Sugar Industry Mechanisation Project

Transcription

PUBLIC DISCLOSURE AUTHORISED
CARIBBEAN DEVELOPMENT BANK
TWO HUNDRED AND SIXTY-FOURTH MEETIN G OF THE BOARD OF DIRECTORS
TO BE HELD IN BARBADOS
DECEMBER 11, 2014
PAPER BD 95/14
SUGAR INDUSTRY MECHANISATION PROJECT - GUYANA
(President’s Recommendation No. 896)
1.
This Report covers the appraisal of a Project to enhance the capacity of Guyana Sugar Corporation
Incorporated to produce and harvest sugar cane on selected estates.
2.
On the basis of the attached Report, I recommend:
(a)
(b)
a loan to the Government of Guyana in an amount not exceeding the equivalent of seven
million, five hundred thousand United States dollars (USD7.5 mn) consisting of:
(i)
an amount not exceeding six hundred and sixty two thousand United States dollars
(USD0.662 mn) from the Ordinary Capital Resources of the Caribbean
Development Bank (CDB); and
(ii)
an amount not exceeding the equivalent of six million eight hundred and thirtyeight thousand United States dollars (USD6.838 mn) from CDB’s Special Funds
Resources (SFR);
a grant of an amount not exceeding the equivalent of thirty-seven thousand United States
dollars (USD0.037 mn) from CDB’s SFR;
on the terms and conditions set out and referred to in Chapter 7 of the attached Report.
3.
In addition I recommend:
(a)
This information is withheld in accordance with one or more of the exceptions
to disclosure under the Bank’s Information Disclosure Policy.
(b)
a waiver of CDB’s Guidelines for Procurement in respect of procurement related to the
mechanical harvesters under the Project to extend eligibility to suppliers who are not from
CDB member countries. The value of the waiver being requested is estimated at
USD1.6 mn.
4.
Funds are available within CDB’s existing resources and/or borrowing programme for the relevant
disbursement period.
PUBLIC DISCLOSURE AUTHORISED
CARIBBEAN DEVELOPMENT BANK
APPRAISAL REPORT
ON
SUGAR INDUSTRY MECHANISATION PROJECT – GUYANA
This Document is being made publicly available in accordance with the
Bank’s Information Disclosure Policy. The Bank does not accept
responsibility for the accuracy or completeness of the Document.
Considered at the Two Hundred and Sixty-Fourth Meeting
of the Board of Directors on December 11, 2014.
(BD 95/14)
AR 14/12 GUY
Director (Ag.)
Projects Department
-
Andrew Dupigny
Division Chief
Social Sector Division
-
Deidre Clarendon
DECEMBER 2014
This Report was prepared by an Appraisal Team comprising:
Stephen Sandiford, Portfolio Manager; Luther St. Ville, Project Coordinator; Cavon White, Operations Officer (Analyst);
Yuri Chakallal, Disaster Risk Management Specialist; Xiomara Archibald, Country Economist; M. Stephen Lawrence,
Operations Officer (Engineer); McDonald Thomas, Operations Officer (Social Analyst); Dave Waithe, Legal Counsel;
Richard Look Kin, Risk Officer; Clairvair Squires, Consultant Operations Officer; Suzanne King, Coordinating Secretary.
Any designation or demarcation of, or reference to, a particular territory or geographic area in this
Document is not intended to imply any opinion or judgment on the part of the Bank as to the legal or other
status of any territory or area or as to the delimitation of frontiers or boundaries.
CURRENCY EQUIVALENT
Dollars ($) throughout refer to United States Dollars (USD) unless otherwise specified
USD1.00 = GYD206.00
GYD1.00 = USD0.00485
ABBREVIATIONS
ACP
bn
BOD
BOG
BTL
CARICOM
CC
CCV
CDB
CEO
CET
CG
DFQF
D&I
DRC
DRCR
DRM
EIA
EM
EMP
EMS
EPA
ERR
EU
FAO
FEPI
FEUI
FRR
FY
GAWU
GDI
GDP
GEPOS
GII
GOGY
GuySuCo
GWh
GYD
ha
HDI
HDR
HIPC
-
African, Caribbean and Pacific
billion
Board of Directors
Bank of Guyana
Booker Tate Limited
Caribbean Community and Common Market
Climate Change
Climate Change Variability
Caribbean Development Bank
Chief Executive Officer
Common External Tariff
Central Government
Duty Free Quota Free
Drainage and Irrigation
Domestic Resource Cost
Domestic Resource Cost Ratio
Disaster Risk Management
Environmental Impact Assessment
Estate Manager
Environmental Management Plan
Environmental Management System
Environmental Protection Agency
Economic Rate of Return
European Union
Food and Agriculture Organisation of the United Nations
Factory Energy Performance Index
Factory Energy Use Index
Financial Rate of Return
Financial Year
Guyana Agricultural and General Workers Union
Gender Development Index
Gross Domestic Product
Gender Equality Policy and Operational Strategy
Gender Inequality Index
Government of Guyana
Guyana Sugar Corporation Incorporated
Gigawatt hour
Guyana Dollars
hectares
Human Development Index
Human Development Report
Heavily Indebted Poor Countries
(ii)
ABBREVIATIONS Cont’d
hr
IDA
IMF
ISO
kWh
LBI
mn
MoA
MDG
MPI
M&E
OCC
OCR
OECD
OER
OO
OIE
p.a.
PC
PCR
PD
PLW
PMC
PMT
SDF
SER
SFR
SP
SSMP
SW
TA
TERI
TOR
tc:ts
tn
tn/hr
tsh
UNDP
USA
US¢
USD
-
hour
International Development Association
International Monetary Fund
International Sugar Organisation
kilowatt hour
La Bonne Intention
million
Ministry of Agriculture
Millennium Development Goals
Multi-dimensional Poverty Index
Monitoring and Evaluation
Office of Climate Change
Ordinary Capital Resources
Organisation for Economic Cooperation and Development
Official Exchange Rate
Operations Officer
Office of Independent Evaluation
per annum
Project Coordinator
Project Completion Report
Project Director
Project Launch Workshop
Project Management Committee
Project Management Team
Special Development Fund
Shadow Exchange Rate
Special Funds Resources
Sugar Protocol
Skeldon Sugar Modernisation Project
Staff Weeks
Technical Assistance
The Energy and Resource Institute
Terms of Reference
tonnes cane:tonnes sugar
tonne
tonne/hour
tonnes of sugar per hectare
United Nations Development Programme
United States of America
United States cents
United States dollars
(iii)
MEASURES AND EQUIVALENTS
1 millimetre (mm)
1 centimetre (cm)
1 metre (m)
1 kilometre (km)
1 square mile (sq mi)
1 hectare (ha)
1 tonne (tn)
1 kilogram (kg)
=
=
=
=
=
=
=
=
0.039 inches
0.394 inches
1.083 yards
0.621 miles (mi)
840 acres (ac)
2.471 acres (ac)
0.984 tons (t)
2.204 pounds (lb)
TABLE OF CONTENTS
COUNTRY DATA: GUYANA
LOAN AND PROJECT SUMMARY
1.
2.
3.
4.
5.
6.
7.
STRATEGIC CONTEXT AND RATIONALE
PROJECT DESCRIPTION
FINANCING STRUCTURE AND COSTS
PROJECT VIABILITY
RISK ASSESSMENT AND MITIGATION
BORROWER, IMPLEMENTING AGENCY, PROJECT MANAGEMENT AND
IMPLEMENTATION
TERMS AND CONDITIONS
APPENDICES
1.1
1.2
1.3
1.4
1.5
2.1
2.2
3.1
3.2
4.1
4.2 (a)
4.2 (b)
4.2 (c)
4.2 (d)
4.3
4.4 (a)
4.4 (b)
4.4 (c)
MACROECONOMIC REVIEW – FIRST HALF 2014
SECTOR REVIEW
ANNEX 1 TO APPENDIX 1.2 – OVERVIEW OF SUGAR CANE HARVESTING
ANNEX 2 TO APPENDIX 1.2 – SUMMARY OF ISSUES TO BE ADDRESSED
WITHIN THE FRAMEWORK OF GUYSUCO’S 2013-2017 STRATEGIC PLAN
SOCIAL CONTEXT
CDB LENDING TO AND EXPERIENCES IN THE SUGAR INDUSTRY
LOCATION OF GUYSUCO ESTATES
DRAFT TERMS OF REFERENCE - GENDER INTEGRATION ACTION PLAN
DETAILED DESCRIPTION OF PROJECT
PROJECT COST, PHASING AND FINANCING PLAN
REQUEST FOR WAIVER OF SPECIAL DEVELOPMENT FUND GROUP 2
ANNEX 1 TO APPENDIX 3.2 – SDF 8 COUNTRY GROUP AND RESOURCE
ALLOCATIONS
ANNEX 2 TO APPENDIX 3.2 - GRANT ELEMENT CALCULATIONS AND
SCENARIO ANALYSIS OF FINANCING OPTIONS
SUMMARIES OF THE FINDINGS OF THE TERI ENERGY AUDITS FOR EACH
SUGAR PLANT (2013)
HISTORICAL FINANCIAL STATEMENTS - BALANCE SHEETS AS AT
DECEMBER 31, 2009 TO DECEMBER 2013
HISTORICAL FINANCIAL STATEMENTS – INCOME STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 2009 TO DECEMBER 31, 2013
HISTORICAL FINANCIAL STATEMENTS – CASH FLOWS FOR THE YEARS
ENDED DECEMBER 31, 2009 TO DECEMBER 31, 2013
HISTORICAL FINANCIAL STATEMENTS – RATIO ANALYSIS FOR THE YEARS
ASSUMPTIONS USED IN THE FINANCIAL ANALYSIS
PROJECTED FINANCIAL STATEMENTS - BALANCE SHEETS AS AT
DECEMBER 31, 2013 TO DECEMBER 31, 2023
PROJECTED FINANCIAL STATEMENTS – INCOME STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 2013 TO DECEMBER 31, 2023
PROJECTED FINANCIAL STATEMENTS – CASH FLOWS FOR THE YEARS
(ii)
4.4 (d) PROJECTED FINANCIAL STATEMENTS – RATIO ANALYSIS FOR THE YEARS
4.5
INCREMENTAL ANALYSIS
4.6
ECONOMIC RATE OF RETURN CALCULATION
4.7
NOTES AND ASSUMPTIONS TO THE ECONOMIC ANALYSIS
4.8
GENDER MARKER ANALYSIS
4.9
SUMMARY OF NATURAL HAZARD IMPACT ASSESSMENT AND ASSESSMENT
OF NATIONAL IMPORTANCE OF GUYSUCO - DRAINAGE AND IRRIGATION
BENEFIT
4.10
SUMMARY CLIMATE CHANGE ANALYSIS OF GUYANA’S AGRICULTURAL
SECTOR
4.11
AVERAGE ANNUAL TOTAL OPPORTUNITY DAYS PER YEARAND PER CROP
ACROSS ALL ESTATES FROM 2001 TO 2013
6.1
GUYSUCO ORGANISATIONAL CHART
6.2
DRAFT PROJECT MANAGEMENT DUTIES AND RESPONSIBILITIES
6.3
PROJECT MANAGEMENT ORGANISATION
6.4
DRAFT IMPLEMENTATION SCHEDULE
6.5
IMPLEMENTATION SUPPORT PLAN
6.6
ESTIMATED QUARTERLY DISBURSEMENT SCHEDULE
6.7
PROCUREMENT PLAN
6.8
REPORT ON INVESTMENT COST OF PROJECT
6.9
REPORTING REQUIREMENTS
2009
2010
2011
2012
2013
548,478.5
611,716.5
700,242.4
778,017.1
822,238.6
413,114.0
460,072.0
525,672.0
582,657.0
614,130.0
406,944.0
110,056.0
(103,887.0)
...
1.5
471,416.0
116,839.0
(128,182.0)
...
(2.5)
558,234.0 603,506.0
125,535.0 145,204.0
(158,098.0) (166,053.0)
...
...
(6.2)
(3.6)
...
...
...
...
...
20.6
14.2
7.7
2.3
10.1
11.2
0.0
14.1
5.3
14.9
3.3
3.6
18.3
16.0
6.8
2.6
10.4
11.7
0.0
14.8
5.3
14.5
3.5
3.9
18.6
19.1
6.5
1.3
9.6
10.7
0.0
15.8
5.1
13.6
3.6
3.9
18.7
21.3
6.3
1.3
7.8
11.7
0.0
15.7
4.2
13.3
3.6
3.9
23.4
15.8
4.1
2.0
9.6
11.5
0.0
14.0
5.3
14.4
3.5
3.6
359,549.0
296,417.0
3.3
400,922.0
309,373.0
4.4
460,108.0
326,194.0
5.4
511,337.0
341,905.0
4.8
537,428.0
359,758.0
5.2
MONEY AND PRICES (GYD mn)
Consumer prices (av. annual % change)
Money supply (M1; annual % change)
Total domestic credit(net)
Private sector (net)
Public sector (net)
Estimated Tourism Expenditure (USD mn)
2.9
8.7
47,222.3
94,390.1
(33,275.3)
...
3.8
21.8
55,446.5
112,333.4
(41,280.3)
...
5.0
20.3
93,477.6
134,636.1
(25,994.7)
...
2.4
15.6
99,004.0
161,644.0
(44,890.4)
...
1.9
2.5
123,780.4
185,130.0
(36,143.8)
...
CENTRAL GOVERNMENT FINANCES (GYD mn)
Current Revenues
Current Grants
Current Expenditures
Current Account Surplus/ (Deficit)
Capital Revenue and Grants
Capital Expenditure and Net Lending
Overall Surplus/ (Deficit)
94,890.7
0.0
80,441.0
14,450.1
17,275.1
46,990.3
(15,265.5)
107,875.4
0.0
86,386.4
21,489.0
11,820.7
46,658.4
(13,348.7)
120,915.5
0.0
100,620.4
20,295.1
13,452.8
50,116.3
(16,368.4)
130,228.6
0.0
114,914.7
15,313.9
13,509.5
56,441.8
(27,618.3)
136,494.8
0.0
122,054.0
14,440.8
8,671.7
50,144.5
(27,032.0)
BALANCE OF PAYMENTS (USD mn)
Merchandise Exports (f.o.b)
Merchandise Imports (c.i.f)
Trade balance
Net Balance on services account
Transfers (net)
Current Account Balance
Capital and Financial Account
Net Errors and Omisions
Overall Balance
768.2
(1,179.40)
(411.2)
(119.0)
299.6
(230.6)
454.0
11.0
234.5
885.0
(1,419.10)
(534.1)
(84.1)
370.8
(247.4)
339.2
24.7
116.5
1,129.1
(1,770.50)
(641.4)
(145.4)
414.6
(372.2)
373.2
(16.0)
(15.0)
1,415.5
(1,996.70)
(581.3)
(204.6)
419.2
(366.7)
428.5
(18.7)
32.9
1,375.9
(1,847.30)
(471.4)
(307.2)
353.2
(425.3)
509.5
(8.9)
(119.5)
1,359.1
426.1
60.4
365.7
933.0
17.5
7.8
9.7
4.3
7.8
1,536.1
493.2
36.1
457.1
1,042.9
28.7
16.9
11.8
5.8
9.1
1,724.1
514.0
31.1
482.9
1,210.1
39.9
26.9
13.0
...
...
1,815.6
457.0
26.1
430.9
1,358.6
...
...
...
...
...
1,725.6
479.1
21.0
458.1
1,246.5
...
17.4
...
...
...
204.30
203.75
204.16
204.50
206.25
PER CAPITA GDP (current market prices; GYD)
GROSS DOMESTIC PRODUCT (GDP)
GDP at Current Market Prices (GYD mn)
Demand Components:
Consumption Expenditure
Gross Domestic Investment
Exports of goods and non-factor services
Imports of goods and non-factor services
Gross domestic savings ratio (%)
Se ctoral distribution of curre nt GDP (%)
Agriculture
Mining and Quarrying
Manufacturing
Utilities
Construction
Transport and Communication
Hotels and Restaurants
Wholesale and Retail Trade
Financial and Business Services
Government Services
Other Services
Less Imputed Service Charge
GDP at Current Factor Cost (mn)
GDP at constant 2006 Prices (mn)
Annual rate of growth in GDP (%)
TOTAL PUBLIC DEBT (USD mn)
Total public debt
Domestic debt outstanding
Long term
Short term
External debt outstanding
Debt Service
Amortisation
Interest Payments
External debt service as % of exports of goods and services
Total debt service as % of current revenue
AVERAGE EXCHANGE RATE
Dollar(s) per US dollar
Data for 2013 are provisional.
INTEREST RATES
Domestic Rate - Time Deposit
Domestic Rate - Saving Deposit
Prime Lending Rate
Treasury Bill Rate
Bank Rate
POPULATION
Mid-Year Population ('000)
Population Growth Rate (%) (end of period)
Crude Birth Rate (per 1,000 persons)
Crude Death Rate (per 1,000 persons)
Infant Mortality Rate (per 1,000 live births)
EDUCATION
Net School Enrollment Rate (%)
Primary
Secondary
Pupil-Teacher Ratio
Primary
Secondary
LABOUR FORCE
Unemployment Rate (%)
Male
Female
Participation Rate (%)
Male
Female
2009
2010
2011
2012
2013
2.5
2.8
14.5
4.5
6.8
2.5
2.7
14.5
3.6
6.3
2.1
2.2
14.0
2.5
5.5
1.6
1.7
13.8
1.5
5.3
1.3
1.4
12.8
2.1
5.0
753.2
(1.0)
19.2
7
10.8
752.1
(1.5)
19
7
14.7
750.7
(1.9)
18.8
6.9
14.4
748.9
(2.3)
18.4
6.9
13.8
746.9
(2.7)
18.5
6.6
12.9
78.0
81.0
81.0
76.0
83.0
...
...
...
25.0
...
25.0
24.0
...
...
...
...
20.2
15.5
26.0
60.0
80.0
42.0
21.0
17.8
25.1
60.0
80.0
41.0
21.0
17.2
25.7
60.0
79.0
42.0
...
...
...
...
...
...
1970
1980
1990
2000
2010
60.0
58.0
62.1
61.0
57.0
64.0
62.0
58.0
66.0
63.0
60.0
67.0
66.0
63.0
69.0
...
...
...
...
...
...
...
...
...
...
INDICATORS OF HUMAN DEVELOPMENT
HEALTH AND EDUCATION
Life Expectancy at Birth (years)
Male
Female
Dependency Ratio
Male
Female
Adult Literacy Rate (%)
Male
Female
Human Development Index
HOUSING AND ENVIRONMENT
Households with piped water (%)
Households with access to flush toilets (%)
Households with electricity (%)
1.03
1.03
1.02
...
...
...
0.679
55.7
26.3
...
Environmental strategy or action plan (year prepared): 2003
Source(s): Bank of Guyana; Ministry of Finance; Caribbean Tourism Organisation;World Bank.
… not available
Data as at September 18, 2014
0.81
0.82
0.80
...
...
...
0.64
0.64
0.64
...
...
...
0.680
0.708
68.6
29.0
69.0
60.8
29.5
71.6
98.5
...
...
0.725
...
79.0
...
0.636
94.0
83.0
...
LOAN AND PROJECT SUMMARY
Financial Terms and Conditions
Borrower: Government of the Cooperative
Amortisation Period:
Republic of Guyana (GOGY)
Ordinary Capital Resources (OCR)
22 years
Special Funds Resources (SFR)
30 years
Grace Period:
OCR
4
5 years
SFR
5
10 years
Disbursement Period:
September 30, 2015 – December 31, 2017
Executing Agency: Guyana Sugar Corporation Inc.
(GuySuCo)
Source:
Amount (USD mn):
0.662 OCR Interest Rate: 3.95% per annum (p.a.) variable;
OCR – Loan:
SFR – Loan:
6.838 SFR Interest Rate: 2% p.a.
Total Loan:
SFR – Grant:
7.500 Commitment Fee: 1% p.a. on the undisbursed balance
of the OCR portion of the Loan, commencing from the
0.037 60th day after the date of the Loan Agreement.
Counterpart:
4.500
Total:
12.037
Risk Management
Country Rating: N/A
Outlook: N/A
Limit: N/A
Overall Project/Entity Score: N/A
As of November 28, 2014:
Approvals:
Disbursements:
Repayments:
Undisbursed:
Outstanding Loans:
Availability (Adjusted for Approvals):
Availability (Adjusted for Approvals and Disbursements):
Incremental Capital Adequacy Charge:
($’000)
280,264
215,096
79,168
61,343
135,929
N/A
N/A
N/A
Office of Risk Management Commentary:
This information is withheld in accordance with one or more of the exceptions to
disclosure under the Bank’s Information Disclosure Policy.
(ii)
Project Summary
Project Outcome and Description:
The outcome of the Project is improved productivity of sugar cane cultivation and sugar production on selected
estates in Guyana.
The components of the Project are:
(a)
Enhancing sugar cane production and harvesting:
(i)
(ii)
Purchase of machinery and equipment to facilitate:
(aa)
the preparation of sugar cane fields into mechanically-friendly configurations;
(bb)
semi-mechanical planting, mechanical weed control and fertilising of sugar
cane; and
(cc)
mechanical harvesting of sugar cane.
Land preparation for revised field layouts.
(b)
Factory energy efficiency improvements.
(c)
Training of employees for operation, maintenance and repair of machinery and equipment.
(d)
Consulting services to assess and develop an action plan for gender equality and integration.
(e)
Project Management Services.
CDB’s Results Framework:
No.
1.
2.
Indicator
Land irrigated or improved through drainage, flood
and irrigation works (hectares).
Energy savings as a result of Energy
Efficiency/Renewable Energy interventions (GWh).
2014
2015
2016
2017
-
350
1,150
1,000
-
2.085
4.391
4.611
Gender Marker Summary:
Gender
Marker
1/
Analysis
0.5
Data
0.5
Engagement
0.5
Response
1.0
Marginal Gender Mainstreaming: limited potential to contribute to gender equality.
Score
2.5
Code
MM1/
(iii)
Exceptions to CDB Policies:
A waiver of CDB’s Guidelines for Procurement to allow for the inclusion of agents/suppliers from non-eligible
sources, to be invited to bid, along with suppliers from CDB’s member countries, for the procurement of
mechanical harvesters. The value of the waiver is estimated at USD1.6 mn.
1.
STRATEGIC CONTEXT AND RATIONALE
LOAN REQUEST
1.01
GOGY has requested financial assistance from CDB to improve the harvestable production and
efficiency of operations on selected sugar cane estates in Guyana. The proposal forms part of a
GOGY/GuySuCo programme designed to improve the sustainability of the sugar industry.
SECTOR ANALYSIS
Socio-Economic Context
1.02
Residents of Guyana’s coastal communities have traditionally been dependent on agricultural
production, particularly the cultivation of sugar cane and rice, for their livelihood. Other crops cultivated
include coconuts, cassava, citrus fruits, pepper, pumpkin, vegetables and ground provisions. Livestock and
fish production also provide employment for many men and women and, along with rice and the other
crops, are extremely important for the country’s food security.
1.03
Although the services sector has been growing in economic importance in recent years, agriculture
still remains the dominant economic activity in Guyana, accounting for around 25% of Gross Domestic
Product (GDP) (see Figure 1). Agriculture (including forestry and fisheries) has been a major driver of
socio-economic development; successive administrations have therefore closely aligned the country’s
development policy agenda with investments in this sector, particularly sugar and rice. Rice production
has been on a positive growth trajectory over the past five years, while the sugar industry, once the mainstay
of the Guyanese economy, has generally been in decline. Notwithstanding, the sugar industry still
contributes around 5%1/ of GDP, provides direct employment for approximately 16,0002/ (in 2013) (95%
male), supports over 300 services providers, and is the third largest contributor of foreign exchange. It also
plays a critical socio-economic and environmental role in the predominantly low-income coastal
communities where cultivation and processing are concentrated. See Appendices 1.1 and 1.3 for more
details on the economic and social context.
1/
2/
Average contribution to GDP in Current Basic Prices, 2006-2013.
GuySuCo’s estimate of the number of workers employed in the industry as at December 31, 2013.
-2FIGURE 1: SECTORAL CONTRIBUTIONS TO GDP IN
CURRENT BASIC PRICES (AVERAGE 2006-2013)
Source: Bureau of Statistics
Structure and Performance of the Sugar Cane Industry
1.04
Sugar cane is grown on approximately 50,0003/ hectares (ha) (25% of cultivated lands) in Guyana,
mainly by the State owned GuySuCo which currently operates eight estates and seven factories4/. Four
estates, with independent factories (Skeldon, Albion, Rose Hall and Blairmont) are located in the Berbice
Region. The other four estates are located at East Demerara - La Bonne Intention (LBI) and Enmore, Wales
and Uitvlugt in the Demerara Region.
1.05
All GuySuCo factories are designed to self-generate 100% of their energy needs during the crop
season. In addition, the Skeldon factory has the capacity to supply the national grid. As a result, GuySuCo
provides electricity for an estimated 90,0005/ residents of the Berbice Region from electricity generated at
the Skeldon factory.
1.06
Industry studies have revealed that estates located in the Berbice Region currently have the highest
productivity potential (see Table 1.1).
3/
4/
5/
Private farmers, a large percentage of whom farm on lands leased from GuySuCo operate on approximately 8,000 ha (16%) of
the area under production.
In keeping with plans to improve the efficiency of operations, one factory was closed in 2011.
GuySuCo’s estimate.
-3TABLE 1.1: ESTIMATED PRODUCTIVITY POTENTIAL BY ESTATE
POTENTIAL PRODUCTIVITY tch, tc:ts, tsh6/
Estates in Berbice Region
Estates in Demerara Region
Unit
tch
tc:ts
tsh
Skeldon
80
11.25
7.1
Albion
78
10.35
7.5
Rose Hall Blairmont Enmore LBI/GD
77
80
77
78
11.26
10.4
10.89
10.89
6.8
7.7
7.1
7.2
Wales Uitvlugt
79
73
11.32
11.67
7.0
6.3
1.07
GuySuCo maintains a complex drainage and irrigation (D&I) system for sugar cane estates which
plays a critical role in regulating surface water between large inland conservancies and the protective
seawall complex located along extensive stretches of Guyana’s coastline. Approximately 60% of the area
served by this system is non-sugar land, including an estimated two-thirds of the area under rice cultivation.
Given the increasing frequency of excess rainfall, possibly due to climate variability, the D&I system is of
growing importance to people’s livelihoods and well-being in coastal areas. Without it: (a) non-sugar
agricultural output (in particular rice production) would be compromised; and (b) coastal communities in East
and West Demerara, including the city of Georgetown, and East and West Berbice, would be at critical risk
of flooding.
1.08
Sugar production has been on a downward trend since the early 2000s, declining from a high of
331,052 tonnes (tn) in 2002 to 186,801 tn in 2013, and the yield of sugar per ha declining from a high of
approximately 7 tn of sugar per ha (tsh) in 2003 to 4.1 tsh in 2013. Reduced yields of sugar cane and sugar
have also impacted the cost of producing sugar and by extension the viability of the sugar industry in
Guyana.
1.09
In 2013, sugar industry cost of production7/ was approximately 36 United States cents per pound
(US¢36/lb). By comparison, average cost of production in Brazil, the World’s largest producer of sugar
cane, is estimated at US¢20/lb. It is important to note, however, that whilst overall industry production cost
in Guyana is relatively high, costs of production on the three estates in the Berbice Region have, over the
period 2006-2013, averaged less than US¢25/lb. despite there being inefficiencies. Table 1.2 shows the cost
of production by Region.
TABLE 1.2: COST OF PRODUCTION BY REGION 2006-2013
Estate
Berbice
Demerara
Head Office Expenses
2006
19.71
23.81
1.81
2007
17.77
22.69
2.45
2008
21.21
26.59
2.03
Year
2009 2010
20.02 23.08
25.87 28.60
1.90
2.63
INDUSTRY
23.09
22.07
25.28
22.08
27.61
2011
23.11
34.70
2.10
2012 2013
24.46 29.06
37.43 43.83
2.33
3.00
28.65
30.36
36.60
Source: GuySuCo
A more detailed analysis of the sector is presented in the Sector Review at Appendix 1.2.
6/
7/
tch = tonnes of cane per hectare; tc:ts = tonnes cane to tonne of sugar; tsh = tonnes of sugar per hectare.
Figure excludes depreciation and finance charges. When included, cost of production per pound in 2013 was approximately
US¢43.03.
-4Key Issues
1.10
The main factors contributing to under-performance of the industry are:
(a)
An acute under-supply of labour: Competition from other sectors of the economy in
particular, rice, mining and construction - a general reluctance to engage in the labour
intensive work associated with sugar cane production and harvesting, and high instances
of industrial unrest have negatively impacted the labour supply to the industry.
(b)
Climate variability: Guyana experiences two dry seasons per year – February to April and
August to November. These periods are most conducive to carrying out the main activities
related to sugar cane planting and harvesting. As a direct consequence of weather
variability and possibly a consequence of climate change, “opportunity days”8/ available to
carry out these operations have been on the decline. GuySuCo has been challenged as a
result of its labour, machinery and equipment pool to efficiently carry out critical activities
impacting sugar cane and sugar yield within this narrowing window.
(c)
Under-performance of factories, in particular the Skeldon sugar factory: All GuySuCo
factories have for several years been operating below capacity resulting in high operational
cost. Total grinding hours lost due to insufficient cane being supplied to factories increased
from 1,729 hours in 2003 to 13,665 hours in 2011. In addition, operational difficulties have
resulted in frequent suspension of operations and low sugar recoveries at the Skeldon
factory since 2007. Given that the Skeldon Estate accounts for approximately 20% of the
area under sugar cane production, inefficiencies at that factory have a significant impact
on industry output.
(d)
Limited investment in production infrastructure: Financial difficulties have constrained
investment in critical production infrastructure in both field and factory operations. This
has negatively impacted operational efficiencies and the cost of producing sugar.
Marketing Arrangements
1.11
The traditional market for sugar exported9/ from Guyana has been the European Union (EU), within
the framework of the EU Sugar Protocol (SP). Through SP, Guyana (and other African, Caribbean and
Pacific (ACP) sugar exporters) benefited from an EU market price that was typically two to three times that
of the ‘World Market’ price and 50% higher than the next most remunerative export market - the US. SP
reforms implemented in 2006-2009 resulted in a 36% price cut in the EU reference price for sugar. Further
industry reforms are expected to be implemented in 2017, the most significant of which will be the removal
of beet sugar and iso-glucose production quotas. Industry analysts are of the view that the 2017 reforms
are likely to result in increased sugar production in the EU. Despite the fact that several10/ ACP countries,
including Guyana, will benefit from Duty Free/Quota Free (DFQF) access to EU markets, the increase in
supply from EU producers, will likely reduce the demand for imports and place downward pressure on EU
market prices. Concomitantly, growth in demand from developing countries is likely to result in some ACP
producers reducing their dependence on the EU market.
8/
9/
10/
“Opportunity days” are defined as those days when land preparation, mechanical planting, fertilising, spraying, and/or
harvesting can take place.
Exports from Guyana accounts for less than 10% of ACP supplies to the EU.
ACP countries which have entered into economic partnership agreements with the EU will, commencing October 2014, benefit
from DFQF access to the EU market. In 2008, 15 CARICOM Member States including Guyana, entered into an Economic
Partnership Agreement with the EU.
-51.12
Guyana benefits from a price premium on the US market and from protection within Caribbean
Community and Common Market (CARICOM) through a 40% Common External Tariff (CET) imposed
on raw sugar imported from non-CARICOM sources. The estimated amount which GuySuCo can supply
annually within the framework of the current US marketing arrangement is 20,000 tn. For several years,
GuySuCo has limited its sales to CARICOM Member States as a result of production shortfalls and a focus
on the EU/US market given quota obligations and more favorable prices. Other Caribbean producers Jamaica, Belize and Barbados - adopted similar strategies. As a result, most CARICOM countries have
sourced sugar from non-regional producers having obtained waivers on the CET in keeping with the
protocol established by the CARICOM Secretariat. Given the forecast of lower prices on the EU market,
Guyana is expected to more aggressively explore sales to CARICOM. The demand from CARICOM is
estimated at approximately 150,000 tn for raw brown sugar. The domestic demand is estimated at
25,000 tn per year. The Region does not have the capacity to refine sugar, therefore all white sugar
consumed in the Region (approximately 200,000 tn annually) is imported.
1.13
GuySuCo is currently negotiating with a long-time buyer in the EU to establish a long-term contract
for the supply of sugar. Consideration is also being given to exploring the feasibility of expanding product
offerings including, either directly or through partnerships, developing refinery capacity (for white sugar)
and/or the production of ethanol.
COUNTRY’S SECTOR STRATEGY
1.14
Given the wide ranging role which the sugar industry plays in the Guyanese economy, GOGY has
made a strategic decision to continue supporting the industry. GOGY’s strategy for the industry, as
articulated in the Agricultural Sector Strategy 2013-202011/, seeks to make the industry internationally
competitive by increasing productivity. Key elements of the strategy include:
(a)
increasing production to 450,000 tn sugar by 2020;
(b)
attaining an industry average of no greater than 12 tc/ts and under 10 tc:ts for at least 2
factories;
(c)
attaining production of 7.5 tsh; and
(d)
achieving (overall) at least 60% mechanical harvesting by 2020.
1.15
In keeping with the framework of the Agricultural Sector Strategy, GuySuCo, in consultation with
key stakeholders including GOGY and Trade Unions representing industry workers, has developed a
Strategic Plan for the period 2013-2017. The Plan identifies several areas of investment geared towards
addressing the under-performance of the industry largely through measures aimed at cost reduction through
improvements in technical performance and optimising the use of existing processing capacity. GuySuCo,
using internal technical services and with support from independent consultants, has developed a detailed
Investment Plan, identifying the required upgrades by estate and factory.
11/
Agriculture - Our Vision for Sustained Economic and Social Prosperity, A National Strategy for Agriculture in Guyana
(2013-2020).
-61.16
Key activities to be implemented under the Strategic Plan (2013-2017), include:
(a)
increasing sugar production and productivity through the implementation of an industry
mechanization programme to address labour supply challenges and to mitigate against the
impact of weather variability; and
(b)
increasing capital investment in field and factory to improve operational efficiencies
including factory upgrades to ensure that, at a minimum, sugar factories can fully selfgenerate electricity during the crop seasons.
1.17
Improvements in productivity will also be driven by implementation of findings emerging from
ongoing research undertaken by GuySuCo in collaboration with the West Indies Cane Breeding Centre.
These include introduction of improved:
(a)
varieties - covering areas related to increased yields, suitability for mechanical harvesting,
weed control characteristics, etc.;
(b)
pest, disease and weed control methods; and
(c)
plant nutrient, soil and land preparation/management systems.
1.18
GuySuCo has also commenced implementation of a new production system which involves
elimination of the fifth ratoon. In addition to achieving an improvement in yield, research findings have
indicated that elimination of the fifth ratoon will result in cost savings for the industry.
1.19
The total investment sum required to achieve the targets identified in the Strategic Plan is estimated
at $40 mn. Earlier in 2014, GOGY provided GuySuCo with $30 mn. Further details of the issues being
addressed by GuySuCo within the framework of the Strategic Plan are presented in Annex 2 to
Appendix 1.2.
Outlook
1.20
In addition to productivity enhancements within the industry GOGY recognises that, given lower
price forecasts (World Market US¢22/lb and EU Market US¢19-25/lb) and a reduction in demand from the
EU, profitability/sustainability of the sugar industry will be dependent on the extent to which the industry
is able to:
(a)
maintain marketing arrangements with traditional buyers in the EU;
(b)
establish new marketing arrangements within and outside the EU; and
(c)
exploit opportunities within CARICOM.
1.21
Early indications are that the measures being implemented by GuySuCo to improve productivity
are beginning to show positive results. Sugar output for the period January 1 to September 27, 2014 was
approximately 139,000 tn, up from 114,000 tn over the same period 2013. Latest estimates for 2014 (first
and second crop combined) are that production will be approximately 220,000 tn, an increase of 18% over
2013. A comparison of sugar production by estate for the period 2013 and 2014 (January to September) is
detailed at Table 1.3. The main contributors to improved performance in 2014 are related to:
-7(a)
Skeldon Estate - production of sugar as at the end of September 2014 registered an increase
of approximately 76% over the corresponding period in 2013 largely on account of
improved operations at the Skeldon factory.
(b)
East Demerara Estates - during the first crop of 2014 GuySuCo introduced mechanical
harvesting (two mechanical harvesting units) on its East Demerara Estates. As a result, for
the first time in six years, all mature canes on those estates were harvested resulting in a
significant (approximately 58%) increase in sugar output.
TABLE 1.3: COMPARISON OF SUGAR PRODUCTION BY FACTORY IN 2013 AND 2014
(JANUARY TO SEPTEMBER)
Estate
Skeldon
Albion
Rose Hall
Blairmont
East Demerara
Wales
Uitvlugt
Total
Period
Jan. 1 – Sept. 27,
Jan. 1 – Sept. 27,
2014
2013
21,177
12,046
28,634
29,206
19,560
17,224
23,046
17,130
20,644
13,076
16,013
16,598
9,856
8,983
138,930
114,263
Variance
Tonnes
9,131
(572)
2,336
5,916
7,568
(585)
873
24,667
%
75.80
(1.96)
13.56
34.54
57.88
(3.52)
9.72
21.59
1.22
This improvement in sugar industry output in 2014 has already impacted favourably on the
Guyanese economy with the Bank of Guyana (BOG) reporting 3.5% growth for the first half of 2014, and
projecting growth of 4.5% for the year as a whole. The BOG indicated that growth was largely driven by
a rebound in sugar production and continued good performance of the rice sector – which, as indicated
earlier, receives significant support through D&I systems maintained by GuySuCo.
1.23
GuySuCo expects, largely through investments in mechanised production and harvesting systems,
to increase sugar yield per ha (from an industry average of 4.1 tsh in 2013 to 6.512/) and sugar production
to approximately 350,000 tn by 2017 in keeping with production targets in Table 1.4 below. Based on the
actual volume of sugar produced to date (see Table 1.3 above), GuySuCo is on track to achieve the 2014
target of 220,000 tn. The area under sugar cane is expected to progressively increase from approximately
50,000 ha in 2013 to 54,000 ha in 2017. The increase in area under production will largely be as a result
of bringing back, into full production, lands at Skeldon and Uitvlugt which were taken out of production
given ongoing factory (Skeldon) and labour availability (Uitvlugt) challenges. Mechanised harvesting will
also reduce the percentage of carry-over13/ canes. Over the past decade, carry-over canes have been a major
contributor to low yields.
12/
13/
Over the period 2002-2004 GuySuCo was able to realise tsh of over 6.5.
Refer to Figure 5 in Appendix 1.2.
-8-
TABLE 1.4: SUGAR PRODUCTION TARGETS 2014 TO 2017
Year
Area Harvested (ha)
Sugar (tn)
Increase over previous year (tn)
Actual
2013
45,963
186,801
-
2014
49,422
220,000
33,245
Projected
2015
2016
50,980
52,996
245,000 300,000
25,000
55,000
2017
54,121
350,000
50,000
1.24
Mechanical production and harvesting has proven to be effective in overcoming the labour related
challenges confronting the industry. As a result, GuySuCo intends to continue its programme of land
preparation to facilitate mechanised operations. As indicated in Table 1.5, GuySuCo has converted
approximately 31% of lands under production for mechanical production and harvesting. A further 6,000
ha are targeted over the next three years. The focus will be on Albion, Rose Hall and Uitvlugt.
TABLE 1.5: AREA UNDER MECHANICALLY FRIENDLY LAYOUTS
AS AT JUNE 30, 2014
Estate
Skeldon
Albion
Rose Hall
Blairmont
East Demerara
Wales14/
Uitvlugt
Total
Area under
Cultivation
(Hectares)
8,902
9,616
6,688
5,808
7,681
3,356
6,005
48,056
Area in Mechanically Friendly Layout
Hectares
5,216
974
375
1,277
5,970
0
980
14,792
%
58.6
10.1
5.6
22.0
77.0
0.0
16.3
30.8
LINKAGE OF PROJECT TO CDB’S COUNTRY AND SECTOR STRATEGY AND
POVERTY GOALS
1.25
In March 2013, CDB’s Board of Directors (BOD) approved the Guyana Country Strategy Paper
2013-2017. The Strategy focuses on critical development outcomes linked to CDB’s strategic objectives,
and highlights the need for CDB to assist Guyana in addressing low sugar cane productivity and sugar
yields through improvements in the production and harvesting systems. Interventions in the sugar industry
in Guyana are linked to the following strategic objectives as defined in the Strategy Paper:
(a)
14/
Promoting broad-based economic growth and inclusive social development:
(i)
improved access to and quality of social and economic infrastructure;
(ii)
sustainable improvements in agricultural production and productivity; and
Approximately 45% of lands on the Wales Estate have been leased to private farmers and in general this estate does not
experience the labour-related challenges which have plagued the rest of the industry.
-9(b)
Supporting environmental sustainability and disaster risk management (DRM) - enhanced
protection and sustainable management of natural resources and reduced vulnerability to
natural hazards.
LESSONS LEARNT AND INCORPORATED INTO DESIGN
1.26
The proposed Project is the third CDB intervention in the sugar industry in Guyana. The most
recent being the Skeldon Sugar Modernisation Project (SSMP). The SSMP is a $119.3 mn project
financed jointly by GOGY, GuySuCo and CDB. CDB’s financing15/ of $28.2 mn was approved by CDB’s
BOD in July 2003 and the SSMP was scheduled to be implemented over a 53-month period ending in the
last quarter of 2007.
1.27
The SSMP was affected by several factors which negatively impacted implementation
performance. The new factory was commissioned in 2008 and a combination of factors, including faulty
equipment/equipment installation, has compromised operations for several years. For the CDB-financed
component, the most significant challenge was unseasonably heavy rainfall (see Figure 2) which negatively
impacted the number of days available for the conduct of field activities.
FIGURE 2: RAINFALL SKELDON ESTATE 2003-2013
2500
2000
Rainfall (mm)
1500
1000
500
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
1.28
The revised date for completion of the Project is December 2014. Meanwhile GuySuCo, assisted
by independent consultants, has developed a plan to address design and equipment related issues which
negatively impacted operations at the new factory. Implementation of recommended measures is on-going
and is expected to be completed in time for processing of canes during the first crop of 2015. Measures
implemented to date have resulted in a significant improvement in factory performance in 2014. See
Appendix 1.4 for more details on the SSMP.
15/
CDB financing was focused on the agricultural component of the project and included major earth works (water storage,
drainage, irrigation and cane transport systems, estate roads and aqueduct systems, etc.). Given soil conditions in the project
area, implementation was compromised by heavy rainfall/water logging.
- 10 1.29
The proposed Project builds on lessons learnt by CDB in financing the on-going SSMP, and CDB’s
general experience in the design and implementation of infrastructure projects. Some specific lessons learnt
include:
1.30
(a)
land preparation for the production of sugar is a specialist activity necessitating the use of
appropriate technical skills and equipment;
(b)
the soils in sugar cane growing regions in Guyana are predominantly heavy clays with
attendant swelling and high water retention capacity. The workability of those soils is
accordingly compromised during the heavy rainfall events. Accordingly, special attention
must be placed on factors related to equipment power rating, overall weight and weight
distribution, and the time available in any given year to execute infrastructure works; and
(c)
the need for GuySuCo’s Head Office to play a critical role in overseeing activities across
the industry and to maintain overall responsibility for reporting on activities undertaken at
the estate level.
The design of the proposed Project addresses these considerations as follows:
(a)
intervention areas are geographically distinct and separate (see map at Appendix 1.5). This
will reduce the probability that rainfall will impact concurrently in both geographical
zones, mitigating its potential effect on the project outputs/outcomes;
(b)
technical specification of equipment identified for purchase under the Project takes into
consideration the prevailing soil types and heavy rainfall characteristics of sugar producing
areas in Guyana. It is important to note, however, that the nature of the works contemplated
under this Project requires significantly less earth works than that undertaken under the
SSMP. Unlike the case with the SSMP, work will be confined to existing sugar cane fields
and will not involve the construction of new structures or work on previously undeveloped
areas. Furthermore, GuySuCo has, over the past five years, prepared approximately
13,000 ha of land into machine friendly layouts (Broad English beds), demonstrating their
capability to execute the works under the proposed Project which targets 2,500 ha over a
period of three years;
(c)
execution of field works will be programmed for the traditional dry season and adjusted to
reflect the downward trend in available “opportunity days”. The number of “opportunity
days” per year for the execution of works is accordingly conservatively estimated at 80;
and
(d)
the Project will utilise GuySuCo’s Head Office based monitoring and reporting systems –
with the ultimate responsibility for reporting to CDB residing at the Head Office level.
RATIONALE
1.31
The sugar industry plays a critical role in Guyana’s social and economic development including the
provision of important environmental services through the D&I system maintained by GuySuCo. Planned
changes to the EU SP make it imperative that measures be instituted to address the challenges contributing to
the industry’s decline, in particular those which have reduced the cost efficiency of sugar production. Among
the most pressing challenges are: (a) unreliable supply of labour for sugar cane production and harvesting as
a result of competition from other sectors and the general reluctance of persons to be engaged in labour
intensive aspects of sugar cane production; and (b) net reduction in “opportunity days” available for the
- 11 conduct of field operations as a consequence of climate variability. Evidence in Guyana, and the sugar
industry worldwide, suggests that both these challenges can be addressed by investment in locally appropriate
mechanisation of production and harvesting, as well as requisite changes in land preparation practices and
worker capacity upgrading.
2.
PROJECT DESCRIPTION
PROJECT OUTCOME
2.01
The development outcome is improved productivity of sugar cane cultivation and sugar production
on selected estates in Guyana. The Design and Monitoring Framework and Key Indicators are presented
at Tables 2.1 and 2.2.
PROJECT DESCRIPTION
2.02
The proposed Project is part of an overall GOGY/GuySuCo programme which seeks to improve
the sustainability of the sugar industry in Guyana. Over the period 2014-2017, GOGY/GuySuCo will be
investing in excess of $30 mn into the programme which will, among other things, result in increased
mechanisation of sugar production and harvesting; and improved efficiency (including energy efficiency)
of factory operations and general sugar industry production infrastructure. A key output of the programme
is the preparation of 6,000 ha of sugar cane fields in a mechanically friendly layout of which this Project is
accounting for 2,500 ha.
2.03
Interventions under the proposed Project will be focused on Uitvlugt (Demerara Region) and Albion
and Rose Hall (Berbice Region). Uitvlugt Estate currently experiences the most acute labour supply shortage
in the industry. Meanwhile, Albion and Rose Hall, notwithstanding their relatively high productivity are also
experiencing labour supply challenges which, if left unattended, could seriously erode performance on those
estates. As indicated (Table 1.5) both Albion and Rose Hall have a relatively low percentage of the cultivatable
land in mechanically friendly layouts. The geographic spread of interventions is expected to mitigate the
impact of weather variability (unseasonal rainfall) on the achievement of project outcomes. It is deemed
unlikely that during the traditional dry seasons, the time of year generally suited for land preparation, heavy
rainfall events will simultaneously impact both western and eastern parts of Guyana.
2.04
The provision of equipment for full-mechanical harvesting will be confined to Uitvlugt given that
the Uitvlugt factory is the only one (of the three in the project intervention areas) with the facilities for
handling mechanically harvested canes. Interventions at all estates will also facilitate improved drainage
of sugar fields.
TABLE 2.1: DESIGN AND MONITORING FRAMEWORK
Narrative Summary
Project Impact:
Performance Targets/Indicators
By December 31, 2022:
A sustainable sugar industry in Guyana.
Foreign exchange earnings from sugar
increases from $108 mn in 2013 to
$207 mn.
Data Sources/Reporting
Mechanisms
1.
2.
3.
4.
GuySuCo shows consistent net surpluses.
National Trade Reports.
Country Economic and Industry
Reports.
GuySuCo Annual Reports.
Reports of the Sugar Association
of the Caribbean.
Use of Information
Assess the socio-economic
contribution of the Project.
Assumptions
Assumptions for Achieving Goal:
1. GOGY’s economic policies continue to
be favourable to the sugar industry.
2. Decline in market prices associated with
planned EU market reforms in 2017 is
not worse than analyst projections.
3. No significant depreciation in the value
Project Outcome:
Improved
productivity
and
cost
efficiency on selected estates in Guyana.
1. Cost of sugar production reduced:
(a) at Uitvlugt to less than US¢30/lb
from US¢36.6/lb in 2013;
(b) at Albion to less than US¢25/lb from
US¢25.24/lb in 2013; and
(c) at Rose Hall to less than US¢25/lb
from US¢31.86/lb - in 2013.
of the Euro relative to USD.
Assumptions for Achieving Outcome:
1.
2.
Sugar Estates’ Annual Report
2. Report to stakeholders on
the efficacy of the
intervention.
2. 2,400 ha at Uitvlugt mechanically
harvested.
3. Increased yield – tsh:
(a) at Uitvlugt to 5.9 from 3.2 in 2014;
(b) at Albion to 7.06 from 5.8 in 2014;
and
(c) at Rose Hall to 6.47 from 4.3 in
2014.
3. Maintenance issues manageable.
5. Timely disbursement of GOGY’s
financial contribution to GuySuCo for
capital investment in keeping with
priorities defined in the GuySuCo
Strategic Plan.
(b) at Albion 3.26
(c) at Rose Hall 5.98
(a) at Albion and Rose Hall - 500 ha
each; and
(b) at Uitvlugt 2,400 ha.
2. The industrial climate is favourable to
full optimisation of “opportunity days”.
4. Minimum of 80 “opportunity days” per
year for the life of the Project.
2. Reduction in Factory Energy Use Index
(FEUI) - kWh/tn of cane crushed
(a) at Uitvlugt 3.27
1. Mechanical production of canes
undertaken on 3,400 ha:
1. GuySuCo undertakes capital works
(field and factory) across the industry.
1.
2.
3.
Reports of Project
Management Team.
Project Supervision Reports.
Reports of Engineering
Consultant.
6. Improved operations at the Skeldon
factory.
- 12 -
By June 30, 2016:
Intermediate Outcomes
1. Assess
progress
to
achieving
improved
productivity and cost
efficiency.
TABLE 2.1: DESIGN AND MONITORING FRAMEWORK (Cont’d)
Narrative Summary
Project Outputs:
Mechanical sugar production and
harvesting equipment and machinery in
place
Data Sources/Reporting
Mechanisms
Performance Targets/Indicators
1. 2,500 ha of land in project target areas
developed to facilitate mechanical
production and harvesting of sugar
cane by December 2017;
Lands on project targeted estates
prepared in Broad English beds.
2. 86 pieces of machinery/ equipment
procured by December 2015;
Capacity-building of machine/
equipment operators.
3. 40 machine/equipment operators
trained by March 2016;
Factory energy efficiency
improvements.
4. Results of energy efficiency audits
implemented by June 30, 2016;
Gender Integration Action Plan
Project Inputs:
5. Plan developed by December 31, 2015.
Investment By Source
($’000)
CDB
GOGY/
TOTAL
GuySuCo
Item
6,887
-
6,887
Land Preparation
Factory Energy Efficiency
Improvements
Training of Employees
-
2,400
2,400
-
990
990
-
218
218
Project Management
-
223
223
33
4
37
565
52
665
-
1,230
52
7,537
4,500
12,037
Gender Integration Action Plan
Physical and Price Contingencies
Finance Charges
TOTAL COSTS
Assumptions
Assumptions for Achieving Outputs:
1. Track implementation
progress of components.
1. No significant delays in procuring
equipment
2. Monitor project
management effectiveness.
2. Equipment performs within technical
specifications.
Linking Input to Output:
1. Monthly Progress Reports.
2. CDB staff supervision and site
visits.
3. CDB/GOGY
disbursement
records.
4. Bi-Reports on Investments Cost.
5. Reports by Consultants.
1. Track
implementation
progress of components.
project
management effectiveness.
1. No undue delay is experienced in
delivering services with respect to
procuring machinery and equipment.
2. Monitor
2. Cost
of various inputs are within
estimates and
commitments by
participating entities.
3. Minimum of 80 “opportunity days” per
year for the life of the Project.
4. Timely
resources.
provision
of
counterpart
- 13 -
Machinery and Equipment
1. Reports of Project Management
Team.
2. GuySuCo Annual Reports.
3. Project Supervision Reports.
Use of Information
TABLE 2.2: KEY RESULTS INDICATORS
Development Impact
1. Foreign exchange earnings from sugar (USD
mn).
2. GuySuCo’s Net Financial Position
Project Outcome Indicators
1. Cost of sugar production (US¢/lb)
(a) Uitvlugt Estate
(b) Albion
(c) Rose Hall
Intermediate outcomes
1. Increased yield - tsh
(a) Uitvlugt Estate
(b) Albion
(c) Rose Hall
4. Lands at Uitvlugt mechanically harvested. (ha)
Project Output Indicators
1. Land in project target areas developed to
facilitate
mechanical
production
and
harvesting of sugar cane.
(a) Uitvlugt Estate
(b) Albion
(c) Rose Hall
2. Machinery/Equipment procured
3. Factory Energy Efficiency Improvements
completed.
(a) Improvements to electrical systems,
diesel generator, electric drives, steam
generation pumps, compressed air
system and lighting system.
4. Gender Integration Action Plan completed
2015
2016
2017
Loss
2019
2022
207
Frequency of Reports
GuySuCo Annual Report.
Surplus
Surplus
GuySuCo Annual Audited
Financial Statements
GuySuCo Annual Report.
36.6
25.24
31.86
<34
<25
<30
2014
1st Crop
3.2
5.8
4.3
2,085
4,391
≈6.0
≈7.0
≈6.5
4,611
900
0
0
0
1,400
100
100
500
1,900
400
400
1,400
2,400
500
500
2,400
900
0
0
No
1,150
100
100
Yes
2,150
400
400
2,400
Yes
Yes
<30
<25
<25
Responsibility for
Data Collection
General
Manager,
Agricultural Services
General Manager
General
Manager,
Agricultural Services
Estates’ Annual Report.
1. Reports of Project
Management Team.
2. GuySuCo Annual Reports.
3. Project Supervision Reports.
Project
(PC)
Coordinator
- 14 -
(a) Uitvlugt Estate
(b) Albion
(c) Rose Hall
2. Total energy savings resulting from Factory
Energy Efficiency Improvements (kWh)
3. Mechanical production of canes (ha)
Baseline
2014
1st
2013
Crop
108
- 15 2.05
Key components of the Project are:
(a)
Enhancing sugar cane production and harvesting through:
(i)
(ii)
2.06
purchase of machinery and equipment to facilitate:
(aa)
the preparation of sugar cane fields into mechanically-friendly
configurations at all three Estates (Albion, Rose Hall and Uitvlugt);
(bb)
semi-mechanical planting, mechanical weed control and fertilising of
sugar cane at the three Estates; and
(cc)
mechanical harvesting of sugar cane at Uitvlugt.
land preparation for revised field layouts at the three Estates. This includes
associated drainage modifications;
(b)
Factory energy efficiency improvements at Albion, Rose Hall and Uitvlugt in keeping with
the recommendations of an independent energy audit conducted on GuySuCo factories in
December 2013.
(c)
Training of employees in the operation, maintenance and repair of machinery and
equipment. Training will be conducted by equipment suppliers, on GuySuCo estates
currently involved in mechanical production and harvesting operations, and at GuySuCo’s
training facility.
(d)
Gender equality and integration: This will involve consulting services to GuySuCo to
assess gender integration issues in the sugar industry and develop an action plan with
gender responsive measures to facilitate access and the transitioning of women and men
into non-traditional occupations as a result of the mechanisation of sugar cane production
and harvesting. The Terms of Reference (TOR) for undertaking the Gender Integration
Action Plan is provided at Appendix 2.1.
(e)
Project Management Services.
Appendix 2.2 provides a more detailed description of the Project.
3.
FINANCING STRUCTURE AND COSTS
3.01
The Project is estimated to cost $12.037 mn which will be financed with resources from CDB and
GOGY. A physical contingency allowance of 5% has been applied to the cost of field machinery and
equipment. This is deemed adequate given that the specification of the equipment has been established as
part of project preparation and the prices are readily known. The cost estimates are acceptable to CDB.
Table 3.1 presents the summary of estimated costs and sources of financing for the project components
while detailed information on the cost estimates, phasing and financing is presented at Appendix 3.1.
- 16 TABLE 3.1: SUMMARY PROJECT COSTS AND FINANCING
($’000)
GOGY/
Item
CDB
GuySuCo TOTAL
1. Machinery and Equipment
6,887
6,887
2. Land Preparation
2,400
2,400
3. Factory Energy Efficiency Improvements
990
990
4. Training of Employees
218
218
5. Project Management
223
223
6. Gender Integration Action Plan
33
4
37
7. Physical and Price Contingencies
565
665
1,230
8. Finance Charges
52
52
T
Total Project Cost
7,537
4,500
12,037
h
Percentage Contribution (%)
62.6
37.4
100
is
i
n
This information is withheld in accordance
with one or more of the exceptions to
f
disclosure under the Bank’s Information
Disclosure Policy.
o
r
m
3.02
The proposed financing of the Project isatas follows:
i
(a)
CDB financing totaling $7.537 mm comprising:
o
(i)
a loan of $0.7 mn, fromn CDB’s OCR;
is
(ii)
a loan of $6.8 mn, fromwCDB’s SFR, and
(iii)
a grant of $37,000 fromit CDB’s SFR.
h
h
el mn of the total counterpart resources. This will finance
(b)
GOGY counterpart funding of $4.5
d
all costs associated with the planting
of cane, factory energy efficiency improvements and
i
project management.
n
3.03
The proposed OCR portion of the Loana will be repayable in 17 years, following a grace period of
5 years. A commitment charge of 1% p.a. on cthe undisbursed balance of the OCR Portion of the Loan,
commencing from the 60th day after the date cof the Loan Agreement, will also be payable. The OCR
o The SFR portion of the Loan is proposed at the Group 3
interest rate which is variable, is currently 3.95%.
r period of 10 years, at a 2% interest rate.
terms of a 30-year repayment, inclusive of a grace
d
a
This information is withheld in accordance
with one or more of the exceptions to
n
disclosure under the Bank’s Information
c Disclosure Policy.
e
w
it
h
o
n
e
o
r
m
o
r
- 17 4.
PROJECT VIABILITY
TECHNICAL ANALYSIS
4.01
In preparation of the Project, CDB Staff, assisted by a consultant, reviewed GuySuCo’s Strategic
Plan 2013-2017, the sugar production targets and the proposed activities to be implemented, and the
capacity of the factories on the project targeted estates to efficiently process sugar cane. This assessment
satisfied staff that the Strategic Plan adopts a pragmatic approach to addressing the challenges faced by the
sugar industry. Measures detailed in the Plan are also consistent with performance indicators agreed to
between the EU and GOGY for the provision of EU support to Guyana within the framework of the EUfinanced “Accompanying Measures for Sugar”. Given that over the past five years GuySuCo has
successfully converted approximately 26% of the area of sugar cane lands to mechanically friendly layouts,
CDB staff are satisfied that the Company has the capacity and systems to effectively execute the works.
By directly contributing to a programme conceived by industry stakeholders in Guyana, using existing
systems to execute the Project, and by focusing on results, the design of the proposed Project is consistent
with the objectives of the Paris Declaration on Aid Effectiveness and the Accra Agenda for Action (2008).
4.02
Mechanical harvesting operations under the proposed Project will be confined to the Uitvlugt
Estate. Currently, the Uitvlugt Estate is the only one, among the three intervention estates, with the capacity
to process mechanically harvested sugar cane. In addition to facilitating mechanical harvesting, the
preparation of lands into ‘mechanically friendly’ layouts will improve the efficiency of cane production
(improve yields at a reduced cost), as well as sugar cane harvesting using manual and semi-mechanical
systems.
4.03
GuySuCo’s investment in labour-saving approaches to sugar cane production and harvesting is
supply driven, based on the need to fill the gap between labour requirements and supply. Overall, however,
the use of mechanical production and harvesting systems is in keeping with changes in global sugar
production and harvesting where, even in countries with an abundant supply of cheap labour, the industry
is embracing mechanisation, given concerns related to worker safety and cost efficiency. The
mechanisation programme not only facilitates harvesting, but a number of crop husbandry activities. These
include semi-mechanical planting, mechanical fertilising and mechanical application of herbicides.
Land Preparation
4.04
Conversion of fields to a more machine-friendly layout is a necessary pre-condition to mechanical
production and harvesting. GuySuCo has three traditional field layouts: English Beds, Dutch Beds and
conventional Ridge and Furrow, all of which are unsuitable for mechanical production and harvesting due
to their limited size (maximum 10 m in width), and presence of multiple in-field drains. Technical analysis
and GuySuCo’s own experience in mechanical sugar cane production and harvesting, has determined that,
given the existing configuration (including D&I and cane transport infrastructure), the most cost-effective
method of land preparation to facilitate mechanical production and harvesting is to convert existing fields
into Broad English Beds (450 m long by 30 m wide and a design slope of 3.5%). No substantial changes
in the main estate D&I, and transport canal layout are required. Broad English beds are also quite conducive
to manual and semi-mechanical harvesting.
4.05
The assessment also made recommendations as it relates to machine and equipment specifications,
given the prevailing conditions (soil type and weather) and production methods on GuySuCo estates. In
general, the equipment identified for purchase under the Project is the better performing equipment
currently being used in the preparation of approximately 13,500 ha of land already converted to Broad
English Beds, over the past five years. The most significant considerations are weight/weight distribution
- 18 of machinery and equipment, and the capacity of extractor fans on mechanical harvesting equipment. A
critical piece of equipment required for the construction of Broad English beds is a ‘Long Boom’ Excavator.
In general, however, ‘Long Boom’ Excavators, have limited use outside the sugar industry, and as a result
are not readily available through private contractors. The equipment proposed will appropriately address
the issue of mechanical sugar cultivation and harvesting.
Factory Energy Efficiency Improvements
4.06
Achieving the objective of reducing the cost of production will require, in addition to investments
at the field and factory level, a reduction in the cost of factory operations. GOGY/GuySuCo has recognised
that energy efficiency is a powerful and cost effective tool for achieving a sustainable energy future and
reducing the need for investment in energy infrastructure. GuySuCo’s factories are designed to generate
power for the entire operation from bagasse fuel, however poor operational efficiency and excessive use of
plant equipment have resulted in a high amount of diesel consumption. GOGY is presently pursuing a Low
Carbon Development Strategy which is being implemented by the Office of Climate Change (OCC). The
OCC commissioned Energy Audits at all the sugar estates to identify opportunities for reducing energy
consumption in GuySuCo’s factories. These audits were undertaken, in 2013, by The Energy and Resource
Institute (TERI), India. For each factory, the audit recommends a prioritised list of short and medium-term
measures which will reduce its high diesel consumption. CDB’s staff have reviewed, and have had
technical discussions with GuySuCo on, the findings of these energy audits and are satisfied with the
methodology and recommendations proffered. GuySuCo has committed to, and will fund the
implementation of all the recommended measures by the second quarter of 2016. TERI audits anticipate
potential energy savings of 4.35kWh, 4.34kWh and 7.91kWh, per metric tn of canes crushed, at Albion,
Rose Hall and Uitvlugt respectively.
4.07
As recommended by TERI audits, the Project will address improvements to the electrical systems,
diesel generator, electric drives, steam generation pumps, compressed air system and lighting system, at
each of the three sugar plants. Table 4.1 below details, for each factory, the main features of the findings
of TERI audits. Given the nature and accuracy of audits, the projected energy savings targets under the
Project are estimated at 75% of the potential energy savings predicted by the audits.
- 19 -
TABLE 4.1: MAIN FEATURES OF FINDINGS OF TERI ENERGY AUDITS (2013)
Parameter
Baseline:
Annual Energy Consumption (‘000 kWh/yr)
Cane Crushed (tc) (‘000 tn/yr)
Sugar produced (ts) (‘000 tn/yr)
Quality Ratio (tc:ts)
Factory Energy Use Index (FEUI)
(kWh per tn of Cane crushed)
Factory Energy Performance Index (FEPI)
(kWh per tn Sugar produced)
Energy Intervention:
Potential Annual Energy Savings (‘000 kWh/yr)
Potential Reduction in FEUI
Adjusted Reduction in FEUI
(75% of potential reduction)
Project Projections (Targets):
Projected FEUI
(kWh/tn Cane crushed)
Projected FEPI*
(kWh/tn Sugar produced)
Albion
Rose Hall
Uitvlugt
14,931
568
54.0
10.52
26.29
8,469
424
34.4
12.31
19.97
5,039
230
18.9
12.19
21.91
276.5
245.9
267.1
2,473
4.35
3.27
1,842
4.34
3.26
1,833
7.97
5.98
23.02
16.72
15.93
242.2
205.8
194.2
* If Quality Ratios change as a result of non-energy related factors, then the projected FEPIs can be adjusted accordingly.
4.08
Appendix 4.1 summarises the findings of TERI energy audits for each sugar factory, by presenting
tables which list the recommended measures/corresponding costs, the resulting savings potentials, and the
timeframe for implementation by GuySuCo.
Training of Employees
4.09
Mechanical production and harvesting of sugar cane is a specialist activity requiring appropriately
skilled machine and equipment operations. Accordingly, the Project allows for the continuous training of
employees in the operation, maintenance and repair of machinery and equipment. GuySuCo has established
a training plan which includes the certifying of operators and maintenance personnel.
FINANCIAL ANALYSIS
- 20 ECONOMIC ANALYSIS
4.27
The sugar industry in Guyana has a relatively high local value added. Along with gold and rice, it
is a major earner of foreign exchange17/ and provides significant socioeconomic benefits and environmental
and social services. The industry contributes to economic growth and provides direct employment for
approximately 16,000 persons in various capacities including cultivation, harvesting, sugar processing,
research and administration and commercial services. GOGY, as the major shareholder in the parastatal
GuySuCo, is committed to the continuation of the sugar industry. It provides financial support to assist the
industry to remain durable and to continue to deliver sustainable benefits to the Guyanese economy and
society even in times of GuySuCo’s marginal financial performance. This commitment has been sustained
based on the industry’s direct and indirect benefits to GOGY. These include contribution to economic
growth; increased public revenues (through taxes and levies); provision of economic linkages; net foreign
exchange earnings; increased socio-economic returns; and environmental services provided by GuySuCo
in managing the D&I system to mitigate flood hazards in the coastal plains.
Incremental Economic Rate of Return
4.28
The economic viability of the Project has been established given its ERR of 19%. This has been
estimated through an incremental analysis based on “with” and “without” project scenarios. The Project is
expected to address the problem of continuing decline in workers available for cultivation and harvesting
of sugar cane and will contribute to increased harvested production and additional sales of sugar and
molasses. In addition, it will also contribute to the reduction of harvesting costs per tn. “Without” the
Project, the sugar cane harvested would continue to decline at the project estates and negatively impact the
industry’s performance in achieving sugar output targets. A summary of the ERR calculation is presented
at Appendix 4.6 and the Notes and Assumptions to the Economic Analysis are provided at Appendix 4.7.
Sensitivity Analysis
4.29
The ERR has been subjected to sensitivity tests related to increased capital and operating costs, a
reduction in benefits and delays in implementation. Given its incremental nature, the ERR has remained
robust. The ERR is most elastic18/ to changes in sugar sales although there is significant buffer as the
switching value for this variable is in the region of 17%. In the other tests related to variations in capital
and operating costs the ERR shows definite signs of inelasticity with switching values over 30%. However,
major risks to the industry relate to: unfavourable weather conditions for the mechanical reaping of canes;
the unavailability of labour; and the market price of sugar. Given lessons learnt, the ERR’s sensitivity was
also tested for delays in implementation. This showed a reduction in the ERR to 15% and 10% for delays
of one year and two years, respectively. The results of the sensitivity analysis are summarised in Table 4.4.
17/
18/
Foreign exchange gains are based on direct foreign sales of 80% of production, and savings of 20% of production for local
consumption.
Elasticity of 1.3.
- 21 TABLE 4.4: SENSITIVITY ANALYSIS SUMMARY
Scenarios
Base Case
10% reduction in benefits (prices and output)
25% reduction in sugar revenues
20% increase in capital costs
20% increase in operating costs
1 year’s delay in implementation
2 year’s delay in implementation
Resultant
ERR (%)
19
14
8
14
15
15
10
Switching Value
(%)
15
17
32
35
-
DOMESTIC RESOURCE COST
4.30
Projects and programmes that enhance sugar cane cultivation and sugar manufacturing have the
potential to earn foreign exchange but may not be always financially profitable. Consequently, given the
importance of foreign exchange to the economy, such operations may, at times, need government’s
protection and or support in meeting operating and capital costs. In such cases, it is necessary to
demonstrate the level of domestic resources that would earn a unit of foreign exchange at the CDB hurdle
rate of 12%. The Project’s Domestic Resource Cost (DRC) has been estimated as 92 to 1 and the DRC
ratio (DRCR) is 0.44. Since the Official Exchange Rate (OER)19/ is given as 206 to 1 and the Shadow
Exchange Rate (SER) is expected to be approximately GYD210 to USD1, the DRC and the DRCR
estimates20/ indicate that it is economically viable for GOGY to continue subsidising and protecting the
cultivation and harvesting of sugar cane and processing of sugar for export and local consumption. The
Project’s incremental results indicate that the marginal cost is still below the average cost and there is further
room for expansion to capitalise on foreign exchange gains while paying strict regard to the field and factory
productivity.
4.31
Based on sensitivity tests using various discount rates, the DRCR is expected to be sound given the
high exports sales complement and the potential to produce internally generated energy and other byproducts within the sugar factories whose productivity is expected to be enhanced by the Project. The
DRCR approaches the critical value of 1.0 if the discount rate falls below 3%.
SOCIAL, GENDER AND ENVIRONMENTAL ANALYSIS/RISKS AND SAFEGUARDS
4.32
The Project is classified as category “C” under CDB’s Environmental and Social Review
Procedures as it has little potential for adverse environmental or social impacts or social risks. An
Environmental and Social Impact Assessment is therefore not required.
Social and Gender
4.33
The social impacts of the proposed Project are expected to be generally positive. The sugar
industry, as the largest employer in the country, has historically been highly labour intensive, requiring
large and regular labour supply, mainly men, for planting and harvesting during the two crop seasons.
Although labour cost still accounts for about 60% of GuySuCo’s operating expenses, recent changes in the
Guyanese economy have been impacting the availability of labour, resulting in labour turn out rates of about
50% for planters and harvesters industry-wide as the sugar industry now has to compete for workers with
19/
20/
The exchange rate was liberalised in 1991. There is supposed to be free trading without restriction.
This is based on a favourable internal rate of foreign exchange generated and the industry’s comparative advantage.
- 22 others, such as the construction and gold industries21/. This situation has caused unreliable labour supply
on some estates and chronic shortages on others. The Project will address both current and future labour
supply constraints at these estates without the displacement of workers.
4.34
In addition to the production of sugar, GuySuCo, as an entrenched social institution, provides a
variety of social and human development services to communities contiguous to the estates, and technical
assistance and credit services to private sugar cane farmers. Therefore, by contributing to the improved
operational efficiency of GuySuCo, the Project will also help in enhancing the quality of life of community
residents.
4.35
It is expected that in the next few years, as the conversion to mechanisation is embedded in the
industry, the gender division of labour in the industry will change. This will also raise the importance of
improving the productivity of its current male work force and expanding opportunities for the employment
of women. It is observed that in the estates where the mechanisation process is more advanced, more
women are being employed in some of the traditionally male-dominated agricultural operations. At one of
the estates, for example, where no women were previously employed as planters, the introduction of semimechanical planting has resulted in ten females being employed as semi-mechanical planters. A similar
situation is expected to develop in the project estates, as the arduous manual planting and harvesting tasks
currently undertaken by men are replaced by labour saving equipment that could also be operated by
women. Therefore, increasing mechanisation could provide new employment opportunities in the industry
for women, resulting in increased incomes, improved working conditions and quality of life for them and
their families.
4.36
In this regard, the Company would need to systematically expand its current approaches to
integrating women into its workforce and to articulate a decent work strategy. GuySuCo prides itself as an
equal opportunity employer, and, in accordance with the country’s 1997 Prevention of Discrimination Act,
it is precluded from discriminatory practices (on the basis of one’s sex, for example) in its employment
activities. However, the Company does not yet have specific programmes to ease the entry of women into
traditionally male-dominated occupations. Lessons from other countries in the Region indicate that
effective access to these occupations by women is impeded by traditional gender occupational segregation
in the wider society 22/. Since the sugar industry employs a substantially large share of the country’s labour
force, the consultancy services provided under the Project to analyse the structure and factors that influence
occupational positions of men and women in the Company and develop an action plan to address this issue,
will among other things, lead to specific programmes by the Company to facilitate the transitioning of males
and females into non-traditional occupations and enhance gender equality in the industry.
4.37
Application of the Bank’s Gender Marker resulted in the Project being rated: Marginal Gender
Mainstreaming. The Project, is likely to make some contribution to gender equality but due to its short
implementation period, this will be limited. Details of the Gender Marker analysis are provided at
Appendix 4.8.
Environmental Assessment
4.38
While the Project relates to agriculture, it involves the acquisition of equipment and the preparation
of existing fields already traditionally cultivated under sugar cane, to accommodate mechanical harvesting.
The Project is not anticipated to have any significant adverse environmental impacts on biodiversity, and/or
21/
22/
Labour turn out rates for these categories of workers in Albion, Rose Hall and Uitvlugt estates are 60%, 64% and 60%
respectively.
Jobs, Gender and Small Enterprises in the Caribbean: Lessons from Barbados, Suriname and Trinidad and Tobago, Carol
Ferdinand (Ed.), International Labour Organisation, 2001.
- 23 natural habitats. Land preparation is internal to existing fields and is not expected to incur any significant
negative natural hazard impacts and/or exacerbate the potential for flooding through substantive grade
changes. Existing main D&I canals will remain un-altered and current capacities for handling surface runoff
will be maintained. Any unlikely residual flooding/drainage impacts from preparation and transition
activities will be addressed through: (a) field-work operational management considerations; and (b) routine
post field-bed conversion, monitoring and maintenance. Apart from the foreign exchange directly earned
by sugar production, GuySuCo’s operations in D&I contributes significant benefits to national development
through both flood risk reduction and irrigation water resource management in the coastal plain where built
development and other non-sugar agriculture are also concentrated. The significance of GuySuCo’s
operational contribution to, and pivotal role in, facilitating overall national D&I should not be underestimated. The national development benefit provided by GuySuCo’s operations cannot and should not be
valued exclusively on sugar production output and/or the revenue generated from sugar sales. Further
detailed analysis of the importance of GuySuCo’s D&I is presented in Appendix 4.9.
4.39
Given observed climate variability trends, the land preparation and mechanisation envisaged by the
Project is a means of climate adaptation. A summary analysis of climate change impacts on Guyana’s
agriculture sector is presented in Appendix 4.10.
4.40
GuySuCo has an articulated “Environmental Policy” which emphasises pollution prevention, on its
lands and surrounding communities both from its cane cultivation and sugar manufacturing operations.
Through this policy, GuySuCo is committed to compliance with national legislation and defined
internationally acceptable standards. Under its environmental management system (EMS), and across its
operations, GuySuCo currently maintains a regimen of quarterly water quality testing and effluent
monitoring for: conservancy source water; D&I canals into and out of fields; well-water, as well as factory
inlet and outlet streams. Samples are sent to and checked for compliance by the Environmental Protection
Agency (EPA) from environmental and public health perspectives against EPA identified international
standards. GuySuCo adheres to the EPA monitoring requirements and is compliant with the standards
identified. There are strict conditional guidelines for aerial spraying and operational facilities for storage
and treatment of aerially applied, agrochemical wash-down.
4.41
Since 1996, GuySuCo has terminated wide-scale use of insecticides and pesticides and is
undertaking integrated pest management with biological control and physical methods such as flood
fallowing. GuySuCo is continuing work towards achieving ISO14001. GuySuCo implemented an
occupational health and safety policy which is consistent with the Guyana Occupational Safety and Health
Act, No. 32/1997c.
Climate Change and Climate Variability
4.42
Guyana experiences two wet and two dry seasons per calendar year. Wet seasons occur between
April to July and November to January. As a direct consequence of climate variability and possible
consequence of climate change, “opportunity days” available to workers in the industry has moved from
over 120 days to 80 days or less. In 2013, the Rose Hall Estate in East Berbice recorded 65 “opportunity
days”. Average annual total “opportunity days” per year and per crop across all estates from 2001-2013 is
presented at Appendix 4.11 and graphically plotted with trend-line analysis in Figure 4.1. From the data,
the trend between 2001 and 2013 has been a net decline in “opportunity days”. The reduction in
“opportunity days”, is negatively impacting both field and factory production operations. This is further
compounded for estates where the availability of field labour is also restricted. Climate adaptation therefore
demands an increase in locally appropriate technological interventions and operational management
measures to optimise sugar cane cultivation, harvesting and the production of sugar.
- 24 FIGURE 4.1: “OPPORTUNITY DAYS” ACROSS ALL ESTATES (2001-2013)
Avg. Annual "Opportunity Days"
250
200
150
100
50
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
1st Crop
2nd Crop
Total-1st & 2nd Crop
Linear (Total-1st & 2nd Crop)
Source: GuySuCo
SUSTAINABILITY AND RISKS
Maintenance
4.43
GuySuCo has reviewed its maintenance programme and have identified gaps in the skills set of
staff of the Maintenance Department. As a result GuySuCo has placed renewed focus on training of its
maintenance personnel. GuySuCo operates a staff training school for the maintenance of operations in the
field and factory where mechanics are trained to maintain and fix specialist equipment owned and operated
by the Company. A requirement for the procurement of new equipment will be for the supplier to provide
initial training to GuySuCo mechanics on the use and maintenance of the equipment. Thereafter, this
training will be integrated into the existing on-going staff training programme. GuySuCo will ensure that
the equipment purchased under the Project is maintained in keeping with the manufacturer’s
recommendations. It will be a condition of the Loan that GuySuCo submits to CDB a plan for the training
of its employees in the operation, maintenance and repair of the field machinery and equipment.
- 25 -
5.
RISK ASSESSMENT AND MITIGATION
Risk Assessment
5.01. The Project carries a variety of risks which can be categorised under the headings of financial,
implementation and operational risks. Various risk mitigation measures have been established to manage
these risks, as presented in Table 5.1
TABLE 5.1: SUMMARY OF MAJOR RISKS AND MITIGATION MEASURES
Risk Type
Financial
Description Of Risk
Revenue Risk – Changes to the EU
SP scheduled to be implemented in
2017 are expected to result in
increased supply of sugar and
downward pressure on price in the
EU, the main market for sugar
produced in Guyana. This could
negatively affect sales, as GuySuCo
may not be able to compete with
other sugar producers in the world
who are more cost efficient.
Financial
Credit
Financial
Foreign Exchange Risk – Risk of
losses due to adverse movements in
Euro, US and Guyanese dollar
exchange rates.
Human Resources – The industry is
currently experiencing labour
supply challenges due to continued
loss of trained staff (mainly workers
involved in sugar cane production
and harvesting) to other industries,
putting at risk the efficiency of
operations.
Weather and Climate Change –
Hazard events associated with
climate change and floods can ruin
cultivation, reduce access for
harvesters and labourers and reduce
sucrose content.
Plant and equipment maintenance –
Breakdown of plant and equipment
could cause higher operational costs
and negatively impact production.
Operational
Operational
Operational
Mitigation Measures
By continued investment in mechanisation, GuySuCo will aim to
improve its competitiveness in terms of sugar cane yields and
recoveries and administration efficiencies.
GuySuCo is leveraging its existing good relationship with a major
player in the global sugar industry to negotiate longer term supply
contracts in an attempt to maintain access to the EU market post 2017.
More reliance is being placed on supplying the CARICOM market,
given the fact that the CET (40%) on raw sugar sourced from extraregional sources allow the sales price to CARICOM to exceed prices
on the world market.
GuySuCo depends on GOGY to finance its operations and capital
programme. GOGY is committed to financing the sugar industry
which provides significant economic and social benefits. The
availability of financing is accordingly dependent on GOGY’s fiscal
situation.
GuySuCo is exploring options to mitigate such risk as part of its
ongoing contract negotiations with EU customers.
The mechanisation programme is a direct response to the loss of
labour supply challenges. In an effort to remain competitive GuySuCo
will continue to offer a range of salary and non-salary compensation
packages and increase expenditure on training.
GuySuCo understands its role in establishing and maintaining
drainage systems in support of its own production and for adjoining
lands. This is part of its environmental management programme.
Working with GOGY ministries/agencies GuySuCo will continue its
role in the implementation of measures aimed at effective
management of the D&I systems by other stakeholders.
Presently GuySuCo operates a staff training school for the
maintenance of operations in the field and factory. Mechanics are
trained to maintain and fix specialist equipment owned and operated
by the Company.
A requirement for the procurement of new equipment will be for the
supplier to provide initial training to GuySuCo’s mechanics on the use
and maintenance of the equipment. Thereafter, this training will be
integrated into the existing on-going staff training programme.
- 26 -
Risk Type
Implementation
6.
Description Of Risk
Mitigation Measures
Selection of suppliers with ability to produce spare parts and on-going
technical support.
Delay in implementation due to
weather related shocks could
negatively impact the realisation of
benefits.
Recent trends suggest an estimated 120 “opportunity days” for the
conduct of field operations per year. The implementation period for
the Project is, however, conservatively set at 80 “opportunity days”
per year.
BORROWER, EXECUTING AGENCY, PROJECT MANAGEMENT AND
IMPLEMENTATION
BORROWER AND EXECUTING AGENCY
6.01
GOGY is the Borrower and GuySuCo is the Executing agency.
The Borrower
6.02
For the purpose of financing general development in Guyana, GOGY, acting on behalf of the State,
is authorised under Section 3 (1) of the External Loans Act (Cap. 74:08) of Guyana (the External Loans
Act) to raise loans outside of Guyana of such sums not exceeding GYD400 bn in the aggregate, and such
further sums as may be necessary to defray the expenses of such loans. All sums borrowed under Section 3
(1) of the External Loans Act, and all interest and other charges payable on such sums, are a charge on the
Consolidated Fund of Guyana. The Minister responsible for Finance (the Minister) may, by order subject
to affirmative resolution of the National Assembly, increase this limit. As a condition precedent to first
disbursement of the proposed loan, CDB will need to be satisfied that the aggregate of all loans (including
the proposed loan) raised under this power does not exceed the limit imposed by Section 3 (1) thereof.
6.03
Any agreement between GOGY and CDB in respect of sums borrowed under this power must
be made in the name of Guyana and may be signed by the Minister or by any persons authorised in writing
by him in that behalf. A copy of every such agreement must be laid before the National Assembly as
soon as practicable after the execution thereof.
6.04
The Minister, or any person authorised in writing by him in that behalf, is empowered to:
(a)
issue such instruments, including bonds, as may be necessary for the purpose of any such
agreement; and
(b)
exercise all such powers and authorities and do or cause to be done all such things as
appear to him to be necessary for giving full effect to any such agreement.
THE EXECUTING AGENCY
6.05
The Project will be executed by GuySuCo. GuySuCo is a limited liability company incorporated
on May 21, 1976 under the provisions of the Companies Act (Cap. 89:01) of Guyana and continued under
Section 339 of the Companies Act, 1991 (the Companies Act). The Articles provide for a maximum of
12 directors. GuySuCo’s BOD is appointed by the Minister of Agriculture and includes representatives
from both the public and private sector.
- 27 -
Functions and Powers
6.06
Under Clause 3 of its Memorandum of Association (the Memorandum), the objects for which
GuySuCo is established are, inter alia, to:
(a)
carry on in Guyana and elsewhere the business of owners, planters and cultivators of
sugar and other plantations, buyers, sellers, growers, exporters, importers and
manufacturers and merchants, agents, factors and dealers in sugar, rum and other products
of the sugar cane; and
(b)
cultivate, manufacture, refine, prepare, buy, sell, deal in, export, import and distribute all
kinds of sugar, sugar cane, sugar beet, and molasses, maize, corn and the raw material and
by-products of such manufacture and refining and all such other things capable of being
used in any such business as aforesaid or required by any customers of or persons having
dealings with GuySuCo.
6.07
The Memorandum, by Clause 3 (x), permits GuySuCo to enter into any arrangements with any
governments or authorities that may seem conducive to the objects of GuySuCo. Accordingly, GuySuCo
has the power to carry out the Project as agent of GOGY.
Shareholding
6.08
GuySuCo is authorised to issue 10,800,000,000 ordinary shares of GYD1.00 each. All shares have
been issued and fully paid up and are held by GOGY, through National Industries and Commercial
Investments Ltd., its holding company.
Management and Control
6.09
GuySuCo falls within the definition of “government company” in the Companies Act, i.e., a
company registered under the Companies Act in which not less than 51% of the paid-up share capital is held
by the Government or a company which is a subsidiary of such a company. As a government company,
GuySuCo shall, not later than six months after the end of each calendar year, submit to the Minister of
Finance, inter alia, a report containing an account of its transactions throughout the preceding calendar
year in such detail as the Minister may direct, and a statement of the accounts of the company audited in
accordance with the Public Corporations Act 1988. While the 2013 unaudited financial statements are
available, the 2013 audited financial statements are still to be finalised and presented to the Minister. It
shall be a condition precedent to first disbursement of the Loan that GuySuCo shall have furnished to CDB
a copy of its audited financial statements for 2013 together with the accompanying Management Letter
issued by GuySuCo’s auditors and it shall be a condition of the Loan that commencing with the financial
year 2014, audited financial statements with a management letter be submitted to CDB within 180 days of
the end of the financial year.
ORGANISATIONAL CAPACITY
6.10
GuySuCo is facilitated by the enabling environment provided by GOGY which is particularly
interested in the sustainability of the local sugar industry, given its importance to the sustainable
development of Guyana. GOGY’s Agricultural Sector Strategy articulates the goals for the sugar industry’s
output and efficiency.
- 28 -
Mission
6.11
GuySuCo’s overall mission is to meet established world standards and use human resources to
achieve sustained profitability in order to make a full contribution to economic, technical and social
progress in Guyana.
GuySuCo’s Strategic Plan
6.12
Within the frame work of GOGY’s Agricultural Sector Strategy, GuySuCo in consultation with
key stakeholders, adopted a Strategic Plan 2013-2017 to address under-performance in the industry. The
overall objective of the Plan is to achieve 350,000 tn of sugar by 2017 and to increase, productivity and
profitability. The Plan was developed based on a SWOT23/ analysis which provided a basis on which the
leadership, managerial and operational issues are to be addressed. The Plan has placed significant
importance on on-going recruitment and training (internal and external) at all levels, a new Staff
Performance Appraisal System based on results by linking performance to sugar production targets and
efficiency in agricultural practices and sugar processing and in providing administration services.
6.13
The Management of GuySuCo has adopted the corresponding action plans and GOGY has provided
the financial assistance required to implement the important activities in congruence with the over-arching
goals of the organisation. GuySuCo will monitor the targets specified in the Plan based on key performance
indicators. GuySuCo’s performance reports will be considered by its BOD annually and a revision of the
Plan will be done as necessary.
Structure and Management
6.14
GuySuCo’s BOD reports through its Chairman to the Minister of Agriculture. A Chief Executive
Officer (CEO) is head of the day to day operations. There are nine principal departmental heads in the
following areas: Finance; Agricultural Services; Research; Technical Services; Human Resources;
Security, Materials Management; Information Systems Management; and Estate Management. The Estate
Managers coordinate the work of four Senior Estate Personnel representing: Factory Management, Human
Resources, Agricultural Management, and Finance. Other important departments include: Shipping and
Logistics; Health and Safety; Marketing, and the Project Management Unit. The summarised GuySuCo
Organisational Chart is presented at Appendix 6.1.
6.15
GuySuCo has had, until recently, a contractual arrangement with Booker Tate Limited (BTL) in
managing the sugar industry in Guyana. BTL provided strategic leadership and assistance in planning,
developing and operating the industry. Local staff were responsible for managing field and factory
operations at the estates while having the opportunity to understudy BTL. GuySuCo now provides its own
strategic leadership and management of its operations through its BOD and its qualified and experienced
staff. Some senior members of GuySuCo’s staff who benefitted from the association with BTL have been
promoted to assume responsibility for the Company’s vision, mission, leadership, management and
operations. The management and supervisory staff will undergo special management training at the Arthur
Lok Jack School of Business and at the Port Mourant Training School operated by GuySuCo. Upgrading
Port Mourant Training School and its curricula which is a part of the GOGY investment programme, will
assist in enhancing the skills of staff at various levels with a view to achieving projected field and factory
production and productivity targets. The training of apprentices and management trainees gives GuySuCo
the opportunity to replace lost skills at a faster rate and to strengthen the skill level critical to the
achievement of the projected targets. Apart from training available from machinery and equipment
23/ An
analysis of Strengths, Weaknesses, Opportunities and Threats.
- 29 suppliers, knowledge of the use and maintenance of the equipment to be used in mechanisation will be
included among the curricula of the training school.
6.16
GuySuCo maintains an established management information system based on a range of
operational, financial, technical and economic indicators and the Company therefore has the capacity to
track the performance of the industry globally and its own performance through a range of appropriate
production and efficiency indicators. Also, as part of the GOGY’s investment programme, the
reconfiguration of GuySuCo’s wide area network will be undertaken to maintain adequate levels of
communication between all estates and GuySuCo’s administration.
Human Resources and Employment Analysis
6.17
GuySuCo employs persons with skills in areas such as Agriculture, Engineering, Finance,
Information Technology, Administration, and Human Resource Development. Over the last six years the
total staff averaged 14,900. There has been an increase over the last three years in the administration staff
as the contract with BTL ended. While females account for only 6% of the staff they are represented in all
areas of GuySuCo’s operations. The Strategic Plan has placed significant importance on on-going
recruitment and training (internal and external) at all levels and a new Staff Performance Appraisal System,
based on results, by linking staff performance to sugar production targets, efficiency in agricultural
practices, sugar processing, and the provision of administration services. All employees benefit from
primary health care provided by GuySuCo and all permanent staff participate in a contributory medical
scheme and a non-contributory pension scheme. It is expected that the training and revised Performance
Appraisal System will assist in developing staff to their full potential and will motivate them to strive for
higher production levels. Salaries and wages are fixed periodically by agreement between the two major
unions, Guyana Agricultural and General Workers’ Union and the National Association of Agricultural,
Commercial and Industrial Employees who would usually negotiate, particularly at the start of harvest
times, for workers’ rights and benefits.
PROJECT MANAGEMENT
6.18
GuySuCo maintains a Project Management Services Unit, headed by the General Manager,
Agricultural Services. The Unit is responsible for coordinating, in partnership with Estate Managers, capital
works on all estates, including the capital works foreseen within the Strategic Plan and the GOGY $30 mn
investment programme. CDB staff are confident that the works proposed under the proposed CDB-financed
Project can be undertaken within the present framework. The General Manager, Agricultural Services, will
act as Project Coordinator (PC). The PC will be assisted in implementation, on the three project estates, by
the Estate Managers and their staff. It shall be a condition precedent to first disbursement of the Loan that
the PC be appointed. Withdrawal of loan proceeds will be coordinated with the Ministry of Agriculture
and the Ministry of Finance. A draft for the duties of the PC is set out at Appendix 6.2. The Proposed
Project Management Organisation Structure is presented at Appendix 6.3.
6.19
Administrative support (accounting and clerical) will be provided by the targeted estates and main
office throughout the implementation period.
Project Management Committee
6.20
GuySuCo’s BOD will have oversight of the Project through a sub-committee of BOD, which will
be established as the Project Management Committee (PMC) to review progress reports, provide guidance
and monitor project implementation. The PMC will include at least three members of GuySuCo’s BOD, a
representative from the Ministry of Finance and the Permanent Secretary, Ministry of Agriculture. The
Permanent Secretary, Ministry of Agriculture will serve as Chairperson. The PC will provide bi-annual
- 30 reports to the PMC and this committee will be required to meet as often as required, but at least twice per
year. It shall be a condition precedent to first disbursement of the loan that the PMC has been established.
IMPLEMENTATION
6.21
The Project will be implemented over a period of approximately 38 months. Relevant milestone
dates are noted in the provisional Project Implementation Schedule that is provided at Appendix 6.4. Project
start-up activities will include a Project Launch Workshop which is scheduled to occur by the first quarter
of 2015 and will be organised in collaboration with GuySuCo. During this workshop, details pertaining to
project implementation and CDB’s policies and procedures will be discussed with key stakeholders
involved in implementation. An Exit Workshop, to evaluate project implementation and to determine
lessons learned, will take place after completion of all project activities.
6.22
CDB will also provide implementation support which will include:
(a)
reviewing implementation progress and achievement of project outcomes;
(b)
addressing implementation issues;
(c)
monitoring and review of progress and audit reports;
(d)
monitoring changes in risks; and
(e)
compliance with legal agreements.
The Implementation Support Plan is included at Appendix 6.5.
PARTICIPATION OF BENEFICIARIES AND STAKEHOLDERS
6.23
Project stakeholders were engaged extensively by GuySuCo both during preparation of the
Company’s Strategic Plan and the project proposal that emanated from it. This involved visits by the Chief
Execution Officer and other management staff to each estate where meetings were held with a cross section
of the workforce including union representatives. The Project was also discussed with GuySuCo’s BOD,
Ministry of Finance, Ministry of Agriculture, other Government officials and the statutory, National Cane
Farmers Committee. During project appraisal, CDB staff also had discussions with a wide range of
stakeholders directly involved in the industry as well as secondary stakeholders. These included
management staff at the three estates, farmer representatives, officials of the Ministry of Labour, including
the Bureau of Women’s and Men’s Affairs, and Trade Unions representing workers in the industry. On the
basis of these discussions, it is evident that there is widespread support for activities that could lead to the
success of the sugar industry and specifically to the initiative to expand mechanisation in the areas identified
in the proposed Project.
DISBURSEMENTS
6.24
Disbursement will be in accordance with the CDB’s Guidelines for Withdrawal of Proceeds of
Loans. It is estimated that disbursements will be made over a period of 38 months, with first disbursement
by September 30, 2015 and final disbursement by December 31, 2017. The estimated annual disbursement
schedule for the CDB loan and the counterpart funding is summarised below at Table 6.1 and the Quarterly
Disbursement Schedule is detailed at Appendix 6.6.
- 31 TABLE 6.1: DISBURSEMENT SCHEDULE
($’000)
Year
1
2
3
Total (Base Cost)
%
CDB
Loan
6,887
6,887
64
CDB
Grant
33
33
Local
Counterpart
1,322
1,411
1,102
3,835
36
Total
8,242
1,411
1,102
10,755
100
%
77
13
10
100
PROCUREMENT
6.25
Procurement of all goods and consultancy services to be financed by the CDB loan will be in
accordance with CDB’s procurement procedures and guidelines, except as noted at paragraph 6.26 below.
6.26
The mechanical harvesters presently in operation at GuySuCo, are specially designed to operate in
Guyana’s agro-ecological conditions. They have previously been supplied from non-CDB member
countries. A waiver is being requested to permit suppliers from non-eligible sources, to be invited to bid
along with suppliers from CDB’s member countries. The value of the waiver being requested is estimated
at $1.6 mn.
6.27
Due to the unique nature of operations in Guyana where the harvested cane is transported to the
factories by canal, special equipment (Cane Trailers and Cane Elevators) has had to be custom
manufactured to facilitate this method of transport and delivery. The required equipment is proprietary and
obtainable only from one source. These will therefore have to be procured by Direct Contracting in Guyana,
as permitted under CDB’s Procurement Guidelines. Further details of the Procurement Plan are presented
at Appendix 6.7.
MONITORING AND EVALUATION
6.28
GuySuCo has a well-established monitoring and reporting system which is used to track
performance against Company targets. Each estate is responsible for the collection and recording of data
on aspects related to both field and factory operations, as well as weather related data. The information is
forwarded to a central database at GuySuCo’s Head Office.
6.29
The data collection requirements of the Project, as detailed in the Design and Monitoring
Framework at Table 2.1 is in keeping with the parameters routinely monitored by the Company on a
continuous basis. The proposed Project will accordingly utilise data generated by the existing framework.
It will be the responsibility of the PC for reporting to CDB, the management and BOD of GuySuCo and
other relevant stakeholders. The required format for the submission of bi-annual reports to CDB on
Investment Cost is provided at Appendix 6.8. Reporting requirements are provided at Appendix 6.9.
6.30
In accordance with CDB’s Project Performance Evaluation System, the Project is accorded a
composite rating of 5.9 – Satisfactory. This rating indicates that the Project is likely to achieve its
development objective. A summary of the Project Performance Evaluation Matrix is shown at Table 6.2.
It will be an integral part of the monitoring and evaluation system.
- 32 -
TABLE 6.2: PROJECT PERFORMANCE EVALUATION MATRIX
Criteria
Strategic relevance
Expected
Performance
Scores
7.5
Poverty Relevance
6.0
Efficacy
5.5
Cost Efficiency
6.5
Institutional Development
Impact
5.0
Sustainability
6.0
Overall Performance
5.9
Justification
Sustaining the sugar industry is a development priority of GOGY given the
contribution which the industry makes to socio-economic development in
Guyana. GOGY is accordingly supportive of measures aimed at improving
the competitiveness and sustainability of the industry. The Project is
consistent with CDB’s Strategic Objective, ‘supporting inclusive Growth
and Sustainable Development’.
The sugar industry provides direct employment for approximately 25% of
the country’s labour force, and directly supports 300 business and service
providers. In addition, GuySuCo provides D&I services for approximately
two thirds of non-sugar agriculture and the population in several
communities along with a variety of social and human development
services to the estates’ host communities. The Project will enhance
GuySuCo’s ability to continue providing these services without the
displacement of employment in the industry.
The Project design takes into consideration lessons learnt by GuySuCo in
the implementation of mechanical systems on other estates. Given the
favourable results obtained by GuySuCo to date there is a high probability
of the attainment of the stated objectives.
The estimated ERR is 19% and FRR 14%. Both rates are above the CDB
cut-off rate of 12%.
The Project will enhance the skills of machine operators and thereby
significantly impact their capacity to efficiently perform the tasks related
to mechanical production and harvesting of sugar cane.
The Project is designed to improve the efficiency of sugar cane production
and harvesting. By so doing it is expected to have a positive impact on the
sustainability of GuySuCo’s operations and the sugar industry in general,
and reduce GOGY’s subventions to the industry.
Satisfactory.
7. TERMS AND CONDITIONS
7.01
The proposed financing for the Project is as follows:
(a)
a loan to GOGY of an amount not exceeding the equivalent of seven million five hundred
thousand dollars ($7,500,000) to assist GOGY in financing a Project to enhance sugar cane
production and harvesting in Guyana (the Loan Component); and
(b)
a grant to GOGY of an amount not exceeding the equivalent of thirty seven thousand
dollars ($37,000) to assist GOGY in financing consultancy services to be provided to
GuySuCo to develop a gender integration action plan in accordance with the TOR set out
at Appendix 2.1 (the Grant Component),
(together, the Project).
- 33 7.02
It is recommended that CDB lend to GOGY an amount not exceeding the equivalent of seven
million five hundred thousand dollars ($7,500,000) (the Loan) consisting of:
(a)
an amount from CDB’s SFR not exceeding the equivalent of six million eight hundred and
thirty eight thousand dollars ($6,838,000)(the SFR Portion); and
(b)
an amount from CDB’s OCR not exceeding the equivalent of six hundred and sixty two
thousand dollars ($662,000) (the OCR Portion)
to assist GOGY in financing the Loan Component on CDB’s standard terms and conditions and on the
following terms and conditions:
(1)
(2)
Repayment: Repayment of the Loan shall be made:
(a)
in the case of the SFR Portion, in eighty (80) equal or approximately equal and
consecutive quarterly instalments commencing ten (10) years after the date of the
Loan Agreement.
(b)
in the case of the OCR Portion, in sixty-eight (68) equal or approximately equal
and consecutive quarterly instalments commencing five (5) years after the date of
the Loan Agreement.
Interest: Interest shall be payable quarterly:
(a)
at the rate of two per cent (2%) p.a. on the amount of the SFR Portion withdrawn
and outstanding from time to time; and
(b)
at the rate of three decimal nine five per cent (3.95%) p.a. (variable) on the amount
of the OCR Portion withdrawn and outstanding from time to time.
(3)
Commitment Charge: A commitment charge at the rate of one per cent (1%) p.a. shall
be payable on the amount of the OCR Portion unwithdrawn from time to time. Such charge
shall accrue from the sixtieth (60th) day after the date of the Loan Agreement and shall be
payable quarterly.
(4)
Disbursement:
(a)
The first disbursement of the Loan shall be made by September 30, 2015, and the
Loan shall be fully disbursed by December 31, 2017, or such later dates as CDB
may specify in writing.
(b)
Except as CDB may otherwise agree:
(i)
the Loan shall be used to finance the components of the Project allocated
for financing by CDB as shown in the Financing Plan for the Project at
Appendix 3.1 up to the respective limits specified therein; and
(ii)
total disbursements shall not exceed in the aggregate sixty-two decimal
three per cent (62.3%) of the cost of the Project.
- 34 (c)
(5)
(6)
(7)
The Loan shall not be used to meet any part of the cost of the Project which consists
of identifiable taxes and duties.
Procurement:
(a)
Except as provided in sub-paragraph (b) below, procurement shall be in
accordance with the procedures set out and/or referred to in the Loan Agreement
between CDB and GOGY, or such other procedures as CDB may from time to
time specify in writing. The Procurement Plan approved by CDB is set out at
Appendix 6.7. Any revisions to the Procurement Plan shall require CDB’s prior
approval in writing.
(b)
Eligibility for procurement of mechanical harvesters for the Project shall be
extended to include suppliers from countries that are not CDB member countries.
Conditions Precedent to First Disbursement:
(a)
CDB shall be satisfied that the aggregate of all loans (including the Loan) raised
under the External Loans Act does not exceed the limit imposed by Section 3(1)
of that Act.
(b)
The PC referred to in sub-paragraph 7(c)(iii) shall have been appointed.
(c)
The PMC referred to in sub-paragraph 7(c)(iv) shall have been established.
(d)
GuySuCo shall have furnished to CDB a copy of its audited financial statements
for the financial year 2013 together with the accompanying Management Letter
issued by GuySuCo’s auditors.
Other Conditions:
(a)
Except as CDB may otherwise agree, the Project shall be executed by GuySuCo.
(b)
GOGY shall contribute to the Project an amount of not less than the equivalent of
four million five hundred thousand dollars ($4,500,000) which shall be expended
in a timely manner on the components of the Project designated for financing by
GOGY as shown in the Financing Plan for the Project, unless CDB shall otherwise
specify in writing;
(c)
GuySuCo shall:
(i)
carry out the Project at all times with due diligence and efficiency, with
management personnel whose qualifications and experience are
acceptable to CDB, and in accordance with sound technical,
environmental, financial and managerial standards and practices;
(ii)
institute and maintain organisational, administrative, accounting and
auditing arrangements for the Project acceptable to CDB;
- 35 (iii)
for the duration of the Project appoint the General Manager, Agricultural
Services of GuySuCo as PC with the duties and responsibilities set out in
the TOR at Appendix 6.2. The qualifications and experience of any person
subsequently appointed as PC shall be acceptable to CDB;
(iv)
establish, and for the duration of the Project, maintain a PMC with the
composition, reporting structure and duties set out in Appendix 6.2;
(v)
commencing with the financial year 2014, for the duration of the Loan,
within one hundred and eighty (180) days after the end of each financial
year of GuySuCo, furnish to CDB a copy of its audited financial
statements together with the accompanying management letter issued by
GuySuCo’s auditors, and shall implement, in accordance with a timetable
acceptable to CDB, such recommendations of the auditors as CDB may
require;
(vi)
provide the financial and other resources required to adequately maintain
the field machinery and equipment financed from the Loan and keep the
field machinery and equipment financed under the Project, or cause the
same to be kept, in good repair and condition;
(vii)
for the duration of the Project, commencing in 2015, submit to CDB by
December 31 of each year:
(viii)
(aa)
a training plan satisfactory to CDB, for the training of GuySuCo
employees in the operation, maintenance and repair of the field
machinery and equipment (the Training Plan) with respect to the
following calendar year; and
(bb)
evidence acceptable to CDB that the training referred to in the
Training Plan for the preceding year has been undertaken; and
except as CDB may otherwise agree, furnish or cause to be furnished to
CDB, the reports listed in Appendix 6.9 in the forms specified or in such
form or forms as CDB may require, not later than the times/periods
specified therein for so doing.
7.03
It is also recommended that CDB make a grant to GOGY of an amount not exceeding the equivalent
of thirty seven thousand dollars ($37,000) (the Grant) from CDB’s SFR to finance the Grant Component,
on CDB’s standard terms and conditions and on the following terms and conditions:
(1)
Disbursement:
(a)
Except as CDB may otherwise agree, and subject to sub-paragraph (b) below,
disbursement of the Grant shall be made as follows:
(i)
an amount not exceeding the equivalent of ten thousand dollars ($10,000)
shall be paid to GOGY as an advance on account of expenditures in
respect of the Gender Consultancy after receipt by CDB of:
(aa)
a request in writing from GOGY for such funds;
- 36 -
(ii)
(b)
(c)
(bb)
a copy of the signed contract between GOGY and the consultants
for the services in respect of the Gender Consultancy; and
(cc)
evidence acceptable to CDB that the condition precedent to first
disbursement of the Grant set out in sub-paragraph (3) below has
been satisfied.
the balance of the Grant shall be paid to GOGY periodically after receipt
by CDB of an account and documentation, satisfactory to CDB, in support
of expenditures incurred by GOGY in respect of the Grant Component.
CDB shall not be under any obligation to make:
(i)
the first such payment under sub-paragraph 1(a)(ii) above until CDB shall
have received an account and documentation, satisfactory to CDB, in
support of expenditures incurred by GOGY with respect to the advance
referred to in sub˗paragraph 1(a)(i);
(ii)
any payment under sub-paragraph 1(a)(ii) above until CDB shall have
received the requisite number of copies of the reports or other deliverables,
in form and substance acceptable to CDB, to be furnished for the time
being by the consultants, to GOGY and CDB in accordance with the
TOR at Appendix 2.1; and
(iii)
payments exceeding the equivalent of thirty three thousand three hundred
dollars ($33,300) or ninety percent (90%) of the amount of the Grant until
CDB shall have received:
(aa)
the requisite number of copies of the final report or other
deliverables, in form and substance acceptable to CDB to be
furnished by the consultants in accordance with the TOR at
Appendix 2.1; and
(bb)
a certified statement of the expenditures incurred by GOGY
in respect of and in connection with, the Grant Component.
The first disbursement of the Grant shall be made by September 30, 2015, and the
Grant shall be fully disbursed by March 31, 2016, or such later dates as CDB may
specify in writing.
(2)
Procurement: Procurement shall be in accordance with the procedures set out
and/or referred to in the Grant Agreement or such other procedures as CDB may from time
to time specify in writing.
(3)
Condition Precedent to First Disbursement of the Grant:
The conditions precedent to first disbursement of the Loan shall have been satisfied.
- 37 (4)
Other Conditions:
(a)
Except as CDB may otherwise agree, GOGY shall implement the Grant
Component through GuySuCo.
(b)
GuySuCo shall:
(c)
(i)
in accordance with the procurement procedures applicable to the Grant,
select and engage competent and experienced consultants to carry out the
services set out in the TOR at Appendix 2.1; and
(ii)
within a timeframe acceptable to CDB implement such recommendations
arising out of the Gender Consultancy, as may be acceptable to CDB.
Except as CDB may otherwise agree, GOGY shall:
(i)
(ii)
(d)
meet or cause to be met:
(aa)
the cost of the items designated for financing by GOGY in the
budget for the Grant set out at Appendix 2.1 (the Budget);
(bb)
any amount by which the cost of the Grant Component exceeds
the amount set out in the Budget; and
(cc)
the cost of any other items needed for the purpose of, or in
connection with, the Grant Component; and
provide or cause to be provided, all other inputs required for the punctual
and efficient carrying out of the Grant Component not being financed by
CDB.
CDB shall be entitled to suspend, cancel or require a refund of the Grant, or any
part thereof, if the Loan or any part thereof is suspended, cancelled or called in.
APPENDIX 1.1
MACROECONOMIC REVIEW – FIRST HALF 2014
(Dollars ($) throughout refer to Guyanese dollars (GYD) unless otherwise specified)
1.
OVERVIEW
1.01
Following eight consecutive years of expansion, the Guyanese economy is estimated to have grown
by 3.2% in the first half of 2014 and is projected to grow by 4.5% for the year as a whole. Relative to the
growth rates in excess of 5% recorded in the past three years, the 2014 outturn indicates some loss of
momentum; the impetus previously provided by strong mining sector growth is fading as gold prices
continue to settle down from record highs. Growth in the first half has been largely driven by a notable
rebound in sugar production after an extended slump, as well as the continuation of a rice production boom
observed since 2011, both of which have fed into robust growth in manufacturing. Construction and other
key service industries have also recorded significant contributions to growth. Despite increased sugar and
rice exports, the fall-off in gold exports is estimated to have resulted in an overall balance of payments
deficit and a corresponding drawdown on the foreign reserves of the BOG. However, the deficit has
narrowed in comparison with the first half of 2013 and the deterioration in the foreign reserves has been
slightly more moderate. The Guyana dollar has remained relatively stable against the United States dollar,
depreciating marginally to $206.50 from $206.25 at end-2013. Key monetary aggregates have continued
to reflect the fall-off in foreign reserves, but the positive offset from private sector credit growth observed
in 2013 is starting to diminish. The banking system has remained relatively stable and sound in terms of
profitability, capital adequacy and asset quality. In the context of moderate inflation, monetary policy has
continued to focus on maintaining adequate levels of liquidity to support credit expansion and economic
growth. The overall fiscal surplus of the non-financial public sector narrowed, as significant increases in
recurrent and capital expenditure offset moderate growth in revenues. Nevertheless, the fiscal surplus,
together with debt relief and other factors, was reflected in a reduction in debt levels.
1.02
The 4.5% growth projection for 2014 is largely predicated on expectations of continued recovery
in sugar production, with non-sugar output projected to grow at a more moderate rate of 3.2%, as mining
output is anticipated to remain constrained in the near term, to the extent that gold and other international
commodity prices remain subdued. However, the recent heightening of geo-political tensions has begun to
push up oil prices, reviving inflationary pressures, and has the potential to further disrupt commodity
markets, with mixed terms-of-trade effects. Nevertheless, BOG has revised the inflation target downward
from 5 to 3% for the year as a whole, in light of declining consumer prices observed in the first half, but
will continue to monitor price developments to inform monetary policy. GOGY’s fiscal policy stance
remains expansionary for the most part, with expenditure slated in the budget to increase significantly in
line with the ramping up of the Public Sector Investment Plan, leading to a higher deficit. However,
GOGY’s mid-year budget review provides revised estimates for 2014 that show slightly lower expenditure
and deficit figures than the original budget estimates. In addition, continued efforts to secure further debt
relief and debt compensation should help to contain the debt to sustainable levels.
2.
SECTOR ANALYSIS
(a)
Real Sector
2.01
Real output increased by an estimated 3.2% in the first half of 2014, with a strong recovery in
sugar-cane and sugar production reflecting favourable weather conditions and the easing of longstanding
challenges relating to labour and capital inputs, while non-sugar output growth was limited to 2% given
mixed sector outturns. Notably, despite lower paddy prices and some delays in payment by millers to
farmers, the boom in rice production of recent years continued, with output increasing by 18.3% over the
record high level of 2013. In addition, the forestry sector recorded robust growth of 38.1%, following years
APPENDIX 1.1
Page 2
of stagnation, supported by the introduction of new incentives to harvesters and sustained demand from
furniture manufacturing and construction. The manufacturing sector recorded growth of 11.2% overall,
driven by rice milling and sugar production, as well as other aspects of light manufacturing. Construction
output expanded by 16.8%, having grown by 22.6% in 2013, with continued impetus from private
residential and commercial activity, as well as implementation of public sector projects. However, while
the ongoing construction boom continued to boost quarrying, the mining sub-sector declined, as gold
declarations fell by 17.2% and bauxite production by 3%, reflecting adverse price movements, particularly
a 16.1% contraction in the average export price of gold to $1,243 per ounce. Consequently, overall nonsugar output was constrained by a reversal of the robust performances of mining and quarrying in recent
years.
2.02
Consumer prices decreased slightly (-0.4) during the half-year, reflecting some moderation in
international commodity prices, as well as the impact of domestic policies. With regard to the latter, GOGY
continued to provide financial support to electricity suppliers and monitor fuel prices and taxes to dampen
the pass-through of imported price volatility in order to manage energy prices. The decline in gold prices
also helped to dampen domestic demand-driven inflationary pressures.
(b)
External Sector
2.03
With strong growth in export proceeds from sugar (26.4%), rice (14.9%) and timber (31.3%)
offsetting a 24.6% decline in gold export earnings and combining with a 7.5% decline in goods imports for
a reduction in the merchandise trade deficit, the Balance of Payments is estimated to have improved in the
first half of 2014. The overall deficit narrowed to $93 mn from $145.6 mn for the first half of 2013, as the
lower merchandise trade deficit, higher current transfers and lower net services outflows contributed to a
narrowing of the current account deficit that compensated for a reduction in the capital and financial account
surplus. The slight deterioration on the capital account was due to increased holdings of net foreign assets
by commercial banks, even as continued investment in mining notwithstanding falling gold prices led to
10.7% growth in foreign direct investment. The overall Balance of Payments deficit implied a drawdown
on the foreign reserves of BOG, as a result of which the Net International Reserves fell by 13.4% to
$650.4 mn. The Guyana dollar nevertheless remained relatively stable, depreciating by just 0.1% against
the United States dollar over the course of the half-year, to $206.5 at the end of June 2014.
(c)
Financial Sector
2.04
In 2013, key monetary aggregates reflected the fall-off in foreign reserves, with broad money
declining by 0.1%, as a 4.4% contraction in net foreign assets was only partially offset by a 14.6% increase
in net domestic credit. The expansion in domestic credit was mainly driven by net lending to the public
sector, as private sector credit growth was relatively subdued at 2.9%, down from 4.8% in the first half of
2013, reflecting the slowing momentum in the real economy. The lending to the private sector was mainly
concentrated in the mining, construction/engineering and real estate sectors, which grew by 10.3, 7.6 and
7.5%, respectively. In addition, credit to rice milling grew by 6.4%, followed by ‘other services’ and
manufacturing, which registered growth of 5.4% and 4.9%, respectively. On the other hand, personal
lending and credit to distribution declined by 5.4 and 1.1%, respectively, mirroring declines in imports of
consumer goods. Total private sector deposits decreased by -1.7%, having expanded by 5.1% in the first
half of 2013. The public sector remained a net depositor within the banking system, although its net position
declined by 21%, as the Central Government reduced its deposits by 16.4%, while lending to Central
Government decreased by 7.1%, largely reflecting a decrease in treasury bills held by the banking system.
The latter in turn reflected a reduction in BOG issuance of treasury bills in its open market operations, as
monetary policy continued to focus on the provision of adequate levels of liquidity for maintaining credit
expansion and economic growth. Following a slight increase in 2013, profitability levels were generally
APPENDIX 1.1
Page 3
maintained through the first half of 2014. Table 2.1 presents key prudential indicators for the banking
system.
TABLE 2.1: BANKING SYSTEM PRUDENTIAL INDICATORS
YEAR TO JUNE 2010-2014
Prudential Indicator (Benchmark)
Solvency
Capital to risk-adjusted assets (8%)
Asset Quality
NPLs to Total Loans (5%)
Profitability
Return on Assets
Return on Equity
Liquidity
Liquid Assets to Total Assets
(d)
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
19.0
20.0
20.0
20.1
21.4
4.9
5.1
4.9
5.4
6.0
1.2
11.3
1.2
11.4
1.2
11.4
1.3
11.9
1.3
11.4
30.5
30.6
27.5
32.4
30.4
Fiscal Operations
2.05
The non-financial public sector recorded an overall fiscal surplus of $1.7 bn for the first half of the
year. However, this was more than 80% lower than the surplus recorded in the corresponding half of 2013.
In a context of moderate revenue growth, the significantly smaller surplus was due to a sizable expansion
in both recurrent and capital expenditure.
2.06
Generally reflecting the sustained, albeit slower, expansion in economic activity, a 2.9% increase
in tax revenue was fairly broad-based, with increases across most tax categories. Notably, higher personal
income tax collections were associated with a 5% salary increase granted in 2013, coupled with an increase
in arrears collections. At the same time, 3.4% growth in non-tax revenue collections was largely due to an
increase in BOG profits.
2.07
On the expenditure side, non-interest current expenditure rose by 28.7%. Wages and salaries
increased by 11.3%, boosted by the implementation of the 5% salary increase and new recruits by the
government service; spending on other goods and services went up 50.8%, reflecting improved timeliness
in programme execution; and transfer payments increased by 34.9%, primarily on account of a subsidy to
GuySuCo. Capital expenditure was up 34% as significant progress was made with the execution of
previously delayed projects.
2.08
The generally positive fiscal performance contributed in part to an approximately 4% reduction in
the total debt stock from end-December 2013 to the end of June 2014. The stock of domestic debt declined
by 11.8% to $422.7 mn, while the stock of external public debt fell by 1.6% to $1.23 bn. The former is
attributed to reduced issuance of treasury bills associated with BOG open market operations. The latter
represents debt compensation arrangements to cancel $55.5 mn in oil debt owed to Venezuela, equivalent
to the value of rice and paddy shipped from October 2013 to February 2014, as well as additional enhanced
HIPC debt relief under the CARICOM Multilateral Clearing Facility Wind-up Agreement, which provided
for the cancellation of $35.9 mn in debt outstanding.
APPENDIX 1.1
Page 4
3.
OUTLOOK
3.01
The 4.5% growth projection for 2014 is largely predicated on expectations of continued recovery
in sugar production, with non-sugar output projected to grow at a more moderate rate of 3.2%, as mining
output is anticipated to remain constrained in the near term, to the extent that gold and other international
commodity prices remain subdued. However, the recent heightening of geo-political tensions has begun to
push up oil prices, reviving inflationary pressures, and has the potential to further disrupt commodity
markets, with mixed terms-of-trade effects. Nevertheless, BOG has revised the inflation target downward
from 5% to 3% for the year as a whole, in light of declining consumer prices observed in the first half, but
will continue to monitor price developments to inform monetary policy. GOGY’s fiscal policy stance
remains expansionary for the most part, with expenditure slated in the budget to increase significantly in
line with the ramping up of the Public Sector Investment Plan, leading to a higher deficit. However,
GOGY’s mid-year budget review provides revised estimates for 2014 that show slightly lower expenditure
and deficit figures than the original budget estimates. In addition, continued efforts to secure further debt
relief and debt compensation should help to contain the debt to sustainable levels. The debt ratio is therefore
expected to remain at around 60% of GDP over the short to medium term.
TABLE 3.1: KEY MACROECONOMIC INDICATORS AND FORECASTS 2009-2014
% of GDP (unless otherwise indicated)
Item
2009 2010P 2011 2012P 2013E 2014F
Real GDP (% change)
3.3
4.4
5.4
4.8
5.2
4.5
Inflation - End of Period (% change)
3.6
4.5
3.3
3.5
0.9
3.0
Central Government Overall Fiscal Balance (3.7)
(3.0) (3.1)
(4.7)
(4.4)
(4.9)
Central Government Primary Balance
5.1
6.4
5.4
3.6
3.2
3.2
Gross Debt
64.8
65.3 65.2
65.3
58.2
61.6
Source: CDB, GOGY Budget 2014.
APPENDIX 1.2
SECTOR REVIEW
Guyana Agriculture Sector
1.
In terms of contribution to GDP, the most important sector in Guyana is mining, followed by
agriculture. The mining sector is dominated by gold, whilst the agricultural sector is dominated by rice and
sugar. According to the Agriculture Strategy 2013-2020, it is estimated that there are 1,740,000 ha of land
being used for agricultural purposes in Guyana with the main crops (rice and sugar) accounting for 90,000
and 50,000 hectares respectively. In 2013, rice exports amounted to $243 mn (14% of total exports) whilst
sugar accounted for $132.2 mn (9.5%). Rice production is on a positive growth trajectory, with production
increasing from 291,681 tn in 2000 to 535,555 in 2013, whilst sugar production has been on a decline.
According to the Sector Strategy, major challenges facing the sector include water management and,
notwithstanding the fact that the sector employs an estimated 33% of the labour force, an inadequate supply
of labour.
Sugar Industry – Structure
2.
Sugar cane production and processing is dominated by the State-owned GuySuCo which currently
operates eight estates and seven factories. Four estates, with independent factories (Skeldon, Albion, Rose
Hall and Blairmont) are located in the Berbice Region. The other four estates are located at East Demerara
(LBI and Enmore), Wales and Uitvlugt in the Demerara Region. LBI and Enmore canes are processed at a
single factory, whilst the other Demerara estates operate independent factories.
3.
Industry studies have revealed that estates located in the Berbice Region have the highest
productivity potential (see Table 1) given a combination of factors including percentage of Class A soils
(see Table 2) rainfall intensity/distribution, and available sugar cane varieties.
TABLE 1: ESTIMATED PRODUCTIVITY POTENTIAL BY ESTATE
Potential Productivity tch, tc:ts, ts/ha
Berbice Region
Estate
tch
tc:ts
ts/ha
Skeldon
80
11.25
7.1
Albion
78
10.35
7.5
Rose Hall
77
11.26
6.8
Demerara Region
Blairmont
80
10.4
7.7
Enmore
77
10.89
7.1
LBI
78
10.89
7.2
Wales
79
11.32
7.0
Uitvlugt
73
11.67
6.3
TABLE 2: DISTRIBUTION OF SOIL CLASSES (% OF CULTIVATED AREA)
Estate
Soil Class
Skeldon Albion Rose Hall Blairmont Enmore
Class A (%)
49.7
21.7
11.1
52.5
37.1
Class B (%)
39.7
63.0
74.5
8.0
14.8
Class C (%)
10.6
14.8
11.4
37.2
34.8
Class D (%)
0
0
0
0
11.0
Class E (%)
0
1.0
3.0
2.0
2.0
LBI
30.0
54.3
12.3
3.0
0
Wales
7.4
80.7
0
8.0
4.0
Uitvlugt
0
47.0
12.6
40.4
0
Total
26.1
48.5
16.9
7.3
1.2
Source: GuySuCo
4.
The Skeldon Estate is the largest, currently accounting for approximately 20% of lands under sugar
cane. GuySuCo is also the sole processor of sugar cane in Guyana and operates all sugar factories – six of
the factories are based on the traditional method of sugar processing (milling) whilst, the Skeldon factory,
APPENDIX 1.2
Page 2
which commenced operations in 2008, uses diffusion technology. GuySuCo also operates two packaging
plants, one at Enmore and the other at Blairmont with a combined capacity of 48,000 tn per year.
5.
Approximately 8,000 ha of the area under sugar cane cultivated are managed by individual farmers
and small-farmer cooperatives, supplying mainly to factories at Skeldon, Albion, Rose Hall, Uitvlugt and
Wales. The relationship between private farmers and GuySuCo is governed by the National Cane Farmers
Committee Act. The Act, among other things, establishes the price which GuySuCo pays to farmers calculated on the basis of sugar recovered from canes delivered by farmers to the factory. In an effort to
encourage the participation of private farmers in the industry, GuySuCo provides a range of incentives,
including technical assistance, and machinery and equipment rental. Whilst technical advice is free, farmers
are required to meet the cost associated with machinery and equipment rental.
6.
Traditionally, sugar cane production and harvesting operations are done manually, with the
resultant effect being that GuySuCo is the largest single employer in Guyana. In 2013 the labour force was
estimated at approximately 16,000 persons, of which an estimated 90% are represented by one of the three
Trade Unions1/ operating in the industry.
Performance
7.
As shown in Figures 1 and 2 the industry has been experiencing a downward trend since the early
2000s with production of sugar declining from a high of 331,052 tn in 2002 to 186,801 tn in 2013, and the
yield of sugar per/ha declining from a high of approximately 7 tsh in 2003 to 4.5 tsh in 2013. As shown in
Figure 3, the cost of production of sugar in Guyana is relatively high (and has been increasing) compared
to the price of sugar on the world market.
FIGURE 1: SUGAR PRODUCTION
(tn)
350000
300000
250000
ts
200000
150000
100000
50000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
Source: GuySuCo
1/
The General Agriculture Workers Union, National Association of Agriculture and Commercial and Industrial Employees, Guyana
Labour Union.
APPENDIX 1.2
Page 3
FIGURE 2: TONNES SUGAR PER HECTARE
(tsh)
8
Tonnes Sugar
7
6
5
4
3
2
1
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
Source: GuySuCo
FIGURE 3: COST OF PRODUCTION VS WORLD MARKET PRICE
40.00
35.00
US¢/lb
30.00
25.00
20.00
15.00
10.00
5.00
0.00
2006
2007
2008
2009
2010
2011
2012
2013
Year
GuySuCo
8.
World Market
The main factors attributed to under-performance in the industry relate to:
(a)
An acute under-supply of labour: Traditionally, sugar cane production and harvesting in
Guyana have been very labour intensive. Activities related to both manual production and
harvesting of sugar cane are physically exhausting tasks carried out under difficult working
conditions. As a result, there is a general reluctance of persons to become engaged in
manual labour operations related to sugar cane production and harvesting. Further
compounding the situation is competition from other sectors of the economy, in particular,
mining and construction, and frequent occurrences of industrial action, in some cases
associated with events not directly related to the sugar industry. An inadequate supply of
APPENDIX 1.2
Page 4
labour for harvesting on several estates over the past decade has resulted in a situation on
several estates where the harvest of mature canes has been deferred resulting in a loss of
sugar of up to 30%.
An analysis of GuySuCo’s records reveals that the estate most impacted by labour supply
shortages is Uitvlugt, followed by Rose Hall and Albion. Within those estates the category
of workers in shortest supply are those designated for sugar cane planting, weeding,
fertilising and harvesting. The labour supply challenges at Uitvlugt have resulted in a
substantial portion of sugar cane land being taken out of production. Notwithstanding the
decrease in area under cultivation, Uitvlugt continues to face challenges in meeting the
labour requirements for the conduct of sugar cane husbandry and harvesting and as a result
productivity is relatively low with attendant high cost of production. Indications are that
labour supply and weather-related challenges are likely to be further exacerbated due to
economic growth, and demographic and climate change.
The combination of factors has resulted in a situation where Uivtlugt and Skeldon have
become the worst performing estates both in terms of sugar cane and sugar yield, and in
cost of production of sugar. The Skeldon Estate has also been reporting high levels of
carry-over canes, that is, mature canes whose harvesting has been deferred. With an
estimated drop of up to 30% in sugar yield, this is a significant contributor to the low levels
of sugar production/yield in the industry (see Figures 4 and 5).
(b)
Climate variability: In general, Guyana experiences two dry seasons per year – February
to April and August to November. These periods are most conducive to carrying out the
main activities related to sugar cane production – in particular land preparation, and
harvesting. As a direct consequence of climate variability and a possible consequence of
climate change, “opportunity days” available to carry out those operations have, on
average, been reduced from 120 days per year to less than 80 days per year. Average
annual total “opportunity days” per year and per crop across all estates from 2001 to 2013
is presented in Figure 6. From the data, the trend between 2001 and 2013 has been a net
decline in “opportunity days”. The reduction in “opportunity days” is further compounded
for estates where the availability of field labour is also restricted. Climate adaptation
therefore demands an increase in locally appropriate technological interventions and
operational management measures to optimise sugar cane cultivation, harvesting and the
production of sugar.
APPENDIX 1.2
Page 5
FIGURE 4: TONNES SUGAR PER HECTARE 2013 – ESTATE
7
6
5
tsh
4
3
2
1
0
Skeldon
Albion Rose HallBlairmont Enmore
LBI
Wales
Uitvlugt
ESTATE
Source: GuySuCo
FIGURE 5: CARRY-OVER CANES 2011-2014
500,000
450,000
400,000
Tonnes Cane
350,000
300,000
250,000
200,000
150,000
100,000
50,000
Skeldon
Albion
Rose Hall Blairmont
ESTATE
East
Demerara
Wales
Uitvlugt
APPENDIX 1.2
Page 6
FIGURE 6: “OPPORTUNITY DAYS”ACROSS ALL ESTATES 2001-2013
Avg. Annual "Opportunity Days"
250
200
150
100
50
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
1st Crop
2nd Crop
Total-1st & 2nd Crop
Linear (Total-1st & 2nd Crop)
Source: GuySuCo
(c)
Operational difficulties at the Skeldon factory: which have resulted in frequent suspension
of operations, a failure to date, to achieve design specifications (grinding of 350 tn sugar
cane per hour), low sugar recoveries, low energy efficiencies, etc.;
(d)
Limited investment in production infrastructure: both field and factory, which have
negatively impacted operational efficiencies.
Marketing
9.
Sugar is one of the world’s most important commodities. The main sources of sugar are sugar cane
and sugar beet. It is estimated that only 30% of the world’s sugar production is traded on international
markets. Brazil is the largest sugar cane producer, producing on average, double that produced by the
second largest producer, India. The EU is the third largest producer of sugar and the largest producer of
beet sugar. Brazil is the world’s largest exporter followed by Thailand, whilst the main importers are the
EU, the USA, Indonesia and China. Most large producers, with the exception of Brazil, intervene in the
sugar trade (through, for example, subsides, quotas or by restricting exports) - this has a direct impact on
price/price volatility of sugar traded on the World Market. A comparison of sugar prices in the World, EU
and US market is presented at Table 3.
TABLE 3: COMPARISON OF SUGAR PRICES IN THE WORLD,
EU AND US MARKET
(US¢/lb)
Year
1980 - 2000
2001 - 2014
Forecast
2014 - 2023
World
Market
5 - 15
7 - 27
22
EU
Intervention
Price
Fixed at 32
Fixed at 19
19 - 25
US
Intervention
Price
20 - 22
19
-
Source: Food and Agriculture Organisation/Organisation for Economic Cooperation
and Development (FAO/OECD), C. Czarnikow Sugar Futures Ltd, US Sugar No. 11
APPENDIX 1.2
Page 7
10.
For ACP states including Guyana, the most important market has been the EU. Sugar production
and trade in the EU operates within the framework of the EU Common Agricultural Policy which includes
a system of production quotas, price controls, export subsidies and import tariffs designed to protect
domestic sugar producers. EU production, which exceeded quotas in any given year, either had to be
exported, sold for industrial non-food uses, or stored.
11.
For several years the main market for sugar exported from Guyana was the EU within the
framework of the EU SP established in 1975. The SP is a commitment by the EU to purchase and import
$1.3 mn per tn of cane sugar from sugar producing ACP States. Within the framework of this Agreement
the EU undertook to guarantee prices higher than world market prices.
12.
The SP provided a relatively stable and predictable sugar market for ACP sugar producers that
lasted for more than 40 years. ACP exporters benefited from an EU market price that was typically at least
30 cents per pound for raw sugar, 2-3 times the ‘world market’ price, and usually 50% higher than the next
most remunerative export market - the United States of America.
13.
In 2006, the EU began implementation of reform to the Sugar Regime and SP. The Reform was
implemented in the wake of a World Trade Organisation panel ruling which established that EU sugar
exports were cross-subsidised and, as such, should be capped to no more than $1.35 mn per tn - based on
the white sugar value. The capped amount would correspond to the equivalent shipments of sugar from
preferential ACP/lesser developed countries.
14.
According to the International Sugar Organisation (ISO) the most significant of the 2006 reform
measures included:
(a)
reference sugar prices reduced by 36% over four years starting from 2006-2007. The
reference price for raw sugar was initially set at EUR523.7/tn in 2006-2007, and revised to
EUR335.2/tn in 2009-2010; and
(b)
the sugar price intervention (an obligation of the Commission to buy from the industry any
unsold quota sugar at a guaranteed price) was abolished after 2009-2010 and replaced with
a system of private storage. Producers taking advantage of the scheme are paid a fee for
private storage of excess production.
15.
In anticipation of a decline in revenue from sugar, several ACP States ceased sugar production
operations whilst others such as Guyana which opted to remain in sugar were recipients of aid from the EU
(under an aid package labelled “Accompanying Measures for Sugar”) designed to improve the efficiency
of their operations.
16.
Initially, market prices in the EU declined sharply followed by a reduction in supplies and
associated upward price pressures. As a result, in 2013 sugar prices on the EU market were above prereform levels. In addition, countries such as Guyana have benefited from relatively high Euro/USD
exchange rates.
17.
In June 2013, the EU announced that, in an effort to bring the EU sugar sector more in line with
other agricultural sectors in the EU, further industry reforms will be implemented in 2017. The most
significant change will be the removal of sugar and isoglucose (High Fructose Syrup) production quotas,
as well as minimum beet prices. Presently, the EU regulates both sugar and isoglucose production through
a system of fixed quotas distributed to Member countries. Any production above the quotas cannot be
freely released in the EU market. This excess must either be sold to the chemical or bioethanol industry or
exported within the World Trade Organisation limits of up to $1.35 mn per tn.
APPENDIX 1.2
Page 8
18.
An ISO Study, ‘The EU Sugar Market Post 2017’, has predicted that the planned 2017 reforms will
possibly lead to higher production of sugar in the EU given the evidence of efficiency improvements by
EU producers. . The ISO Study further suggests that a scenario of high domestic EU prices will prompt
consumption of isoglucose by the industrial end users to rise, reducing the sugar market share in that branch
of the EU market. As such, it is predicted that the EU may lose its current status as one of the world’s
largest sugar importers. Athough ACP countries which have signed EPAs with the EU will continue to
benefit from duty-free quota-free entry into the EU market (post 2017), there will likely be downward
pressure on EU market prices. An EU market price forecast is presented at Table 4 below.
TABLE 4: EU MARKET PRICE FORECAST
Price Scenario
Low
High
Likely
Euros per Tonne
2014-2017
2017-2023
280
280
450
450
330 - 420
330 - 420
Source: C. Czarnikow Sugar Futures Ltd.
World Market
19.
Industry Analysts are projecting a moderate increase in world sugar consumption and price over
the period ending 2023. According to the FAO/OECD Agricultural Outlook, global sugar production is
projected to increase by 1.9% per year over the period 2015-2023 with most of the increase in production
originating from countries producing sugar cane rather than sugar beet. The outlook for global sugar
consumption is also projected to increase by 1.9% per year over the same period. According to the report,
world sugar prices are expected to edge moderately upward over the same period and are projected to reach
USD431/tn (US¢19.5/lb) by 2023. This scenario suggests a convergence of World Market and EU prices.
20.
However, Analysts caution that:
(a)
there is a large degree of uncertainty regarding price forecasts, particularly in the longer
term;
(b)
developments in Brazil remain central to driving prices, and are expected to continue given
a reliance on Brazil to meet global demand – for example, weather related shocks or a
decision by Brazilian producers to allocate increased volumes of Brazilian sugar to ethanol
could positively impact price;
(c)
a faster than expected development of a beet bioplastic industry as well as a significant
offtake of beet ethanol production could boost further potential sugar import demand by
the EU beyond current market expectations leading to an increase in the price of sugar; and
(d)
sugar beet competes with other agricultural crops for the EU’s limited land area, and the
volatility in alternative crops will have an impact on growers’ planting decisions and by
extension supply and price.
Other Market Options
21.
Guyana benefits from a price premium on the US market for an estimated 20,000 tn. per year. In
addition, Guyana benefits from protection within CARICOM – with a Common External Tariff of 40%.
However, as is the case with the US market, demand is relatively low (CARICOM 80,000 tn per year and
domestic sales 25,000 tn per year) compared to the capacity of the industry to supply.
APPENDIX 1.2
Page 9
22.
Unless there is a repeal/implementation delay of the planned EU market reforms post 2017, or
changes in global supply which positively impact world market price, the profitability/sustainability of the
sugar industry in Guyana will be dependent on the extent to which the industry is able to lower the cost of
production to enable the industry to compete on the EU and/or World Market.
Guyana Sugar Industry – Long-Term Prospects
23.
For decades the sugar cane industry in Guyana has been synonymous with the production of sugar.
Little attention was paid to diversification of the sugar cane industry, largely on account of the preferential
treatment and associated support provided by the EU SP.
24.
Ongoing changes to the SP, increases in factors of production, expansion of sugar cane/sugar
production by large commercial operators in Brazil, Australia, and competition from non-sugar cane
sweeteners, have over the past two decades severely eroded the returns from the production of raw sugar.
These changes were largely responsible for the scaling down of sugar production in Barbados and Jamaica
and the closure of the industry in Trinidad and Tobago and in St. Kitts and Nevis. Further challenges loom
on the horizon, in particular, concerns related to the link between sugar and obesity and the associated
strong advocacy in developed countries to discourage sugar consumption.
25.
Whilst sugar prices in the EU are projected to experience downward pressure post 2017, projections
are that world market price will increase over the period ending 2023 with the most likely price on both
markets forecast to be US¢22/lb (World Market) and US¢19-25/lb (EU market). As shown in Table 5,
notwithstanding the fact that sugar cane and sugar production in Guyana is highly inefficient, estate and
factory costs of production on estates in the Berbice Region over the period 2006-2013 is relatively
favourable when compared to market price forecasts. Whilst production cost on estates in the Demerara
Region suggests that these estates are highly inefficient and have been for several years, recent evidence
(2014) has suggested that mechanisation of production systems could significantly improve output levels
and lower cost of production on those estates. Accordingly, authorities in Guyana are of the view that by
improving industry productivity and efficiency and by association lowering the cost of production, the
industry can, in the medium term, be set on a path to sustainability.
26.
Other reasons for keeping the industry operational are related to the socio-economic benefits it
provides to the Guyanese population as it relates to:
(a)
employment and related social services;
(b)
provision of water management services for non-sugar agriculture, including
approximately two-thirds of the area under rice production; and
(c)
provision of flood control along a significant section of Guyana’s coast line, which lies
below sea level, and is highly vulnerable to flooding.
27.
GOGY is also giving consideration to exploring, more aggressively, options for diversifying the
industry. The production of packaged sugars, generation of electricity (from bagasse) for use on estates,
and, in the case of Skeldon, sale to the national grid and plans to explore the establishment of a refinery are
positive but insufficient steps. There is need to explore the development of a more holistic sugar cane
industry. In this regard, stakeholders recognise that there is merit in exploring options for the production
of ethanol. GOGY should accordingly make available to GuySuCo the relevant skills to explore the
feasibility of that option.
APPENDIX 1.2
Page 10
TABLE 5: COST OF PRODUCTION OF SUGAR IN GUYANA
BY ESTATE/FACTORY 2006-2013
(US¢/lb)
Year
Estate
2006 2007 2008
2009
2010
2011
2012
Skeldon
21.82 21.23 32.76 23.15 26.99 30.05 27.61
Albion
18.37 17.16 19.45 19.51 22.18 21.65 23.11
Rose Hall
20.26
- 23.08 23.41 26.26
Blairmont
19.77 16.86 20.24 19.01 20.47 19.78 21.85
Berbice
19.71 17.77 21.21 20.02 23.08 23.11 24.46
Enmore
17.72 19.46 25.78 24.32
5.40 29.50 29.11
LBI
26.14
- 29.66 93.32
Wales
25.41 21.85 23.69 26.31 28.56 31.11 34.77
Uitvlugt
28.00 37.75 33.47 28.88 30.63 32.42 37.24
Demerara
23.81 22.69 26.59 25.87 28.60 34.70 37.43
Head Office Cost
1.81 2.45
2.03
1.90
2.63
2.10
2.33
Industry
23.09 22.07 25.28 22.08 27.61 28.65 30.36
2013
34.78
25.24
31.86
27.58
29.06
51.17
35.64
46.32
43.83
3.00
36.60
Source: GuySuCo
Sector Strategy
28.
GOGY’s strategy for the sugar industry, as articulated in the Agricultural Sector Strategy 20132020, seeks to make the industry internationally competitive by increasing productivity/efficiency and
reducing the cost of production of sugar. Key elements of the strategy include:
(a)
increasing production to 450,000 tn sugar cane by 2020;
(b)
attaining an industry average of no greater than 12 tc/ts and under 10 tc/ts for at least two
factories;
(c)
attaining production of 75 tn of sugar cane per ha; and
(d)
achieving (overall) at least 60% mechanisation in harvesting by 2020.
29.
In keeping with the framework of the Agricultural Sector Strategy, GuySuCo, in consultation with
key stakeholders including GOGY and trade unions representing industry workers, has developed a
Strategic Plan for the period 2013-2017. The Plan identifies several areas of investment geared towards
addressing the underperformance of the industry. Measures will be instituted to increase the productivity
of estates (sugar yield per unit area) and reduce the cost of production per unit of sugar. The target is to
produce approximately 350,000 tn of sugar by 2017, largely through improvements in sugar yield per/ha
(tsh) from the current average of 4.3 tsh to 6.5 tsh. The existing factories have the capacity, subject to
ongoing maintenance, to produce the target of 350,000 tn sugar. Accordingly, factory related investment
is intended to improve operational and energy efficiencies with a focus on the Skeldon factory towards the
goal of increasing sugar recoveries and reducing the cost of production.
30.
GuySuCo, using internal technical services and with support of consultants, has developed a
detailed investment plan identifying, by estate and factory, the required upgrades. The total investment
required to achieve the target identified in the Strategic Plan is estimated at $40 mn. In 2014, GOGY
provided GuySuCo with $30 mn. GuySuCo, through GOGY, is seeking an additional investment of $7 mn
to cover the shortfall. GuySuCo will provide counterpart funds of $3 mn using internally generated
resources.
APPENDIX 1.2
Page 11
31.
Key activities to be implemented include:
(a)
Mechanisation of sugar cane production and harvesting: To reduce dependence on manual
labour and to mitigate against the impact of a reduction in the number of “opportunity
days” available for the conduct of field operations. GuySuCo’s existing Dutch, Ridge and
Furrow, and English beds are unsuitable for mechanical production and harvesting due to
their limited size, drainage and transport arrangements, and the labour intensive
maintenance and tillage requirements. The most cost-effective method of land preparation
to facilitate mechanised production and harvesting of canes is to prepare fields as Broad
English beds, 450 metres (m) long x 30 m wide. This configuration does not require reorientation of roads or D&I infrastructure. The costs of tillage for maintaining Broad
English beds is estimated to be 30% to 40% less than that required for fields prepared using
the traditional layout. An additional advantage of the Broad English beds is that they are
also amenable to manual harvesting, weed control and fertiliser application. GuySuCo has
targeted the preparation of 6,000 ha into the Broad English Bed over the period 2015-2017.
(b)
Increasing Capital Investment – Field and Factory: The poor financial performance of the
company has negatively impacted GuySuCo’s ability to undertake capital investment –
both field and factory. GuySuCo, however, recognises that in order to achieve sugar
operational efficiencies there is need for a substantial investment to improve infrastructure
in both sugar cane fields and factories. The Strategic Plan also foresees investments to
improve: all weather roads, cane transport systems, irrigation and drainage and related cane
production and harvesting systems, and factory operations including measures aimed at
increasing sugar recoveries and energy efficiency. These improvements are expected to
results in an overall improvement in production efficiencies (yield of sugar cane per unit
area and sugar recoveries), as well as a reduction in the unit cost of production.
(c)
Increasing the Participation of Private Farmers: GuySuCo has embarked on a programme
geared at increasing the participation of private farmers in the industry as a way of
addressing labour supply challenges. Private farmers are in general able to attract labour
– being better placed to enter into part-time/seasonal/day job arrangements than GuySuCo.
In 2012, 5,387 ha (10.99%) of the total 49,003 ha of sugar cane harvested was owned by
private cane farmers. It is projected that by the end of 2017, 16.41% of the hectares
harvested would be owned by private farmers. The focus on privatisation will be on estates
with the greatest labour supply challenges. A total of 1,500 ha of GuySuCo lands has been
targeted for leasing to private farmers at the Uitvlugt Estate over the next two years. A
major incentive for private farmers is the possibility to become FairTrade certified.
FairTrade certified farmers obtain, through the FairTrade Labelling Organisation, a price
premium. GuySuCo facilitates private farmers by the provision of a wide range of advisory
services and machinery and equipment rental and the provision of credit either directly or
through financial institutions.
ANNEX 1 TO APPENDIX 1.2
OVERVIEW OF SUGAR CANE HARVESTING
1.
Manual harvesting involves the cutting of sugar cane stalks and the loading of those stalks on,
‘punts’ for transport to the factory. Fields are burnt the day before harvesting is due to begin. Burning has
the effect of reducing the amount of trash (dry leaves) on cane stalks thereby improving (on average a two
fold increase) productivity per worker. Burning also has the added benefit of improving worker safety aiding in the control of pests (including rodents) and poisonous snakes. On the down side the ash and smut
generated from burning can negatively impact worker health.
Mechanical Harvesting
2.
Mechanical harvesting, refers to the use of specially designed machines for sugar cane harvesting.
The process can either be semi-mechanical – where the cutting of canes is done manually and the
transportation of stalks to punts is done by machine.
3.
In full-mechanical harvesting, machines both cut and load cane stalks into tractor driven trailers.
In Guyana, mechanical harvesting also requires the use of an additional piece of equipment (an elevator),
for transferring cut canes from tractor trailers into punts for transport to the factory. A mechanical
harvesting unit consists of four pieces of equipment - a harvester, the accompanying tractor and trailer and
an elevator.
4.
GuySuCo currently operates ten fully mechanised harvesting units, eight on the Skeldon Estate and
two at Enmore. Semi-mechanical harvesting is currently practised across the industry. Evidence in Guyana
indicates that one mechanical harvesting unit, operated by ten persons, is required for 500 ha of cane per
crop. In addition to being able to handle larger volumes of sugar cane, as indicated in the table below, fullmechanical harvesting is also more cost effective than either manual or semi-mechanical harvesting.
TABLE 1: COMPARISON OF METHODS HARVESTING COST
Method
Manual
Semi-mechanical
Mechanical
USD
per Tn
20
9
5.4
Source: GuySuCo
5.
Efficient mechanised harvesting requires specific conditions the most important of which relate to:
(a)
bed length – beds must be relatively long to reduce the time and space for equipment
turning;
(b)
suitable space must be left at the end of the field to facilitate machine and collector trucks
turning;
(c)
level of the fields – land must be level to reduce the risk of damage to sugar cane stems
and to minimise the uptake by the machines of soil and other extraneous matter; and
(d)
sugar cane varieties – cane must be erect and of relatively uniform height at maturity.
SUMMARY OF ISSUES TO BE ADDRESSED WITHIN THE FRAMEWORK OF
GUYSUCO’S 2013–2017 STRATEGIC PLAN
Issue
Plans to Address
Technical difficulties with the New
Skeldon Factory
The factory will be retrofitted in keeping with the
recommendations of independent consultants. Retrofitting is
on schedule to be completed by November 2014 at an estimated
cost of $2.5 mn.
This will be addressed by improvements in: plant material
selection and preparation; land preparation; water, plant
nutrition and weed management; and elimination of fifth
ratoon.
Low sugar cane yield
Improved land preparation weed control and plant nutrition
Timely and proper land preparation is essential to ensuring
proper plant anchorage, nutrient uptake and ease of harvesting.
Meanwhile, weeds can reduce sugar cane yields by between
15% and 70%. Thus ensuring that the crop is weed free,
particularly in the first ninety days after planting/harvesting is
essential to obtaining optimum yields. Specialised machinery
and equipment is being introduced to facilitate more timely and
effective implementation of those measures.
Elimination of fifth ratoon
GuySuCo’s production data have revealed that it is
uneconomical to maintain canes beyond the fourth ratoon given
declining yields and relatively high maintenance cost. As at the
end of 2013 approximately 30% of GuySuCo’s holdings were
older than the fourth ratoon, a major contributor to the relatively
low tonnage of sugar produced per ha. A decision has been
taken by the Corporation that canes will be harvested after the
fourth ratoon and the area replanted.
Given the pervasive labour supply challenges being
experienced throughout the industry key to improving
performance in these areas is the use of specialised machinery
and equipment.
Increasing the pace of industry mechanisation to enable semi
and full mechanical harvesting on all estates. This will increase
the rate of supplying canes to factories and thereby increase the
efficiency of factory operations.
Factories operating below capacity
resulting in high operational cost.
Total grinding hours lost in the
industry due to insufficient cane being
supplied to factories, largely due to
shortage of labour, increased from
1,729 hours in 2003 to 13,665 hours in
2011.
Some factories not configured to Financial constraints have limited investment in factories.
process mechanically harvested cane. GuySuCo however recognises the need for factory upgrading to
optimise sugar recoveries and energy efficiencies. Several
factories will be upgraded over the period 2014-2016 largely
through resources provided by GOGY.
Page 2
Issue
Plans to Address
A dwindling supply of labour, high
levels of absenteeism and the loss of
skilled workers negatively impacting
field and factory operations.
Increases in the cost of non-labour
inputs - fuel, fertilisers, machinery and
equipment spares.
Introduction of an apprentice programme, on-going training
and retraining of workers at all levels and the gradual
introduction of mechanisation to meet the gap in the supply of
labour.
All factories have the capacity to generate energy through the
use of bagasse – the goal is to ensure 100% of factory energy
needs during sugar cane processing is internally generated.
GuySuCo will make the necessary investments in factories to
achieve/sustain energy production goals. Management of pest
and disease will be through the use of biological control
measures.
Introduction of machines and equipment for land preparation,
semi-mechanical planting, application of agro-chemicals and
harvesting, etc. Mechanisation also requires a change in land
preparation estimated at three time the cost per unit when
compared to the traditional system. As at December 31, 2013,
13,471 ha were prepared for mechanical harvesting.
Increase in the capacity to produce value-added sugar and
explorations of options to diversify the industry away from a
total reliance on the production of sugar. On-going initiatives
include a pilot project on ethanol production.
Weather variability reducing the
number of “opportunity days” –
particularly for land preparation,
planting and harvesting operations.
Market
price
variability
and
uncertainty particularly for bulk sugar.
APPENDIX 1.3
SOCIAL CONTEXT
Population and Livelihood
1.
Guyana, is the largest country in the English-speaking Caribbean but with a population of 747,884
(2012 Census1/) and a total land area of about 215,000 square kilometres (km2). It is sparsely populated
relative to its size. Females slightly outnumber males in the population, resulting in an estimated sex ratio
of 992/. The 2012 population also represents a slight reduction of about .04% over the 2002 figure of
751,223 and a continuation of the country’s fluctuating population pattern over the last three censuses. The
1980 census recorded a population of approximately 760,000. In 1991, it was reduced by about 5% and
after increasing by 4% in 2002 it declined again, though marginally, in 2012. The country is multi-ethnic
with its social structure and relations dominated by two major ethnic groups: viz. Afro-Guyanese and IndoGuyanese. Amerindians, descendants of British, Portuguese and Chinese and people of mixed race make
up the rest of the population. Population density is low, averaging 3.5 persons per sq km, but the population
is unevenly distributed with approximately 90% residing in communities along the narrow coastal strip. It
ranges from 140 persons per km2 in the areas around the capital city, Georgetown, to less than one in parts
of the Hinterland. Unlike the coastal area which has a sex ratio similar to the national average, in the
Hinterland regions, it is in excess of 100, which suggests a possible higher rate of out migration for women
than men in those areas.
2.
The coastal strip has rich alluvial soils which are suitable for agriculture and as a result, many of
the families residing there are engaged in agricultural production, particularly the cultivation of sugar cane
and rice, for their livelihood. Some rice is also exported to countries in the Region but most is consumed
domestically. Other crops cultivated along the coast include coconuts, cassava, citrus fruits, pepper,
pumpkin, vegetables and ground provisions. Livestock such as cattle (some of which is also raised in the
hinterland), pigs, poultry, and fish - mainly shrimp which is carried out primarily for export - also provide
employment to many men and women and, along with rice and the other crops, are extremely important for
the country’s food security.
3.
The country’s once dominant sugar cane plantations dotted the coastline. These plantations are
operated by GuySuCo, which produces sugar for local consumption and export to Europe, USA and
CARICOM countries. Cultivable lands, particularly for rice and sugar cane, expanded in the mid-20th
century with the introduction of mechanisation. This resulted in increased agricultural production and
incomes for the many families that depended on agriculture.
Poverty and Human Development
4.
Data in the 2014 Human Development Report (HDR) suggest that Guyana experienced several
improvements in overall living conditions over the last few years. In 2010, the country had a Human
Development Index (HDI) value of 0.628. This changed to 0.632 in 2011, 0.635 in 2012 and then to 0.638
in 20133/. The HDR, reporting also on the country’s Multidimensional Poverty Index (MPI) 4/, provided a
further favourable picture in the area of human deprivations. It recorded an MPI of 0.31 with 7.8% of the
population being multi-dimensionally poor and an additional 18.8% near poor, making it about just 17%
being both poor and vulnerable to poverty. Only 1.2% was estimated to be in severe poverty.
1/
2/
3/
4/
Guyana 2012 Population and Housing Census Preliminary Report, June 2014.
99 males for every 100 females.
http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/GUY.pdf. Guyana HDI values and rank changes in the 2014 HDR
UNDP.
MPI identifies multiple deprivations in the same households in education, health and living standards. A deprivation score of
33.3% is used to distinguish between the poor and the non-poor.
APPENDIX 1.3
Page 2
5.
Similar progress was observed in the area of gender equality. The 2013 Gender Inequality Index
5/
(GII) showed that Guyana attained a value of 0.524; a slight improvement over 2012 of 0.49. This is
above the Medium HDI and the average for Latin America and the Caribbean. This gave it a ranking of
113 which is higher than Suriname (95) and Belize (84). The country’s Gender Development Index (GDI)6/
was also quite favourable. It attained a GDI of 0.985 which is also greater than that for Suriname (0.974),
Belize (0.963), Latin America and the Caribbean (0.963) and the Medium HDI (0.875). These
achievements were reflected in the country’s 2011 Millennium Development Goals (MDG) Progress Report
which pointed out that eight indicators in five of the MDGs were set to be achieved. These were: reducing
extreme poverty and hunger by half, achieving universal primary education, promoting gender equality and
the empowerment of women, reducing child mortality, combating HIV/AIDS, malaria and other diseases,
and ensuring environmental sustainability.
Project Sites
6.
The three estates; Albion, Rose Hall and Uitvlugt are located along the more populous and fertile
coastal strip. Albion and Rose Hall are in the East Berbice-Corentyne area (Region 6) that extends from
north to south along the west bank of the Corentyne River – the country’s eastern border with Suriname.
Region 6, with about 110,000 people, is the second most populated region in the country. The population
is almost equally distributed between men and women. However, with a total area of 36,234 km2, it is
rather sparsely populated, averaging about three persons per km2 - slightly below the national average. The
region’s population is also in decline, recording a decrease of about 30% since the 1980 population of
152,386.7/ This is due both to high emigration and rural to urban migration which in turn have impacted the
availability of labour, particularly in agriculture related occupations.
7.
Albion houses GuySuCo’s largest sugar factory. It is located approximately 18 km east of New
Amsterdam - the Region’s capital - and has a population of about three thousand, of which 95% are of East
Indian descent. The remaining 5% is split among Blacks, Amerindians, and Chinese. Like other rural
communities, the people live mostly off the land. The men are usually engaged in the cultivation of
commercial crops, i.e. sugar and rice, while the women grow and sell a wide variety of vegetables and
tropical fruits. However, the vast majority of the adult population is employed on the sugar cane estate.
Men make up 95% of the estate’s workforce. About 80% of the employees are in the agriculture section
with harvesters or cane cutters which are exclusively men8/, accounting for over 50% of this group.
8.
Rose Hall is the smallest town in Guyana. It is situated some 23 km east of New Amsterdam, has
an area of 13 km² and a population of about 8,000. The area was once owned by Dutch planters and
purchased later by field slaves. In 1908, it attained village status; and became a town in 1970. It serves as
a central hub for the lower and upper Berbice Regions, where people from the surrounding areas come to
buy raw materials, grocery and clothing from the predominantly female vendors9/. The Rose Hall Sugar
Estate is the main source of employment for residents. About 25% of the population are registered as
GuySuCo employees of which 95% are men. Among these, like Albion, 80%, of the work force are
agriculture workers, with 97% of them being men. Of 53% of the agricultural workforce, only men, are
employed as cane cutters.
GII reflects gender-based inequalities in three dimensions – reproductive health, empowerment, and economic activity.
GDI was introduced in the 2014 HDR. It measures gender inequalities in the achievement of three basic dimensions of human
development – health (female and male life expectancy at birth); education (female and male expected years of schooling for
children and mean years for adults aged 25 years and older); and command over economic resources (female and male estimated
GNI per capita).
7/ Guyana 2012 Population and Housing Census Preliminary Report, June 2014 and http://en.wikipedia.org/wiki/Guyana.
8/
There is one woman among them.
9/ http://en.wikipedia.org/wiki/Rose_Hall,_Guyana.
5/
6/
APPENDIX 1.3
Page 3
9.
Uitvlugt is situated along the coastal public road on the west bank of the Demerara River in
Region 3 - the Essequibo Islands-West Demerara Region. The Region’s administrative centre is located in
the town of Vreed-en-Hoop but other communities such as Parika on the eastern bank of the Essequibo
river estuary, Schoon Ord and the large islands at the mouth of the Essequibo, i.e. Hog Island, Wakenaam
and Leguan, give it its mixed urban/rural character. The Region has a long tradition in the cultivation of
rice and sugar. The sugar industry is operated in the Tuschen/Uitvlugt area. About 28,000 acres of land is
used for sugar, of which 6,000 acres are used by private farmers. Another 20,000 acres is in rice and 7,000
under the cultivation of non-traditional crops such as a variety of ground provisions, vegetables, citrus
fruits, watermelons and pumpkins. The area is also known for livestock production10/. Men are actively
engaged in the agricultural activities, fishing, manual work, and the like, but women are also engaged in
fishing and kitchen gardening to supplement household income. Some women also work as teachers,
seamstresses, cooks, shop assistants, and vendors.
10.
Unlike Region 6 which has experienced population decline, Region 3’s population has increased
from about 103,000 people in 2001 to approximately 107,000 in 2012. This is due to a process of social
and economic transformation experienced in the Region in the last ten years. An increased demand for
housing in the country has resulted in large numbers of new residents moving from other areas of the
country into the large public and private housing developments being set up in the Region. This has
provided new opportunities for employment in construction, tourism and the entertainment industries.
These changes have resulted in the Region being one of the fastest growing areas in the country, and has
given rise to the residents being less reliant on agriculture for livelihood. As a consequence, it is also one
of the regions with the most severe agricultural labour supply constraints.
11.
Uitvlugt was once a very large sugar plantation employing thousands of workers in the different
aspects of the industry. The community now has a population of around 2,000 from a variety of ethnic
backgrounds. The estate employs about 1,600 persons, 93% male, who come both from the community
and other villages in the Region. Like the other two estates, the agriculture workers (mostly men) make up
the largest share of the employees, accounting for 73% of the workforce. About 50% of these workers are
cane cutters.
12.
Uitvlugt, is about 20 minutes by road from Vreed-en-Hoop traveling west. In recent years, the
community, like its neighbours along the west coast road, has been experiencing significant changes that
have altered its dependence on the sugar estate for livelihood. The residents are now able to find
employment in other areas such as shop assistants, carpenters, masons and heavy equipment operators.
These occupations, which are perceived to demand less arduous work, either pay equal or higher wages
than the highly physically demanding cane cutting job. As a result, less people are willing to be agricultural
workers on the estate and are opting for employment in other sectors. This situation has contributed to
significant labour shortages on the estate and has altered the once seamless relationship between the
community and the sugar industry.
10/ Data
from the Ministry of Agriculture Region 3 Office.
APPENDIX 1.4
CDB LENDING TO AND EXPERIENCES IN THE SUGAR INDUSTRY
1.
The proposed Project is the third CDB intervention in the sugar industry in Guyana. In 1993, CDB
assisted Guyana with financing to improve capacity to drain several areas of the coastal lands, thereby
reducing the extent of flooding in the sugar estates and associated communities during the wet season.
2.
The most recent CDB intervention in the Sugar Industry in Guyana is the SSMP. The SSMP is a
$119.3 mn project financed jointly by GOGY, GuySuCo and CDB. CDB’s financing of $28.2 mn (21% of
the overall project cost) was approved by CDB’s BOD in July 2003 and was scheduled to be implemented
over a 53-month period ending in the last quarter of 2007.
3.
The objective of the SSMP is to increase production and improve productivity and cost efficiency
in the sugar industry by expanding and modernising production related activity at the Skeldon Estate and
adhering to an Agricultural Improvement Plan throughout the industry. Key components of the Project
include:
(a)
the construction of a new factory (based on diffusion technology) with the capacity to
process 350 tn of sugar cane per hour), and an associated 8 MW power plant. The power
plant was designed to serve the needs of the sugar factory and neighbouring community –
financed from counterpart resources;
(b)
the development of approximately 4,500 ha of land for sugar cane production including the
establishment of water storage, irrigation and drainage structures, access roads, cane
transport canals, etc. – financed by CDB; and
(c)
procurement of field machinery and equipment in support of sugar cane production and
transportation to the new factory – financed by CDB.
4.
The Project was affected by several factors which have impacted negatively on its implementation
performance. The CDB-financed component is expected to be completed in 2014, approximately eight
years behind the appraisal estimate. Key factors responsible for delays on the CDB-financed component
relate to:
(a)
unprecedented high rainfall levels since the inception of the Project. Among the reasons
identified by policy makers for investing in Skeldon was the relatively low rainfall levels
prevalent in the area. However, rainfall levels in the Skeldon area since project inception
has increased dramatically. This coupled with the fact that soils in the project area (heavy
clays) are slow draining made working conditions exceedingly difficult and protracted.
This had an adverse impact on the implementation of works foreseen under the Project –
land clearing, associated infrastructure development and is the most significant reason for
the delay in project implementation; and
(b)
poor performance of contractors – execution of a number of key contracts was prolonged
due to inadequate resourcing by contractors including the use of unsuitable equipment.
This was exacerbated by adverse weather/field conditions, and a general reluctance by
GuySuCo to terminate contractors.
Land development works have largely been completed. As at the end of 2013, Skeldon Estate and private
farmers accounted for an estimated 10,000 ha (20% of the industry total) of lands under sugar cane
production.
APPENDIX 1.4
Page 2
FIGURE 1: RAINFALL –SKELDON ESTATE 2003-2013
2500
Rainfall (mm)
2000
1500
1000
500
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
5.
The most significant difficulties with the SSMP relate to operations at the new factory.
Traditionally, sugar factories in Guyana mechanically grind sugar cane stalks to extract juices. The new
factory is however based on diffusion technology. Under optimum conditions, factories based on diffusion
technology are cheaper to operate and the sugar yield is 2-3% higher than factories utilising the traditional
milling system, hence the decision by stakeholders in Guyana to invest in this technology. On the downside,
factories using this technology are less efficient at handling cane with high levels of extraneous matter.
6.
The new factory was commissioned in 2008, and coincided with the decommissioning of the
existing factory. Operations of the new factory was affected by high quantities of extraneous matter in
harvested canes, material and equipment failure. As a result, factory systems and processes operated
below design specifications. Although designed with capacity to process 350 tc per hour – the maximum
achieved to date is 220 tn per hour.
7.
The resultant effect is that key performance indicators including tc/ts, tsh, have been seriously
compromised (see Figures 2 and 3).
APPENDIX 1.4
Page 3
FIGURE 2: SKELDON ESTATE - TSH
8
7
6
5
tsh
4
3
2
1
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
FIGURE 3: SKELDON ESTATE – TC/TS
25
tc/ts
20
15
10
5
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
8.
Given the fact that the Skeldon Estate accounts for approximately 20% of the total area under sugar
cane, this has had a significant negative impact on the overall performance of the industry. In 2013, the
Skeldon Estate accounted for approximately 13.6% of overall sugar produced, and was second to last in the
key productivity measure - tsh.
APPENDIX 1.4
Page 4
FIGURE 4: BY ESTATE – TSH (2013)
7
6
5
tsh
4
3
2
1
0
Skeldon
Albion
Rose Hall Blairmont
Enmore
LBI
Wales
Uitvlugt
Estate
9.
GuySuCo is in the process of retrofitting the Skeldon factory in keeping with the recommendations
of independent consultants. Remedial work, estimated at $2.5 mn is on schedule to be completed before
the 2015, cane harvest and will include:
(a)
the design and installation of new cane delivery mechanisms in keeping with the designs
currently in use on other estates – this is necessitated by the findings that the current cane
delivery mechanisms, operating at optimum, will not be able to load the required 350 tc
per hour;
(b)
the replacement/repair of key pieces of equipment which were either defective when
installed, or improperly installed; and
(c)
installation of cane washing equipment to reduce the percentage of extraneous matter
entering the production chamber.
10.
Retrofitting is on schedule to be completed in November 2014, in time for processing cane during
the first crop of 2015. GuySuCo is also implementing a training programme/engaging additional engineers
and technicians as part of the strategy to improve operations at the factory.
APPENDIX 1.5
LOCATION OF GUYSUCO ESTATES
APPENDIX 2.1
GENDER INTEGRATION ACTION PLAN
DRAFT TERMS OF REFERENCE
1.
BACKGROUND
1.01
The sugar industry in Guyana plays a vital role in social and economic development and
environmental protection for the country as a whole. The industry accounts for approximately 15 percent
(15%) of Gross Domestic Product and is the third largest contributor of foreign exchange. It is the single
largest employer in the country, employing about 18,000 persons and supporting over 300 service providers.
Sugar cane is grown on approximately 25% of the cultivated coastal lands mainly by the state-owned
company Guyana Sugar Corporation Inc. (GuySuCo). GuySuCo operates eight estates with seven factories
with a total of about 50,000 hectares (ha).
1.02
Employment in the industry as a whole, but particularly in the activities related to the production
and harvesting of sugar cane, has historically been highly labour intensive and as such, dependent on a large
and regular supply of labour during the two cropping seasons each year. However, in recent years a general
reluctance of persons to engage in the arduous labour aspects of the industry, aided by changes in the
Guyanese economy, has resulted in increased competition for labour from other sectors. This has caused
unreliable labour supply on some estates and chronic shortages on other.
1.03
In order to address this challenge, and as part of an ongoing industry modernisation programme,
GuySuCo has been introducing mechanised and semi-mechanised approaches in different elements of its
operations. It is expected that in the next few years, as labour constraints issues become more acute, the
mechanisation process will expand and become a central feature of the industry. This change is likely to
create new employment opportunities for both women and men in the industry. Currently, males make up
the vast majority (94%) of the approximately 15,000 GuySuCo employees. This significant underrepresentation of females also exists at the level of individual sugar estates, with the proportion of females
ranging from 10% at La Bonne Intention to 4% at Rose Hall and Skeldon. However, when this is examined
by department and category of workers, females are better represented in the ‘Administration’ department
and in the ‘Junior Staff’ category, since they are more likely to hold clerical and/or administrative positions
in areas such as finance or human resources. The lowest levels of female representation are in the
‘Agriculture’ department and the ‘Workers’ category, where the more physical tasks such as planting and
harvesting are concentrated. With the notable exception of weeding, these roles are mostly undertaken by
males. The predominance of males is particularly acute at the lowest skill-levels, i.e. in the more physically
demanding roles of ‘Workers’, and at the more technical/supervisory and best remuneration positions of
‘Senior Staff’.
1.04
With increased mechanisation, men that are engaged in lower paying jobs will have the opportunity
to be trained and upgraded as equipment operators. In a similar manner, new positions could be opened to
women, as the arduous manual planting and harvesting activities undertaken exclusively by men are
replaced by labour saving equipment that could also be operated by women. Some of this change has
already been observed on the Blairmont estate, where the introduction of semi-mechanised planting has
resulted in the employment of women as planters for the first time. Such changes will open new
opportunities for both men and women to enter non-traditional occupations. This will inter alia alter the
gender division of labour in the industry and also result in alterations in the staffing structure and the nature
of inter-personal relations in GuySuCo.
1.05
While GuySuCo is an equal opportunity employer, compliant with the country’s 1997 Prevention
of Discrimination Act. The Company has a decent work strategy that is consistent with the International
Labour Organisation Convention on Decent Work and Child Labour, but it does not yet have a Gender
APPENDIX 2.1
Page 2
Equality Policy and Strategy, nor systematic procedures for integrating large numbers of females and male
into non-traditional occupations. CDB is providing assistance to GuySuCo to engage the services of a
consultant to examine the gendered patterns of labour market behaviour in the country and to develop an
action plan to enhance the ability of men and women to assume what would be considered traditionally new
positions that are likely to emerge from the mechanisation operations in the sugar industry.
2.
OBJECTIVE
2.01
The general objective is to assist GuySuCo to build capacity for effective gender integration in its
operations. Specifically, the consulting service will assess gender integration issues in the sugar industry
and develop an action plan with gender responsive measures to facilitate access and the transitioning of
women and men into non-traditional occupations as a result of the mechanisation of sugar cane production
and harvesting.
3.
METHODOLOGY
3.01
The Consultant will perform all investigative and analytical work to realise the objective stated
above. This will include, but not be limited to, desk review of GuySuCo’s existing strategies, documents
and regulatory frameworks, conduct interviews and consultations with key stakeholders, including
GuySuCo staff, relevant government agencies such as the Women Affairs and Men’s Affairs Bureau,
Ministry of Labour, Trade Unions and other civil society organisations.
4.
SCOPE OF SERVICES
4.01
The Consultant will work closely with the Human Resources Department of GuySuCo in carrying
out this assignment. The Consultant shall report to the Human Resource Director, or his/her designate who
will serve as the local counterpart.
4.02
Specifically the Consultant shall:
(a)
conduct a gender analysis of the division of labour in the sugar industry along with the
socio-cultural factors associated with occupational positions of men and women employed
by GuySuCo;
(b)
assess the socio-economic context of labour issues in the industry and their effects on
GuySuCo’s operations;
(c)
assess the mainstream labour related policies, programmes, institutional mechanisms and
structures of GuySuCo, for their application, accountability and monitoring of gender
equality standards;
(d)
conduct a needs assessment of the knowledge and skills required by women and men in
order to access employment opportunities in new non-traditional occupations provided by
the mechanisation of sugar cane production and harvesting;
(e)
identify new challenges and opportunities, anticipating that significant changes in
traditional gender division of labour will have implications for GuySuCo’s organisational
culture and interpersonal relations;
(f)
develop guidelines for GuySuCo to facilitate access by women and men to employment
opportunities in non-traditional occupations;
APPENDIX 2.1
Page 3
5.
(g)
develop strategies for advocacy and capacity building in promoting an inclusive workplace,
for GuySuCo, with specific reference to men and women transitioning into the different
occupations and to assist all employees respond to those changes in the company; and
(h)
develop and recommend gender-specific and/or gender-responsive indicators to assess the
integration of men and women into non-traditional occupations and GuySuCo’s attainment
of the International Labour Organisation’s decent work principle of equality of opportunity
and treatment for all women and men.
TIMING AND QUALIFICATIONS
5.01
It is expected that the assignment will require a maximum of 40 days over a period of three and a
half months. The Consultant should possess at least seven years professional experience in Gender and
Labour Relations, with a strong background in gender equality development in the private sector.
6.
REPORTING
6.01
The consultant(s) shall submit the following reports, one (1) hard copy each, along with an
electronic copy either by email, on CD ROM or flash drive, to GuySuCo and CDB at the times indicated
below. GuySuCo and CDB will provide comments on each of the deliverables described in above within
two weeks of receiving the report.
(a)
a detailed work plan and approach setting out an overview of the key issues, the scope and
methodology, tasks and responsibilities and a time schedule for the completion of the
assignment within three (3) weeks of commencement of the assignment;
(b)
a Draft Report that responds to the requirements set out in paragraph 4.01 above within ten
(10) weeks of commencing the services; and
(c)
a Final Report that adequately incorporates the comments provided by GuySuCo and CDB
on the Draft Report, within four (4) weeks of receiving such comments.
6.02
All reports shall contain sex-disaggregated data and critical gender analysis of the information
presented.
BUDGET
(USD)
APPENDIX 2.2
DETAILED DESCRIPTION OF PROJECT
1.
The proposed Project is part of an overall GOGY/GuySuCo programme which will improve the
sustainability of the sugar industry. Over the period 2014-2017, GOGY/GuySuCo will be investing in
excess of $30 mn into the programme which will, among other things, result in increased mechanisation of
sugar production and harvesting; improve the efficiency (including energy efficiency) of factory operations
and general sugar industry production infrastructure. A key output of the programme is the preparation of
6,000 ha of sugar cane fields in mechanically friendly layouts of which this project is accounting for
2,500 ha.
2.
Interventions will be focused on Uitvlugt, Albion, and Rose Hall estates with the main determining
factors being that these estates experience the most severe labour shortages in the industry. The geographic
spread of interventions is expected to mitigate against the impact of weather variability on the achievement
of project outcomes. It is deemed unlikely that during the traditional dry seasons, the time of year generally
suited for land preparation, heavy rainfall events will simultaneously impact both western and eastern parts
of Guyana.
3.
A total of 2,500 ha of land will be prepared in mechanically friendly layouts. The provision of
equipment for full-mechanical harvesting will be confined to Uitvlugt. In addition to experiencing the most
acute labour supply challenges, the Uitvlugt factory is the only one (of the three in the project intervention
areas) with the facilities for handling mechanically harvested canes.
Project Components
4.
Key components of the Project are:
(a)
Enhancing sugar cane production and harvesting through:
(i)
purchase of machinery and equipment to facilitate:
(aa)
the preparation of sugar cane fields into mechanically-friendly
configurations at all three Estates (Albion, Rose Hall and Uitvlugt): This
will involve the purchasing of the following numbers of equipment as
follows:
Item
Excavator
Tillage Tractor
(150-165 Hp)
(bb)
Albion
(No.)
2
Rose Hall
(No.)
2
Uitvlugt
(No.)
6
2
2
6
Total
Estimated
Cost (USD)
semi-mechanical planting, mechanical weed control and fertilising of
sugar cane at the three Estates. This will involve the purchasing of the
following numbers of equipment:
APPENDIX 2.2
Page 2
Albion
(No.)
2
Rose Hall
(No.)
2
Uitvlugt
(No.)
5
Tractor
(100-110 Hp)
Fertiliser Applicator
2
2
5
1
1
2
Boom Sprayer
1
1
2
Boom Sprayer
Tractor
Fertiliser Applicator
Tractor
1
1
2
1
1
2
Item
Rotary Ditcher
Total
Estimated
Cost (USD)
and
(cc)
mechanical harvesting of sugar cane at Uitvlugt. This will involve the
purchasing of the following numbers of equipment:
Albion
(No.)
-
Rose Hall
(No.)
-
Uitvlugt
(No.)
4
Cane Haulage Tractor
(100-110 Hp)
Cane Trailer
-
-
12
-
-
12
Cane Elevator
-
-
4
Item
Billet Harvester
(ii)
Total
Estimated
Cost (USD)
Land Preparation for revised field layouts at the three Estates. This includes
associated drainage modifications: This operation involves the conversion of
traditional English Beds to Broad English Beds. Three English Beds, each
approximately 10 metres wide are combined to make one Broad English Bed, 30
metres in width. This kind of layout can facilitate all three methods of harvesting:
fully mechanical, semi-mechanical (Bell Loading) and manual. The converted bed
is cambered with a design slope of 3.5% to provide adequate drainage.
APPENDIX 2.2
Page 3
(b)
Factory Energy Efficiency Improvements at Albion, Rose Hall and Uitvlugt: Energy
efficiency is critical to overall improvement of factory efficiencies at the three Estates.
Energy Audits were commissioned at all the sugar estates to identify opportunities for
reducing energy consumption in GuySuCo’s factories. These audits were undertaken, in
2013 by TERI, India. For each factory, the audit recommends a prioritised list of shortterm and medium-term measures which will reduce its high diesel consumption. The
ultimate aim is to generate power for the entire operation from bagasse fuel. CDB Staff
have reviewed, and had technical discussions with GuySuCo on, the findings of these
energy audits and are satisfied with the methodology and recommendations proffered.
GuySuCo has committed to, and will fund the implementation of all the recommended
measures by the second quarter of 2016. As such, there is a capital programme, funded
by GOGY/GuySuCo, which focuses on efficient means of energy generation and
utilisation. As recommended by TERI audits, the Project will address improvements to
the Electrical Systems, Diesel Generator, Electric Drives, Steam Generation, Pumps,
Compressed Air System and Lighting system, at each of the three sugar plants.
Appendix 4.1 summarises the findings of TERI energy audits for each factory, by
presenting tables which list the recommended measures/corresponding costs, the resulting
savings potentials, and the timeframe for implementation by GuySuCo.
(c)
Training of employees for operation, maintenance and repairs of machinery and
equipment: This activity is continuously undertaken by GuySuCo at Estate locations. This
is done in accordance with needs analysis and the company’s training plan, and is
facilitated by local and overseas institutions.
(d)
Gender equality and integration: This component will involve the engagement of
consulting services to assist in building GuySuCo’s capacity for effective gender
integration in its operations. It will comprise an assessment of gender integration issues in
the sugar industry and development of an action plan with gender responsive measures to
facilitate access and the transitioning of women and men into non-traditional occupations
as a result of the mechanisation of sugar cane production and harvesting.
(e)
Project Management Services: GuySuCo maintains a Project Management Services Unit,
headed by the General Manager, Agricultural Services: The Unit is responsible for
coordinating, in partnership with Estate Managers, capital works on all estates, including
the capital works foreseen within the Strategic Plan and GOGY’s $30 mn investment
programme. CDB Staff are confident that the works proposed under the proposed CDB
Project can be undertaken within the present framework.
APPENDIX 3.1
PROJECT COST, PHASING AND FINANCING PLAN
($’000)
APPENDIX 3.2
REQUEST FOR WAIVER OF SPECIAL DEVELOPMENT FUND GROUP 2
SDF 8 COUNTRY GROUP AND RESOURCE ALLOCATIONS
GRANT ELEMENT CALCULATIONS AND SCENARIO ANALYSIS
OF FINANCING OPTIONS
APPENDIX 4.1
SUMMARIES OF THE FINDINGS OF THE TERI ENERGY AUDITS FOR
EACH SUGAR PLANT (2013)
ALBION SUGAR PLANT
Ref.
No.
Proposals
SHORT TERM MEASURES
Annual
Energy
Savings,
kWh
Annual
Diesel
Saving,
KL
Annual
Cost
Savings
GYD’000
Cost of
Implementation
GYD’000
Simple
payback
period,
Years
Completion
Date
1.
Electrical Systems:
Improvement of Power Factor at Power House LT
Main Panel
76737
23253
5.1
5.0
0.98
Dec. 2015
2.
Steam Generation:
Insulate, un-insulated flanges, valves and pipe
lines – inlet turbine lines
57600
17454
3.84
2
0.5
Dec. 2015
480000
145454
32
30.0
0.94
Dec. 2015
144000
43636
9.6
NIL
Immediate
Immediate
19200
5818
1.28
NIL
Immediate
Immediate
28800
8727
1.74
NIL
Immediate
Immediate
537600
162909
35.84
NIL
Immediate
Immediate
720000
218181
48
15
0.3
Dec. 2015
50400
15272
3.36
2.5
0.8
Jan. 2016
57600
17454
3.84
NIL
Immediate
Immediate
219000
66364
14.6
Marginal
Immediate
Immediate
6566
1989.5
0.44
Marginal
Immediate
Immediate
1508
457
0.1
2.5
25.0
June 2016
73704
22334.4
4.91
9.57
1.95
June 2016
2472715
749302.7
164.65
66.57
0.35
3.
4.
5.
6.
Replace boiler Induced Draft fans with new
energy efficient fans
Pumps:
Replace operating general service water pump
with high grade stork ejector stand by pump
Interconnect condensate water collection tanks
and operate two pumps
Operate stork ejector pump – 5 instead of pump –
4 for low grade pan ejectors
7.
Switch off injection water pump - 6
8.
Optimising injection water flow to evaporators
and pan condenser to switch of vacuum pumps
and stand by water pumps
Compressed Air System:
Provide ring main system for compressed air
distribution, to avoid compressed air pressure
drop
Plug compressed air leaks in air distribution pipe
lines
Lighting System:
Switching “OFF” the Lamps at Plant and Office
area during day time/while not in use
Replacement of 4 feet FTL -1*40W,4 feet FTL2*40W, 2 feet FTL and 1*20W with 4 feet
1*36W(T8),2*36W (T8) and 2 feet FTL 1*18W
(T8)
MEDIUM TERM MEASURES
9.
10.
11.
12.
13.
14.
Lighting System:
Replacement of 60W Incandescent (GLS) with
15 W Compact Fluorescent Lamp (CFL)
Replacement of HPMV 1*80W, 1*175W,
1*250W and 1*400W with 40W, 80W, 120W and
200W Induction Lamps
Grand-Total
APPENDIX 4.1
Page 2
ROSE HALL MS PLANT
Annual
Energy
Savings,
kWh
Annual
Diesel
Saving,
KL
Annual
Cost
Savings,
GYD’000
Cost of
Implementation
GYD’000
Simple
payback
period,
Years
Completion
Date
47304
14.3
3.15
2.5
0.8
Dec. 2015
123480
37.4
8.20
7.0
0.9
Dec. 2015
Reduce operating speed of the boiler feed water
pump
Operate boiler – Induced Draft fan with
reduced speed by providing Fluid
coupling/Variable speed drive
Pumps:
Switch off one general service water pump
115200
34.9
7.68
6.0
0.8
June 2015
46080
14.0
3.10
3.0
1.0
June 2015
82800
25.1
5.50
NIL
Immediate
Immediate
6.
Switch off condensate transfer and imbibitions
water stand by pumps
14400
4.4
0.96
NIL
Immediate
Immediate
7.
Switch off stand by injection water pump
(Evaporator condenser)
169200
51.3
11.28
NIL
Immediate
Immediate
8.
Optimising injection water flow to evaporators
and pan condenser to switch of vacuum pumps
and stand by water pumps
540000
163.6
36.00
20.0
0.6
Dec. 2015
9.
Installation of Variable Speed Drive (VSD) for
juice heater supply pump
72000
21.8
4.80
2.0
0.4
June 2015
Ref.
No.
1.
2.
3.
4.
5.
Proposals
SHORT TERM MEASURES
Electrical Systems:
Improvement of Power Factor at Power House
LT Main Panel
Steam Generation:
Insulating the un-insulated flanges, valves and
pipe lines – inlet turbine lines
10.
Plug compressed air leaks & switch off
Compressor – 2 (old)
108000
32.7
7.20
NIL
Immediate
Immediate
11.
Lighting System:
Switching ‘OFF” the Lamps at Plant and Office
area during day time/while not in use
319740
96.8
21.30
Marginal
Immediate
Immediate
6666
2.0
0.44
1.0
2.3
June 2016
12.
Lighting System:
Replacement of 4 feet FTL -1*40W,4 feet FTL2*40W, 2 feet FTL and 1*20W with 4 feet
1*36W(T8),2*36W (T8) and 2 feet FTL 1*18W
(T8).
13.
Replacement of 60W Incandescent (GLS) with
15 W Compact Fluorescent Lamp (CFL)
6788
2.0
0.44
2.5
5.7
June 2016
14.
Replacement of HPMV 1*175W, 1*250W and
1*400W with 80 W. 120 W, and 200W
Induction Lamps
190642
57.7
12.70
25.6
2.0
June 2016
1842300
557.9
122.75
69.6
0.5
Grand-Total
APPENDIX 4.1
Page 3
UITVLUGT SUGAR PLANT
Ref.
No.
Proposals
SHORT TERM MEASURES
Annual
Energy
Savings,
kWh
Annual
Diesel
Saving,
KL
Annual
Cost
Savings,
GYD’000
Cost of
Implementation
GYD’000
Simple
payback
period,
Years
Completion
Date
1.
Electrical Systems:
Installation of capacitor bank to improve power
factor
45552
13.8
3.03
2.5
0.8
Dec. 2015
2.
Diesel Generator:
Stop cooling water to non-operating Diesel
Generator sets
43680
13.2
2.91
NIL
Immediate
Immediate
3.
Electric Drives:
Permanent star connection to bagasse elevator and
carrier
18000
5.5
1.20
NIL
Immediate
Immediate
4.
Steam Generation:
Install control valve across line to stand by
turbine 1 MW
180000
54.0
11.80
Marginal
Immediate
Immediate
5.
Insulating the un-insulated flanges, valves and
pipe lines – inlet turbine lines
132000
40.0
8.80
5.0
0.6
June 2015
6.
Replace boiler Induced Draft fans with new fans
360000
110.0
24.00
2.5
1.0
Dec. 2015
7.
Pumps:
Operate small rating general service water pump
(Pump-1 or 3) during plant shut down period
113183
34.3
6.80
NIL
Immediate
Immediate
8.
Optimise the operation of injection and stork jet
water pumps and switch off vacuum pump
211527
64.1
12.80
Marginal
Immediate
Immediate
9.
Installation of variable speed drive for general
service water pump or operate pump with level
control feed back
42000
12.7
2.50
1.0
0.4
June 2015
151800
46.0
10.10
1.0
0.1
June 2015
75600
22.9
5.04
Marginal
Immediate
Immediate
150645
45.7
10.04
NIL
Immediate
Immediate
1336
4.4
0.97
1.0
1.0
June 2015
190800
57.0
12.70
20.2
1.6
June 2016
54000
16.0
3.20
6.0
1.9
June 2016
63657
19.3
4.24
6.0
1.4
June 2016
1833780
558.8
120.13
67.7
0.6
10.
11.
12.
13.
14.
15.
16.
Switch off air compressor during plant shut down
period
Plugging off compressed air leaks in air
distribution pipe line
Lighting System:
Switching ‘OFF” the Lamps at Plant and Office
area in day time/while not in use
Replacement of 4 feet FTL -2*40W (T12),
1*40W and 2 feet FTL 1*20W with 4 feet FTL
2*32W, 1*32W (T8) and 2 feet FTL 1*16W (T8)
Steam Generation:
Replace boiler Induced Draft fans with fans along
with ducts
Reducing the operating speed of the boiler feed
water pump
Lighting System:
10.3.3 Replacement of HPMV 1*175W, 1*250W,
and 1*400W with 80W, 120W and 200W
Induction Lamps
Grand-Total
APPENDIX 4.2(a)
HISTORICAL FINANCIAL STATEMENTS - BALANCE SHEETS
AS AT DECEMBER 31, 2009 TO DECEMBER 31, 2013
(GYD mn)
APPENDIX 4.2(b)
HISTORICAL FINANCIAL STATEMENTS – INCOME STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 TO DECEMBER 31, 2013
(GYD mn)
APPENDIX 4.2(c)
HISTORICAL FINANCIAL STATEMENTS – CASH FLOWS
(GYD mn)
APPENDIX 4.2(d)
HISTORICAL FINANCIAL STATEMENTS – RATIO ANALYSIS
APPENDIX 4.3
ASSUMPTIONS USED IN THE FINANCIAL ANALYSIS
APPENDIX 4.4(a)
PROJECTED FINANCIAL STATEMENTS - BALANCE SHEETS
AS AT DECEMBER 31, 2013 TO DECEMBER 31, 2023
(GYD mn)
APPENDIX 4 4(b)
PROJECTED FINANCIAL STATEMENTS – INCOME STATEMENTS
(GYD mn)
APPENDIX 4.4(c)
PROJECTED FINANCIAL STATEMENTS – CASH FLOW STATEMENTS
(GYD mn)
APPENDIX 4.4(d)
PROJECTED FINANCIAL STATEMENTS – RATIO ANALYSIS
APPENDIX 4.5
(GYD mn)
APPENDIX 4.6
ECONOMIC RATE OF RETURN CALCULATION
(GYD mn)
Item
2015
2016
2017
2018
2019
2020
2021
2022
2023
BENEFITS
Sugar
-
-
902
901
905
905
905
905
905
Molasses
-
-
131
141
143
143
143
143
143
Residual/Scrap Value
71
-
-
1,033
1,042
1,048
1,048
1,048
1,048
1,119
Operating Costs
Agriculture
-
-
359
387
387
387
387
387
387
Factory
-
-
31
37
38
38
38
38
38
Total Operating Costs
-
-
390
424
424
424
424
424
424
80
160
160
-
-
-
TOTAL BENEFITS
COSTS
Project Investment Cost
1. Agricultural Development
(i) Harvesting/Field Conversion/Land Preparation
(ii) Field Machinery and Equipment
(a) Uitvlugt Estate
1,009
-
-
(b) Albion Estate
158
-
-
(c) Rose Hall Estate
158
-
-
18
14
14
3. Factory Efficiency Improvements
92
92
58
4. Training
15
15
15
Total Investment Costs
1,531
281
248
TOTAL COSTS
1,531
281
637
424
424
424
424
424
424
NET BENEFITS
(1,531)
(281)
395
618
624
624
624
624
695
ERR 19%
APPENDIX 4.7
NOTES AND ASSUMPTIONS TO THE ECONOMIC ANALYSIS
1.
ECONOMIC RATE OF RETURN)
1.1
The ERR has been estimated as 19% based on a benefit-cost framework similar to that presented
in the financial analysis. This demonstrates the economic feasibility of the Project. Therefore from an
economic point of view, this Sugar Mechanisation Project is recommended based on its favourable impact
on GuySuCo’s operations over the medium term and on the economy of Guyana.
2.
PROJECT LIFE
2.1
The Project life has been assumed to be ten years for purposes of the economic analysis. This is
based on the effective life of the major capital equipment identified as part of the project investment
package.
3.
3.1
The ERR has been estimated based on incremental analysis deduced from comparing “With
Project” and “Without project” scenarios projected in constant prices. The “Without project” scenario
assumes that even with on-going mechanisation the labour shortage would continue and harvestable sugar
cane and sugar production and sales would increase at a less than acceptable rate. The “With Scenario”
assumes that the capital investment would contribute to an increase in sugar cane harvested and there would
be an incremental increase in production and sales of sugar and its by-products. The mechanisation process
will also contribute to an enhancement in the efficiency in harvesting sugar cane and overall cost efficiency
in sugar cane cultivation. The parallel investments in agronomic practices, mechanisation and improvement
in factory operations are considered in projecting the “without project” scenario. The net project benefits
are therefore only associated with incremental gains from the mechanisation of the project areas. These
benefits are reflected by the increase in sales of sugar and its by-products (exports and domestic
consumption) and savings through efficiency gains.
4.
PRICES
4.1
In estimating the ERR, financial prices were converted into economic prices by applying specific
factors and a standard conversion factor to the financial costs of agricultural activities, harvesting, sugar
production and sales and administration. For an internationally traded good such as sugar, economic prices
were derived based on commodity price projections. The local consumption of sugar was reflected by a
conversion factor of 1.0 which really is the free on board price for sugar as in the case of the GuySuCo
foreign sales. However, it is assumed that without GuySuCo’s existence, sugar would have to be imported,
so in supplying the local market GuySuCo would be contributing to foreign exchange savings through
import substitution. In such a case, the cost including freight price could apply but the total sales (benefits)
was taken as its total free on board price. Molasses is sold locally and the economic value has been based
on willingness- to-pay considerations. This was therefore converted to economic prices by applying the
standard conversion factor. The cost of non-traded goods have been converted into border price
equivalents. Imported items for the agriculture sector are considered free of import duty and taxes. The
shadow price for skilled and semi-skilled labour is estimated at 0.6 of the financial cost while the economic
price equivalent of skilled labour has been assumed to appropriately reflect the financial value. For the
agricultural and sugar production cost, composite indicators were obtained by applying conversion factors
to the constituent parts like equipment, labour and other material inputs) of these cost components. Some
main conversion factors are given in Table 1.
APPENDIX 4.7
Page 2
TABLE 1: CONVERSION FACTORS
Items
1. Capital Costs (machinery) and Equipment
2. Unskilled and semi-skilled
3. Skilled Labour
4.General Administration Expenses
5. Factory
6. Agriculture
7. Harvest/Field
9. Standard Conversion Factor
5.
Specific
Conversion
Factor
0.94
0.6
1.0
0.9
0.9
0.85
0.9
1.0
0.9
RESIDUAL VALUE
5.1
While there is office furniture that will have a life of only five years, the main field equipment will
be fully depreciated at the end of the project life (year ten). A scrap value has been imputed.
6.
SENSITIVITY AND QUALITATIVE RISK ANALYSIS
6.1
These analyses were carried out to gauge the importance of certain variations to the Project
assumptions to the success of the Project and to identify the variables that could jeopardise this success,
and to identify actions that may be taken to reduce the risk of failure. The cases studied were:
(i)
(ii)
(iii)
(iv)
reduction in benefits;
increase in the project cost;
increase in operating costs; and
a delay in project implementation by one and two years.
Switching values were calculated to determine the extent of change in those variables beyond which the
CDB hurdle rate of 12% is not achieved.
7.
DOMESTIC RESOURCE COST ANALYSIS
7.1
In an open economy like Guyana, a shortage of foreign exchange can be a key obstacle to economic
development. The DRC analysis has been used to estimate the resource cost in domestic currency required
to earn a unit of foreign exchange. DRC calculation which is similar to the Modified1/ Bruno Ratio has
been estimated as GYD92 to USD1 based on Net Present Value calculations of foreign exchange flows and
total DRC required to generate the net foreign exchange flows. The opportunity cost of capital has been
assumed to be 12%. Although there may be a case made for a lower cost of capital given the lower interest
regime that exists, variations to the discount rate have only demonstrated limited impact on the DRC which
compares favourably with the OER projected2/ to fluctuate between GYD200 and GYD210 to USD1.
Foreign inputs and outputs have been estimated at border prices equivalents and local taxes, duties and
transfer payments have been excluded from the analysis.
1/
2/
The Modified ratio is calculated using the entire project life instead of using just one year as in the case of the original Bruno
Ratio.
BOG Assessment.
APPENDIX 4.7
Page 3
7.2
GOGY is justified in continuing its investment in the sugar industry based on the level of foreign
exchange the industry generates and its comparative advantage which is calculated as the DRCR, estimated
as DRC/SER3/. This indicates the comparative advantage based on whether this ratio is equal to 1
(neutrality), less than 1 (comparative advantage), or greater than 1 (comparative disadvantage). In this case
where the DRCR is less than 1 it may be deduced that the Guyana economy would benefit from the transfer
of resources into the production of sugar as the net value of the output is greater than the opportunity cost
of resources used. The situation would become even more favourable if the country could embrace
sustainable sugar cane industry products related to renewable energy and others that may displace current
imports or local products with high foreign inputs. The same risks and sensitivities identified in the ERR
analysis apply here. These are associated with, sugar prices, unfavourable weather and field and factory
efficiencies. Apart from these, the DRC results can be significantly impacted by major variations in the
OER exchange rate which is supposed to be flexible. Given the relatively high standard conversion factor
used in the analysis, the OER and SER are fairly convergent, although it can be expected that given the
openness of the economy, the SER will tend to be above the OER.
3/
Michael Bruno 1972.
APPENDIX 4.8
GENDER MARKER ANALYSIS
Criteria
Score
Description/Code
Analysis
0.5
Social and gender analysis conducted at project
appraisal.
Data
0.5
Sex disaggregated included in the context analysis.
Engagement
0.5
Consultation was held with a wide range of
stakeholders during project appraisal including the
Women and Men Affairs Bureaux.
Response
1.0
Implementation support will be provided under
GEPOS to foster gender equality in employment
outcomes.
Total
2.5
Code: MM
APPENDIX 4.9
SUMMARY OF NATURAL HAZARD IMPACT ASSESSMENT AND
ASSESSMENT OF NATIONAL IMPORTANCE OF GUYSUCO
DRAINAGE AND IRRIGATION BENEFIT
SUMMARY NATURAL HAZARD IMPACT ASSESSMENT
1.
Sugar cane cultivation in Guyana is conducted on land reclaimed from the sea and from swamps
some 260 years ago. The hazard with the highest potential of occurrence over the design life of the
Project is flooding. This potential exists at locations where cultivated lands may border conservancies,
D&I canals, rivers or the sea. Flood hazards in Guyana can either be attributed to the independent effects
of marine surge, tidal effects1/, river currents and heavy rainfall in hinterland or coastal regions, or a
combination of these factors acting simultaneously.
2.
The preparation and transition of existing cultivated lands for mechanical harvesting at Rose Hall
(500 ha), Albion (500 ha), and Uitvlugt (1,500 ha) involves the conversion of existing English beds
(L 10 m x W 400 m) to Broad English Beds (L 450 m x W 30 m). Substantively, this work is not expected
to incur any significant negative natural hazard impacts and/or exacerbate any potential for flooding as it is
not expected to alter the principal configuration or hydraulic attributes of the existing main or cross-canals
and will ensure that traditional in-field gradients and channel retention capacities remain. Where internal
field drains may be lost due to bed consolidation, the practice is to widen and deepen remaining field drains
to accommodate original design volumetric capacities.
NATIONAL IMPORTANCE OF GUYSUCO MANAGED D&I NETWORK
3.
Across its estates2/, GuySuCo moderates and maintains a complex network of D&I canals. This
D&I system plays a critical mediating role in regulating surface waters between large inland conservancies
(water storage basins) and the protective seawall complex in regions 3, 4, 5 and 6. GuySuCo’s operations
in D&I, services 145,000 ha. Forty percent (40%) of these lands are cultivated with sugar cane. The
remaining non-sugar lands (60%), comprises a mixture of built residential and commercial development as
well as rice cultivation.
4.
The system comprises approximately: 1,398 km of field and façade drains; 5,971 km of navigation
trenches and factory source-water supply canals; 1654 km of surfaced dams, 180 aqueducts; 13,563
drainage boxes and 55 pumps stations. The D&I system is drained by a combination of gravity at low tide
and/or via active pumping. On an annual basis, GuySuCo maintains and rehabilitates 20% of the D&I
system components, under its charge.
5.
Apart from the foreign exchange directly earned by sugar production, GuySuCo’s operations in
D&I, contributes significant benefit to national development through both flood risk and irrigation water
resource management in the coastal plain where built development and other non-sugar agriculture is also
concentrated. The financing of the operations and management activities of all D&I systems is, in general,
considered insufficient3/.
6.
In 2013, the total amount budgeted to maintain the GuySuCo’s D&I system was $8.1 mn. This
amount represents 7.4% of the total annual 2013 sugar industry cost (agriculture, factory and
administration) and 0.26% of 2013 GDP. USD4.9 mn of the average annual GuySuCo’s D&I budget or
1/
2/
3/
Observed monthly spring tides in excess of $3 mn, approximately one week per month.
See Appendix 2.1 for map showing main estate locations.
IADB (2004): Guyana Agricultural Support Services Programme Loan Proposal.
APPENDIX 4.9
Page 2
approximately 3.7% of total annual industry cost directly benefits inhabited communities and other nonsugar lands.
TABLE 1: GUYSUCO’S D&I BUDGETS FOR 2005 AND 2013
(USD mn)
Item
GuySuCo’s D&I Budget
Total Annual Industry Cost
Community Benefit – Other non-sugar lands, residential communities
and commercial development is 60% of GuySuCo’s D&I Budget
Annual GuySuCo’s D&I Budget as a % of Total Annual Industry Cost
Annual GuySuCo’s D&I Budget as a % of Total Annual Industry Cost
benefiting other non-sugar lands, residential communities and
commercial development
National GDP
GuySuCo’s D&I Budget as a % of National GDP
2005
5.8
110
3.5
2013
8.1
165
4.9
5.3%
3.2%
4.9 %
3%
788
0.74%
3.1 bn
0.26%
7.
Between 2005 and 2013, proportionately the annual GuySuCo D&I budget as a percentage of total
industry cost has remained relatively constant (around 5%); as well as, the amount of the GuySuCo D&I
budget benefiting communities and other non-sugar lands (around 3%). However, the GuySuCo D&I
contribution as a percentage of overall national GDP has decreased by some 0.5% of GDP in 2013 versus
2005. As investments in non-sugar community lands traditionally directly benefiting from GuySuCo’s
D&I, increase with time, it is important that there is also an attendant increase in D&I maintenance and
investments which GuySuCo operations facilitate, to their benefit. Based on the data available at the time
of preparing this report, it is unclear whether, other non-GuySuCo D&I investments are covering the deficit
and are now providing substantive alternative primary D&I benefit.
8.
In any hypothetical future scenario of either the abandonment of the D&I system or the
discontinuance of maintenance of the GuySuCo managed D&I system, areas from Diamond in West
Demerara to Enmore in East Demerara, including the city of Georgetown; as well as areas from East and
West Berbice would be at critical risk of flooding under periods of excess rainfall.
9.
Between 1988 and 2010, flood events resulted in more than $634 mn in economic damages and
affecting up to 42% of the population4/. In January 2005, flooding in Regions 3, 4 and 5, induced by heavy
rainfall, resulted in $465 mn in total damage and losses or 59% of GDP (ECLAC). By 2030, the cumulative
annual loss due to flooding in Guyana is projected to be $150 mn5/. This at-risk value has been estimated
by using flood maps that combine an assessment of flood risk, population density, and economic activity.
10.
Since 2005, the value of physical assets and livelihoods at risk in the re-claimed coastal plain where
70% of the population reside, continues to rise through increased investment. In this context, the
significance of GuySuCo’s operational contribution to and pivotal role in facilitating overall national
D&I should not be under-estimated. The national development benefit provided by GuySuCo’s operations
cannot and should not be valued exclusively on sugar production output and/or the revenue generated from
sugar sales.
4/
5/
http://www.preventionweb.net/english/countries/statistics/?cid=73.
Guyana Low Carbon Development Strategy (2013).
APPENDIX 4.10
SUMMARY CLIMATE CHANGE ANALYSIS OF
GUYANA’S AGRICULTURAL SECTOR
1.
Climate Change (CC) models have projected that mean annual temperature will increase between
°
0.9 c to 3.3°c by the 2060s and 1.4°c to 5.0°c by the 2090s in all seasons, with more rapid warming likely in
the southern interior regions than in the northern coastal regions1/. CC precipitation models project
decreases in mean annual rainfall of between -18 and -4%. Relative to 1980 to 1999 mean sea levels, CC
models project sea level rise ranging between 0.18 m and 0.56 m under varying emission scenarios2/.
2.
Generally, CC and CC Variability (CCV) are forecasted to have a net negative impact on Guyana’s
agricultural productivity and socio-economy. Decreased sugar production will consequently result in
decreased industry revenue, livelihood loss, increased commodity prices, and negative social impacts.
Production and yield losses will result as a consequence of the nature, scale and spatial distribution of CC
and CCV induced biophysical impacts.
3.
CC and CCV is predicted to impact coastal agriculture in Guyana through coastal inundation;
salinisation of acquifers, other inland irrigation waters and rivers; periodic drought; and via erosion/soil
loss3/. Crop response models forecast that CC induced increases in atmospheric carbon dioxide may lead
to increased productivity of between 5-10% for C4 plants such as sugar cane; but researchers note that such
responses are also contingent upon varieties cultivated as well as soil fertility.
4.
Agriculture predominates the land use along the coastal plain. CC induced sea level rise (CC SLR)
is reducing the hydraulic head between the inland conservancies and sea outlets, resulting in lower flow
rates and discharge time windows to expel excess water from the system. Under such conditions, capacities
for flood management are constrained and flood risk to coastal agriculture, including sugar cane cultivation,
increases.
5.
Despite resource challenges, GuySuCo is suitably positioning itself to respond to the present and
future challenges posed by CC and CCV. This is consistent with the imperative of agriculture sector
adaptation to CC, as identified in Guyana’s DRM Plan for the Agriculture Sector (2013-2018).
Restructuring and modernisation of the sugar industry is continuing. The industry is investing in research
on the impacts of CC on mechanisation, cultivation, harvesting and production yields and interventions at
all levels from field to factory to increase efficiencies. The industry has also participated at sub-sector and
wider sector level in initiatives that examine Guyana’s vulnerability and capacity to respond to the impacts
of CC.
1/
2/
3/
http://country-profiles.geog.ox.ac.uk.
Inter-governmental Panel on CC. (2007). CC 2007: The physical science basis. Contribution of Working Group I to the Fourth
Assessment Report of the Intergovernmental Panel on CC. Cambridge, United Kingdom: Cambridge University Press.
GuySuCo. (2009). Vulnerability and Capacity Assessment: Impacts of CC on Guyana’s Agriculture Sector. Submitted to
Caribbean Community CC Centre (CC) under the Mainstreaming Adaptation to CC Project.
APPENDIX 4.11
AVERAGE ANNUAL TOTAL “OPPORTUNITY DAYS” PER YEAR
AND PER CROP ACROSS ALL ESTATES FROM 2001-2013
Year
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Average
“Opportunity Days”
First Crop
86
59
51
24
16
36
23
17
17
31
27
14
33
Average
Second Crop
128
138
108
123
127
91
81
115
127
56
69
77
49
Average
Annual Total
214
197
159
147
143
127
104
132
144
87
96
91
82
GUYSUCO ORGANISATIONAL CHART
Guyana Sugar Corporation Inc.
10/29/2014
Approved by: ____________________________________
Chief Executive
MINISTER OF AGRICULTURE
BOARD OF DIRECTORS
Executive Assistant
Security Service
Manager
Head – Information
Systems Department
Head – Agri. Research
Estate Managers
Factory Managers
Senior Communications
Officer (vacant)
Human Resources
Managers
General Manager
Agriculture Services
Agriculture Managers
Finance Managers
Chief Medical Officer
Human Resources
Director
Chief IR Manager
Finance Director
Chief HR Manager
Corporate Health &
Safety Manager
Head – Project
Management Unit
Company Secretary/
Legal Officer
Finance Controller
Marketing &
Development Manager
Shipping & Logistics
Manager-DST
Head – Materials
Management Dept.
APPENDIX 6.1
The position of the boxes on this chart are for purposes of identifying reporting
relationships only. They are not meant to portray either status or grade.
Factory Operations
Manager - Demerara
General Manager
Technical Services
APPENDIX 6.2
DRAFT PROJECT MANAGEMENT DUTIES AND RESPONSIBILITIES
PROJECT COORDINATOR
1.
GuySuCo’s General Manager of Agricultural Services will act as PC and shall be responsible for
the overall coordination and management of all project activities. Responsibilities include, but are not
limited to:
(a)
monitoring the implementation of all components of the Project and informing GuySuCo’s
BOD through the PMC, and CDB of any events likely to impact negatively on the Project’s
implementation;
(b)
executing procurement in accordance with CDB’s Loan Agreement;
(c)
advertising for, and leading the procurement of goods and services;
(d)
overseeing all contracts works under the Project;
(e)
reviewing and agreeing with the form and content of the bi-annual progress reports prior
to submission to CDB;
(f)
representing GuySuCo in all dealings with the suppliers;
(g)
providing cost control and keeping separate accounts for project-related expenditures and
disbursement activities;
(h)
preparing and submitting to CDB claims for disbursement or reimbursement;
(i)
liaising with CDB on all technical and administrative aspects of the Project;
(j)
serving as secretary to the PMC;
(k)
preparing and submitting to CDB, bi-annual reports on the investment cost of the Project
in the form shown in Appendix 6.8 of this report, or in such form or forms as may be
specified by CDB, within six weeks after each crop;
(l)
preparing a Project Completion Report for submission to CDB within three months of
completion of the Project; and
(m)
submitting to CDB other project status reports as listed at Appendix 6.9.
PROJECT MANAGEMENT COMMITTEE
2.
A Sub-Committee of GuySuCo’s BOD shall be established as the PMC. It will have overall
responsibility for the coordination and guidance of the Project and its Chairperson will be the Permanent
Secretary, Ministry of Agriculture. In the absence of the Chairperson, a member of the Sub-committee will
be agreed upon by the members present.
3.
Membership of the PMC shall also comprise, but not be limited to, the CEO of GuySuCo, three
members of the GuySuCo BOD and a representative from the Ministry of Finance. The PC and the Estate
Managers shall also be co-opted as non-voting members of the Committee. The PC will serve as secretary
APPENDIX 6.2
Page 2
to the Sub-Committee. One of the Estate Managers will deputise as secretary in the absence of the PC.
Each Ministry represented will be required to nominate their representative and an alternate. Other persons
may be invited to participate in Sub-committee meetings based on the subject matter being addressed.
These special invitees will, however, not be authorised to vote.
4.
The Sub-committee shall:
(a)
provide overall operational guidance for project implementation to ensure that the Project
meets its objectives;
(b)
approve all implementation and financial reports required by the respective loan
agreements prior to their submission to the Ministry of Finance and CDB;
(c)
provide assistance and guidance to the PC in handling implementation and coordination
problems brought to its attention; and
(d)
monitor the efficiency and effectiveness of the resource allocation requirements for the
Project.
5.
The Sub-committee shall meet at least twice per year, and more often if required. The PC may
request additional meetings when faced with extraordinary situations. The Chairperson shall convene the
meetings. It shall be a condition precedent to first disbursement of the loan that the PMC has been
established.
APPENDIX 6.3
PROJECT MANAGEMENT ORGANISATION
Minister of Agriculture
Board of Directors
(GuySuCo)
PMC
PC
Accounting and Administration
support from GuySuCo’s staff
Estate Manager
(Uitvlugt Estate)
Estate Manager
(Rose Hall Estate)
Estate Manager
(Albion Estate)
Administrative, Clerical and Accounting Assistance from each of the three (3) Estates
APPENDIX 6.4
APPENDIX 6.5
IMPLEMENTATION SUPPORT PLAN
1.
The implementation support to be provided will include:
(a)
reviewing implementation progress and achievement of project outcomes;
(b)
addressing implementation issues;
(c)
monitoring systems to ensure their continued adequacy through monitoring reports, audit
reports and field visits;
(d)
monitoring changes in risks and compliance with legal agreements as needed;
(e)
sensitisation of GuySuCo staff/management to gender equality concerns; and
(f)
monitoring environmental management plans and related activities.
The Implementation Support Plan will be reviewed at least once a year to ensure that it continues to meet
the implementation support needs of the Project. In addition to reviewing implementation progress, the
Plan aims at providing technical support to the Borrowing Member Country in the achievement of the
results.
2.
The Plan has been developed based on the risk profile of the Project with particular focus on the
operational risk (particularly where capacity constraints have been identified) as well as the traditional
supervision focus areas of financial management, contract management and procurement.
Strategy and Approach for Implementation Support
3.
Supervision of the Project will be undertaken by a Team comprising an Operations Officer (OO)
(Agriculture), who will be the Supervision Coordinator, an OO (Engineer) and an OO (Analyst). The Team
will be supported by a Procurement Specialist, OO (Social Analyst); OO (Environment)/DRM Specialist,
and Legal Counsel as required. Formal supervision and field visits will be undertaken semi-annually.
4.
The first formal supervision activity will be ab Project Launch Workshop (PLW). The objective
of the PLW is to review the implementation arrangements, train project management staff in the use of
CDB’s fiduciary management and procurement systems and discuss project supervision issues. The PLW
is scheduled for the third quarter of 2015. Arrangements for PLW will be finalised after the confirmation
by the Ministry of Agriculture that all project management arrangements are in place, i.e., the PC,
supporting staff and the PCM. Participants at PLW will include key stakeholders of the Ministries of
Finance and Agriculture, GuySuCo, PCM members, PC, and those staff of the Project Management
Services Unit who have responsibility for financial matters. The training provided during PLW on the
Bank’s financial management and procurement procedures and guidelines will be augmented during the
semi-annual supervision visits and support will be provided on a timely basis to respond to client’s needs.
5.
During supervision, the Operations Officers (Engineer and Agriculture) will provide support in the
finalisation of contract documentation for the procurement of equipment and in advising on evaluation and
assessment of bids. The Supervision Coordinator will coordinate CDB’s team to ensure that project
implementation is consistent with the requirements as specified in the Procurement Plan, Terms and
Conditions and other legal documents. The supervision team will prepare annual Project Supervision
Reports identifying the status of project implementation and any issue(s) requiring the resolution of
management. On the completion of the Project, or after 90% of the funds have been disbursed, CDB staff
will facilitate an Exit Workshop to assess project results, discuss implementation issues and identify lessons
learnt. A draft Project Completion Report (PCR) will be prepared by the Client and discussed during the
APPENDIX 6.5
Page 2
Exit Workshop. The PCR will be finalised by the supervision team and validated by the Office of
Independent Evaluation (OIE). Staff will prepare a Management response to the OIE’s validation report.
The validation report and management’s response will be presented to the CDB’s Audit and PostEvaluation Committee.
TABLE 1: IMPLEMENTATION SUPPORT STAFF SKILLS REQUIREMENTS
Time
First 12
Months
12 – 38
Months
Focus
Primary Skills Needed
Support with satisfying conditions
precedent; agreeing the content of bid
documents
Legal
Procurement
Project Launch Workshop
- Project management
- Implementation issues
- Disbursement procedures
- Other matters
Legal
Procurement
Financial Management
Technical - Agriculture
(a) Monitoring of Project
Implementation and Results;
(b) Contract management support –
review of contract documents, and
evaluation reports;
(c) Review of monthly and quarterly
reports;
(d) Preparation of PSR;
(e) Claims processing; and
(f) Supervision missions
(a) Monitoring of Project
Implementation, risks and results;
(b) Claims review and disbursement.
Agriculture
Engineering
Procurement
Legal
Social
(a) Contract management support –
finalisation of specifications,
review of contract documents and
bid evaluation reports;
(b) Review of monthly and quarterly
reports;
(c) Preparation of PSRs; and
(d) Supervision missions
Procurement support – prior reviews,
etc.
Monitoring of compliance with legal
covenants
Resource Estimate
Supervision Coordinator - 2 Staff Weeks (SW);
Legal Counsel - 1 SW;
Procurement Specialist - 1 SW;
OO, Engineer - 1 SW
Supervision Coordinator - 2 SW
Legal Counsel - 1 SW
Procurement Specialist - 1 SW
Claims Disbursement Officer - 1 SW
OO, Engineer - 1 SW; OO, Analyst - 1 SW;
Administrative Staff - 2 SW
Supervision Coordinator - 3 SW;
OO, Social Analyst - 1 SW;
Claims Disbursement Officer – 1 SW
Legal Counsel –0.5 SW
Agriculture
Legal
Engineering
Social
Agriculture
Procurement
Legal
Engineering
Social
Supervision Coordinator - 2.5 SW p.a.;
OO, Engineer - 1.5 SW p.a.;
OO, Analyst - 1 SW p.a.;
OO, Social Analyst -1 SW
Claims Disbursement Officer - 2 SW p.a.
Supervision Coordinator - 3 SW p.a.
Legal Counsel - 1 SW p.a.; OO, Engineer - 3
SW p.a.; OO, Analyst - 3 SW p.a.;
Procurement Specialist - 1 SW p.a.
Social Analyst - 1 SW p.a.
Procurement
OO, Engineer - 1 SW p.a.
Procurement Specialist - 0.5 SW p.a.
Legal - 0.5 SW p.a.
Agriculture
Legal
APPENDIX 6.5
Page 3
Time
Focus
Preparation of PSR - annually
Primary Skills Needed
Agriculture
Engineering
Preparation of PCR and Exit Workshop
Agriculture
Legal
Procurement
Engineering
Social
Resource Estimate
Supervision Coordinator - 1 SW p.a.;
OO, Engineer -1 SW p.a.; OO, Analyst - 1 SW
p.a.; OO, Social Analyst - 1 SW p.a.
Claims Disbursement Officer - 1 SW p.a.
Divisional/Management Review - 2 SW p.a.
Supervision Coordinator - 3 SW;
OO, Social Analyst - 1 SW;
Administrative Officer - 2 SW
APPENDIX 6.6
ESTIMATED QUARTERLY DISBURSEMENT SCHEDULE
CDB
Year
Subtotal
Quarters
1
Grand Total */
OCR
Interest
during
Implementation
SFR
Cumulative
Disbursements
Total
1
2
-
-
-
-
-
3
4
324
324
649
3,739
3,060
6,799
17
35
52
4,081
3,419
7,500
4,081
7,500
-
*/ Any variance in totals is due to decimal rounding.
APPENDIX 6.7
PROCUREMENT PLAN
REPORT ON INVESTMENT COST OF PROJECT
($'000)
Elements of Project
(1)
Expenditure
for this
Quarter
Cumulative
Expenditure
to Date
(2)
(3)
Projected Expenditure for the
Quarter
Ending Ending Ending
(4)1
(4)2
(4)3
Estimated
Expenditure to
Complete
Project
(5)
Lastest
Estimate of
Expenditure
Project
Estimate as per
Appraisal
Report
Expenditure
Variance
Favourable/
(Adverse)
Comments/Reasons
for Adverse Variance
and Financing
Proposals to Meet
Cost Overrun
(6)
(7)
(8)
(9)
1. Machinery and Equipment
6,887
2. Land Preparation
2,400
3. Factory Energy Efficieny Improvements
990
4. Training of Employees
218
5. Gender Integration Action Plan
Base Cost
7. Physical and Price Contingencies
Total Cost before Financing Charges
8. Finance Charges
Total Cost
CDB
OCR
SDF
GRANT
GOGY
37
223
10,755
1,230
11,985
52
12,037
662
6,838
37
4,500
APPENDIX 6.8
APPENDIX 6.9
REPORTING REQUIREMENTS
Report
Time of Submission
1. Half Yearly Progress Report on Within 15 days after the end of each semester until the
Project Implementation prepared Project is completed, commencing six months after the
by the PC.
start date of the Project.
2.
Tender Evaluation Report by PC.
Within six weeks of the closing date for the Tender
Package.
3.
Quarterly Report on Investment Six weeks after the end of each quarter until completion
Costs of the Project prepared by of all project activities.
PC.
5.
Consultants’ Reports.
As per the TORs.
6.
Within three months of the end of the academic year.
7.
Audited Financial Statements of
GuySuCo.
Within 180 days of the end of the financial year. A
management report should also be forwarded.
8.
Project Completion Report
prepared by PC.
Within three months of project completion.

Sugar Industry Mechanisation Project

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