Sierra Leone Telegraph: 3 April 2015
China’s economic interests in Sierra Leone have risen by over 400% in the last five years, and this resurgence can be largely explained by its vast investment in the country’s mining sector.
But China’s economic expedition in Sierra Leone has prompted several Sierra Leoneans to now refer to Sierra Leone as the 24th province of China.
Critics say that while senior Chinese government officials – including the chief of police are being held to account and charged with corruption and abuse of office in Beijing, in Sierra Leone, the Chinese are encouraging and fueling corruption in high places – double standards to the highest degree.
And recent events leading up to the full acquisition of Sierra Leone’s largest iron ore mining company – African Minerals Limited, by the Chinese company – Shandong Iron and Steel, is a perfect example of how China’s interests and the interests of those in power in Sierra Leone have become massively intertwined.
A new Chinese business philosophy in Africa, of: “What’s yours is ours.” But honest investors say they will leave Sierra Leone, because of corruption and the porosity of the rule of law.
Analysts believe that with China now poised to bankroll the near bankrupt economy of Sierra Leone, after years of mismanagement and corruption, every sector of the economy – from fishing, forestry, and agriculture, will soon fall under the direct control of Beijing’s industrial cartel.
What is evidently clear also, is that the industrial coup d’état that saw China’s Shandong Iron and Steel, taking full control of African Minerals Limited, was with the blessing of president Koroma, who personally ensured that all due legal niceties were bypassed and shareholders stripped of their rights.
But this abuse of executive powers and misdirection of the judiciary, in order to facilitate the fast-tracking of the transfer of ownership of African Minerals Limited to Shandong, will most certainly destroy any confidence that foreign investors have in Sierra Leone.
Today, Friday, 3 April, 2015, a former shareholder in African Minerals Limited, contacted the Sierra Leone Telegraph to say that the handling of the African Minerals affair by the Koroma government and the High Court, was at best shambolic, and worse – downright corrupt.
This is what he told the Sierra Leone Telegraph:
I would like to bring to your attention two UK-listed mining companies which were operating in Sierra Leone, in order that you may perhaps warn private investors not to invest in any companies based in that country.
It is very risky to invest in Sierra Leone, since there is almost no transparency in oversight and governance.
London Mining (AIM: LOND) went into administration in September 2014. Its Marampa mine was bought by renowned Romanian/Australian entrepreneur Frank Timis in late October, with the help of the Sierra Leone finance minister Marah (Photo), from the administrator PwC, in a hurried deal at bargain price.
African Minerals’ (AML) (AIM: AMI) Chairman Frank Timis bought the Marampa mine in the knowledge that, at that time, AML needed funding.
He separated AML, the parent company into two parts – African Minerals Engineering Limited and the project companies (Tonkolili mine, Power Plant, Rails and Port) in late 2014.
Then came the news from the AMI Regulatory News dated 27 February 2015 that African Mineral’s pre-export finance facility (PFX) debt was bought and transferred from Standard Chartered to Shandong Iron and Steel (SISG) who are the junior partner.
The news report – ‘Interim injunction in Sierra Leone’ said that:
“On 26 February, the Company received by e-mail from SSHK an interim order of the High Court of Sierra Leone, issued on 23 February 2015, in relation to compliance with the shareholders agreements between AML (and subsidiaries) and Shandong Steel Hong Kong Resources Limited (SSHK) a recently set up subsidiary of SISG.
“The document names the plaintiff as SSHK and the defendants as Tonkolili Iron Ore (SL) Ltd, African Railway & Port Services (SL) Ltd, African Power (SL) Ltd, AML and Frank Timis.
“The order grants an interim injunction restraining the defendants from unilaterally taking any steps that will lead to the dissolution, liquidation, winding up or placing into administration of any of the defendant companies. The injunction continues until the hearing and determination of the application, with a hearing date of 2 March 2015.”
Following this, SISG took control of AML assets. An extract from RNS dated 3 March 2015, stated that: “The Lender has taken control of the Holding Companies by appointing new directors who have a voting majority, and has taken steps to take control of AML’s 75% shareholding in the operating companies by appointing replacement directors to those companies.
“The Lender’s sister company, Shandong Steel Hong Kong Resources Limited (both ultimately owned by Shandong Iron and Steel Group), owns the 25% in the operating companies not held by AML.”
There seems to be no rule of law in Sierra Leone, as SISG has taken control of AML assets without, it seems, following due legal procedures.
African Minerals thereafter appointed Deloitte as administrators on 26 March 2015, which is where we as shareholders stand today.
However, the government of Sierra Leone made an announcement about restarting the mine (an AML asset) in partnership with SISG before Deloitte was even appointed.
This would seem to indicate that SISG is colluding with the government of Sierra Leone, to the detriment of stakeholders, in particular shareholders.
I hope that you will report this story in the hope that it will prevent anyone else from losing their hard earned money, as likely to happen to the shareholders of African Minerals Limited.
End of Report.
Last August, 2014, the Sierra Leone Telegraph asked one of the top foreign investors in Sierra Leone – former Director and founder of London Mining Limited – Mr. Chris Brown, about his experience of so called ‘dodgy and unfair mining agreements’ in Sierra Leone.
This was his response:
“I have read the report on African Minerals by Human Rights Watch, but I am not familiar with the other reports. When I was the Managing Director of London Mining, I lost the Marampa mines and Pepel railway line to African Minerals, under very dubious circumstances.
“The then Minister of Mines and Mineral Resources, Dr Alhaji Abubakar Jalloh, visited Romania on a supposed fact finding mission with two other ministers in 2008.
“Then six days later, the minister signed an MOU with African Minerals to build a new “Standard Gauge” railway between Marampa and Pepel.
“I find it just a bit too much of a coincidence that the Chairman of African Minerals – Frank Timis, was born in Romania, and African Minerals never did actually build a Standard Gauge Railway. Instead, they simply repaired the old narrow gauge railway and extended it to Tonkolili.
“But, rather than fight the decision, I created the “Plan B” road and barge route for London Mining.
“I am a visitor to your country, so it is not up to me to advise how the Government runs its country, but for the Government of Sierra Leone to run the country as it best sees fit.
“My only caveat is that it does not involve me in any corrupt practices. If the Government wants me to invest further capital in the country, then it will have to work harder to attract my investment.
“At the moment, the Government is not really doing a very good job.
As a foreign investor in Sierra Leone, do you believe the government has created the right conditions and environment that are conducive to foreign business investments?
As a foreign investor, I am sorry to say, that in my personal view, Sierra Leone is one of the worst places to invest in the world I have visited, and I have visited a lot of countries!
Firstly, the Government penalises any visitors to your country with high visa costs and landing charges at the airport.
Then, if you import anything into your country through the Freetown Port, it requires up to 15 different signatures, by up to eight different Government agencies in up to five different buildings spread around Freetown (as a result, some of our duty free container actually cost more in demurrage than the duty we saved!).
The labour force is mostly unskilled and whilst they seem cheap on face value, they are not as productive as skilled foreign labourers, and have to be closely monitored against theft every single moment they are on site.
Even when they are caught stealing, they are very difficult to sack because of strong unions and biased courts.
Anyone in the country with any skills, such as accounting and legal professionals, are even more expensive than similar professionals in London and New York, but much more ineffectual.
Borrowing money from the banks in Sierra Leone is prohibitively expensive, at 15-24% interest rates, and is usually repayable within a year!
Then, if you actually make a profit, the myriad of taxes are complicated and designed to create a wealth of bureaucracy and to rake in as much money for the Government.
But despite all that, dealing with corruption in Government is actually much more frustrating for a business, especially if you have a policy of never paying bribes!”
These are related links to the African Minerals Story: