Dec 24, 2016 News
By Kiana Wilburg
Thousands of workers within the sugar sector will soon know their fate, as a Cabinet subcommittee has finally finished drafting its recommendations on the way forward with the industry.
This was confirmed yesterday by Minister of Agriculture, Noel Holder.
Holder is a member of that subcommittee, which was established last month. Other members include Finance Minister Winston Jordan, Natural Resources Minister, Raphael Trotman and Minister of State, Joseph Harmon.
Holder told this newspaper that the subcommittee has put together a paper with its recommendations which will go before Cabinet next Wednesday. He said that Cabinet will decide whether to keep or discard part or all of the options on the paper.
While he was not able to divulge a few of the suggestions on the way forward, he stated that they far exceed the expectations of the International Monetary Fund (IMF) which has been calling on the authorities to reduce its billion-dollar bailouts to the sector.
The IMF documented this in its Article IV Consultation report in March, last.
The report said that according to the authorities in Guyana, planned budget transfers for the sugar industry are expected to decline and eventually cease over the medium term. The IMF also noted that transfers to the loss-making state-owned sugar company (GuySuCo) remain a drag on fiscal performance.
In its report, it noted that transfers to GuySuCo were equivalent to 1.8 percent of GDP in 2015, and are budgeted at about 1.3 percent of GDP for 2016.
IMF staff urged the local authorities to adopt a restructuring plan for the sector that will improve cost efficiency, productivity, and alternative revenue streams, drawing upon the reforms proposed by the Commission of Inquiry into GuySuCo. It said, too, that the scope and pace of reform should take into account social implications.
Finance Minister Winston Jordan recently opined that based on the allocation for sugar in the 2017 budget, government has indeed started the process of reducing the billion-dollar bailouts to the sector.
He said, “When we started in 2015, we started with $12B; then 2016 we had $11B going towards the sector; and for 2017 we have $9B. So there is a process of reduction that is taking place…”
Kaieteur News was able to confirm from two reliable sources that the options up for consideration include privatization as recommended in the Commission of Inquiry into GuySuCo, and the most extreme being the closure of the sector.
According to the COI report, it was recommended that the process of privatization should start as early as practicable, with an aim to be completed within a three-year period. As a consequence, the report said that the state should divest itself of all assets, activities and operations currently associated with GuySuCo.
Government officials have also agreed that radical reorganization and diversification are urgently needed.
Another recommendation made to Cabinet was the need to bring an end to the production of bulk sugar at the Skeldon Sugar Estate. Kaieteur News also understands that the US$200 million factory is in dire need of costly repairs.
In this regard, Chairman of the Guyana Sugar Corporation (GuySuCo), Dr. Clive Thomas said, “Skeldon needs to be divested. We thought it would have been saved or salvaged by a mechanization project and that was not helpful. Then to get the costs down to competitive levels, moves were made to involve private cane farmers in supplying cane to Skeldon. That, too, did not work.
The reality before us is that the factory has lots of faults; it is badly designed and poorly constructed.”
Thomas added, “The factory is deteriorating. New steel is needed, some of the furnaces don’t work, some of the boilers don’t work…the factory is just not properly built. The cost for the repairs needed is about, if not over, US$60M ($12B). It is that big of a disaster.”
A few months ago the sugar sector received a whopping $2B in assistance from the national purse. This financial support is to help meet routine expenditure, and is in relation to the second crop for the sector. The cost to repair Skeldon alone would be six times that bailout.
The amount needed to fix the problems facing Skeldon is also more than the $11B ploughed into the sugar industry for the entire year.
Government was also presented with the option to diversify Rose Hall /Providence and the East Demerara estates. It was noted that in addition to the Wales Estate, the estates at East Demerara and Rose Hall are underperforming and should be transitioned into diversification.
“We were told that those estates have prime agricultural lands, have access to the required facilities, and are strategically located for access to support services and trade,” said one official.
He concluded, “We were also advised by GuySuCo officials that these advantages should be exploited in financially viable diversification ventures. They said that preparations should commence from January 1, 2017, so that the lands can be prepared for proposed diversification projects as the canes are harvested during 2017. The diversification plans are contingent on this decision.”
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