PRESS STATEMENT By People’s National Congress Reform Thursday 11 December, 2008 Media Centre, Congress Place, Sophia
GUYSUCO: It is with complete astonishment that the Party noted the newspaper report, on Wednesday 3 December 2008, that the Probe team, convened by the Minister of Agriculture, to look into the East Demerara Estates, found neglect in the East Demerara Estates - presumably by the staff of the estates.
The Party is of the view that this mismanagement is a hallmark of all of the GUYSUCO Sugar estates and not just the ones in East Demerara. It is evident that the Minister of Agriculture and the Administration consider the Guyanese people and the media to be so gullible that they would accept this unfolding pantomime without question.
The Party has been monitoring GUYSUCO closely and, we are in receipt of information about the corporation which we find so disturbing that, we feel duty bound to make a full public disclosure, at this time.
In the year 2007 Strategic Plan, it is stated clearly that the capital budget for 2008 (the first year in which the strategic plan becomes operational) should address certain problems in the various Estates with a view to correcting them.
In keeping with this new strategic plan, the estates submitted their capital budgets for 2008, totalling G$5.6 billion, but the amount allocated was slashed to G$2.43 billion. This represented a 50% reduction of the capital budgeted by the GUYSUCO estates. This drastic slashing of the capital budget is a clear indication that GUYSUCO is in a serious economic crisis. All of the estates are in trouble and not just the East Demerara Estates. The Government should, therefore, stop misleading the Guyanese people about GUYSUCO’s current predicament.
GUYSUCO’s own executives summarise their situation this way:
“The consequence of this decision (on top of the cancellation of G500M of the 2007 capital expenditure to fund wage increases and G$ 1.0 billion reduction in 2006 for similar purposes) is that plant and equipment reliability will be compromised and consequently the risk of not being able to process crops in the correct time frame will increase”.
The GUYSUCO summary goes on to report:
“The reduction of the G$5.6 billion planned expenditure to below half of this quantity will significantly restrict management’s ability to achieve the objectives outlined within the strategic plan in particular with reference to the Factory Incentive Production but now probably the Annual Incentive Production as well.”
When the capital expenditure breakdown is looked at, estate by estate, for all capital reductions, some of the cuts are incredibly high! For example, at Albion, GUYSUCO’s biggest and most productive estate, their capital requirement were stated as G$543.635 million, it was slashed to G$195.84 million.
As far as cane yields are concerned the situation it is extremely disappointing and the following are identified as contributing factors:
1. A GUYSUCO investigation has discovered that difficult weather and the shortage of labour, during cropping time, has forced the industry to reap canes too close to the onset of the rainy seasons and, as a consequence, the re-growth of the ratoons were adversely affected by the rainfall. This contributed significantly to this year’s poor yields.
2. Delays in the availability of fertilizer and the ineffective application of other agro-chemicals are a major factor responsible for the loss of productivity. GUYSUCO no longer imports its own fertilizer, as it used to do since colonial times. The corporation has contracted out the supply of fertilizers to selected contractors. Supplies, through these contractors, are unreliable and often unpredictable. As a consequence, supplies of fertilisers and other agrochemicals, to GUYSUCO, have become a major negative influence on their productivity. The GUYSUCO Report contains the following statement: “the recent fertilizer price increases are obviously of great concern. Whilst similar large increases have been experienced by some Caribbean countries, e.g. Jamaica, others do not appear to have large increases over the past year, e.g. Belize and Barbados. This calls into question the pricing used by current suppliers in Guyana.” GUYSUCO requires around G$2.4 billion dollars worth of fertilizer annually. We, the PNCR-1G strongly urge that GUYSUCO should import their own fertilizers and other agro-chemicals to avoid late deliveries and highly exploitative prices from the contracted suppliers.
3. The long time lag, between the burning and the delivery of cane to the factories, is becoming a cause for great concern, since it leads to a serious deterioration in the quality of the juice. Additionally, the time periods when grinding is not done, as a result of the unavailability of cane, remains unacceptably high on most estates. This is yet another cause of the deterioration in the quality of the juice, which contributes to lower sugar yields, since it is taking more tons of cane to make a ton of sugar.
The New Skeldon Factory:
The New Skeldon #2 Factory is a cause for much concern and should be the subject of a major bipartisan national inquiry.
Approximately 7,000 tons of cane was crushed in October 2008, producing 224 tons of sugar. The new Skeldon Factory has not been able to produce at its rated capacity, of 350 tons of cane per hour, and is struggling to operate continuously, at the greatly reduced production rate, of 140 tons of cane per hour!
Several mechanical defects are yet to be corrected, including diffuser operation, shredder replacement bearings and automation of the process.
It is not possible to harvest all of Skeldon’s cane, even if the estate operates to the end of December 2008, and a significant amount of the cane would have to remain in the field to be carried over to 2009.
The quality of the Skeldon canes continues to be poor, due to inadequate drainage, which has resulted, because of the major expansion of new lands which have been added to the existing lands under cultivation. This has reduced the efficiency of the existing drainage system. As a result, the percentage of sugar in the cane is reduced. For example, the Skeldon’s pol (this is the % of sugar in the cane) was 9.4%; Uitvlugt, the worst yielding sugar estate in the Industry, was 9.78%.
The old Skeldon factory was brought back into production and has not functioned well. The extraction is the lowest in the industry, 89.5%. Albion, for example, was 93%. GUYSUCO is, therefore, forced to transport cane, produced at Skeldon, to the Albion factory. This is an expensive operation which will cost the industry dearly. However, the shortage of trucks is hampering this operation.
The high use of diesel fuel generators, at all locations, during the crop, continues to be an area of high cost for all factories. In other words, the factories are not grinding continuously to generate enough bagasse to fuel the generators, even during the crop.
As of 10th November 2008, GUYSUCO produced 218,880 tons, when their expected production should have been 268,173 tons! In other words, they are 49,293 tons behind their production estimates and there are some significant problems with the Skeldon estate. That estate was supposed to have produced 38,599 tons by the middle of November but they only produced 16,009 tons! 22,590 tons less! Out of an industry wide shortfall, of 49,293 tons, Skeldon alone accounted for nearly half. This is an extremely poor performance,
Albion, by comparison, was supposed to have produced 58,084 tons by the middle of November and they have actually produced 51,470 tons. Albion produced nearly 7,000 tons less than estimated. There are no problems in the East Demerara Estates that can possibly compare with the disastrous situation in Berbice. Production, for the month of October 2008 alone, for the entire Industry only yielded 30,374 tons against an estimate of 43,086 tons.
Four estates closed their crops, at significantly lower yields than estimated. These four estates, Uitvlught, Wales, Enmore, and Blairmont, ceased their grinding operations during the first week of November! The other estates were expected to continue to grind until the first week of December.
With all of these problems, GUYSUCO now estimates that the 2008 total sugar production will only be around 236,000 tons!
If this is true it would be the poorest annual production since 1991.
The Cost of Labour and Industry Profitability:
GUYSUCO’s problems arise from a shortage of labour, on most estates, to do the harvesting and husbandry work necessary to remain competitive in today’s world. For example, in the 6 year period immediately prior to the GUYSUCO 1998 strategic plan being implemented in full, 1994-1999, the industry made a total before tax profit of G$19.361 billion dollars, whereas, in the six year period after that, 2001-2006, they made a loss of G$6.577 billion! The main reason, which our investigations uncovered, , was that the labour cost which was 42.72% of the price of all sugar exported, during the period 1994 to 1999, and rose to 64.9% of all sugar exported, between 2001 to 2006!
The irony of the situation is that, because of a total misunderstanding of the dynamics of our sugar industry, the PPP members of the GUYSUCO Board agreed to reduce the workforce from 28,000 to 18,000 without understanding the consequences of their actions and this has led to a major shortage in labour.
This reduction in the workforce did not decrease the wage bill, instead, it doubled it. In the 6 year period, 1994-1999, the total wage bill for GUYSUCO was G$50.04 billion, whilst in the 2001-2006 period, the wage bill was G$90.698 billion.
Sadly, the total earnings of all sugar exported, during this same period, 1994-1999, was G$809.6 billion and, in the period 2001-2006, it dropped to G$715.9 billion. So, whilst the price of labour almost doubled, during the period 1994 to 2006, the total earnings of the industry fell by an average of 11.6%!
As a result, since most field operations are no longer being performed on time, the entire industry is in crisis.
Since 21% of the Preferential Price will be removed, in September, 2009, it would prove increasingly difficult, if not impossible, to salvage our sugar industry.
The PPP and the GUYSUCO Board:
The parlous financial state of the sugar industry is not the fault of the managers of the corporation; it is the fault of the Government and the members of the GUYSUCO Board, who are predominantly PPP/C political appointees.
The GUYSUCO Board contains one person who aspires to be a PPP/C Presidential Candidate in 2011 Elections, and the Head of GAWU, which represents the sugar workers, along with a senior representative of the Bank of Guyana, who has no experience or understanding of the Sugar industry.
The Farcical Inquiry Report:
The PNCR observes that the Jagdeo Administration and GUYSUCO are trying to fool the Guyanese people by convening an Inquiry, using two members from GAWU, two members from the GUYSUCO and a former Chairman of the Board of GUYSUCO (whose hand, in the mess the corporation finds itself today, has not been clarified for the Guyanese people, as yet!).
These are the people the PPP Administration has put to investigate why the East Demerara estates are failing. They have, as expected, concocted a work of fiction and deception, which they call an Inquiry Probe Report, as to why GUYSUCO is in the situation that it is in today.
This Report has little credibility and is intended to draw attention away from the real problems GUYSUCO faces in Berbice.
There has been too much political interference in the running of GUYSUCO and we do not blame Booker-Tate for this situation.
The blame lies squarely with the PPP/C regime and its acolytes!
People’s National Congress Reform
Congress Place, Sophia
Thursday 11 December, 2008
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