PNC's Nationalisation Policy of the 1970s
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Even before Guyana became independent in May 1966, the PNC as a political party, and later as a party in Government opposed nationalisation as an economic policy. One of the main reasons for this was its pro-imperialist policy and its opposition to the pro-socialist PPP which consistently promoted the nationalisation of the "commanding heights of the economy". However, by 1970, after the PNC had seized control of the Government through rigged elections in December 1968, its leader Prime Minister Forbes Burnham began his advocacy of "cooperative socialism" and the promotion of "meaningful participation" of the government in the main areas of the economy.
After Guyana became a co operative republic in 1970, one of the first policy measures the PNC government adopted was to "own and control" the country's national resources by means of nationalisation. It decided, in the first instance, to take control of the bauxite industry.
Up to that period there were two foreign-owned bauxite mining companies based in Guyana. These were the Demerara Bauxite Company (DEMBA) with mines and processing plants at Mackenzie and Ituni on the Demerara River, and the American-owned Reynolds Guyana Mines Ltd operating at Kwakwani on the Berbice River. DEMBA, the larger company, was owned by ALCAN (of Canada), a subsidiary of the American bauxite giant, ALCOA.
In the early 1970s, Guyana was producing metal grade bauxite, calcined bauxite and alumina, and it was the world's fourth largest bauxite producer supplying roughly 90 percent the world's calcined bauxite. As an important foreign exchange earner for the country, the bauxite industry accounted for about 20 percent of the country's GNP and about 40 percent of foreign exchange earnings.
In various public speeches after the promulgation of the Republic on 23 February 1970, Burnham continued to emphasise "ownership and control" of Guyana's natural resources by Guyanese. And in speaking about "meaningful participation" in the "commanding heights of the economy" he gave indications that the government was aiming at having a share in the foreign-owned bauxite and sugar industries. In a radio broadcast on the first anniversary of the Republic, Burnham complained that Guyana over the last fifty years had received less than 3 percent of the profits accruing from the exploitation the country's bauxite. Shortly after, on 1 March 1971, the Guyana parliament by a majority vote of 48 to 3 passed the "Bauxite Nationalisation Act". The PPP gave full support to this measure in keeping with its socialist policies.
However, Burnham was not too interested in total nationalisation, and despite the passing of this Act, he continued to tout the policy of "meaningful participation in bauxite" and "majority participation". This was the position the PNC government took in talks with representatives of ALCAN, the Canadian owners of DEMBA when it suggested "majority participation". The ALCAN representatives were not in favour of this, and counter-offered "equal partnership". But due to intense political pressure from the PPP, academic groups and sections of the trade union movement, the government refused to accept this offer and almost immediately it began discussing full compensation terms for the take-over of the company.
After agreement was reached, DEMBA was nationalised on July 15, 1971, and renamed the Guyana Bauxite Company (GUYBAU). According to the terms of the nationalisation, the government agreed to pay ALCAN a sum of G$107 million (US$53.5 million) over a period of no more than 20 years with interest at 6 percent subject to withholding tax.
Actually, the compensation terms initially agreed to were much lower, but a result of imperialist counter pressures, they were revised upwards - from G$100 million to G$107 million; from no interest to 6 percent, less 1.5 percent withholding tax; and from a repayment period of 40 years and over to 20 years.
To provide working capital for the new state-owned entity, the government borrowed US$8 million from Chase Manhattan Bank of the United States.
Burnham announced around the same period that his government would next take over the US-owned Reynolds Guyana Mines Limited. But to intimidate the government from moving in this direction, the US representative abstained in a World Bank vote on a G$10.8 loan application from Guyana.
After 1971, US aid was substantially reduced. Loans to Guyana had averaged G$10.4 per year in the period 1967 71 and grants of G$1.7 per year in the period 1965 71. But after the nationalisation of DEMBA, economic pressure was exerted, and loans fell to G$6.2 per year in the period 1972 76 and grants to a mere G$356,000 per year in 1972 73.
The PPP, which supported the nationalisation of DEMBA, felt that the nation was betrayed by the agreement, and stated that the compensation would be higher than what the government stated. It pointed out that the compensation would actually cost the Guyanese people G$160 million over the repayment period of 20 years. The nation also was burdened with the US$8 million borrowed from Chase Manhattan bank, the Party said. It was obvious from this statement that while PPP was in favour of nationalisation, it did not agree with the compensation form of it applied by the PNC administration.
It was clear that the nationalisation of DEMBA did not follow the socialist form, and ALCAN was certainly pleased with the deal. The new bauxite company, GUYBAU, immediately signed a contract with the South African-based Philipp Brothers to be its marketing agent for bauxite on the world market. Philipp Brothers was closely tied up with the apartheid regime in South Africa and was also a subsidiary of the multi-national giant, the Anglo American Corporation.
With DEMBA in the bag, the PNC, claiming it was applying its policy of cooperative socialism, continued on a series of nationalisations. In 1972, the government took over Guyana Timbers Ltd., and on the following year it appropriated all idle lands owned by the sugar companies for housing and agriculture.
By 1975, the PNC was bragging that it was the "Marxist-Leninist vanguard party", that it had "paramountcy over the Government" and that its nationalisation policy was part of its strategy to build socialism in Guyana. Burnham even branded the PPP as a group of "Mensheviks" who were out to undermine the Guyanese "revolution".
On New Year's Day 1975, with the blessing of the US government and after generous compensation terms were offered by Guyana, the Reynolds Guyana Mines Ltd. in Berbice was nationalised and renamed BERMINE. Then on 26 May 1975, the sugar operation of the British-owned Jessel Holdings was taken over. These were followed on 1 January 1976 by the nationalisation of the British-owned Sprostons, an engineering and ship-building firm.
Some special deals were worked out with the sugar companies. In the case of Jessel Holdings, that company owned two sugar factories, about 2,000 acres of sugar-cane fields, 63 percent of the shares of Diamond Liquors Ltd. and 20 percent of the shares of Demerara Sugar Terminals Ltd. The purchase agreement of May 26, 1975, stated that the Government would pay G$15 million for the local assets of this British Company, of which G$5 million would be paid in cash. The remaining G$10 million would be paid over a period of 10 years with an interest rate of 8.5 percent subject to withholding tax of 25 percent. According to the PPP, the total compensation costs would actually amount G$25 million.
By the beginning of 1976, most Guyanese were convinced that the multi-corporation giant, Booker McConnell, which owned most of the sugar estates, along with numerous other businesses, would soon be taken over by the government. The company was responsible for over 40 per cent of Guyana's sugar exports and about 25 per cent of the GDP. But according to Burnham, in a speech in 22 February 1976, the company brought no new capital into Guyana since 1966. Nationalisation talks began early in the year, and the company was finally taken over on 26 May.
Bookers' assets in Guyana were estimated at G$102.5. During the nationalisation negotiations, the Government under opposition pressure offered compensation of $1. Immediately, a "destabilisation" campaign was launched, no doubt to force the Government to retreat from this position. In the end the latter agreed to pay $102 million at 6 percent interest in 20 years!
This compensation deal was heavily attacked by the PPP and the newly formed Working People's Alliance, both of which showed that the final pay-back terms were over-generous and would further add to the exploitation of the Guyanese people. Burnham retorted by describing the PPP and WPA as "political morons".
The entire sugar industry was soon after reorganised under the supervision of the State-owned Guyana Sugar Corporation (GUYSUCO). The large department store, formerly owned by Bookers, became know as Guyana Stores.
With this large nationalisation completed, almost all foreign-owned companies were now controlled by the government, except Berger Paints and Cable and Wireless with which some agreements for take-over were reached by the following year. No moves were made to take over the foreign owned banks and insurance companies.
At first, most of the nationalised companies produced profits, but around late 1977, inertia stepped in, and a downturn occurred. Part of the problem was the fact that Burnham made political appointments to the management of these companies and experienced managers were pushed out or left on their own accord. In addition to mismanagement, an over-heavy bureaucracy as a result of the "job-for-the-boys" policy, wasteful spending and corruption, the oil crisis of the late 1970s, and foreign exchange problems also played their part in reducing profits.
The PNC encouraged the growth of a parasitic-bureaucratic elite who grew rich by bleeding out the profits from the nationalised companies. What it did was to encourage its leading members to establish "cooperatives" which were then given lucrative contracts to supply goods and services to these companies. In many cases, these goods and services were sub-standard resulting in time wasting and lower production. Further, with nationalisation, there was no workers' participation and control in management and decision making.
By 1977 - just a year after nationalisation - GUYSUCO ran up a loss of G$15.6 million, while GUYBAU's income drastically decreased from G$33.3 million in 1977 to G$24.1 million two years later. In the case of the bauxite operations, this problem of decreasing income and losses would continue to occur year after year.
26 July 2005