Home Letters Sugar tax levy saved other sectors of economy
Over the past decade, the criticism of the sugar industry has been incessant. The crucial role of the sugar tax levy (contributing over G$100 billion to other sectors during the period 1974 to 2000) has often been ignored in these discussions.
Notwithstanding, criticisms have become more pronounced after the European Union (EU) withdrew its preferential treatment in 2009, which immediately reduced its buying price of sugar by 34%. That drastic price reduction exposed weaknesses in the sugar industry, such as higher production costs compared with open market prices. And past corruption, coupled with a top-heavy management structure with extra-generous compensation packages, continues to weaken the financial viability of the sugar industry.
With the PNCR-led coalition’s rationale that the closure of 4 sugar estates in 2016-2017 would allow for consolidation, re-engineering, and better performance, the 3 surviving sugar estates (Blairmont, Albion, and Uitvlugt) have fallen short of this expectation, at least for the first six years. It would be a huge challenge, though not necessarily insurmountable, for GuySuCo to turn around this industry within the next two years.
An encouraging signal is the movement away from bulk sugar to packaged sugar, which doubles GuySuCo’s earnings from sales (US$300 per MT vs US$670 per MT). It is hoped that GuySuCo would build upon this piece of success, despite some production setbacks.
Sugar output in 2019 was 107,203 metric tonnes (MTs); in 2020 production declined to 87,875 MTs (18%); and it plummeted to 58,025MTs in 2021 (34%). With 22,000 MTs set aside for local consumption, this means that only 44,000 MTs will be available for the external markets. Cost of production of sugar is a nagging problem. It is reported that cost of sugar is twice the world market price (production cost of $US 0.33 per lb. vs open market cost of $US 0.16 per lb.). When one considers that Guysuco has incurred a debt of $(G) 72+ billion and had to be subsidized from 2010 to 2020 by $(US) 76.965 billion at an average of $(G)7.6965 billion per annum, the PPPC government had to address this matter with urgency.
While the statistics cited here do not paint a rosy picture, the PPPC government contends that the sugar industry might not be financially sound at this time, but this does not necessarily mean that sugar is not economically viable. Sugar is a community-based industry, like bauxite, it is woven into workers’ history and culture. Sugar has been so dominant in the economy that the history of Guyana up to 1980 could be regarded as a history of sugar. Estates have been providing sugar workers’ livelihood, a sense of self-worth, as well as helped to shape their perspective on life.
A transition from sugar to any other product must therefore not only be gradual but also sensitive. While the PPPC had promised to re-open 3 (Enmore, Skeldon, Rosehall) of the 4 closed sugar estates, a meticulous survey that they conducted upon taking office, revealed that the factories, the dams, the trenches, and the abandoned cane fields at Enmore and Skeldon could not be economically and logistically rehabilitated. When this is combined with Guysuco’s heavy debt, as well as, its huge annual subsidy, the government felt that they must address this problem in a way that will not hurt workers and their communities. They therefore changed their strategy for Enmore and Skeldon.
Enmore would be re-opened but not necessarily around sugar, and so is Skeldon. Dismissed workers at Skeldon are given part time jobs, while the government seeks to divest the sugar estate. Acqua-culture (rearing of shrimps), peasant cane farming and other crops will be encouraged like the cultivation of industrial hemp. At Enmore, the packaging plant is scheduled to be relocated at Albion, and workers there have been absorbed at GK+B Industries’ $(US) 35 million fabrication facility. Approval was also given to Rudisa to set up an agro-processing factory at Enmore. President Dr Irfaan Ali says that Enmore will become an industrial hub for the East Coast region.
Rosehall is scheduled to re-open with sugar production its main goal in early 2023. Wales is slated to become another industrial center The $(US) 900 million gas-to-energy project for the Wales Development Zone includes the construction of a plant to convert gas into electricity (300 megawatts). There has been a suggestion that Uitvlught sugar estate might be converted into ethanol production but there is no confirmation on this. The factory has not been grinding due to mechanical problems for several weeks. Workers there are being provided with alternative jobs during this down time.
Sugar is going through a bad patch but with the right vision and commitment it will survive and continue to make major contributions to the country as well as to sustaining vibrant sugar estates and adjacent communities that are interlocked with spinoff industries such as travel, businesses, insurance, mortgages, etc. The role of sugar in the agriculture diversification process must not be diminished; it still has the potential for financial and economic viability. Sugar should not be allowed to become a casualty of the Dutch disease.
Dr Tara Singh