Sierra Leone Telegraph: 6 July 2015
The Sierra Leone Telegraph has tonight learnt that Addax – one of the handful of foreign companies to answer to president Koroma’s call for foreign direct investment in 2008, is now unable to meet its financial obligations, due to costs overrun and drop in production output.
According to sources in Freetown, the company had shut down its operations until further notice, while it keeps the business under review.
“Addax Bioenergy Company has officially announced at a meeting held at Mara community that they will shut down operations for the next six months starting from 1st July, 2015. This has come as a result of the fact that the company can no longer financially support its operations as they are faced with huge financial constrains.
“In an earlier engagement with the company during our monitoring visits, a senior company official disclosed that they have a financial deficit close to Euro 150,000,000 (one hundred and fifty million Euros).
“He also stated that the company was not able to reach its threshold of producing 19,000,000 (Nineteen million) liters ethanol as they were only able to produce 7,000,000 (seven million) liters and this has negatively impacted on the profitability of the company.
“Also, as a result of low yield of the sugarcanes the company has not been able to meet their promise of supplying 13Mega Watt of electricity to the national grid.
“At the moment, close to 80 percent of expatriate staff and casual workers have been laid off and it is feared that close to 2,000 jobs will be lost during this six months period.
“At the Mara meeting today, the company encouraged the local communities to support them in looking after their properties so that they will not be vandalized,” an unofficial report stated yesterday.
Last week the company hinted in a published statement that all was not well with its operations.
On the 24th June 2015, the company announced that: “Over the next six months, AOG, as main shareholder and Addax Bioenergy SA, have decided to downscale their sugarcane bioethanol operation in Makeni, Sierra Leone, and to conduct a review of all options for the future.”
It went on to state that: “Since its inception in 2008, this Greenfield project, run by AOG subsidiary Addax Bioenergy, has had to overcome a number of unforeseeable events. These have had a significant impact on the timeframe, costs and revenues initially planned.
“They include the Ebola outbreak in May 2014, which not only has had a terrible human toll on the country, but has also led to substantial delays as most of Addax Bioenergy’s contractors declared “force majeure” and left the site.”
And in order to mitigate the continuing risk of serious financial losses, the company said that it was: “Taking advantage of the naturally-low level of activity during the rainy season when no revenues are earned, costs will be reduced and operations downscaled. The number of expatriate consultants will be reduced. At the same time, most local employees will be maintained and assets kept in good working order.”
“The review process will explore all options for the operation’s future. AOG and Addax Bioenergy intend to work closely with H.E. President of Sierra Leone and his government to find the right way forward for the operation and for the country.”
The Addax operation is a massive 10,000 hectares (ha) sugar cane plantation and processing plant, employing about 3,600 people. It is located approximately 15km west of Makeni in the Bombali District and in the Chiefdom of Malal Mara in the Tonkolili District in the Northern Province of Sierra Leone.
The factory and related infrastructure, fields developed for rice farming and ecological conservation areas cover another 4,300 ha, bringing the effective project area to around 14,300 ha.
The company’s plan was to produce about 85,000m3 of ethanol per annum and approximately 100,000 MWh of renewable power per annum. The refinery and the irrigation system for the sugarcane estates is said to be powered by the biomass plant, fuelled by sugarcane fibre residues.
It is understood that failure by the company to meet its promised 15 MW of power supply to the national grid has been disappointing, though construction of the distillery and power plant was completed in 2014, with production planned to become fully operational in 2017, according to Addax.
Early this year, African Minerals was declared bankrupt after failing to meet its financial obligations to creditors, and was then bought out by the Chinese majority shareholder – Shandong Ltd., and there are suspicions the Chinese may well be lining up their cash waiting to pick the pieces of Addax at next to nothing.
Last week, four large oil companies decided to pull out of the oil exploration business in Sierra Leone, stating that the country’s oil sector is not commercially viable. Also, there are suspicions the Chinese may be keeping an eye on those abandoned oil exploration rights.
I worked there on the Addax project to build housing for incoming VIP and it was the poor management totally from the top to supporting managers whom all were S. Africans (I am American). It was a plot to poach my crew who were the best construction team on the ground, and make me the odd guy out. They didn’t even get me my residency visa, and negated to live up to my contract. So it boils down to the Mafia who was there in charge who blew it. And no wonder shame on ADDAX for entrusting the whole operation to the Maffia that was in charge. I wonder how much money they embezzled out of the operation. I am sure they went home very rich fellows, straight up. If any upper management wants to second guess me I would testify in court 100%.
It is a shame that such a huge investment would go waste. I was part of installation of equipment in the labs. By then I envied the project because it one of the few in West Africa. W
When I looked back at the sugar cane plantations and the massive power plant at the site, I was ashamed of being an African, because we cannot manage such a project. We always want monetary gains first, whilst the project is in its infancy.
Let us not make this project go waste. Heads must come together and a solution found as quickly as possible. This project could help cura- unemployment in the community the the project was established. Looking forward to hearing a positive turn-around of the project.
I would like to know what happened to the Addax ethanol plant. Can anyone help with the information, please?
Well said Alan Luke. Sierra Leone is indeed not open for business. Only the “one asset wonders” like the Sierra Rutiles of the World which according to Africa Confidential’s piece of June 26th have or are engaged in corrupt dealings with Ernest Koroma, can operate in such an environment. One wonders how much longer, Sierra Rutile’s largest instutional shareholder, Pala Investments, which has significant legitimate investments in mining and mine service assets in other well-regulated jurisdictions, can hold on in Sierra Leone.
President Koroma and the rest of the idiots in power have destroyed every ounce of goodwill that the international investment community had towards the country.
It is not clear why taxpayer funds are being wasted on trips outside of the country to advise the world that the country is open for business when this is clearly not the case.
These closures reveal that Sierra Leone is not opened for business. Businesses, whether foreign or local, face significant obstacles including:
1) having senior public officials and police officers on their payroll – protection racket
2) securing water and fuel supplies to ensure production is uninterrupted
3) hiring and maintaining expensive expats because of lack of skills and education
4) poor levels of productivity by ill-disciplined and lazy workforce who are accustomed to having their every need met by someone else either through theft, bribery or dependency.
5) bribery and corruption especially at the ports and other revenue generating or licensing government departments.
Until we decide to put our house in order, our future remains bleak. Investors will simply go to countries that are attractive to inward investment.
Pretty certain that the allegations of corruption in the recent scathing Africa Confidential article on Ernest Koroma’s Sierra Leone did not help matters.
Your readers may recall that the June 26th, 2015 edition of Africa Confidential (a highly respected publication) confirmed that the President of Sierra Leone was granted a 10% equity stake in Addax SL.
Under the current rotten regime, foreign investors cannot operate successfully in Sierra Leone without engaging in corrupt activity and this is the most significant impediment to the development of the country.
By any objective measure, the adverse impact of corruption on the economy of Sierra Leone is much greater than the impact of Ebola and low commodity prices combined.
Foreign investors would do well to stay away from Sierra Leone until Koroma and his cronies are voted out in the next election.
Shame on Ernest Koroma, John Sisay of Sierra Rutile and the rest of the organized crime gang for making Sierra Leone synonymous with corruption.