Salone News

On the sale of the shares of Sierra Leone’s Sierra Rutile company

14 July 2018 at 16:02 | 3128 views

Commentary

By Kortor Kamara, USA

In response to Dr. Samura Kamara’s Radio Democracy interview this morning, regarding the sale of Sierra Leone government shares in the Sierra Rutile Company (SRL), I am republishing an excerpt from my 2009 article, for the nation to better understand what the the terms of the First Amendment Agreement entailed and how erroneous and disingenuous Dr. Samura Kamara’s recitation of the facts, terms and conditions of this agreement was this morning.

What is the First Amendment Agreement?

According to the First Amendment Agreement dated February 4, 2004 between the government of Sierra Leone (GOSL) and Sierra Rutile Limited, the government assigned to SRL “all its rights, title and interest in, to and under the future PAYE taxes due from SRL to the GOSL in an amount not exceeding 37 million US dollars. In consideration for the foregoing assignment, SRL agreed to transfer up to a 30% equity interest in Sierra Rutile Holdings Ltd to the GOSL within 60 days of the end calendar year commencing on April 1, 2005, equal in value to the PAYE amounts accrued during such calendar year”.

According to the company’s financial statements, as of December 2007 and 2008 only a total of 2,466 shares have been transferred and PAYE accrued for the year in Sierra Rutile Limited amounted to 1,840,000 USD(one million eight hundred and forty thousand dollars) and in 2007 USD1,288,000 (one million two hundred and eighty eight).

The above assignment in lieu of PAYE taxes resulted in GOSL obtaining a 2.063% ownership interest in Sierra Rutile Holdings Limited (SRHL). SRHL is one of several subsidiaries of TRG whose main business is listed as an “intermediate holding company”. Thus, as can be noticed the country’s revenue stream from PAYE taxes payable by SRL has cleverly and or corruptly been transferred into a worthless minority share ownership in a company with essentially no independent source of revenues.

As a British Virgin Islands incorporated company, SRHL has no legal requirement to prepare and file audited accounts in Sierra Leone. TRG thus has been able to rip-off Sierra Leone of over 3 million dollars just in 2007 and 2008 through such an unconscionable agreement.

Despite being a minority shareholder, GOSL does not have a seat on the board of directors of TRG. Decisions thus affecting a company and country that the nation has obtained loans on its behalf, provided subsidies and deferred collection of interest payments and owes equity shares in are made without any participation by representatives of the government.

I would be pleasantly surprised if our Ministers of Finance and Mines and at least the High Commissioner in London were present at the concluded June 11, 2009 TRG shareholders meeting in London. Rather Mr. Alex Kamara, a CEMMATS Group Director was appointed to the TRG board on March 10, 2008. According to TRG, CEMMATS has a “number of contracts for the supervision of the construction of the capsized dredge and a new power house at SRL”.

Moreover, compounding the loss to the nation by such an unconscionable agreement signed in 2004, the financial statements for 2008 showed a negative loss of shareholders interests. The company’s loss before interest, tax, depreciation and amortization for 2008 is reported at 22.8 million dollars. The losses attributed thus to the minority shareholder (GOSL) exceeded their equity shares and as such the company absorbed the losses. However, any future reported profit by SRHL and SRL would be allocated to the majority interest until the government’s share of losses previously absorbed by the company is recovered.

The scheme of equity ownership on the surface appears economically viable to a layman, however what it entails in actuality is increasingly the country becomes saddled with the liabilities of a company in proportion to its shares. Thus as an example, with a projected 30 percent shares in the company and losses of 22.8 million in 2008, Sierra Leone is assessed a 30 percent share of the entire losses of the company. It is interesting to note that since the signing of the agreement, TRG has not posted any profits thus robbing the country of royalty payments and saddling the nation with additional debts.

Currently aside from the salaries of its workers and the 10 percent mandatory company contribution into NASSIT, the company does not provide any retirement benefit plan for its employees. The agricultural development fund the company contributes for development of agriculture in the mining communities represents a paltry $75,000.00 per annum.

This annual amount is allegedly paid into a separate fund under the management of the government. An audit of this account by the ACC on behalf of the chiefdom communities would be highly in order to ensure that the intended recipients are benefiting.

In conclusion, a cursory review of TRG’s financial statements reveals that this company Is highly leveraged with loans and guaranties from international financial institutions Sierra Leone is signatory to forming the bulk of capital for its operations. For example, the European Union provided the GOSL the sum of 25 million Euros, to be on lent to Sierra Rutile in 2006. The loan carries an interest rate of 8% per annum with the principal and interest paid to support socio-economic development projects in Sierra Leone. However, upon capsizing of the dredge, TRG in 2008 secured a moratorium on payment of the interest with GOSL, thus impeding our nation’s development.

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