The Lost Opportunities for Wales Estate

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By Sasenarine Singh

Changing course demands an intense focus on short-term performance, but success needn’t come at the expense of long-term value. This is what the Government of Guyana failed to achieve in its dealings with Guysuco.

In February 2016 in a newspaper interview, Agriculture Minister Mr. Noel Holder defended the move to close the Wales Sugar Estate (WSE) by claiming that it was the “beginning of a process to resuscitate the sugar industry”. He assured the nation that “there are plans in place to cushion the impact of this decision.” On May 2016, he outlines his plans to use the WSE to “rebrand and revitalize the sugar industry”. His plan was focused on converting WSE into a “national processor of dairy products, fruit juices, and rice production”. By the end of 2016, the Minister expressed his satisfaction with the progress being made on this plan to convert the WSE into a “model agricultural producer so that other areas of the sugar industry can benefit from this diversification model”.

By February 2018, very little of what the Minister promised was delivered. The entire West Bank Demerara (WBD) area was rendered into an economic dead zone. There has been little if any economic resuscitation on the WBD and the Granger Government introduced very little social cushions to support the sugar workers that were severed without any severance pay. But the most tragic development of all was that the WSE diversification plan failed. The consequence was the commencement of a process of massive destruction of asset value across the sugar belt.

My conclusion was that the plan all along was to divest the entire sugar belt but they clearly did not understand how to frame the sale. What we can observe today is that Team Granger has introduced seeds of irreversible failure in the sugar belt that will hurt the production capacity of the industry once they are in charge. Today producing less than 100,000 tonnes of sugar annually is a reality.

WHAT WAS NOT DONE WITH RESPECT TO WALES!

Team Granger failed to make the operations at WSE more reliable by denying that estate continuous investments in growth centers such as new innovations or its people who are critical to the value-added process. What the administration did not do was initiate balance between the short-term and long-term business decisions both financially and organizationally.

Could an ethanol plant not be bolted on to the sugar factory? Could this ethanol not be piped across the Demerara River into the Guyoil fuel tanks to achieve a blended E-10 product at the fuel pumps as is happening in many other countries including the USA? This single initiative if fully exploited could have saved Guyana US$20 million annual by causing a reduction in the volume of fossil fuel imported from Trinidad and paid for in US dollars.

This new investment project if priced on the international market was valued at no more than US$4 million and had a payback of within 10 years. In the final analysis, all the jobs at Wales could have been saved. As a bonus some 100-150 new jobs would have been created directly in the WBD area.

Team Granger panicked because of their lack of executive experience in Government and this led them to make some sweeping decrees that destroyed real value in the sugar belt. They should have fed-off the recommendations from the Commission of Inquiry and prioritize these recommended investment projects in a thoughtful manner. Instead they hired a failed leader in Mr. Hanoman to evaluate the options and allow the strongest personalities in the administration to dominate the conversation. The end result was an inferior hatchet job. What they failed to do was adequately collaborate and engage key stakeholders such as the workers and their unions on the solutions. In fact the administration took a position that the workers were the enemy when in reality the workers were their greatest assets.

Lastly, they failed to identify the right talent within the industry for the right roles. Those islands of human success could have been employed to energize the rest of the workers across the sugar belt to deliver on the turnaround process. Rather some 1980’s personnel were rehired to do a 21st century job. In the final analysis, the Granger administration approached Guysuco without a sensible roadmap to support the journey. The question of whether to privatize or not should not be the issue. But privatizing a weak company vs. privatizing a strong company will realize different values for the shareholders. Team Granger by 2018 has made Guysuco into a much weaker company that it was in 2016. Therefore, we must expect a steeply discounted price for this company if it is to be privatized today.

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Sasenarine Singh holds a Master of Science degree in Finance. Please feel free to share your comments at sasesin1@yahoo.com
The views expressed in this article are those of the writer and do not necessarily represent the position or policy of the THE WEST INDIAN.

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