Break-up of Guysuco proposed

Last Updated on Thursday, 31 December 2015, 2:09 by Denis Chabrol

The state-owned Guyana Sugar Corporation (Guysuco) should exit the production of bulk sugar for export and be broken up into small potentially profitable ventures, according to the Commission of Inquiry.

“Guysuco will, therefore, be deconstructed into several subsidiary operations/business units/ revenue streams based on appraisals of their potential profitability,” states the document.

The probe team further recommended that if by the end of the remaining preferential market access regime to the European Union (EU) in 2017, Guysuco is still producing bulk sugar, then it should focus exclusively on the Caribbean Community (Caricom) market which has a demand for 150,000 tonnes of brown sugar.

Under the chairmanship of Vibert Parvatan, the Commission urged government to announce in the 2016 budget that it should “publicly announce that it will do everything in its power to remove itself from the production of bulk sugar for export as soon as is practical” after studying the pros and cons.

If government decides to go that route, the Commission further recommended that government should announce the formal creation of a Holding Company to hold the shares of subsidiaries/business units and other revenue streams created out of Guysuco’s operations. They can be electricity co-generation, supply of drainage and irrigation to communities, supply of business services such as Information Technology, tourism and recreation; prime real estate and property holdings (selected Guysuco premium real estate), agricultural equipment pools including aircraft for rental to farmers, sugar refinery to produce plantation whites or refined sugar, molasses, alcohol, ethanol and special sugars.

Calculations show that the co-generation plant at Skeldon can earn a profit of GYD$578 million in 2016; the quick sale of 26 acres at LBI and 2,284.50 acres at LBI at a conservative price of GYD$25 million per acre. The Land Sales subsidiary is projected to earn a net profit of GYD$11,621 million next year and GYD$10,990  million in 2017 until 2020.  Projections are that the Packaging Plant subsidiary will make a profit of GYD$1,087 million in 2016 and peak at GYD$1,153 million in 2020. The plant will purchase sugar from Enmore factory at prevailing world market prices of (currently) 14.34 US cents to produce direct consumption sugars such as Demerara Gold, Demerara Brown, Enmore Crystals, Regale and Cuisine brands and Caricom bagged sugar.

The Commission of Inquiry explains that the legally established Holding Company will result in a deconstruction of Guysuco’s operations into from the “present over-centralised structure and operations of Guysuco into a decentralized and, hopefully, more flexible and adaptable operational structure.”

Under the proposed structure, the Holding Company will not be involved in day-to-day operations of the subsidiaries but will instead set broad policies and guidelines for their operations to generate profits at set targets.

The Commission of Inquiry first wants government to and Guysuco’s management to negotiate the restructuring of debts owed to government agencies and other holders of Guysuco’s debts for which the government has contingent liability.

The Holding Company’s capital structure should be partially facilitated by the negotiated conversion or restructuring of most of Guyana’s present indebtedness to the government into equity. Other options such as debentures and bonds, the Commission says, should be explored to raise new equity.

In terms of the 2015 and 2016 crops, the Commission wants Guysuco to optimize the corporation’s performance indicators for sugar to raise or improve the sale-ability of Guysuco’s major assets and attract new entrants, in particular private cane farmers and investors, to the industry.

Also being recommended are the “systematic pursuit of a mechanization project” and “serious evaluation” of all of the diversification options such as production of ethanol, aquaculture , other agricultural crops, dairying and other animal stock.

In relation to the workers, the Commission recommends that all existing accumulated customs and practices in the sugar industry should be bought out for a comparable upfront payment in exchange for a joint agreement with new working conditions where these no longer apply.