I was not surprised when the independent media highlighted that the new Skeldon state of the art factory consumes more than twice as much cane to produce one tonne of cane compared to the old colonial factory.
We have been saying this for years, but we were told that we do not know what we were talking about by the former president who pretended that he knew all but in reality most of the time know very little about what he was talking about.
He was the master bluff who bamboozled even Janet Jagan with all his fancy talk which were all grounded in very little substance. For anyone to spend more than $47 billion on a factory they should have had a ten-year projection of a payback plan and detailed sensitivity analysis of the different pricing option to ascertain feasibility of the new factory under multiple pricing options. But the Skeldon Factory was not built to save the sugar industry; it was built to enrich a few at the expense of the hard working cane-cutters in Jagdeo’s “cane-cutopia”.
Let the facts speak for themselves. The FAO Sugar Price Index averaged 243 points in the year 2014, down 126 points (34 percent) from 2011. The decision of the European Union to abolish sugar quotas that limited production of sugar in Europe in the past, was a major determinant as to why the world market is now flooded with newly produced sugar.
We saw the European Union setting up this strategy since 1994, so only a certified financial idiot would want to green light a $47 billion investment by builders who are not experts at sugar production.
China is not an Australia, South Africa, India or Brazil at sugar. So why run with such a risky investment with a second rated horse unless the gambler will personally gain financially?
Now the realities are coming home to roost. World sugar production topped 175 million metric tonnes in 2014 compared to 162 million metric tonnes in 2011.
Production is not expected to drop significantly in 2015. This obviously is not great news for Guysuco since as supply fail to materially decline, prices will remain subdued at around US$0.15- US$0.18 in a situation where Guyana continues to produce sugar above US$0.32. Against such a backdrop of ample supplies, international sugar prices remained about eight percent below their level from a year ago and are not expected to increase significantly in 2015.
Guysuco has no choice but to focus on enhancing cane production cane production by using whatever measure necessary. It is time that the private sector be more aggressively courted to cultivate the land and deliver the cane to the factories especially at Skeldon and on the Demerara Estates.
Then the Government of Guyana in partnership with University of Guyana, NARIE and other like-minded research agencies have to spend more money on researching how to cut cost in the field and in the factories. Science is the solution; not trial and error efforts by cell-phone overseers and managers.
Guysuco really has to move on the Ethanol programme to progressively utilize cane production for ethanol blending and use the ramped-up bagasse production to sell more electricity to the national grid at a profit.
Too much time has been wasted since 2008; this is not a political game anymore. More than 16,000 families will suffer direly if the PPP continue these games. This fixation of the PPP of keeping Guysuco in the main in the hands of the State as a way of enslaving its perceived electoral support may be good politics but rubbish economics.
It is hoped that we learn from the mistakes of the past. It is sad that the PPP wasted over $50 billion on Ponzi scheme projects like the Amaila Falls Road to nowhere, the Alexei Ramotar ICT Project that will never deliver the intended services to the nation and the wasteful Kingston Hotel project. That was $50 billion that could have been used to finance an ethanol plant and the necessary equipment to make GUYOIL into the national fuel/ethanol blenders which would have had two momentous impact on the nation –reduce the outflow of cash leaving the country to buy fuel and injecting much needed real cash into the sugar industry.
We are now $50 billion short and three years too late.
Let us not fool ourselves, sugar prices will remain mute for the foreseeable future as supply will outpace demand resulting in a global surplus in the sugar stocks over the next year. With muted sugar prices and operating cost in Guysuco not coming down due to poor management of the industry, Guysuco will continue to be technically insolvent and will continue to face a severe liquidity crisis over the next 12 months.
Unless the Treasury us tapped for several billions, Guysuco will not be able to pay its bills, even salaries. This is not the way to even run a cake shop much less the largest employer in the nation. Shame on the PPP leaders for leading this industry, with such a proud legacy, into the doldrums. If there is any reason Berbicians and other citizens on the sugar belt must reject the PPP at the upcoming polls, it how they misused and mismanaged Guysuco.
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