Buchanan, Grand Bassa County – World steel giant, Arcelor Mittal (AML) is slowly winding down operations in Liberia.
The company has come short in recent years due to what the company continues to call “unfavorable market condition”. AML has sliced jobs and slowed down on its projects, leaving many Liberians frustrated in what was once a promising investment venture.
The steel company argues that the mining industry is experiencing major challenges as a result of the significantly lower iron ore price.
The price of Iron is significantly improving in 2016
But the latest has sparked concerns about a possible breach of the Mineral Development Agreement (MDA), signed in 2005 and amended in 2006.
Among other things, MDA specifies that ArcelorMittal contributes US$3 million a year to the County Social Development Fund for three counties – Nimba, Bong and Grand Bassa Counties – intended for the enhancement of community development in the counties
Economists and politicians have debated the possibilities of giving the company a ‘tax holiday’ to ensure that jobs are protected for Liberians amid these “unfavorable market conditions”.
Back in 2015, former Finance and Development Planning Minister, Amara Konneh revealed that the company requested that the government waived some of the fiscal provisions in the MDA. Konneh later admitted that since the MDA was a legal tool, any decision reached must go through the legislative process.
Liberia’s 2016/2017 Fiscal Budget shows that AML will only pay half of its SDF to each of the three counties.
Grand Bassa will received US$519,250 out of US$1 million for the current budget year, with the same figure projected for the next two fiscal years – 2017/18 and 2018/19.
Nimba and Bong Counties suffer similar fate. Nimba has been allotted US$775,000 out of US$1 million in the 2016/ 2017 budget, and Bong County allotted US$255,750 out of US$500,000.
The counties will also experience similar cut for the next three years as projected in this year’s budget.
It is unclear whether the legal or legislative process was exhausted before these counties SDFs were sliced by AML.
Grand Bassa Superintendent Flip-Flop
In October 2016, Grand Bassa Superintendent Levi Demmah announced at a press conference in Buchanan that the company sliced the SDF, citing the draft budget as a source.
“Our only partner that is now contributing, Arcelol Mittal, we realized from the draft budget, that our allotment or allocation from AML was sliced about half a million dollar,” Supt Demmah said.
But when FrontPageAfrica recently asked the Grand Bassa Superintendent, he somersaulted, saying “the company did not slice the SDF but will rather delay the SDF payment to the county.”
Job cuts Affecting Grand Bassa economy
The reduction in the SDF has sparked concerns, and some residents in Buchanan have expressed dissatisfaction. The steel company is already facing criticisms following its job cuts that heavily affected the county’s local economy, and now the SDF slicing is even receiving more disapproval from locals.
“If there should be a reduction in that money, it should be on the bases of negotiation and the citizens must be aware,” argues Victor Flomo, Secretary General of the Civil Society Chapter in Buchanan.
“Our fear is: what if Arcelor Mittal decides not to pay the SDF again? That means Bassa will benefit nothing.”
“We think it is illegal,” added Solomon Kollie, Chair of an intellectual forum in the port city.”
“Because the MDA is a legislation that must be revised by legislature before anything happens.”
A local business man based in Buchanan said the cut will weaken the capacity of the county’s development projects and also gravely impede local businesses that offer service during the implementation of projects in the county.
“It will affect the entire business climate in Buchanan, because it has weakened and lessen the capacity of the Grand Bassa project management committee (PMC),” explains Kafee Williams. “Whenever they are advertising contracts some of our local businesses participate and this helps our economy to grow.”
Williams describes the decision to ignore the MDA without the citizens input as “criminal and deceptive”, saying the decision was a misstep by the county lawmakers.
“The MDA is a legal contract that we (the county) and Mittal signed, anything to the contrary should have gone for re-visitation and nothing of such was done. Infact, our lawmakers refuse to tell us the detail,” Williams said.
Bassa Legislature; Mittal Tightlipped
Both the steel company and the county legislative caucus have failed to respond to FrontPage Africa inquiry of the decision to cut-into half the county Social Development Funds (SDF).
Representative Gabriel Smith recently told an intellectual forum that the county is opting for the balance of the US$1 million to be deferred since the company is in financial troubles. But he was unclear about whether the reduction met legislative approval.
Grand Bassa Legislative caucus has not commented on the issue, and efforts by FPA to speak to Senator Nyonblee Karnga-Lawrence failed as we were told she’s out of the country.
Efforts by FPA to get response from the company also failed. Text messages, calls and emails to the company’s public relations office headed by Hester Pearson Barker yield no fruit after Barker made promises to response to the inquiry but to no avail.
Mittal continues to assure Liberians that it is committed to its part of the bargain, however; the unfolding in recent years suggest otherwise.
Iron Ore is mined in around 50 countries worldwide and used to make steel for construction of buildings and the making of cars and others.
Experts say global economic growth is the primary factor that drives iron ore supply and demand, and analysis shows that when economies are growing, the need for steel in construction increases, thereby inflating the price on the world market.
Growth in China – the world’s largest consumer of metals has affected the price of iron ore recently. The price slumped to a low of US$38.00 per ton in early December 2015.
It has gradually been climbing since 2016, according to Market Index, in August price was at US$60.47 but dropped again in October at US$58.2.
December has shown significant improvements with the price now at US$79.58, according to Market Index while the Australian Business Review is reporting that the price has surged 4 per cent to $US82.80 a ton on December 13.
But Reuters reported on Thursday, December 15 that “the average price of 62-percent iron ore will be $54.7 per ton CFR China in 2017, while the average forecast price for 2018 is $51.1 per ton.”
Reuters reported: “Analysts raised their forecasts for the next four years but many of them asked not to publish their forecasts because they are under review due to the recent global rise in prices for steel raw materials and semi-finished and finished products.