Sierra Leone – Mining dispute threatens United States firms

Gregory Simpkins: Sierra Leone Telegraph: 17 April 2021:

The decision by Sierra Leone to shut down the operations of U.S.-owned SL Mining has called into question that government’s commitment to the rule of law with regard to foreign investors. Since the mid-1990s, the U.S. Government has initiated various programs to boost U.S.-Africa trade and investment – from the African Growth and Opportunity Act (AGOA) to the Prosper Africa initiative that was launched in 2018.

The success of these initiatives depends in part on American companies receiving fair treatment in their dealings in Africa. Prosper Africa “brings together services and resources from across the U.S. Government” to promote U.S. business activity in Africa, but how can there be robust U.S. investment on the continent if the legitimate interests of American companies are not respected and the U.S. government doesn’t take action to support American business interests?

Now consider the case of Sierra Leone. In December, the Millennium Challenge Corporation – a U.S. government agency – selected Sierra Leone for a five-year grant program “to reduce poverty through targeted investments that increase economic growth.”

The announcement of the MCC compact, was welcomed by President Julius Bio, who said: “We have achieved this because of the tremendous gains we have made in controlling corruption, investing in people, protecting democratic rights and enabling economic freedoms.”

SL Mining, a Sierra Leone company wholly owned by the Gerald Group, one of the world’s largest metal trading companies, was granted a mining license agreement (MLA) that was ratified by Sierra Leone’s parliament in December 2017. Shortly after, the company started construction of the first phase of its Marampa iron ore project in Lunsar in the Portloko district. The project was commissioned in January 2019, reviving an historically distressed mine to produce the highest quality iron ore concentrate in Africa. One month after SL Mining began exports in June 2019, the Sierra Leone government imposed an export ban on the project and, soon after, cancelled the company’s mining license, alleging breaches under the MLA.

SL Mining denied the charges and – as prescribed under the MLA – filed for dispute arbitration with the International Chamber of Commerce (ICC), which issued peremptory orders and partial final awards compelling the government to allow the company to continue to operate. Sierra Leone challenged those orders before the English High Court, which two months ago dismissed Sierra Leone’s claim and upheld the ICC’s partial final award, concluding that SL Mining “wins on each issue.”

The judgment by the court, widely seen as reaffirming the role of arbitration in dispute resolution, was welcomed by the international investor community. However, the Sierra Leonean government has so far refused to comply with the ICC orders, forcing the project to remain dormant.

In the global marketplace, these negative developments have significantly hampered the country’s standing. “Iron ore from Sierra Leone is becoming increasingly less relevant,” said Erik Sardain, a principal consultant with Roskill. “It’s too much struggle for producers who have invested time and effort and find they have no way of dealing with the government.”

The impact of SL Mining’s shutdown is also being felt by Sierra Leonean families locally as well as nationally, as thousands of jobs relied on the large-scale mining operation. Prior to the shutdown, the Marampa project employed around 1,500 Sierra Leoneans. In Lunsar, the mine was the town’s economic backbone, and the loss of income from the mine, including royalties to the town, stalled community projects. Like many in the community, Abdullai Bangura has paid a huge price. Bangura worked as a plant electrician, earning a stable income, but now he farms cassava and groundnuts, barely enough to support his family in Rogbanneh Village. Locals have a good relationship with SL Mining, and they want the company back.

According to the agreement that the parliament ratified, the Sierra Leone government is obligated to lift the export ban and allow SL Mining to operate the mine while the dispute is resolved through arbitration. Yet the government has elected to put 1,500 people out of work, jeopardizing the livelihoods of another 15,000 people who depended on that income.

In addition, the government deprived itself of over $100 million in income in the form of taxes and royalties from the project at current iron ore prices.

The government further tried to intimidate SL Mining employees, most notably with the unjustified temporary detention of management, including Gerald Group’s Chairman and CEO, a U.S. citizen. The detention not only drew the condemnation of the U.S. Embassy, but the British and Indian High Commissions as well.

The country’s legal dispute with SL Mining is a concern in Washington as Ambassador David Reimer begins his assignment in Freetown. The well-regarded diplomat arrived in the country a few months after the MCC Board of Directors selected Sierra Leone for the compact aimed at reducing poverty. Sierra Leone’s MCC’s scorecard, a part of the compact approval process, was a priority of the former American ambassador, Maria Brewer, who was commended by President Bio for helping secure the compact when she departed in February. The government has welcomed the MCC compact.

However, recent experience suggests that a successful MCC compact is not guaranteed. Sierra Leone was selected for a similar program in 2012, before it was rescinded a year later after the government failed the MCC scorecard indicator for corruption. If the new compact proceeds, it will take several years before the MCC disburses substantial funds to Sierra Leone under its current compact. Resolution of the SL Mining issue by the two parties is likely to be an important MCC consideration moving forward.

Meanwhile, China’s activity in the African mining sector is a recurrent concern of U.S. policymakers, and Chinese mining operations in Sierra Leone have a demonstrably poor track record. In 2019, the government’s decision to grant a license to China’s Kingho for the Tonkolili mine in northern Sierra Leone sparked a parliamentary inquiry over the deal’s lack of transparency. In January, Kingho shipped its first batch of iron ore from the Tonkolili mine, despite lacking a parliament-ratified MLA.

Reimer’s tenure represents an opportunity for both countries to address these concerns and build the bilateral relationship. “We remain deeply committed to Sierra Leone’s success as a democratic nation and to the wellbeing of its people,” he is quoted as saying during a ceremony last month at State House where Bio celebrated the successes of the MCC $44 million Threshold Program, which began in 2015.

Reimer indicated his commitment to seeking resolution of the SL Mining dispute when he appeared before the Senate Committee on Foreign Relations for his confirmation hearing in December.

Responding to a question by then-chairman James Risch (R-ID), who asked how he would respond to the SL Mining case, Reimer committed to “engaging on the SL Mining case directly” with the government while also working to make the country a more attractive location for American investment. Concern about corruption in Sierra Leone was also raised during the hearing by Bob Menendez (D-NJ), who now chairs the Committee, which has oversight of the MCC.

The Biden administration has stated a commitment to promoting U.S. business interests in Africa, along with transparency and the rule of law. An essential element of the rule of law is honoring commercial contracts, but relations between Sierra Leone and the United States are currently clouded by the dispute involving SL Mining.

The dispute touches all of the priorities of the Biden administration in Africa and its timely resolution could help Sierra Leone address underlying issues, from poverty and slow social development to the absence of a strong private sector to drive economic growth. It also would strengthen the rule of law, which is not only a key pillar for the U.S.-Sierra Leone relationship but also is essential to attract investment to a country struggling to better the lives of its people.

The SL Mining case presents a major test for U.S. trade and investment policy. Will the administration continue to allow Sierra Leone to enjoy duty-free, quota-free trade benefits under AGOA if the government refuses to honor contracts or respect internationally binding court decisions?

Will the MCC use its authority to withhold disbursement of funding on a compact with a government that disregards international law? I saw these tools used effectively to promote better trade and investment performance during my time in government, and I hope the commercial rights of American companies will be defended by the U.S. government in this and other cases.

About Gregory Simpkins

Gregory Simpkins  is the Executive Director of the African Merchants Association and writes the Africa Rising 21st Century blog. He recently retired from the U.S. government where he last served as Senior Advisor in the U.S. Agency for International Development Agency’s Africa Bureau. Prior to that government service, he was Staff Director for the U.S. House Subcommittee on Africa, Global Health, Global Human Rights and International Organizations.

8 Comments

  1. To my understanding of the deals and terms of agreement between the then CORRUPT APC LED EB KOROMA GOVT AND SL MINING the Sierra Leonean govt was to have 0.003 cent for every US1/00. And the CURRENT NEW DIRECTION SLPP GOVT saw that as a not good enough and very low RETURNS/REVENUE for the govt and people of mama SALONE. Are we to sell our birthright for cocoa-ebby token sign and executed by the previous APC govt?
    The USA govt established there MCC score cards to assess developing countries in there fight against corruption and establishing democratic institutions in order to finance such govt if they satisfied certain thresholds in the USA MCC SCORE CARDS.
    And despite this hiccups between the SL MINING AND THE GOVT OF MAMA SALONE THEY (USA) ARE SATISFIED IN THE CURRENT SLPP GOVT EFFORTS FIGHT AGAINST CORRUPTION AND THE CURRENT USA AMBASSADOR IN SALONE PAID A CUTESY VISIT TO THE SALONE ACC CHIEF IN HIS GLOUSTER STREET OFFICE IN FREETOWN RECENTLY TO CONGRATULATE AND APPRECIATE THE ACC EFFORTS IN IT’S FIGHT AGAINST CORRUPTION

  2. In today’s world credibility is all that matters in the minds of Investors looking for sustainable returns on their investments.Despite the obstacles and challenges they may be confronted with,a prudent investor will always continue to believe that there’s light at the end of the tunnel of Economic deprivation that induces depression,anxiety and the insecurity that comes with not knowing whether their endeavors will fail or succeed.This is a very bad precedent being set by the government of Sierra Leone.

    I completely agree with Mr stargazer,they shouldn’t be allowed to get away with this duplicitous act, so that our future leaders and governments to come wouldn’t dare to try and play such pernicious games ever again. Make no mistakes, Credibility is all that matters in the world of Investing; Our current government would be sorely mistaken to dismiss it and think that it doesn’t.Be careful of what you do to an investor because countless others are discreetly watching you from the sidelines.

  3. Americanism for the the Americans is good; but for the rest of the world it stinks. Thats why when America sneezes, the rest of the world catches cold.

  4. Sincerest thanks to you guys,special Agent Young4na and Mr Abraham Jalloh for such an insightful contribution on this important issue at hand;Gentlemen,the good name and image that we have toiled very hard to maintain throughout our nations most traumatizing ordeals and darkest nights of gloom is now hanging in the balance like the life of an aging patient on a cardiovascular surgeons operating table bleeding profusely out of control. This little nation of ours could have been a little paradise on earth if only we had the courage to be honest with ourselves and others. Let me reiterate, this President is unfit to rule Sierra Leone not only because he is incompetent but because he is an authoritarian at heart.

    The old corrupt soldier totally lacks people skills; he is unable to think critically for himself and that’s the reason why he has surrounded himself with a small army of imposters that are not ashamed to call themselves Professors. Since when did we become transformed from gentle doves into predatory vultures that feed on rotten flesh? Answer – Is it right to rob investors of what rightfully belongs to them because they are far away from their loving peaceful homes? Whatever happened to decency,empathy,equity of treatment and mutual respect? Strange is it not that errand military boys that used to shine boots for extra rations of food are now turning investors away that could have been bringing us millions of dollars? How the hell did we get to such humiliating,perplexing depths of no return? Again, here’s another piece of advice for SL Mining that will help you understand that you are not dealing with adorable little puppies but merciless ferocious wolves.

    Do not walk away from this fight empty-handed after you have already won judgment in your favor against them because they will become much more emboldened to do much worse to other investors. Trust me,I grew up in this same country that these criminals are now ruling; Soft answers,kind courtesies and humble gestures will never appease their self centered minds; You must never flinch, blink or hesitate to BRING DOWN THE HAMMER whenever someone tries to trample on your rights and when you are faced with injustice. Trust me you will be helping the poor people of our Sierra Leone by standing up to these criminals until they admit their mistakes and decide to do the right thing in the interest of promoting ideas and relationships that facilitate global solidarity. Folks,they are treating American companies with disdain and contempt yet at the same time striving to receive substantial funds from the MCC Compact five year agreement plan that provides grants that support programs that reduce poverty through economic growth – Go figure!(lol) Folks, BRING DOWN THE HAMMER and it shall be well with you.

  5. Personally, I understand the angle where the SL Mining is coming from , based on the fact that capitalism is all about maximizing opportunities. They had invested time and energy to negotiate a “Sweet heart’ deal with the previous APC government which according to the New Direction government is detrimental to our citizens. Just like the Donald Trump administration renegotiated the North American Free Trade Agreement (NAFTA) which was signed with Canada and Mexico, based on his belief that it was an unfair deal for his country. Fortunately the two countries listened to his concerns and they eventually reached a better deal which was a Win Win situation for all.
    I don’t understand why the SL Mining are reluctant to listen to the concerns of the New Direction government. I hope and pray that the two parties will soon reach a Win Win situation.
    Finally, Sierra Leone has jumped 18 places upwards on the 2021 Global Economic Freedom Ranking moving from 168 in 2020 to 150 in 2021 after winning the MCC score for the first time in history. Congratulations to the New Direction government and the people of our beloved nation for this quantum leap.

  6. Maybe to SL mining, Bio’s reneging on his agreement, for those of us that have studied his pattern of behaviour doesn’t come as a surprise. In certain ways, I blamed the western powers for imposing Bio over the people of Sierra Leone. You created a monsters and now you can’t bring it under control since it starts lashing out. Now we as a country are suffering as a results of your ideological differences with China. Our country don’t want to be part of the China and American fight for supremacy and world dominance. Just like we stayed out of your conflict with the Soviet union during the cold war.

    The level headed and good temperament APC candidate who’s head is firmly stuck on his shoulders, DR Samura Kamara of the All People’s Congress would have been the ideal president of Sierra Leone. Had it not been for the falling out between Ernest Bio Koroma and the western powers that decide elections across third world countries and Africa in particular. Western powers hold sway over developing countries like ours on two of the most important components for a stable and secure state. The economic and security front. Those are two of the most important cards western powers can use to influence election outcomes. The first mistake made by the Ernest Bai Koroma’s government was the sacking of his vice president Sam Sumana during the Ebola war.

    By replacing him with Victor Foh, a man who dressed like Chairman Mao, and looks like a member of the Politburo of the Chinese Communist party and his educational links to China, played in the hands of western powers of China taking over Sierra leone, just like what’s happening with some countries across the continent. Zambia comes to mind. They know Bio is not a man of his words. At least he dresses in Armani suits. To western minds image counts for lot. The litany of broken promises is just the way he likes to do things, and that counts for little in their assessment of Bio’s characteristics . Never mind, he overthrew Strasser, he promised to fight corruption, bring the country together, he signed a social contract with the people of Sierra Leone that he will improve their lives, and work to make Sierra leone an attractive foreign investment destination. Promises made promises never honoured. So far what we’ve seen is a government that has lost its sense of direction.

  7. Gentlemen – I have always maintained that this President is unfit to rule our beloved country because of his authoritarian tendencies and blatant disregard for the Rule of Law.Times without number I blew loud trumpets from rooftops warning them not to trample on the legitimate rights of SL mining but they stupidly brushed it off in arrogance and went right ahead and did much worse than anyone expected.These people are not leaders with integrity but Criminals
    and imposters with questionable characteristics. They are opportunists using questionable tactics to enrich themselves.I would like SL Mining and other investors to know that the use of threats, harassment and intimidation of law abiding investors is an abhorrent,repulsive act and there are millions of us who condemn it out-rightly because that’s not the usual Sierra Leonean way of doing things.

    Its time for this inadequate,dysfunctional government to do the right thing and honor its obligations and stop misleading our struggling people with their ceaseless spurious lies and excuses.I mean seriously,how disconnected from reality do you have to be not to fully understand that SL Mining totally has the advantage on this issue at hand; Any way you choose it to examine it – up, down.sideways,at a close range or at a distance,they will end up winning.Folks,Its only lawless men with twisted minds,shady hearts and crooked ideas that would brazenly ignore an legitimate order and judgement made against them.It is only a bunch of ignoramuses that wouldn’t understand that a bird in hand is worth hundreds in the bush; so much money lost over nothing at all.Goodness gracious!

    When will these hopeless dummies with huge potbellies begin to understand that these are progressive times that seek to promote civility and mutual understanding between nations through an attitude of fairness and respect and not through threats and intimidation? My advice to SL mining is to use every legal means available to them to make these people comply with the judgment made against them – listen,these criminals are men with hearts of stone so you must use an iron sledgehammer to shatter them to fragments and pieces in order for them to come to their senses,comply and do the right thing.

  8. PAOPA extremists ‘Beware the ides of March’. ‘What goes around must comes around, and surely what goes up must come down’. Days of reckoning are knocking. Toss up your EGOs and ARROGANCE in place of HUMBLENESS, RULE OF LAW, and INTERNATIONAL BEST PRACTICES of honoring business contracts and judicial arbitration.

    Our nation is among the poorest of the poor, stop fooling yourself in thinking you are ABOVE INTERNATIONAL LAW. The sooner you temper down your uncontrollable egotistical mindsets, the better for our impoverished nation. Too much damage has already been caused by your reckless and irresponsible actions, enough is enough.

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