The Government has thus far been presented with three options regarding the industry – retaining the status-quo, complete privatization, and estate closure and transition into non-sugar ventures. Having considered the options, we strongly believe that they are not in the interest of the industry, the people linked to its operation and the nation as a whole. Thus, to this end, we wish to offer a fourth option, which we believe will safeguard the industry and protect the well-being of the thousands who are dependent on its operation.
Our Union recognizes that the industry has very good potential to succeed in Guyana, and has many positive characteristics – such as an abundance of arable land, adequate labour, low cost cane transportation, inexpensive irrigation, sufficient fresh water, adequate factory capacity, know-how and technical expertise. These strong pillars, we believe, give our sugar industry a solid foundation and a head start relative to its Caribbean counterparts. Sustainability of the industry, we believe, rests with a paradigm shift from it being an inefficient producer of raw bulk sugar to an efficient producer of direct consumption sugars and other products. In addressing the challenges that confront the industry, we recognize that a multi-pronged approach is necessary to reduce costs and enhance revenues.
Our suggestions have taken account of previous work done by GuySuCo. Those ideas, we are aware, were comprehensively studied and examined by external agencies, and found to hold great value in securing the industry. We believe their value remains undiminished; however, we recognize that some updating to the studies may be required to reflect current day circumstances.
We are aware that the industry is confronted by high operating costs and reduction is imperative to ensure competitiveness. Immediately, we urge that a comprehensive review of the various activities, from tillage to sugar and molasses’ delivery, should be conducted with a view to identify inefficiencies and wastage, and to come up with innovative ways to do things better along the entire production chain. The Corporation is fully aware of its cane production cost being the largest contributor to total production cost.
Energy, according to GuySuCo, accounts for 8 per cent of overall costs1 ($2.8B at 2015 levels). We are aware that an energy audit found that with investments of $192M in the factories of Uitvlugt, Wales, Enmore, Blairmont, Rose Hall and Albion, savings of $659M could be realized per annum2. We understand that Wales factory implemented a fraction of those measures, which yielded savings by reducing its diesel usage in 2014/2015. Another idea worth pursuing is having services departments offer their services to the open Guyanese market for a fee. The income generated can be used to offset their operating costs, thus reducing dependence on the industry.
The Sugar CoI report also affirmed the view that GuySuCo was not adhering to known and best agricultural practices. The industry should immediately return to those practices which have served it well, and thus contribute to promoting improved production and productivity and reducing average costs. Research is also a critical element in the cost-reduction drive, as is the adoption of best practices.
Mechanization of operations has been recognized as a significant plank in the industry’s drive to reduce costs. On this matter, our Union has generally been supportive of the process, in keeping with labour attrition. Sugar workers, on the other hand, have also welcomed this development, as it enhances their productivity and consequently their earnings. In 2014, the Corporation, in a presentation to the Economic Services Committee, pointed out that it would require $14B to mechanise its operations, and that its cost savings would amount to over $6B per annum (17 per cent of 2015 overall costs). Pursuing this path, we believe, is one way to allow the industry to become more efficient and cost-effective.
Increasing revenues through sugar diversification
For the Guyana sugar industry to prosper, even under efficient management in the future, it is readily apparent that other income earning streams have to be added3. Our Union strongly subscribes to the position that the industry needs to transform itself from being a “sugar” industry to being a “sugar cane” industry. This strategy has been employed in many countries and has yielded much success, and the experiences of those countries can serve as a useful guide to us. Moreover, this has long been the strategy of GuySuCo, and various ventures have to this end been studied and examined.
Through our suggestions, the entire sugar cane plant will be utilized to widen the range of the industry’s products thus adding a number of profitable revenue streams. Apart from transitioning the industry from a “sugar” industry to a “sugar cane” industry, a sustained modernization programme, taking into account the adoption of realistic ventures, and using sugar products, must be formulated.
In our view, the main contributor to added-value to sustain the sugar industry in the long term will be co-generation4. The lone co-generation plant at Skeldon, in spite of its short comings, has great value. The CoI recommended that the Skeldon Co-Generation Units be returned to GuySuCo, and a reasonable Power Purchase Agreement (PPA) be negotiated with GPL, a view to which we also subscribe. Skeldon Energy Incorporated (SEI), in a recent interaction with our Union, advised that in 2016 it had some U$45M (G$9.45B) in energy sales to the Guyana Power and Light Inc (GPL) and Skeldon Estate from its diesel and steam units.
At this time, we are aware that co-generation feasibility studies are ongoing at Albion and Uitvlugt estates. Previously, feasibility studies advised that co-generation was found to be profitable at Blairmont and Enmore estates. A co-generation plant at Albion is expected to cost about G$7B5 and with rates similar to those enjoyed by SEI, the investment is very lucrative at the estates where the operation is feasible. We understand that Albion often dumps excess bagasse in open spaces, and resorts to burning as a means of disposal.
* Refined White Sugar
There exists a ready market in CARICOM for a total of 200,000 metric tonnes of refined sugar6. With improved production levels reaching 331,000 tonnes in 20257, GuySuCo would be able to satisfy this market, for which the Corporation would receive in excess of US30 c/lb8. Our research informed us that a 180,000-tonne sugar refinery at Skeldon was found to have an Internal Rate of Return of 28.8 per cent9 when a price of US23 c/lb10 was expected.
Higher prices in contemporary times only serve to add to the project’s feasibility. The recent indication, through press reports, that an Indian investor is willing to take over Skeldon operations with a view, among other things, to establishing a refinery serves to remind us of the significant sums that can be earned in this venture.
* Direct Consumption Brown Sugar
We are aware, at this time, that GuySuCo is capable of packaging 50,000 tonnes11 of sugar per annum from its Blairmont and Enmore packaging plants. The price received for this type of sugar is approximately US33 c/lb12, and represents the Corporation’s highest return. GAWU strongly supports the maximization of GuySuCo’s existing capacity, along with further expansion in this regard given the profitability of product lines. The opportunities for emergence of new product brands are numerous. Critical to this venture is the need for a robust product development and a marketing programme with clear vision and focus. North American and European markets ought to be pursued with energy. Efforts on the Geographical Indicator will boost marketing of branded products.
* Bulk Alcohol
The production of bulk alcohol is also another viable business venture, and another distillery in our country could be established next to a sugar factory. We are aware that a feasibility study was conducted for a distillery at Albion, and the results should be further analyzed to determine viability.
* Fuel Alcohol
The majority of GuySuCo’s molasses was shipped to the ‘Other Island’ and Barbados, with DDL placing a significant third13. Fuel alcohol production from molasses is also another opportunity to enhance revenues and reduce imports. An ECLAC study in 2006 pointed out that 50,000 tonnes of molasses per annum was sufficient to meet a 90/10 fuel/ethanol mix. It is an area that requires further examination and consideration, and shouldn’t be outside the realm of possible ideas to ‘save’ the industry.
* Direct Consumption Dark Brown Sugar
The Corporation should examine the sale and production of a darker form of brown sugar. In North America, similar sugar is being marketed as a form of health food. Marketing is once again a critical factor to success.
* Direct Consumption Molasses
The short-lived sale of bottled molasses as a health food was encouraging. GuySuCo must more seriously examine the possibility of selling (and exporting) molasses in small (400 – 500ml) bottles, with necessary promotion14.The difficulties encountered with this venture could be attributed to GuySuCo outsourcing pasteurization and bottling of this product. This challenge and additional production cost can easily be addressed through installation of the Corporation’s own operation, based on market studies for volumes.
* Other Commodities
Sugar cane has been successfully used to produce animal feed, pharmaceuticals, paper, etc. Such ventures have been undertaken in Cuba, and an examination should be pursued; and if feasible, could be implemented in the medium term. Carbon dioxide, a by-product of fermentation, can be trapped, washed and compressed into dry-ice, which is used for freezing.Vinasse, a by-product from distillation, is rich in fertilizer elements, and can be returned to the cane fields as fertilizer.