Repeatedly failing to reach even its revised production targets in recent years, the Guyana Sugar Corporation (GySuCo) is about to shrink the duration of its two annual crops to cope with longer wet weather spells, Agriculture Minister Leslie Ramsammy said.
He noted that in recent years, bad weather has resulted in the first crop shrinking from 16 weeks to 13 weeks and the second crop from 16 weeks to 11 weeks.
Globalisation and Sugar
Today’s truly fundamental defining feature of the condition of the Guyana sugar industry (and Guysuco more particularly), is that, several decades ago it became mature, and from all appearances since the 1960s, it has entered a long-run declining phase, as described in classic industrial and firm theories.
Cane sugar production can no longer reclaim the glory that it had earlier enjoyed in Guyana and the Caribbean, when plantation/estate sugar production was emerging as the leading edge of capitalistic modes of development (especially the emergence of global transnational enterprises and their internationalisation) as world markets for goods, services, capital and finance were being rapidly created....
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Introduction
For the next few columns I shall assess the position of Guyana’s sugar industry in light of the billions of dollars the EU has committed in assistance under its Second Multi-annual Sugar Programme 2011 to 2013 (24.9 million euros or $6.5 billion) and the proposed Budget 2012 subsidy of $4 billion for the coming year. A year ago I had examined The state of the Guyana sugar industry and its reform in the course of 21 consecutive Sunday columns (May 29-October 16, 2011).
President Donald Ramotar has reiterated his call for unity in the sugar industry and committed to working with stakeholders to ensure that it continues to play a central role in the economy.
President Ramotar made this call at the 64th anniversary of the commemoration of the death of the five Enmore Sugar Workers who were killed by colonial police in 1948 as they protested for better working conditions.
In Ghana, India will be investing to reactivate the Komenda Sugar factory, which collapsed in 1983. The move comes after nearly three years of negotiation between the countries as Ghana hopes to revamp its sugarcane industry to enter into the renewable energy market. The investment will come from the Minister of Trade and Industry in India.
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Dear Editor,
For decades Uitvlugt was the estate with the highest rainfall, the worst lands, the poorest drainage and consequently the lowest yield in the Guyana sugar industry, whilst Skeldon was the best yielding estate of cane and sugar per acre and was the flagship of Bookers and then GuySuCo from 1976.
Government has pumped some Four Billion Dollars in support of the sugar industry in an effort to meet its investment requirements thus transforming it into a viable and competitive industry.
The announcement was made on Friday by Finance Minister Dr. Ashni Singh while presenting the 2012 National Budget in the National Assembly.
Even as Enmore sugar estate workers on Thursday went on strike to protest the unsatisfactory payment of Social Security benefits, the Alliance For Change (AFC) denied it was backing restive conditions in the cash-strapped low-producing state-run Guyana Sugar Corporation (Guysuco).
Dear Editor,
The sugar industry continues to produce less sugar and at present we have the lowest sugar production for the past eighteen years. Production stood at two hundred thousand tonnes.
The forecast for this crop is not bright. The industry therefore must be able to produce an alternative arrangement in order to move the industry forward so as to yield a bountiful production in the vicinity of three hundred thousand tonnes for the year 2012. Low production at this point in time will aggravate and increase poverty in the sugar belt.
All those who have struggled consistently for the modernization of the Skeldon sugar factory must certainly now feel a great sense of betrayal that finally the Chinese will manage the factory without the consultation of the main union Guyana Agricultural and General Workers‘ Union (GAWU). As a former field secretary of the GAWU I still hold very strongly that we have the expertise to manage this factory. No one can deny that the GAWU and its members played a leading role in the great struggle of the sugar industry and a return to democratic rule in Guyana.
The columns I have written so far on the sugar industry, starting on May 29, 2011 are intended to conclude with a broad appraisal of its prospects and suggestions for the way forward. From this perspective, the importance of the three preliminary considerations examined in last week’s column, cannot be over-emphasized. The Skeldon Sugar Modernization Project (SSMP) provides a stark warning against mis-management.
Of the four components that comprise the Guyana Sugar Corporation (GuySuCo) – Agriculture, Factory, Human Resources/Industrial Relations and Finance – Agriculture is by far the largest; in quantitative terms Agriculture represents 65 per cent of GuySuCo.
Last week I concluded a rather extended assessment of the downside risks and upside potentials and opportunities facing the Guyana economy over the near-to-medium term, which I have roughly equated as being up to 2014. As long ago as last year I had indicated that, in view of the widespread media coverage at the time, the next topic I would address in my column is the sugar industry and by extension aspects of the performance of Guyana’s agricultural sector.
GEORGETOWN, Guyana -- The European Union has agreed to provide $26 million to help boost and diversify sugar production in Guyana, the Caribbean region's largest sugar exporter.
The EU says in a statement late Tuesday that the money is aimed at compensating for revenue losses stemming from an earlier EU decision to cut import prices for raw sugar exports by up to 36 percent.
Dear Editor,
Sugar has become very bitter under the PPP. But I never expected it to become this bitter. The PPP’s dismantling of a vital industry was officially recorded and verified in the article ‘Jamaica tops Caribbean sugar output in January’ (SN, March 4). In January 2011, Jamaica produced 22,872 tonnes, Belize 18,283 tonnes and Guyana delivered a shocking 9,806 tonnes. Imagine Belize produced almost double the amount of sugar produced by Guyana. This is the most disturbing legacy of the PPP because the PPP always claimed that it was the master of sugar.
The recent controversy arising out of GUYSUCO’s threat to withdraw its recognition of GAWU has opened a window into the internal feuding that has overtaken the PPP and it raises profound questions about the psychological and political distance between the current generation of party leaders and their political base in the sugar industry. For the PPP, control over GUYSUCO has been an important step in creating a managerial elite within the sugar industry that could be seen as representative of the Indo-Guyanese community which has toiled for generations to keep the industry alive under both private and state ownership.
Pay hike talks between the Guyana Sugar Corporation (GuySuCo) and GAWU are expected to resume this week, but the union said yesterday that a meeting was still to be scheduled.
Management and workers of the Guyana Sugar Corpora-tion have to make sacrifices to ensure that the sugar industry makes a successful readjustment and blossoms, PPP General Secretary, Donald Ramotar says.
President Bharrat Jagdeo has warned that if his government’s much-vaunted US$200M Skeldon sugar factory doesn’t succeed …”well the sugar industry is dead”.
It was the starkest warning yet by the Head of State on the Chinese-built factory which has lurched from one crisis to the next and is not working anywhere near to capacity.
Jagdeo was speaking at the commissioning of the Guyana Water Inc. $1.4 billion water treatment plant in Corriverton, Berbice on Thursday. He lamented that the Skeldon Factory was not delivering the expected results and as a result the sugar industry is in trouble.
“This is a US$200 million facility… unfortunately, it’s not delivering the results we expected it to,” Jagdeo said. “They have too many mistakes going on there and I intend to fix it…it has to change,” he said. “We’re not going to make that sort of investment to have a few people mess it up,” he stated. “So even if it means personally I have to get involved, I will get involved to ensure that it is fixed…that it’s delivering the kind of results that it should deliver so that we can safeguard the sugar industry,” he stated.
“If that doesn’t work well, because the European Union cut our sugar prices by 36 percent… if that doesn’t work well the sugar industry is dead,” he stressed. “It’s dead. It’s as simple as that because the bulk of sugar will be produced in the Berbice area,” the President said, noting that the government had hoped that the sugar would have been produced at a lower cost so that the average cost would have allowed them to “to break even at least at the world market level.”
The sugar corporation has been reeling from heavy financial losses and low production. The President’s remarks came after Aa report in Thursday’s edition of Stabroek News that sugar production was far behind target.
The President noted that several countries in the region had downscaled their sugar industries and he said that this was because they lacked the commitment. Jagdeo stressed that his government is committed to the industry and noted that sugar is the basis of much of the economic activity in the Corentyne.
“If sugar is not growing in this Corentyne, this place would be a ghost town…sugar not only pays the sugar workers but the shop keepers and everyone else- the market vendors and every single person here,” he said. “It’s the largest economic activity in this area. And if you change that income…this place becomes very, very vulnerable and I’m not going to let that happen because of a few people. So whatever it takes we’re going to make it work, we’re going to make it work,” Jagdeo said.
The government decision to invest heavily in the sugar industry had been queried in various circles. The investment came just before Guyana’s main and lucrative market in the European Union came under threat from a series of drastic reforms which saw the unilateral termination of Sugar Protocol which Guyana and other Caribbean countries had believed was permanent even within the ambit of the formation of the World Trade Organisation.
Earlier this week, Chief Executive Officer of GuySuCo, Paul Bhim told Stabroek News that the sugar industry is facing a heavy production deficit saying that it has slumped to “some low levels”. He countered by saying that he expects things to “pick up soon”.
While declining to release any production numbers, sources within the industry said the deficit is high as 30,000 tonnes. Second crop numbers were reportedly some 61,000 tonnes as of last week; production averages around 8,000 tonnes weekly. A production target of 280,000 tonnes has been set for this year, but the industry recorded a shortfall during the first crop with output being recorded at 81,864 tonnes.
“It is true that we are behind, yes it could be close to that number, but the weather has severely impacted on our operations”, the CEO told Stabroek News.
He said the industry has been struggling since the start of the first crop and is constantly facing setbacks, but insisted that the current dry weather means better results.
GuySuCo, he said, could easily “catch up” with its production provided the weather holds because there is an adequate supply of cane in the ground.
Meanwhile, General Secretary of the Guyana Agricultural and General Worker’s Union (GAWU), Seepaul Narine said that GuySuCo needs to step things up because the current numbers are not positive indications. “They need to step things up”, he said, noting that while the weather has been a spoiler the industry also has to work harder. He pointed out that the inclement weather has impacted harvesting efforts. Still, he said some of the problems at Skeldon need to be addressed, in addition to efforts being put in across the industry.
In recent times, there have been several glitches at the Skeldon Sugar Factory which have impacted on its operations. Just this week, the factory was operating with one punt dumper. There was no clear indication when the dumper would be functional. Bhim said that the factory was operating satisfactorily inspite of the problem but admitted that less cane was being ground as a result.
The present board of GuySuCo had formulated what it described as a turnaround plan but production and financial results into the second year have been dismal.
The Skeldon factory was built by the Chinese company China National Technology Import and Export Corp. Work began on the factory in 2005 and it was expected that the project would have been completed by October 2007. The commissioning date was pushed back several times until the end of 2008.
The old Skeldon factory was rated at 92 tonnes of cane per hour while the new factory has the capacity to process 350 tonnes per hour.
source: stabroeknews
Introduction
For more than a year, the state-owned Guyana Sugar Corporation Inc has been in the press, mostly for all the wrong reasons. Its 2008 annual report tabled in the National Assembly shows a staggering loss before tax of $6.2 billion, following a gain of $2.2 billion in 2007. Its Skeldon Sugar Modernisation Plant, touted as the saviour of the industry, has been stumbling from problem to problem; reports of excessive salaries paid to some senior managers were sensationalised, even as the corporation stoutly rejected demands from its main workers’ union for increased compensation and benefits.
There were reports too, of one very senior officer – a director no less – resigning from the company after being locked out of a meeting, while another with huge experience in the industry, was given marching orders.
More recently the corporation was the subject of a very heated exchange in the National Assembly surrounding the actual date of payment of $4 billion made to enable the corporation to meet debt obligations. With the government side facing a dilemma of its own making – risking later embarrassment, or admitting that its Finance and Housing Ministers have by their silence misled the National Assembly while engaging in a breach of the law and a clear bail-out – this matter will not go away.
All change
Changes at the top of the corporation saw the termination of the much maligned management contract with Booker Tate after two decades; the resignation and replacement of the Chairman Ronald Alli by Dr Nanda Gopaul, former sugar unionist and political leader now at the Office of the President; a clean-out of the boardroom with the principal survivor being the ruling party’s General Secretary and now presidential aspirant, Mr Donald Ramotar; a new Chief Executive Officer, chartered accountant Mr Errol Hanoman with a mixed history with the corporation, brought back from the UK to take charge of the industry; the appointment of a new Deputy Chief Executive Officer with no prior work experience in the industry; and an Interim Management Committee that includes Ms Geeta Singh-Knight, local head of the failed insurance giant Clico.
For better or worse, they now carry the responsibility for the future of one of the country’s major industries, and by extension, determining the number of billions which taxpayers will have to pump yearly into the corporation, before the country can see any returns.
The result of these changes is an industry that is headed mainly by accountants, with field operations, marketing, and industrial relations coming after.
It has led too, to another study and recommendations for the industry, referred to optimistically as a ‘Blueprint for Success.’ Unlike the earlier Business Plan for the industry, the Blueprint is as secretive – and elusive – as the Holy Grail, precluding any widespread discussion or consultation among key stakeholders. One can only speculate about the reasons for the secrecy, and wonder whether the information in the document is considered too explosive for public knowledge.
Accounts quality
Starting today, Business Page will carry out its own assessment of the industry, beginning with the 2008 annual report and accounts which bear the audit imprimatur of Mr Deodat Sharma, the country’s Auditor General (ag), and his sub-contractor Deloitte and Touche, now TSD Lall and Co. I will consider the available options to preserve salvageable parts of the industry, the implications and costs of delays.
Given the inanimate nature of the patient, it is unable to consent to life-saving surgery, and its political and professional guardians need to act quickly, decisively and rationally, or face losing the industry once considered too big to fail. Perhaps the real question is whether Guysuco is too big – and too costly – to save as taxpayers are called upon to pump dollars like water into the fields, merely to keep the industry afloat.
Before going into the details of the financial statements, a few general points of accounting are worthy of mention:
1. But for some clever presentation of information, the company’s financial position is worse than it is shown to be. For example, nowhere do the financial statements disclose that at the end of 2008, the corporation had overdraft balances of $3.2 billion. In fact, the balance sheet misleadingly shows cash and cash equivalents of $960 million.
2. Amounts due to the Government of Guyana in respect of lease rentals are shown as having decreased by $104M, while amounts due to the Sugar Industry Labour Welfare Fund as increasing by $525M. The notes to the financial statements indicate that these should have increased by $218.5M and $870M respectively. If that is so, the liabilities in the balance sheet are understated by $667.5M.
3. Note 9 to the financial statements presents cash and bank balances net of overdraft balances, understating assets and liabilities and distorting ratios and measures. Guyana dollar balances were presented as a $1,895M payable, masking the true cash and overdraft balances. This also calls into question the positive foreign currency balances with a Guyana dollar equivalent of $2,855M.
4. The balance sheet carries deferred tax assets of $1,169M which seems overly optimistic having regard to the corporation’s prospects in the foreseeable future. The effect is to understate the after-tax loss in 2008, and overstate the net equity of the entity.
5. No deferred tax liability has been recorded in respect of the revaluation of property, plant and equipment, as required by International Financial Reporting Standards.
6. The consolidated accounts of a holding company must eliminate inter-company assets, liabilities and transactions. The amount due from the corporation’s subsidiary, Lochaber Limited, was not eliminated on consolidation.
7. Note 12 shows a convertible Government of Guyana debenture, but conversion terms or diluted earnings per share are not stated or presented.
8. In note 22, which states the foreign currency risk arising from a change in exchange rates, liabilities were added to assets to arrive at the net exposure. As a result, the level of net foreign currency assets in United States Dollars and GB Pounds is overstated by $12,276M.
9. Commodity Market Update published by the Ministry of Agriculture for the month of September 2009 noted that “The Euro rate at the end of the August 2009 averaged 1.439Euro/US$. In the same period in 2008, the rates were 1.4795. GuySuCo, however, has hedged a number of its shipments for 2009.” The financial statements for the year 2008 make no disclosure on hedging.
The Income statement
All figures in millions of Guyana Dollars
Source: Audited Financial Statements
Revenue in 2008 fell by 8.5% to $32,148M, which is less than revenue earned two years earlier. Guyana Dollar sales to Europe declined by 2.6%, to Caribbean countries by 44%, and were almost wiped out in North America. In terms of volume, export sales under the EU Protocol was about the same as in 2007 (152,229 tonnes) and US bulk was zero. Exports of bagged sugar to Caricom and the region declined from 31,160 tonnes in 2007 to 14,421 tonnes in 2008, while exports of packaged sugar to the region increased from 2,979 tonnes to 4,126 tonnes.
The decision to scale back on sales to the Caricom region was taken to enable the corporation to meet its commitment to the EU, resulting in waivers under the Common External Tariff being granted to several Caricom countries to import from outside of the region. Indeed, in November 2008, Guyana advised Caricom that it would be unable to supply the region with sugar in 2009, a development which would seriously affect our reputation as a reliable supplier, introduce a non-regional product at world prices, and make competition for us all the more difficult.
Cost of sales has jumped from 70.6% of sales in 2007 to a whopping 93% in 2008, but the report fails to explain or analyse why the cost of sales increased by $5,067M or 21%. The immediate suspect and whipping boy of the industry is wages and salaries, but the accounts show that in 2008, wages and salaries increased by a mere $50M, or 0.33% over 2007. What the report does show is that despite the corporation’s poor performance, the workers were given 8 days pay as Annual Production Inventive while their unions, GAWU and NAACIE, were paid 0.79 day per employee. The stated purpose of this latter amount is “to assist” two of the country’s most financially secure unions in their educational programmes; others will see this as a novel way to neutralise workers’ representatives.
Next week we will explore further the causes for the dramatic decline on operating profit and proceed to look at the balance sheet.
source: stabroeknews
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