By: SASE Singh; MSc – Finance, ACCA
The stakeholders in the Guyana Sugar Corporation (GuySuCo) need some reassuring economic news, but what I have discovered is what they ought not to be hearing.
As I highlighted last week, revenues have imploded and losses before taxes have multiplied. While gross revenue declined by 63.9 per cent because of a corresponding decrease in cost of sales over the period 2015-2018, the gross loss also declined correspondingly by 63.8 per cent.
However, the state of the losses before tax increased by 375.5 per cent which is quite unacceptable. When one dives into the weeds, immediately one realises that GuySuCo is being used as a milking pot for the People’s National Congress (PNC) ‘FAT CATS’, even though the entire industry is on its knees. Over 6000 ordinary citizens were transferred to a state of impoverishment by this Granger regime, but yet an army of PNC “friends and families” were parachuted into senior management positions only to see the administrative cost grow disproportionately, burning valuable cash for services not rendered.
When one drills down into other income, administrative and other expenses, one can find all the answers to this conundrum. Under the Granger regime, other income was literally wiped out. The People’s Progressive Party (PPP) had taken a policy decision to divest those lands that were deemed as not available for cane cultivation at profit. In 2015, the company benefited from more than GY$8 billion in land sales deriving a profit on those sales of some GY$5.2 billion. The Granger Administration came in and turned the entire apple cart over and that stream of cash literally dried up. There was all sorts of allegations made by one presidential advisor about massive corruption, yet after three and a half years, not one soul is in jail to support these invented stories and figments of his imagination, although he leads one of the nation’s best funded investigative agencies.
With respect to other expenses, there was a temporary increase and this was understandable recognising that most of it was temporary severance costs, which was all funded by Central Government. I was advised by a senior person in the system that buried in that other expenses is the cost of services for the upkeep of the now-shuttered factories. GuySuCo is owed some GY$1.5 billion for these support services since 2017. So I would not worry too much on the other expenses since National Industrial and Commercial Investments Limited NICIL/Central Government is expected to refund most of those costs to GuySuCo.
However, my biggest concern is the state of the administrative expenses, which is mainly head-office-related costs. In an environment when revenue dropped by 63.9 per cent and other income by 94.4 per cent, GuySuCo was only able to cut administrative expenses by 16.6 per cent between 2015-2018. But the real financial elephant in the room remains the manner in how the army of persons closely associated with the last PNC Government from 1986-1992, have invaded the top echelons of GuySuCo for their last personal financial “hurrah” and plunder. If you review the state of affairs at GuySuCo, they all are in receipt of “FAT CAT” salary packages, for services not rendered which in normal societies is tantamount to fraud. The cost for upkeeping the office of the CEO alone cost GuySuCo some GY$380 million in 2018.
The evidence clearly points to my heading – jobs for the PNC FAT CATS who have not delivered value for money services. While the administrative cost on the estates have declined because there are now fewer estates in the pool, we find that the head office expenses have increased.
What is happening at GuySuCo is wanton political interference by this Granger regime as they tinker with the problems but are more focused on the jobs for their friends and families. The real problems in GuySuCo are threefold – high cost linked to low administrative productivity, too many people in administrative services; an inefficient cane to sugar operations system compounded by that albatross at Skeldon; and lastly very low prices for the flagship product, raw sugar – and I have seen no serious measures in the last three years to move up the value chain to value-added sugar-related products.
I would like to see GuySuCo achieve that vision of being a world-class sugar industry producing high-quality value-added sugar-related products as it continues to contribute to the economic development of Guyana.