Monrovia – FrontPageAfrica has reliably learnt that a Liberian delegation comprising the Minister of Finance, Samuel Tweah, Minister of State Nathaniel McGill, Justice Minister Frank Musah Dean and the President Pro Temp of the Senate Albert Chie are reportedly in Turkey in a bid to secure advance taxes from the Turkish firm MNG Gold currently exploration mining operations at the Kokoya Mine located northeast of Monrovia.
Report by Rodney D. Sieh, [email protected]
The company which commenced operations in 2016 in Liberia with a capacity of 650,000 tonnes per year, is one of several concessionaires reportedly being approached by the George Weah-led government for advances on taxes in a bid to bolster the ailing economy.
MNG has a 25-year Mineral development Agreement/Contract (MDA/MDC) with the Government of Liberia which was signed four years ago leading to the establishment of the Kokoya Goldfield.
MNG Liberia, owned by Turkish Billionaire, Mehmet Nazif Günal, operates the Liberty Gold Mines that operates the Avesoro Resources in Western Liberia (Bea Mountain) and the MNG-Gold, two of the largest gold mining operations in the country.
The company recently benefited from a contract between Bea Mountain Mining Corporation (BMMC), a wholly-owned subsidiary of Aureus Mining and MonuRent. As a result of the deal, MonuRent supplier contracts, was novated to MNG Gold-owned Liberian company Atmaca Services – which owns 55% of Aureus.
As part of the agreement with MonuRent, Atmaca Services will pay US$15.4 million in cash to MonuRent to take ownership of the mining equipment; US$7.1 million in cash for the inventory currently on site at New Liberty; US$7.9 million in cash for invoiced receivables; about US$2.5 million in cash for future uninvoiced receivables incurred by BMMC during July and August 2016, (together the sale assets); and US$4.5 million in cash as a contract novation fee.
A similar approach for advance on future taxes has also reportedly been made to ArcellorMittal and other concessionaires doing business with Liberia.
Although taxes and Mineral Development Agreements with concessionaires are binding by law and legislative oversight, the administration is being tight-lipped with these negotiations just at it was with the now controversial loan agreement with the Eton Financial Private Limited.
A 2014 report by the Sustainable Development Institute concluded that in addition to the reduction in revenue generated from corporate income tax, the actual agreements the Government of Liberia has negotiated with mining companies in recent years, place the country in a poor position to maximize the value of iron ore mining. “While some may argue that Liberia should accept whatever revenue it can generate, the Liberian government should seek to fully extract as much revenue as possible from iron ore mining companies for the following reasons: Liberia is in desperate need of a sustainable revenue stream that can be applied for infrastructural and social development; Iron ore is a non-renewable resource, iron ore exploitation causes environmental degradation and is highly susceptible to volatile prices on the global market; The MDAs have income tax rates for companies that are far below those set out in the amended revenue code, a development that international bodies have recognized reinforces Liberia’s cycle of poverty.”
Experts say hypothecating future taxes for a construction loan is bad fiscal management opening the country to future financial shambles. Just as with the Eton and Ebomaf deal, the World Bank and IMF will nix any loan structured based on revenues, which are already dwindling.
50-Banking Days Deadline Elapses for Loans
Ironically, the 50-day deadline for the arrival of the loans from both the Eton and Ebomaf deals expired last week with no sign regarding the status of the loans.
Like the current trip to Turkey, the mission to Singapore and Hong Kong was clouded in secrecy until FrontPageAfrica unraveled the quest for loans for the construction of roads.
Last week, the administration through the Minister of Information, Culture Affairs and Tourism, Mr. Lenn Eugene Nagbe announced that it is holding talks with the World Bank to source a US$500 million loan deal for the implementation of road projects in the country that it has made a top development priority.
The government’s World Bank revelation validates concerns that international monetary bodies have been suspicions about the two controversial loan deals. The government including President Weah took issues with the media and government critics who questioned the loans describing them as “enemies of the state”.
Minister Nagbe said last week that President Weah had told the development partners that “if they do not want his administration to borrow in the commercial space, they should bring money for his development agenda.
World Bank Mum on Liberia Claim
Both the country manager and country director of the bank are yet to respond to a FrontPageAfrica inquiry seeking clarification on the purported agreement announced by the government.
A senior administration official when contacted at the weekend did not confirm or deny the mission to Turkey when probed but said specifically: “The government is exploring several proposals and options to turn the present macro economic situation around. Government is not docile; Government is not sleeping. Government is conscious that it does not have the luxury of time. At the appropriate time, when the discussions are concluded, the results shall be made public.”
What is unclear is how many years in advance payments is the government pursuing and how does government intends on using the money.
The Turkey mission comes amid reports that the government is struggling to meet its revenue targets and is said to be rationing payroll for civil servants.
IMF, World Bank Concern
FrontPageAfrica has also gathered that international monetary institutions like the World Bank and the International Monetary Fund are raising concerns that the government’s consolidated account is empty and putting additional pressure on the reserves. “They are now using overdrafts to finance the government,” one source hinted to FrontPageAfrica last week.
The government itself has not published a quarterly report since taking power in January.
A person within authority of the Liberia Revenue Authority speaking on condition of anonymity because they are not authorize to speak on the issue said there is nothing illegal about seeking advances of taxes as long it does not discount on the total amount the government is supposed to receive in taxes. “It is not a provision in the revenue code but based on volume and output, not discounting or projecting a total value.”
Nevertheless, financial analysts say the administration risks losing money in the future tax payments from MNG, ArcelorMittal and others companies being targeted for advances on taxes amid concerns over whether the government would be able to raise the money or improve the economic outlook.
Analysts are also concerned that the government’s fiscal position may be at risk although the overtures for advance on taxes is not illegal but comes with a lot of complicated risks.
FrontPageAfrica has reliably learned that Taxes are law. The MDA between this company and the government is law. “If you are going to negotiate advances on future taxes, you have to get authorization from the legislature. The Minister of State and Finance who are members of the said delegation cannot negotiate tax amendment outside legislative oversight,” one source told FrontPageAfrica Sunday.
The overtures to MNG is raising concerns and potential conflict of interest issues regarding the government’s ability to provide object oversight and handling of complaints against the company.
In recent weeks, MNG has come under fire from residents in Kokoya Statutory district in Bong County who have been demanding compensations for what they term as destruction to their homes caused by activities of MNG-Gold, a mining company in the area.
Additionally, the company has come under fire of late regarding spillage of three million gallons of diverse toxic chemicals into the community by MNG which experts say could remain in the environment for decades to come. Some of the chemical spill into the community includes cyanide, mercury and lead, which are highly dangerous to the community residents, their water source and flora and fauna.
The Environmental Protection Agency(EPA) recently confirmed that the company did not follow best practices aimed at averting environmental pollution. Under the Mineral Development Agreement signed between AmLib and the government of Liberia in 2005, the company is required to ensure that citizens’ life is protected from chemicals and care for citizens in case of health problems arising from exposure to chemicals.
Last year, the National Bureau of Concession (NBC) accused the company of failing to intervene after residents became from the chemical spill. The company did not provide adequate medical attention to the residents who became ill after using the contaminated creek, according to NBC.
The report was submitted to the Legislature in November 2017 for review, according to Bong County Senator Henry Yallah, a native of Kokoyah District.
Although the company had constructed three hand pumps in Sayewheh Town before the spill, the residents have been advised not to drink from them until the government through the Environmental Protection Agency and the Ministry of Lands, Mines and Energy can conclude an investigation into the spillage.
‘Dangerous Trail’
Besides the obvious concerns over environmental issues, experts are skeptical about the quest to credit off future taxes and see a dangerous trend that may never truly achieve the desired results for several reasons key among which is the likelihood that companies may take advantage of the country’s desperation for cash could take advantage of the situation and exploit Liberia for cheap.
Assuming for example, that the price of the commodity in question, in the case of MNG will be at given future price, and use that as a basis to discount that perceived future value to today’s dollars, lenders seeing the desperation may have the upper hand in such negotiations – they normally would bargain a higher discount rate, a lower future price of the commodity price in question, or both.
Additionally, some say, there’s always the human factor – the greed , reinforced by the weak systems in places like Liberia. But more importantly, the inclusion of the head of the Senate who should be providing checks and balance on the executive, on the delegation raises the billion dollar question: Who will hold the executive branch accountable should the deal go sour?
As the deadline on the two loans elapsed, the government remains mum on what has happened since the ratification and signing of the loan. FrontPageAfrica has learned that a key sticking point has been that some senators have issues with stipulation in the final loan agreement with Ebamof, not what is already in the public domain. FrontPageAfrica has now in its possession a copy of the final draft which some Senators say is delaying the foreign ministry from printing before it becomes.
Experts Fear Hypothecating Future Taxes
FrontPageAfrica has learned that a key sticking point has been that some senators have issues with stipulation in the final loan agreement with Ebamof, not what is already in the public domain. FrontPageAfrica has now in its possession a copy of the final draft which some Senators say is delaying the foreign ministry from printing before it becomes law.
The concerns stem from this portion of the final loan document which states: “This loan agreement represents the entire loan agreement between the parties and supersedes all existing agreement(s) previously executed between the parties or representation s made by one party to the other with respect to the subject matter hereto. This loan agreement may be modified only in writing, duly executed by the parties.”
Some Senators are said to be demanding more regarding any prior arrangements made with Ebomaf during the last presidential elections. This sticking point is said to be a key reason why the loan has not been finalized even after 4-G passages of the two loans.
In recent years, some sub-Saharan countries have embarked on such missions of crediting from concessionaires but in the case of Liberia, critics charge, that the degree to which the country, functions more like a one or two-branch government in Liberia is appalling, making the legislature appear more like another ministry in the executive.
Experts say hypothecating future taxes for a construction loan is bad fiscal management opening the country to future financial shambles. Just as with the Eton and Ebomaf deal, the World Bank and IMF will nix any loan structured based on revenues, which are already dwindling.
Even more troubling for the administration, the five-year revenue budgetary projection by GOL includes anticipated taxes from the concession companies to finance the budgetary expenditure.
Economists say If the GOL is successful in receiving the advance taxes from companies like MNG and Mittal, there may be revenue challenges to finance the expenditure.
Ironically, if GOL cannot find other means of generating revenue, economists say, the administration will be forced to reduce future expenditure which may affect some of her pro-poor agenda. In the final analysis, some say, It may not be good for the government for the many promises being made which will likely affect those languishing at the bottom of the economic ladder on whose backs the current leadership rose to power.