about 70,000 tonnes of sugar, with any additional production having to be sold at prices which are based on the World market.
The world to which Mr Ally alludes, albeit very incompletely, is very different from that which presently obtains. In the interest of the employees of the industry and the economy at large, different remedies are required.