Thursday, January 15, 2009

Sugar shake-up

Stabroek News. January 15, 2009

*Errol Hanoman new chief executive
*Booker Tate management contract ends
*New board to present blueprint for success

Former Finance Director Errol Hanoman has been named as new Chief Executive of GuySuCo in a shake-up that will see the longstanding Booker-Tate management contract end and an interim board has been given a month to present a `blueprint for success’ to lift the country’s key foreign exchange earner out of a production slump.

With immediate effect the new board headed by Permanent Secretary in the Office of the President, Dr. Nanda Gopaul will take up the reins of control and within one month will “present a blueprint of success that will detail strategies over the next two to three years” designed to turn around the Guyana Sugar Corporation, Agriculture Minister Robert Persaud announced at a joint press conference with Head of the Presidential Secretariat, Dr. Roger Luncheon at the Office of the President yesterday. The sugar shake-up has been signalled for months in the face of slumping production, tight finances and questions about decisions made by the Booker Tate-led management. Dr Gopaul, a former President of the sugar union NAACIE and former head of the public service, replaces Ronald Alli as chairman.
Errol Hanoman

Errol Hanoman

The other board members are Geeta Singh-Knights; Keith Burrowes; Dr Rajendra Singh; Donald Ramotar and Jangbahadur Raghurai. Hanoman has been appointed Chief Executive with effect from February 14, 2009 when the current Chief Executive Nick Jackson steps down to take up a new position in Swaziland.

Hanoman, an accountant, joined Booker Tate as a Regional Finance Manager in 1995 following years of service with GuySuCo. In September 2002, Hanoman was appointed Business Director and the focus of his client responsibility returned to the Caribbean and Latin America.

Dr. Luncheon referred to the changes as “a preliminary plan of action” that President Bharrat Jagdeo devised following key consultations in the industry a short while ago. He said there is a clear understanding among those involved in the turnaround process that more is to come. He said Cabinet supports the changes, but emphasised that the new board is a short-term one that is expected to work on a recovery plan to be effected within the shortest possible time.

The administration’s arrangement with Booker Tate Ltd has also changed with a new agreement taking effect in April. Persaud said Booker Tate will continue to provide, on an ongoing basis, the required skills that are difficult to attract, but pointed out that a Technical Support Services Agreement will replace the current Corporate Management Agreement between the administration and Booker Tate. He noted that it will involve required programmed visits by specialists as well as the provision of specific technical personnel to be based in Guyana as required.

In this new agreement, the visits by the technical specialists will cover all aspects of business including finance, factory and agriculture and will make specific recommendations for improvement. The current management arrangement with Booker Tate will end on March 31, 2009. Booker Tate secured a management contract in 1990 after sugar production had fallen disastrously to around 130,000 tonnes per annum. In the succeeding years the Booker Tate-managed Guysuco succeeded in upping production significantly but there has been a sharp decline in the last three or four years.

As GuySuCo struggles to recover from a poor performance last year, a 2008 overdraft of $3.1B and previous years of declining production figures, Persaud told reporters, the recovery plan is critical. He noted too, that the delay in the commissioning of the new sugar factory at Skeldon has aggravated GuySuCo’s problems. But financing has been secured through a combination of local banks and foreign sources according to him, therefore the current focus is on recovery and sustainability in the industry, which is bracing for another round of price cutting in the European market this year.

GuySuCo has set a target of 290,000 tonnes of sugar for this year, but the Agriculture Minister said the figure is subject to a review based on the rainy season. He contended yesterday that the rainfall was among the factors that affected the industry last year releasing figures that indicated that 3,011mm of rainfall was recorded for 2008; there had been 1,990 mm in 2004; 2,484mm in 2005; 2,286 mm in 2006 and 2,554mm in 2007. He gave the opportunity days as being the lowest in 2008 being 465; previous years from 2004 to 2007 showed opportunity days at 653; 594; 627 and 501 respectively.

Persaud said that while the industry is bracing for heavy losses on the European market there has been no other significant change and or any indicators that show a particularly negative impact on GuySuCo for several more years. He said that a particular focus of the local industry this year would be to “tap into markets that are available such as those for specialized and packaged sugar”. He added that the sugar company has been unable to tap into this so far though there have been a few developments in this area.

But market access depends on production, and according to Persaud the current figure would need to exceed 290,000 tonnes. However, he said there is no current indication that points in the direction of an increased target this year.

GuySuCo’s new board is expected to interact with stakeholders including the unions as it draws up a new plan and the new strategies will be includes in the current update of the company’s business plan that the new board will review. According to the Agriculture Minister, the new management team will review cost saving initiatives; cane production performance and the progress of the Chinese contractor on completing the necessary tests among other things at the new Skeldon factory. He said too, that the team will tackle wastage and corruption, noting that past reports have found corrupt practices.

Commenting on corruption in the industry, he said, that internal audits have pointed to practices of malfeasance and corruption. “… just talk to people on the ground and you will hear the most horrid stories”, he added.

With respect to the new factory at Skeldon, he said GuySuCo has already filed for liquidated damages which are around US$5M given the failure of the Chinese firm to hand over the factory on time. He said that the interim board would review the recent plan of action that was drafted by the former board and see to it that the Chinese implement the recommendations. He added that the factory is not likely to be ready for the next crop.
Further, as a feature of the company’s restructuring, estates across the country have been grouped into two regions, Demerara and Berbice. The Demerara region comprises Enmore, LBI, Uitvlugt and Wales, while the Berbice region includes Albion, Blairmont and Rose Hall. Persaud said that each region is headed up by a Regional Director (RD), reporting to the Deputy Chief Executive Officer (DECO), which is a new position that has been created. He noted that the Estate Manager will report directly to RDs while the Agriculture and Factory Managers report to the Estate Manager, additionally the Finance and Human Resource Managers will report to their respective Head Office. Skeldon will continue to operate independently, reporting only to the DCEO.

A report was recently done for the Agriculture Minister by former Chairman Vic Oditt on problems at the East Demerara Estate.

No comments: