GAWU, through reports that appeared in several sections of the press, was, to say the least, surprised to learn that the state-owned NICIL Special Purpose Unit (SPU), according to Finance Minister Winston Jordan, was seeking financing in the region of $10B to $15B in order to resume operations at East Demerara and Skeldon Estates.
By any yardstick, this is a huge sum and we initially thought that the Minister maybe was misquoted. This, however, turned out not to be the case. Minister Jordan said that the SPU was close to finalizing the financing through an arrangement with a consortium of local banks.
Our Union, on this score, cannot help but wonder about the collateral that would have to be put up or the interest rates that would be demanded, among the other conditions that the banks would impose. Just some food for thought!
Sum of investment
Aside from those important considerations we are perplexed by the need for such a large sum. We recall that GuySuCo, with seven factories under its fold, had required lesser financing from the Treasury and, therefore, we are at a loss to figure out why the need for the significant sum.
Moreover, if the Minister’s comments are anything to go by, it seems that hardly any of the monies being sought would be going to the workers. The Minister, according to a Demerara Waves report, was quoted to have said “…it would have been more expensive to keep them [the estates] opening especially in the areas of staffing and costs”.
Therefore, it seems that workers remuneration would be kept to the barest which in itself will present its own problems. Minister Jordan, who is described in the Demerara Waves report as a career economist, ought to be very au fait with the theory of labour supply and thus he would well know there is a point (wage rate) that workers would rather stay home and starve than to work and starve.
It seems that that the sums being sought would be utilized to meet capital expenditure. If this is factual, then the figures, from our point of view, seem high. We recall that the Sugar CoI has estimated that capital expenditure for the period 2016 to 2020 for East Demerara and Skeldon would be $2.57B and $1.151B respectively.
With those investments, the CoI concluded that two estates would have produced 39,615 and 61,744 tonnes sugar respectively by 2020. Should the additional sums be used to fund the sugar diversification projects recommended by the Sugar CoI and endorsed by our Union, then, we believe, it would be shortsighted to sell rehabilitated and improved estates to allow the private owners to cream off the massive profits that could be realized from the implementation of these initiatives.
Whatever is the case, we believe, it would be difficult for NICIL to fully recover its entire investment. Therefore, in other words, the unrecovered portion of the investments being contemplated would amount to a State subsidy to the new owners apart from the other fiscal concessions that the private owners would obviously demand. It appears that the best approach would be for the State to retain ownership.
The Finance Minister, according to the Newsroom report, reportedly said in reference to resumption at East Demerara Estate, would operate “…for producing molasses…”. We do not think that this is the best approach, especially given the possibilities of utilizing the estate’s packaging plant.
Also, it should not be forgotten that molasses is a remnant of sugar production. However, if it is that no sugar would be produced, as can be gleaned from the Finance Minister’s comments, it would mean that the molasses of East Demerara would be of a very high quality.
This, we understand, would lend to more alcohol being produced. Disturbingly, in spite of this very positive characteristic, it would not yield any higher prices as molasses is sold by the tonne irrespective of its quality. Again this amounts to a State subsidy to the buyer of the molasses.
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