GUYSUCO gears to meet future national, industry goals


Guyana Chronicle
October 7, 2000


GOVERNMENT'S quest for national economic growth and the need to reduce cost of production have given rise to the formulation of a strategic plan by Guyana Sugar Corporation (GUYSUCO).

The two policy determinants are totally compatible because one of the most effective methods of reducing unit costs in the sugar industry is to produce more.

Producing greater volumes in new or consolidated and improved factories will yield major benefits and enable GUYSUCO to maintain or increase its contribution to the Gross National Product (GNP) while, simultaneously, lowering expenditure.

The latter achievement is necessary to sustain long-term viability and ensure sustainable operations in the future.

To improve development of sugar here, better its competitiveness, quality and productivity, the Government has made tremendous inputs and intends to implement crucial changes through the proposed National Development Strategy (NDS).

The importance of sugar to this country's development, now and in the foreseeable future, cannot be over-emphasized.

The export-oriented enterprise contributes substantially to socio-economic betterment and the commodity accounts for 16 per cent of Guyana's Gross Domestic Product (GDP) and 30 per cent of total agricultural production. Sugar is not only the largest foreign exchange earner nationally but also the biggest corporate contributor to public revenue.

Moreover, it directly employs 25,000 people or about ten per cent of the national labour force and indirectly affects ten per cent of the population.

The Policy Framework 2000 in the NDS said all evidence suggests that, at least to the end of the first decade of the twenty-first century, Guyana's sugar will continue to have preferential access to the European Union (EU) market.

With great emphasis on that and competition in the globalised world, if the current CARICOM agreement holds and sugar and its by-products are to be assured within the EU, the export prices must be competitive. From a marketing perspective, the GUYSUCO strategy involves the retention of the Sugar Protocol quota of 167,000 tonnes, which has an indefinite duration and is likely to remain secure and the Special Preferential Sugar (SPS) quota.

A fundamental part of the marketing scheme will be to meet or exceed the refiners' quality specifications.

Financial projections for annual sales in the United States (U.S.) is 12,000 tonnes and, after fulfilling commitments in the domestic and preferential EU markets, GUYSUCO intends to become an extended "home market" by securing the most possible customers in CARICOM countries as production increases.

Although recent world prices were very depressed and the World Bank currently projects a price of US10 cents per pound in 2005, some premium on that is anticipated from `neighbourhood' buyers like Haiti, North Brazil and Venezuela. Embodied in the development plan is the continued emphasis on the current initiatives to reduce operating expenses and, in order to achieve the objectives, GUYSUCO will concentrate investment on increasing production in the areas of Berbice where the cost would be less.

It means maximising utilisation of Class One and Two lands where available and developing bigger processing facilities which can benefit from economies of scale and more modern technology but continuing operations in the not so favourable parts where, despite cost disadvantages, a net contribution is made to the economy.

Following an extensive review of the options, GUYSUCO, therefore, is to construct a new factory at Skeldon, extend Albion and close Rose Hall but maintain the other factories for 10 years.

The accomplishment would take the level of production to 457,000 tonnes per annum and cause unit costs to drop to US12.61 cents per pound (including depreciation) and US10.99 cents per pound (excluding depreciation), making GUYSUCO profitable in a mix of regional and premium markets.

The capital cost of the major expansion project, including securing the other factories, is estimated at US$187M, to be partly financed by self-generated funds (US$85M over the seven-year plan period) and sales of land surplus unsuitable for GUYSUCO requirements (US$30M).

The balance of US$72M would have to be borrowed and the World Bank has indicated willingness to facilitate the necessary funding from concessionary sources.

The financial viability of the chosen path will be dependent upon the amount of capital investment and on selling prices within GUYSUCO's main markets.

Sensitivity analyses and tests have been done on the cash flows which would accrue with the option to build a new factory at Skeldon and expand Albion.

GUYSUCO intends to investigate, as well, ways of adding value to its product and other potential developments including adding new factories to allow for co-generation, developing a distillery in conjunction with technical partners, producing special sugars and possibly a refinery to meet CARICOM demand for white sugar.

The main objective of Phase II of the project will be to hike sugar production to over 500,000 tonnes, chiefly by establishing a new factory on the West Bank of Canje River, expanding Blairmont, also in Berbice and consolidating Enmore and La Bonne Intention factories on East Coast Demerara. (A GIS feature by Sheleeza Baksh)


Follow the goings-on in Guyana
in Guyana Today