Sugar may need $16b to stay afloat
By Staff Writer On May 29, 2015 @ 5:25 am In Local News
The Guyana Sugar Cor-poration is requesting a whopping $16b to stay afloat otherwise the state-owned corporation is facing an industry-wide shutdown come Sunday.Noel Holder
Stabroek News was informed that GuySuCo’s Chief Executive Officer, Dr Rajendra Singh was tasked with providing a comprehensive breakdown of the money required to stave off an industry shutdown. This followed his bombshell announcement to the sugar unions on Monday of the imminent closure of the industry if money was not found, in what has become a major problem for the days-old APNU+AFC administration.
Agriculture Minister Noel Holder confirmed to Stabroek News that he met with Singh yesterday and today the CEO is to provide him with an industry-wide plan. Holder said that “Mr Singh and I had a discussion, we think we have charted a way forward…he has to refine his document a bit more before we approach the Ministry of Finance.”
Holder noted that any further discussion including with the Finance Ministry was completely reliant on Singh’s ability to showcase how the money will be spent. “Only if we agree on that. If what he brings back is dissatisfactory, discussion will need to continue.”
Stabroek News inquired as to whether the Finance Ministry would need to be involved given that the Agriculture Ministry could provide immediate fiscal relief in the short term prior to a 2015 budget. Holder stated that the amount GuySuCo was requesting was large and that today he was looking for a “significant decline in that original figure.”
The Agriculture Minister told Stabroek News that “this isn’t like last time. Last year it was a line item, a line item in the budget. It is ridiculous you can’t just come get $6B on a single line item, no breakdowns.”
He said after discussions with Singh it was understood that there would be no government bailout without a comprehensive restructuring plan.
While GuySuCo is requesting billions in bailout money, a financial analyst familiar with the corporation’s history told Stabroek News that without a budget and without a functioning Parliament there is very little that can be done at this point in time to release large amounts.
The analyst told Stabroek News that the Agriculture Ministry could supplement the corporation by loaning four weeks of wages, approximately $600M. All of the government ministries have their own bank accounts with funds that can be utilized as loans for such circumstances.
Analyst Christopher Ram questioned how the government would be allowed to access the Contingency Fund for such a purpose and as a result he said that a bank loan taken out by the government may be one possibility.
Ram stated that the timing of the corporation’s declaration of an emergency was suspicious while noting that it seemed highly unlikely that there would need to be an industrywide shutdown. He noted that the Sugar Industry Labour Welfare Fund could be tapped into. GuySuCo is now in the out-of-crop period.
“It is really an awful dilemma. This is not only a GuySuCo problem, this is a country problem,” Ram said. Over 16,000 persons are employed by GuySuCo directly and thousands others would be affected by an industry closure.
He said that the countless subventions to the state-owned corporation by Parliament in recent years has played an incredible role in creating the present problem.
“I think the entire parliament has been delinquent. They have not attached any condition to the subventions made to GuySuCo,” he stated, adding that the corporation has not tabled any reports to the National Assembly as required by law for years.
“The Parliament, the Parliament of Guyana was pumping money into GuySuCo without the slightest hint of accountability,” he said.
Meanwhile, the Guyana Agricultural and General Workers Union Co-operative Credit Union Society Limited issued a statement yesterday stating that GuySuCo owes $154,410,525 and it was therefore suspending its activities in the sugar industry.
Head of the main sugar union GAWU, Komal Chand called GuySuCo’s actions “immoral and illegal.”
He said that GuySuCo had been making deductions continuously for the past five months and only providing small payments to the Credit Union. Chand said that “this is not their money, this is workers’ money.”
Chand revealed that the Credit Union had previously been borrowing off of the promises that GuySuCo would become up to date on its payments. He said that now that the corporation has “declared themselves heavily broke,” over 5,000 sugar workers’ savings will be impacted.
He said that should a bailout be provided and workers return to work next week they had been informed to not allow the corporation to make Credit Union deductions.
“The sad decision, if it is not urgently redressed by the Corporation will cause the jobs of the Credit Union’s employees to be in jeopardy.
“The Credit Union, therefore, looks forward to receiving as early as possible from the Corporation the workers’ outstanding savings so that its dependable services to thousands of sugar workers would resume as early as possible”, the Credit Union said in a statement yesterday.
Yesterday’s action by the credit union, observers say, exemplifies how severe GuySuCo’s financial problems have been over the last few years and which problems were played down by the former PPP/C government. GuySuCo had also owed a substantial amount in remittances to the National Insurance Scheme.
The opposition PPP/C has not made any statement on the GuySuCo crisis even though it had been in government for the last 23 years and former President Donald Ramotar had been on the corporation board from 1992 until he assumed the presidency in 2011. Critics have said that the PPP/C government ignored the dire problems in the industry for the last five years, in particular, without coming up with viable solutions.
On Monday, Singh revealed that GuySuCo’s financial woes were so dire that without an immediate influx of money, operations would cease as of Sunday.
The corporation was scrambling to find funds earlier this year with the disclosure that the final destination for $3 billion which government had been attempting to transfer from the Guyana Geology and Mines Commission was GuySuCo.
Additionally, the corporation’s co-generation plant and three Wartsila power units at Skeldon were sold to a state-owned company specially created for the purpose at a price of US$30 million.
GuySuCo was also successfully sued by UK-based sugar management firm Booker Tate. On February 20, 2015 the High Court ordered GuySuCo to pay $204M for fees owed during the period Booker Tate managed the industry.
In the meanwhile, a one-year US$15M loan from National Commercial Bank of Jamaica to GuySuCo was being used to finance wages and operational costs . The status of the repayment is unclear although the loan was supposed to be paid back in full in 2015.
As of June last year, GuySuCo’s debt was at a whopping $58b equivalent to 31.6% of the 2014 National Budget.
Stabroek News was unable to reach Singh for comment up to press time yesterday.
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