The future of GuySuCo and sugar – the Commission of Inquiry

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.
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GuySuCo bailouts unsustainable

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?
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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.

SN letter did not contain any figure for the cost of the Enmore packaging plant

Mr M Maxwell is normally very careful with the underlying facts and assumptions in his letters and for that reason they are always worth reading. I am therefore surprised that in his letter to the editor in the Stabroek News of May 28, (‘Enmore’s packaging plant produces less than that of Kenya and costs more’) he would carelessly claim that “I provided an overall figure of US$12.5 million for the cost of only the Enmore packaging plant itself.”

I would appreciate if Mr Maxwell could indicate where in my letter in the Stabroek News of May 17, I made any such statement. Perhaps he is confusing the letter with a report carried in the Kaieteur News in which the journalist used some of the information contained in my Stabroek News letter. But clearly it could not be with respect to the price tag since that was not in my letter to the Stabroek News.

Mr Maxwell might recall that it was the Minister of Agriculture Mr Robert Persaud who following a January 2010 visit to the Enmore plant then under construction told the press that that government was investing $2.4 billion – roughly US$12 million – in the packaging plant.

This is not intended to be a criticism of Mr Maxwell since it is human to err.

Acceptance of invitation from Agriculture Ministry and GuySuCo

I note in an article (Kaieteur News, Wednesday May 25, 2011) captioned “GuySuCo details US$12.5 expenditure on packaging plant”, statements emanating from Mr. Robert Persaud MBA, Minister of Agriculture and the Guyana Sugar Corporation. Both parties were reacting to a Kaieteur News article of the previous day, in which the newspaper raised questions about the cost of the plant.

I am sure that both the Minister and the Corporation are aware that my contribution to the discussion on the GuySuCo packaging plant was by way of a letter in the SN, of May 17, 2011.

In that letter I corrected President Jagdeo’s exaggerated pronouncement of sugar’s contribution to the GDP as 16% instead of approximately 6%. The focus of my letter was to caution that the packaging plant, welcome though it is, could not be a silver bullet for the serious financial problems of the Corporation.

In that connection I drew attention to the wave of packaging plants taking place across the world and specifically referred to a 300,000 tonnes capacity Plant by Mumias Sugar Company (MSC) with a daily capacity of 700 tonnes and a price tag of US$3M.

I challenge both GuySuCo and the Minister of Agriculture to show either in my letter or anywhere else where I referred to or questioned the cost of the Enmore Packaging Plant.

I note that Mr. Robert Persaud has challenged Kaieteur News and me “to conduct a forensic audit of GuySuCo and the Packaging Plant.” I herby accept this challenge to undertake a professional audit, the cost of which will be borne by Kaieteur News.

I hope this is not just bluff on Mr. Persaud’s part and that he has both the authority and the courage to carry through with his challenge. I now await word from him.