The Guyana Sugar Corporation (GuySuCo) participates in a system of contributory pension schemes for its employees. The main pension scheme is called the Sugar and Trading Enterprises Pension Scheme (STEPS) and at the end of 2017 had recorded a deficit that deteriorated by some GY$1030 million (182 per cent) over the preceding five years. In this case, a deficit means there is not enough assets to back the lifetime financial obligations of the pension scheme. This is a financially recoverable situation.
For those employees who retire and are not covered by STEPS, they are paid ex-gratia pensions, which traditionally was recoverable from the Sugar Industry Price Stabilisation Fund (SIPSF). Amounts not recoverable from this fund are underwritten by the profits of the company. If we aggregated all of these retirement funds in GuySuCo (STEPS plus expected ex-gratia pension payments), the 2017 draft accounts revealed a situation that shows they deteriorated by some GY$5 billion over the last five years. This state of affairs created a widening deficit that has now breached the GY$33 billion mark in the red. In layman’s language, at the end of 2017, the workers were entitled to pension payout valued at some GY$45 billion in the long-term, but the company could have only substantiated assets that is GY$33 billion short.
But although one can classify the situation as deleterious, there are two fundamental reasons why the workers must remain hopeful and positive. One, the 2016 Auditor General Report revealed that the SIPSF had on deposit at the Finance Ministry a balance of some G$14 billion to which GuySuCo workers have the first call. Secondly, the payout of this GY$45 billion due to the workers is not all payable today, but in annual tranches in a sort of drip feed model. As workers retire, the payout matures. The reality is that not everyone will retire today and thus the GY$45 billion is not payable in full today. There is time!
An evaluation of the demography of the workforce in GuySuCo revealed that at worst the company will have to find between GY$5-6 billion per year over the next five years to meet retirement obligations. The latest draft financial statements from 2017 reveal that the company has GY$12 billion in convertible assets to immediately fund this obligation, plus the workers do have the first call on that G$14 billion in the SIPSF at the Finance Ministry. This basically means for the next five years GuySuCo is in a position to comfortably make its pension payments. So when people like Clive Thomas tried to use this issue as a red herring to influence policy actions that have now caused irreparable damage to the industry, we have a duty to expose and oppose him.
As a side note, SIPSF was established under the Sugar Industry Special Funds Act of 1947, which was also the legal vehicle that established two other sugar funds – the Sugar Industry Rehabilitation Fund and the Sugar Industry Labour Welfare Fund. Today according to the law, the Finance Secretary of the Finance Ministry is the trustee to these funds. According to the books, the Finance Ministry owes the workers GY$14 billion.
The combined GuySuCo pension scheme, which is the largest in the country, is just too big to fail because of its size, complexity, interconnectedness across the society and the critical functions that it serves within the national financial system. I am of the firm belief that the regulators at the Bank of Guyana should launch a thorough examination into STEPS. Failure to step in and inspect this pension fund would be regulatory reckless of the authorities which can result in the premature liquidation of STEPS. Though this might achieve a political objective to defund the sugar belt, the consequences will be acerbic on rural Guyana for years to come.
Too many mistakes were made in the sugar industry over the last decade but the culmination of executive incompetence was exposed in full, as the nation observed the troika of tragedy (Thomas/Hanoman/Holder) in action between May 2015 and December 2017. Today, as the economy implodes because of these mistakes, it is refreshing to observe that the new controllers of GuySuCo are returning to the philosophical underpinning that the sugar industry is patently intertwined with the economic health of the nation. If sugar gets a cold, Guyana gets the flu. It is therefore imperative that the Government steps in to properly study the state of the pension funds in the sugar industry for the greater good of the economic welfare of the nation. At a minimum, the sugar unions must be involved in the decision-making process at all stages as the different options are considered. Anything else will mean further national economic regression.
