The Fate of Guyana’s Sugar Industry: Economic Viability Would Replace Hard Times

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By Dr Tara Singh

Opposition politicians would have no compunction to write off the sugar industry on the premise that sugar production is no longer economically viable. They question whether taxpayers should be asked to bail out the industry from economic distress at an average annual (2014-2020) cost of $(G)6.3 billion. The expectation, however, is that this level of subsidy would progressively decline and be eliminated in the next 4 years. The subsidy for 2023, for example, is $(G) 4 billion compared with $(G) 6.3 billion. Opposition forces further contend that the cost of production for sugar is twice the world market price for sugar. In addition, they express disenchantment with GuySuCo’s debt (of about $(G)80 billion), which they claim is a burden on taxpayers. It is noted that ½ of this debt is owed to the Government, while the rest (about $(G) 39.745 billion) is owed to creditors: for loans, overdrafts, debentures, and union contributions.

The melodramatic pronouncement by the former APNU-AFC’s Prime Minister that sugar workers are raiding the public treasury, has been greeted with duplicity and astonishment by PPPC operatives. While these figures are not comforting and the government is taking measures to turn around the industry, it is still seeking answers on how the $(G)30 billion bonds that were issued by the PNCR-led coalition for the re-structuring and re-capitalization of the sugar industry were expended! This huge sum has had no demonstrable positive impact on the industry’s performance. Sugar production continued to fall from 92,232MT in 2019 to 53,000MT in 2022. The reason for low production in 2021-2022, according to GuySuCo, is that 3,000 hectares (HA) of sugar cane were destroyed by floods, and another 3,000HA were abandoned by the PNCR-led coalition. It takes about 3-4 years to prepare lands, plant, nurture and reap new canes. With the injection of state funds, the strengthening of management, and operational efficiency, GuySuCo has projected an increase of 7,000MT in sugar production in 2023 and a larger increase of 40,000MT in 2024.

To help compensate for lower production levels from 2020 to 2022, GuySuCo has been focusing on the marketing of packaged sugar which earns 60% more money than bulk sugar. In 2020 package sugar accounted for 34% of total sugar production, and in 2022 this percentage rose to 64. And to accommodate for the growing need for packaged sugar, the PPPC government has established 3 sugar packaging lines at Blairmont sugar estate and has also approved funds for a packaging line at Albion sugar estate. To improve productivity and lower production costs, the PPPC government has invited technical teams from Guatemala and India to advise on enhancement of factory and field operations.
Despite these measures, skepticism is abundant in the sugar industry. Examining the level of subsidies and production factors alone, for example, cannot solve the problems of an industry that is intricately interwoven into workers’ history, their culture, their ‘esprit de corps,’ and their very existence. Many of them know only the sugar industry and have become heavily dependent upon it for their livelihood. Apart from this situation, there are other powerful factors (historical and strategic) that assure the survival and economic viability of the sugar industry.

Sugar workers have historically been able to support all sectors of the economy. When the sugar levy was imposed in 1974, and much to the anguish of the sugar companies and to an unhappy labor force, the return on the sugar levy was sweet music to the PNC government. In 1975 the government had a windfall of $(US) 85 million. GAWU had previously organized a strike against the sugar levy in 1975 contending that (i) they did not support the sugar levy; (ii) they need better working conditions, (iii) and they seek union recognition for GAWU. To prevent the disruption of production in the sugar industry and protect the rising sugar prices, and in a context where the government had been receiving hefty sums from the sugar levy, the PNC government granted union recognition to GAWU in 1976.

However, profit sharing became a major problem. The government took the sugar levy from the gross profits which reduced the size of profits for sharing among workers. With utter resentment, sugar workers decided to strike in 1977 because they did not receive profit sharing for 1975 and 1976, and for 1974 they were short-paid their share in 1974. The union estimated their loss to be $(US) 85 million. The strike lasted for 135 days. It ended on January 5, 1978, but workers lost the battle; they did not receive any relief.
From 1974 to 2003 when the sugar levy was abolished, over $(G)133.32 billion (or $US 1.6 billion) were transferred to the public treasury (SN: 12/18/2019). The sugar levy received in one year could have paid off Bookers for its nationalized assets worth $US 40 million. For 29 consecutive years the Guyana treasury received an annual average of $(US) 57 million from the sugar levy. During this period, all the critics viewed the sugar industry then in a favorable light. Now that sugar is in some difficulty, there is a rush to write its obituary, and ignoring sugar’s substantial contribution to every sector in the economy. Here is another interesting statistic: during the period 2016 and 2020, the sugar subsidy was equivalent to an annual average of 2.6% of the national budget. Juxtapose this with the substantial contribution that sugar levy had made to budget support for 29 years. In 1980, for example, its contribution was 9.5% to the national budget of that year.

These data do not include the $(G) 32 billion Guyana received from the European Union that were diverted to budget support during 2007-2014 consequent upon the removal of the preferential tariff in 2006 that resulted in a 36% cut in sugar price.

Another aspect that is often overlooked or not clearly defined is that the per capita annual subsidy for bauxite workers (2016 to 2020) is more than 2 times that for sugar workers. (An estimated $(G) 14.3 million per bauxite worker vs $(US) 6.55 million per sugar worker}. When we consider these revealing figures and note that the United States, India, European Union, and other countries are heavily subsidizing sugar production, why do critics want to write-off the Guyana sugar industry?

The PPPC believes that the answer to the closure of the 4 sugar estates in 2016 lies in the opposition forces wanting to break the backbone of its (PPPC) support among sugar workers. The PPPC had already known that they were hostile to the rice industry (another strong PPPC base) when they (PNCR-led government) asserted that rice is personal and not government business. The PPPC’s skepticism turned into reality when (i) the PNCR-led coalition’s own Commission of Inquiry (COI) recommended a turnaround time of three years for the industry, which the coalition rejected; and (ii) when the coalition also refused to conduct a socio-economic impact study first before closure. This study was done post-closure of sugar estates and was released by ILO in 2021.

The PPPC pledged that if and when they return to power, they will re-open the sugar estates as functional economic entities. Accordingly, Rosehall will be re-opened later this year. Wales sugar estate will be replaced with the Wales Development Authority, the home of the potential gas-powered energy plant as well as other industries. The Enmore sugar estate will be converted into an industrial hub; already a fabrication facility is being constructed there. Skeldon sugar estate is likely to be replaced with industrial hemp, peasant cane farming, and aquaculture.

The sugar industry is strategic to Guyana as is bauxite. Cost benefit analysis alone cannot determine the fate of these industries. Other factors, like spinoff (multiplier) impacts (transport, vending, banking, etc.) and social cohesion of communities are also critical. The demand for sugar would continue to be strong and within the Caribbean region alone, the annual need is 200,000 MT of white sugar. With structural and operational changes, the Guyana sugar industry would bounce back, and sugar would become sweet again.

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The views expressed in this article are those of the writers and do not necessarily represent the position or policy of the THE WEST INDIAN.