Sierra Leone | Mineral Exchange

(Photo courtesy of Orinoko42)

In 2005, Frank Timiș, a Romanian-Australian businessman, decided to buy 30 percent of the Sierra Leone Diamond Corporation (SLDC). According to someone familiar with the deal, Timiș turned to Tony Baldry, a former law chambers colleague of Ahmad Tejan Kabbah, then president of Sierra Leone. At the time, Baldry was chair of the British Parliament's international development committee and had close links with Sierra Leone.

Timiș’s application was assigned to an unnamed officer in Sierra Leone's Ministry of Mineral Resources, who served as gatekeeper to the mining program. By phone, the officer alerted Baldry that the ministry was seeking $2 million and a $500,000 deposit. Baldry responded that if it was okay with the president (Tejan Kabbah), it was fine with him. The ministry’s approach to Timiș reflected a broader strategy.

Back then, the Mines and Minerals Amendment Act of 1994 and the Mines and Mineral Amendment Act of 2003 regulated mining in Sierra Leone. Also in 2003, a new “Core Mineral Policy” designed to revive the mining sector was established by the Ministry of Mineral Resources (MMR). The MMR was responsible for administration of the mineral industry, the issuance of mining licenses, field monitoring, enforcement, and the maintenance of mining records.

According to a Sunday Times article, Baldry, a former senor Tory MP, headed a Commons committee to alleviate poverty in the Third World. Baldry had also been paid by a diamond firm to lobby the Tejan-Kabbah administration to secure valuable diamond concessions.

No one really paid much attention to the regulatory authority responsible for implementing Sierra Leone’s participation in and compliance with the international diamond trade control requirements of the Kimberley Process Certification Scheme.

"I followed the SLDC thing quite closely," said Lans Gberie, author of the "Dirty War in West Africa: The RUF and the Destruction of Sierra Leone" published in 2005. "From the time when the Canadian Alan Dolan ran it with Moseray Fadika, in the early 2000s."

The SLDC "was at the time--up to and including when Timiș bought those shares--a prospecting, not a mining enterprise, so it had nothing to do with the Kimberley Process." Gberie said.

"Was there anything fishy about Timiș’s rapid takeover? At the time not really, except:

1. Timiș’s colorful background (along with the involvement on his side by the British MP), which prompted the Sunday Times' interest.

2. The unnamed Sierra Leonean official involved in facilitating the deal, who I confirmed at the time was Usman Boie Kamara,  got significant shares in the company," Gberie stated.

Patrick Muana, an assistant professor of English at Texas A&M University, said omissions in the Sunday Times report that may help put the discussion into perspective were that President Ernest Koroma's current trade minister, Usman Boie, was the seemingly corrupt mining official who oversaw some of the worst excesses in the mines ministry. In addition, Muana said Tejan-Kabbah cannot be exonerated in Kamara's impropriety, but he implied the $2.5 million from Timiș must have helped towards investment in rebuilding infrastructure after the war.

Fast forward to 2014.

This April, in a conversation leading up to Sierra Leone’s 53rd Independence anniversary, after more than a 150 years of British rule,  a group of non-governmental organizations published a report saying tax incentives primarily for just six firms amounted to 59 percent of the entire government budget in 2012.

According to an editorial in last week’s Politico SL News, Minister of Information Alpha Kanu defended the government’s decision to provide tax breaks and other duty waivers, which the report said costs the country over US$ 600 million in 2010 – 2012.

“It says the concessions are often given “behind closed doors” and exempt even business houses that supply goods to the companies from paying Goods and Services Tax,” Politico wrote.

According to Gberie, tax concessions were granted to several companies after the end of the war as a temporary measure to attract foreign interest in Sierra Leone, "given the very awful image of the country to outsiders at the time," he said.

"What is remarkable about these concessions under Ernest Bai Koroma is that they are largely unnecessary and officials like Alpha Khan and Koroma himself get significant kickbacks from these favored companies.

"I don't know why Koroma and his supporters did not think it was a scandal for him to accept, on his election in 2007, $2.5 million from Frank Timis ostensibly to renovate the presidential lodge before he moved in there. The money was given to him as a gift," Gberie claims.

Kanu, however, denies the Koroma administration has done anything wrong.  He told Politico the government needed to give the concessions and waivers as they were “extremely necessary” to attract investment into the country.

“Industrial activity in Sierra Leone was minimal in 2009 and Government needed to stimulate the economy by attracting investment,” he said, adding, “there are competing countries around with similar natural resources,” Kanu reportedly said.

“On the hundreds of millions of dollars lost by government as a result, he said the country was gaining “over US$ 400 million out of a zero investment if we had left the climate as it was…So if we lose $200 million and gain $400 million there is a net gain of 200 million dollars,” the paper wrote.

The passage of the new Act has also seen the government begin to fulfill its pledge to review existing mining agreements, and a review of the existing agreement with Koidu Holdings was completed in June 2010. The passage of the new Act has been heralded by some as a break with the past, and an opportunity to usher in a much more effective regulatory and tax regime for the mining sector. - Tax Justice Country Report

"There is nothing wrong in giving tax breaks to encourage investment, said Swarray Mohamed (not his real name. All names have been changed) in a  debate over whether concessions are good or bad deals. “It becomes a calamity if a slice of that $600 million is kicked back."

Thaim Gabriel thought writing off the minister's case was a mistake. Sierra Leone stood to gain a lot more than the estimated $200 million in tax concessions and waivers given to the mining companies, Gabriel said. “However, I do not agree with Khan's statement that the country made "zero" investment.

“Over time,"  Gabriel reckoned, "given that these tax concessions and tax holidays are temporary, the country will get an increasing share of mining profits (upward revision of share agreement would be even better for the country),” he explained. “In addition, jobs created would add income where there was none before, and the spending power of the newly employed will enhance economic growth.”

Zaria Kossi had a contrarian case.  He pointed to Guinea, Sierra Leone's bauxite-rich neighbor, and how "they had just kicked their Frank Timiș equivalent out for giving them a bad deal, while others who wanted to buy the concession were queuing to have a go at better deals with transparency.

“We would have got the same jobs and increases in GDP and loads of dosh for NRA[the National Revenue Authority] but you believe giving even suppliers to African Minerals tax breaks is a good deal,” Kossi skewered.

Last April, Saliou Samb reporting in Business Day said Guinea had amended its mining code to reduce some taxes in an effort to improve the investment climate, as mining investors and major producers become increasingly wary of big-ticket projects in difficult locations.

"Mining firms have since last year frozen billions of dollars’ worth of planned investments in the West African state, the world’s top supplier of bauxite and home to rich iron ore reserves, citing fiscal uncertainty and political turmoil," Samb wrote.

"The changes cut mining profit taxes to 30% from 35% and slash the tax on bauxite to 0.15% of the international market price for aluminium, from 0.55%, according to a copy of the amendments obtained by Reuters," wrote Samb.

"Show me a resource-rich, capital-poor country that has developed without going the route of some kind of tax concessions and some other forms of incentives to attract the capital for exploitation of their resources," Gabriel retorted.

“The current power-holders in Guinea are playing hard-ball," Gabriel said.  "The terms of these mining agreements can be re-negotiated; except if you want to tell me that African Minerals and London Mining would rather pack up and go than pay a higher rate to Sierra Leone.

“Remember Delco picked up and left when they could not meet our dictated terms and their costs of production were trending up, while the quality of the ore (vis-à-vis the current state of extraction technologies) was deteriorating. Also, it was becoming cheaper to produce iron-ore elsewhere in the world.”

Amanita Maliki, in a less full throated voice reminded his colleagues that the "devil" behind tax holidays in developing countries is the World Bank’s Doing Business Report.  "In the mind of the architects of this initiative nothing matters besides corporate profit," Maliki opined. "Countries are compelled to ignore the interests of their citizens in the global competition to attract businesses in the hope of creating jobs.  I guess it goes to show how Sierra Leone’s integration in the global capitalist system is making progress,” he surmised.   

“How is our country being screwed worse now than in the past?” Gabriel asked incredulously. “Would the living conditions of Sierra Leoneans be any better without the exploitation of our mineral resources; given that we do not have world-competitive human resources or capital to market?”

The challenge for civil society is not to push for more taxation, but rather to push for better taxation, says a recent Tax Justice report.  Where space for such engagement is created, taxation can become a catalyst for active public engagement among citizens.

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