Jul 17, 2016 News
The International Monetary Fund (IMF) is pleased that the coalition administration is committed to restructuring public enterprises to reduce their reliance on government support.
With particular reference to the Guyana Sugar Corporation (GuySuCo), Executive Members of the IMF said in their most recent report that the re-engineering of the state entity to a new business model aims to reduce inefficiencies and place operations on a financially sustainable path.
Significantly, during their analysis of Guyana’s financial systems and budgets, they observed that planned budget transfers have been substantially reduced for 2016.
The IMF team said that it was pleased to learn from authorities here that budget transfers are expected to steadily decline and eventually cease over the medium term.
Transfers to the Guyana Sugar Corporation were equivalent to 1.8 percent of the nation’s Gross Domestic Product (GDP) in 2015 and are budgeted at about 1.3 percent of GDP for 2016.
The IMF Executive Members urged the Government however to adopt a restructuring plan for the sector that will improve cost efficiency, productivity, and alternative revenues streams, drawing upon the reforms proposed by the Commission of Inquiry (CoI) into the state entity.
They said that while the initial steps taken in that direction are welcomed, scope and pace of reform should take into account social implications.
Furthermore, it appears that the government is following through with its plans as expressed to the IMF as it has been showing GuySuCo some tough love recently. Kaieteur News understands that the entity received some $9B to handle its expenses this year and it has already expended more that 80 percent of that money. Even though it has since turned to the Government for assistance, it does not seem for the time being that its usual bailouts would be coming anytime soon.
GuySuCo Chairman, Dr. Clive Thomas, said that the entity will have to resort to selling some of its lands to generate income for its unforeseen expenses over the coming years.
The economist said, “What we are trying to do is to use land sales as an important means of financing over the next four to five years. We are looking at our land holdings to see what is possible. Then (we will) decide on how to structure the sales. We have a fair idea to get (sums). So that is a significant source of income.”
He added, “We asked for $12B this year and we got $9B. The rest has to be supplied by land sales. We are also trying to get the (private cane) farmers to diversify into other industries, if they want to. (Also) we have processing plants in Wales so we want to do some (more) juice canning.” Dr. Thomas stated that offers have already been coming in for the corporation to consider. The Chairman also spoke about land along Mandela Avenue, which the corporation had realized was being disposed of by the Georgetown Mayor and City Council (M&CC). He stated that this was attributed to a misconception that the land belonged to the M&CC.
As for the “extreme” recommendations noted in the report on the Commission of Inquiry into the sugar industry, Dr. Thomas cautioned that those working in the sector should not be worried for one bit whether the sector would be closing shop.
“Indeed the changes that are coming will be radical, but it is necessary, because you cannot expect to be doing the same thing every year and getting different results. But we aren’t closing shop. We are concerned about the survival of this industry, but more importantly, bringing it to good health.
“We are trying to move towards value added products coming out of the sugar assets. We are trying to use the assets of the industry in a more creative way.”
Dr. Thomas said that he is working towards recovering Skeldon’s co-generation plant which was sold to Skeldon Energy Inc. (SEI).
He said that the former CEO of GuySuCo, Rajendra Singh, sold the company’s generation facilities to Skeldon Energy Inc—a Special Purpose Company jointly owned by the Guyana Power and Light (GPL) and the National Industrial and Commercial Investments Limited (NICIL), for US$30m, only to have it buy back power to run the factory.
To date the sugar company has also only been paid US$19M of the agreed US$30M and SEI has since indicated that it could revise the outstanding US$11M amount. Dr. Thomas told Kaieteur News that it is imperative that the plant be recovered, as it is a major supplier of power and basically the lifeline of the factory.
“It is such a major producer of power that it supplies 90,000 households in Berbice. We are in discussions with having that sale being reversed from being the property of GPL. It is an important pillar for GuySuCo.
We are hoping to get it for next year. We want to be able to sell GPL power. We are getting ripped off with the plant being in the possession of another company.” The GuySuCo Chairman explained that high on the entity’s list of priorities is moving towards the diversification of the sugar industry especially as it regards refined sugar. He noted that GuySuCo is still working to achieve a breakthrough with a new upgraded sugar called, “Enmore Crystals.”
“This product will help to give us some leverage to sell our sugar for more. This packaged sugar is only being done in small quantities for the markets in Canada, USA and Britain.” The GuySuCo Chairman said that the Board and Management believe that the packaged sugar will do better than “the ordinary sugar sold in the transparent plastic bag.” He noted that samples are already being taken to the three markets he outlined, among other places where contacts are made. Dr. Thomas said, “We are trying to penetrate the market with small quantities and build up as time goes. We are basically doing this to see how we can get a higher price for our sugar.
“And so far, it has been receiving favourable reviews from our international contacts, so we are looking to see how this works out. But there are other plans in the pipeline for the diversification of this product and bringing the industry back to good health.”
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