By HE David Granger
Guyana’s sugar industry will recover from its present reverses; it will not perish. The industry has been the bedrock of our economy for over 350 years – both as a colony and since Independence. The sugar industry was the largest employer of labour, earner of foreign exchange and contributor to agricultural production. The industry’s historic role in national life is undeniable.
The industry, as an export-oriented enterprise, has been subject, historically, to cycles of depression and success caused by both external and internal factors, however. These cycles have forced changes in the structure of the industry, including consolidation and closure.
The Guyana Sugar Corporation is being restructured and revived to become sustainable and profitable. The Corporation is being reformed to restore sugar’s value to the country, to protect the rural economy and to safeguard employees’ livelihoods.
Sugar cultivation, at the start of the 19th century, was based on 380 plantations but declined to 239 three decades later. It decline further, in the ensuring years, to 138 by 1890; 80 by 1990; 39 in 1922; and 18 in 1967.
There were only 11 sugar estates – Albion, Blairmont, Diamond, Enmore, La Bonne Intention, Leonora, Ogle, Rose Hall, Skeldon, Uitvlugt and Wales – by the time the Guyana Sugar Corporation was established in 1976.
The pattern of consolidation and closure, therefore, has been evident for two hundred years. It did not start in May 2015. The following facts should not be forgotten:
– The East Demerara plantations – Diamond, Enmore and La Bonne Intention – were consolidated in 1998 and the administrative office for the merged estates was centralized at La Bonne Intention. The Enmore administrative office and field workshop were closed in the same year, 1998;
– Diamond discontinued cultivation of 4,000 hectares in 2010 and the employees of that estate were transferred to La Bonne Intention;
– The La Bonne Intention factory was closed in 2011 and the majority of its workers were transferred to the Enmore factory.
The Corporation employed 20,420 workers at eight estates in 1992. Its employment stood at 15,080 at the end of 2015. This meant that 5,340 workers were taken off the payroll, either by natural attrition or severance, between 1992 and 2015. The reduction of the industry was not the present Government’s invention. The industry was in a perilous state by 2015. The following facts should not be forgotten:
– production of sugar, which averaged 264,963 MT annually in the decade 1996-2005, declined by 14 per cent to an average of 208,718 MT in the following decade; production cost of a kilogram of sugar was US$ 0.86 per kg in 2014 while the world market price was US$ 0.31 per kg;
– It took 11.2 MT of cane to produce one MT of sugar between 1996 and 2005; it took 12.30 MT in the following decade; and
– employment costs surged to 48 per cent of total costs and accounted for 73 per cent of revenues between 2010 and 2015.
The Corporation was in dire financial straits by 2015. It had accumulated over G$50.0B in the six years between 2009 and 2014. Its debts had reached G$82 B and its working capital had decreased by G$25.0 B.
The Corporation’s financial woes led to underinvestment in field and factory infrastructure and machinery. The Corporation was able to expend only 36.5 per cent of its budgeted capital expenditure between 2010 and 2015. These factors resulted in more frequent equipment failures, lower efficiencies and higher maintenance costs.
These difficulties were compounded by a decline in both field and factory infrastructure, poor industrial relations, the loss of preferential prices in the vital European market and the loss of skilled personnel.
The Corporation’s miseries were compounded by the incredibly unintelligent investment in a new Skeldon sugar factory. It was a monstrous and monumental mistake, the mother of all blunders, and represents Guyana’s worst ever industrial catastrophe.
The Corporation’s woes were aggravated by the attitude of certain trade unions. There were 2,952 strikes between 2001 and 2014 in the industry, resulting in the loss of 1,009,427 man days and more than G$ 2.0 B in workers’ wages. There needs to be a new ‘social contract’ between employers and employees if the industry is to survive.
The Government has responded responsibly and resolutely to the challenges with which it was faced. Concerted action was required to rescue the industry.
– A Commission of Inquiry was appointed on the advice of the Cabinet, in July 2015, to: “Investigate and inquire into the current state of cultivation, production and marketing of sugar, molasses and other by products including power…” inter alia.
– A Task Force was established, subsequent to the submission of the Report of the Commission of Inquiry in October 2015, to develop recommendations on the restructuring of the industry.
– A State Paper on the Future of the Sugar Industry was published and presented to the National Assembly on the basis of the reports of the Commission of Inquiry and the Task Force.
– A Corporate Restructuring Plan was initiated following these processes. The Plan envisaged the contraction of sugar production to 147,000 MT per annum and limiting production to three plantations – East Berbice, comprising the consolidated Albion-Rose Hall plantations; West Berbice, comprising Blairmont; and West Demerara, comprising the consolidated Uitvlugt-Wales plantations.
The consolidation of the Albion and Rose Hall plantations and the Uitvlugt and Wales plantations, resulted, unfortunately, in the severance of several thousand workers. This has been a most difficult and painful decision for the Corporation.
The Government can derive no satisfaction from terminating workers’ service. Had the Corporation not been restructured and sugar production not been consolidated in certain plantations, the entire industry would have collapsed. This would have jeopardised the jobs of everyone and the more than 13,000 other employees of this Corporation.
– The Government has not behaved in a capricious manner. It held consultations with the parliamentary opposition and the sugar unions on 31st December 2016 and 3rd February 2017 and, again, with the unions on 19th January 2018.
– The Government, on 23rd May 2017, approved the establishment, by the National Industrial and Commercial Investments Limited (NICIL), of a Special Purpose Unit to divest the Corporation’s uncultivated estates and unproductive assets. The resources garnered from this process are expected to finance the industry’s restructuring in part.
– The Government approved the appointment of a Chief Executive Officer with effect from 1st August 2018 and a new Board from 1st September 2018. These appointments injected a vibrancy and vitality into the Corporation and the implementation of a Corporate Restructuring Plan.
– The Government commissioned a valuation of the Corporation’s assets. NICIL, in the interim, negotiated in May 2018 a G$30.0B syndicated bond, to provide financing for the Corporation. G$7.0B has been disbursed in support of the Corporate Restructuring Plan.
There is no indecisiveness and guesswork. There is credible Corporate Restructuring Plan and everyone must work together to achieve a favourable outcome. Everyone wins with a prosperous industry.
The Government has not abandoned the industry or the workers to an uncertain future. Government will continue to work diligently to ensure that displaced workers are provided with opportunities to participate actively in other sectors of the economy, such as the production and processing of other crops, livestock, fish, construction, manufacturing, services and mining. The eventual divestment of some of the sugar plantations will enable some of the displaced workers to be afforded the opportunity to regain employment.
The Government has been supporting the CRP. The Ministry of Finance was authorized to provide $42.6 B in transfers to the Corporation over the past four years – a subsidy of more than 3 million dollars per worker. This is what it has cost the Government to save workers’ jobs and to ensure the industry’s survival. The Corporation received over G$7B from the Syndicated Bond negotiated by the National Industrial and Commercial Investments Limited (NICIL).
The Government is aiming for a smaller, stronger but smarter and more sustainable industry. A competitive sugar industry will act as a catalyst for the revitalization of the rural economy. A viable sugar industry will eventually be able to provide additional employment opportunities, including to those affected by the restructuring of the industry.
The Corporate Restructuring Plan requires that sugar production costs be lowered if the industry is to become competitive. The Corporation projects that, with effective agricultural management and through capital investments it can lower production costs to US$0.40 per kg. This will be higher still than the world market price but the Corporation plans to develop other revenue lines such as value-added sugar and co-generation of electricity.
The Corporation’s plans for the short-term involve the rehabilitation of field infrastructure; the modernisation of production including cost-effective mechanization; the retooling of factories including energy efficient equipment and technologies; and increasing milling and other processing capacities.
The Corporation’s plans have identified Albion plantation to become the hub of the Corporation’s modernisation programme. It is anticipated that, subject to enhanced conditions in the regional sugar market and access to additional capital, investments can be attracted for the production of white sugars.
The Government inherited an industry in distress. There were 2,952 strikes between 2001 and 2014 in the industry, resulting in the loss of 1,009,427 man days and more than G$ 2.0 B in workers’ wages.
This is the time for progress, not protests. This is an opportunity for cooperation, not confrontation. No one wins if the industry collapses. The Corporate Restructuring Plan will restore rational development of the sugar industry and restore hope to those who rely on it for their livelihoods.
The Corporation, the workers, the Unions and the Government need to collaborate to preserve this essential economic enterprise. Hard choices have been made. The future will be a sum total of all of choices.
Workers have been the sinews of the sugar industry. Labour built this industry. Labour dug kilometres of canals to drain and cultivate the land, to maintain the crop, harvest its produce and work in the factories, laboratories and offices to create and maintain this industry. Labour must understand that its survival depends on the industry’s success.
The sugar industry is the legacy of our ancestors and will not be left to become a historical relic. The industry can contribute still to national development once the Corporate Restructuring Plan is allowed to function.
Workers are essential to the success of the Plan to restructure the industry and to return it to sustainability and profitability. Guyana’s sugar the industry, with the support of managers and workers, will not merely survive but will thrive.
The Government is committed to enable the Corporation to ensure that the sugar industry is restored to its place of importance in the national economy. The future is bright for the sugar industry.
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