A Green Economy Committee Feature
…can regain former glory of being major foreign exchange earner
Brief Background
Sugar has been a traditional crop of Guyana since the days of colonization for all of our ethnic makeup save our indigenous brothers and sisters. One of the primary reasons for the British creating a colony in Guiana was to farm sugar cane for export to the UK and Europe. It is viewed as one of the six sisters of Guyana joining, rice, bauxite, gold, diamonds and timber which cumulatively reflect the resource rich nature of our country.
Guysuco itself became a state owned entity in 1976 after nationalization. At that time it was the largest employer after Government and the main foreign exchange earner. Thus until recent years, Sugar has been a large part of the Guyanese economy including and post-British occupation. The Sugar sector was only overtaken in the last decade or so by rice and gold as government began to invest more in these other sectors and inland infrastructure; coupled with new markets and world market prices supporting their growth.
The Sugar sector used to account for about 20% of the Government’s revenue and accounted for roughly 38% of the agriculture sector which contributed as much as 32% to our GDP over many years save since 2018 when less than fully informed decisions were taken to close several estates. This is against the backdrop of the level of employment the sector contributed both directly and indirectly to the economy, its substantial foreign exchange earnings, its socio-economic impact on families and livelihoods and its contributions to the financial sector and banks operating within the vicinity of its estates particularly the Wales Estate and the Skeldon Sugar Factory.
The above two tables indicate that between 2001 to 2015 the sugar sector performed well even when there were dips in the country’s Real GDP (2018-2019 excluded as these were years when decisions on closure of some estates were taken.).
The Sugar sector for those more familiar with its intricacies, in addition to its own contribution, also contributes to the agriculture sector from the standpoint of fertilizers and other soil nutrients along with pests and diseases control chemicals; and to the services sector in a huge way in terms of safety gear, consumer and household items, real estate market, and transportation. Hence, the decision to close the operations of Guysuco ought to have been thoroughly examined before taking a rash decision. If the sugar sector had not been neglected in the past few years, it would have buoyed the economy when the rice sector was experiencing difficulties after loss the preferential Venezuelan market which took time to replace with other markets. Hence, the reiteration that we cannot take decisions on our major sectors in abstract.
The Skeldon Sugar Factory
Feasibility
In 2000, Booker Tate a longstanding partner of Guysuco assisted it with the development of the industry with the objectives of increasing sugar production, reducing operating costs and consequently increasing profitability. The siting of the Skeldon factory was due to our eastern corridor being deemed better suited as agricultural conditions were researched and found to be more superior than the west. Hence, siting had a scientific basis.
The scope of the project entailed the construction of an 8,400 tonne cane/day sugar factory to be supported by the development of approximately 5000 ha of surrounding highly shrubbed land to be converted to supply high quality cane.
Booker Tate supervised the construction of the factory which was made to have a capacity to crush 1.5million tonnes of cane and produce around 150,000 of VHP sugar with a cogeneration plant capable of generating10MW of electricity to feed the national grid; to ensure quality workmanship.
Challenges faced by the Skeldon
As with any new venture undertaken of this magnitude, the Skeldon Sugar Factory as well -known encountered challenges which include as mentioned below but overall resulted primarily from general lack of ongoing maintenance works and lack of spares and tools on site causing the factory to deteriorate in various areas.
* Corrosion of parts of the factory and power plant which is understandable given proximity to the Altantic Ocean salt air (a common feature along the Corriverton/Corentyne coast).
* Missing insulation for the plant’s diffuser thus resulting in major heat losses and causing the plant’s boiler fuel feeders to be flagged for possible safety issues.
* Lack of spare parts to effectively maintain aspects as the feeder motors
* Exhaust gas leakages in the boilers occurred due to wrong furnace pressure.
* Demolished oil burners for the boilers which were considered to be a fire hazard.
* Late implementation of private cane farmers to ensure sufficiency of supply of canes
* Notable rain days
* Soil type that does not easily dry (for example in half day) unlike in some of our Caricom sister countries
* Farm beds that were not always conducive to mechanical harvesting which is preferable to allow for quick harvesting and to escape rainy weather conditions.
* Lack of sufficient enforcement of terms in Private Cane Farming contracts as it relates to manufacturing of canes.
Prospects for the Sector
However, the issues at Skeldon Sugar Factory are not unsolvable. With stringent management and strong oversight the sector is capable of viability. It is also important to recognize and appreciate the interconnectivity of this sector to others, to employment and GDP.
A short to medium term strategic plan which must address operational inefficiencies including methodology of pickup of canes; reducing cost of production, increased mechanization, ensuring markets are available and obtaining competitive prices; is to be developed. Such a plan has to incorporate other incoming generating prospects as co-generation, molasses, methanol and bio-ethanol which can reduce energy cost and also promote use of energy or mixed fuel vehicles; jaggery cubes which are known for their health benefits; and cultural heritage tourism.
Only recently we learnt from the GMSA that the closure of estates has significantly affected the operational cost of Demerara Distillers Limited (another large scale employer) via absence of sufficient molasses for the production of Eldorado Rums which is famous worldwide.
A new strategic plan should also encapsulate equity investment not only by investors, but by employees through issue of ordinary shares so that they too have an onus to ensure the company’s profitability in order to earn a dividend.
We are aware of the regret of our neighbouring Trinidad that its agriculture sector was neglected when its oil and natural gas sector tumbled. We should not repeat their mistakes.
At the regional level, equally critical as reiterated by the Sugar Association of the Caribbean (SAC) last March 2019, is that unless the CARICOM Secretariat, and by extension Caribbean trade ministers, do not take ‘definitive and immediate action through the Council for Trade and Economic Development (COTED)’ the Sugar Industry’s future will be at risk. SAC’s concern is that the industry can only survive if the existing 40% Common External Tariff (CET) on all sugar imports is rigorously applied. SAC noted that market intelligence gathered across the region found that ‘more than two-thirds of CARICOM’s sugar demand is currently being supplied by extra regional sugar even though the industry in CARICOM annually produces more sugar than the Anglophone part of the region requires.
All businesses go through peaks and troughs but importantly, is how we navigate the troughs so that more peaks can surface.
It is recommended that some of the proceeds of our emerging oil and gas sector be channeled towards the recapitisation of Guysuco to make it self-sufficient and restore it to its former glory.
