Addressing the crisis in Sugar

A presentation by Christopher Ram to the Commission of Inquiry into the Sugar Industry

Introduction
The Guyana Sugar Corporation (GuySuCo) is not only a company incorporated and intended to be regulated under the Companies Act; it forms a major part of two economic sectors – agriculture and manufacturing. See Appendix 12 – Gross Domestic Product at 2006 Prices by Industrial Origin in Volume 1 of the Estimates of the Public Sector 2015. It is also one of the largest employers in the country and in some areas, such as the Corentyne, it is the single most important economic activity and source of employment.

To the country it is a major foreign exchange earner although it is also a significant user of foreign exchange. It is believed too that the company and the industry also support the rice and other agriculture sub-sectors in sugar areas, and help to manage the anti-flood control systems with its vast network of drainage and irrigation. If the multiplier effect is considered, the economic impact is extended directly and indirectly to commercial banks, insurers, suppliers and service providers.

Alas, it is also – certainly in the last few years – the single largest beneficiary of government subsidies in Guyana. It is estimated that in the five years to December 31, 2015, the company would have received approximately G$50 billion in transfers from the Government. In 2015, 10% of current revenues of the Government proper will be going to GuySuCo, amounting in total to approximately ⅓ of the total employment cost in the 2015 Estimates of Expenditure.

Importantly, like the elephant in the room, sugar has a strong political dimension and forms a major plank of support for the opposition PPP/C. Paradoxically, even when the company came under the control of the PPP/C, GuySuCo has recorded more industrial action than the rest of the country combined.

This Commission of Inquiry (CoI) therefore has an unenviable job with wide-ranging terms of reference on a matter that has provoked intense debate with some persons calling for the shutting down of the industry while others have called for it to be phased out. Leading economist and expert on sugar economics, Dr. Clive Thomas has described the corporation as having Passed the Point of No Return: See Sugar beyond the point of no return: Stabroek News January 8, 2014 while the author of this submission has written that GuySuCo bailouts [are] unsustainable, see chrisram.net June 20, 2015. Continue reading Addressing the crisis in Sugar

Addressing the crisis in Sugar – A presentation by Christopher Ram to the Commission of Inquiry into the Sugar Industry

Introduction
The Guyana Sugar Corporation (GuySuCo) is not only a company incorporated and intended to be regulated under the Companies Act; it forms a major part of two economic sectors – agriculture and manufacturing. See Appendix 12 – Gross Domestic Product at 2006 Prices by Industrial Origin in Volume 1 of the Estimates of the Public Sector 2015. It is also one of the largest employers in the country and in some areas, such as the Corentyne, it is the single most important economic activity and source of employment.

To the country it is a major foreign exchange earner although it is also a significant user of foreign exchange. It is believed too that the company and the industry also support the rice and other agriculture sub-sectors in sugar areas, and help to manage the anti-flood control systems with its vast network of drainage and irrigation. If the multiplier effect is considered, the economic impact is extended directly and indirectly to commercial banks, insurers, suppliers and service providers.

Alas, it is also – certainly in the last few years – the single largest beneficiary of government subsidies in Guyana. It is estimated that in the five years to December 31, 2015, the company would have received approximately G$50 billion in transfers from the Government. In 2015, 10% of current revenues of the Government proper will be going to GuySuCo, amounting in total to approximately ⅓ of the total employment cost in the 2015 Estimates of Expenditure.

Importantly, like the elephant in the room, sugar has a strong political dimension and forms a major plank of support for the opposition PPP/C. Paradoxically, even when the company came under the control of the PPP/C, GuySuCo has recorded more industrial action than the rest of the country combined.
Continue reading Addressing the crisis in Sugar – A presentation by Christopher Ram to the Commission of Inquiry into the Sugar Industry

The future of GuySuCo and sugar – the Commission of Inquiry

Introduction
My last blog post followed the announcement at the annual Enmore Martyrs Day observance that the Cabinet had approved bailout money for the ailing state-owned Guyana Sugar Corporation (GuySuCo). The announcement of some $3,800 million of bailout money was reported in the Stabroek News of June 17. One week earlier, the Minister of Finance had been reported as stating that Parliament was the body to approve any bailout. Seems bailout was done anyway, without parliamentary approval. And as some have suggested, in violation of article 219 (3) of the Constitution which permits only expenditure on the public services when there have been elections and no budget.

There was at the time an indication that a Commission of Inquiry would be appointed and I welcomed it on what I understood such Commissions of Inquiry to be. Not too long afterwards, consistent with a commitment made in the APNU + AFC Manifesto, the Minister of Agriculture announced such an Inquiry into the operations of the Corporation.

The Commission’s members are: Mr. Vibert Parvattan (Chairman), Prof. Clive Thomas (Financial and Economic Analysis), Dr. Harold Davis and John Piggott (Agronomists), John Dow and Joseph Alfred (Factory Operations), George James (Sugar Processing), Nowrang Persaud (Industrial Relations), Claude Housty (Marketing) and Mr. Seepaul Narine, a representative from the main sugar workers’ union GAWU.

By my reckoning the majority of the members have had some association with GuySuCo and bring relevant experience to the exercise. But even relevant in this case seems inadequate. For starters, it seems both misleading and a misnomer to call the body a Commission of Inquiry. The members were appointed not by the President under the Commission of Inquiry Act but by the Minister of Agriculture as an administrative act. And significantly, the focus is more about GuySuCo than about sugar generally.
Continue reading The future of GuySuCo and sugar – the Commission of Inquiry

GuySuCo bailouts unsustainable

Introduction
The debt-ridden, loss-making, misdirected, mismanaged and ailing Guyana Sugar Corporation is the beneficiary of another bailout. This time we are told that Cabinet has approved a first tranche of $3.8 billion, or the equivalent of just under US$19 million. The announcement was made by Prime Minister Moses Nagamootoo at the observance of Enmore Martyrs Day, an occasion that has become a signature political event in Guyana. There was no indication whether the $3.8 billion is tied to any project, activity or otherwise, such as the payment of any debt obligations.

The PPP/C which gained the overwhelming support of sugar workers in the May elections had campaigned on a pledge to pump $20 billion into the ailing industry. And some days before the announcement of the bailout but after the elections, the now fired CEO of the Corporation had said that the Corporation needed $16B to avert an industry-wide shutdown.

Whatever the eventual bailout number will be, it is likely to be huge. Yet, the Granger Government could not risk a shutdown of the industry. Whether as the sole shareholder in GuySuCo, or as the Government, there had to be some decisive intervention. That however, does not make the circumstances any more comforting.

The announcement was made not by the Minister of Agriculture or the Finance Minister but by the Prime Minister whose portfolio centres around information. The use of the term first tranche obviously suggests further tranches and is not particularly reassuring. How many tranches can we expect and what would be the value? And significantly, where would the money come from?
Continue reading GuySuCo bailouts unsustainable

News about GuySuCo’s board is troubling

The news that the Guyana Sugar Corporation (GuySuCo) is without a Board of Directors is troubling, its credibility further diminished. Unlike an entity established under the Public Corporations Act, GuySuCo’s operational law is the Companies Act and by virtue of its 1976 registration, it straddles two such Acts, the repealed Companies Act Cap. 89:01 and the Companies Act 1991.

Under the former, the appointment and terms of office of the directors are made and set by the Minister of Agriculture acting on behalf of the Government. And by virtue of the 1991 Act, the possibility that GuySuCo can have no director is virtually ruled out since the Act makes the directors the sole authority for exercising the powers and functions of the company. That Act states:

The directors of a company must—

(a) exercise the powers of the company directly or indirectly through the employees and agents of the company; and

(b) direct the management of the business and affairs of the company.

There is some indication that while there is no board there is a chairman of the board suggesting that like Atlantic Hotel Inc., GuySuCo is now a single director company. That model has proved bad enough in the case of Atlantic Hotel Inc. But even temporarily, it can be disastrous in the case of GuySuCo whose financial condition is at best precarious and which requires annual injection of public funds to stay in business.

Unfortunately, GuySuCo is not the only entity which has seen provisions of the Companies Act stretched this week. Another government company, Property Holdings Inc. held an AGM chaired by Mr. Winston Brassington, executive head of NICIL. When the legality of the presentation of financial statements for five years was questioned, Ms. Marcia Nadir-Sharma – Brassington’s deputy at NICIL – who attended the meeting as Legal Advisor to PHI, is reported to have said that the Minister of Finance had given approval for late tabling of audited financial statements.

The problem is that the Act grants such power not to a Minister but to the Registrar of Companies acting on an application by the company supported by a resolution of the directors.