Children in a village near Koidu, capital of Kono. Most Kono residents have no access to clean water or electricity Sierra Leoneans have welcomed government efforts to redraft mineral legislation, hoping this will lead to a boost in spending on much-needed public services, but analysts say more drastic reform is needed if the people are to prosper from their diamonds.
Sierra Leone’s diamond and other mineral revenues have hit a low in the global economic downturn, but the government is gearing up for anticipated growth in the long term with a reform package that includes commitments from the Ministry of Mineral Resources to publish its mineral revenues, monitor companies to make sure all payments are made, and increase government revenue accrued from mineral exports 5 percent to 7 percent.
The government has granted "extraordinary concessions" to mining companies, who pay only 3 percent in royalties and can offset 100 percent of their start-up costs against tax, said the National Advocacy Coalition on Extractives (NACE), a local grouping.
This means the government accrues just 5 percent of revenues from minerals mined in Sierra Leone, starving the treasury of up to US$8 million a year, said a group of international NGOs that includes The Justice Network, Third World Network and Christian Aid in their report, Breaking the Curse.
In Kono district, eastern Sierra Leone, where most of the diamond mining takes place, there must be much more transparency on the part of government and mining companies as to revenue flows, they said.
"This is the only way we can monitor how much ends up being spent on building roads, finding jobs, providing clean water or equipping hospitals," said Patrick Tongu, of the Network Movement for Justice and Development, a local NGO.
Two in three Sierra Leoneans live in poverty, and one in five in extreme poverty, according to the UN; while at least 60 percent of Kono's youths are unemployed.
To turn diamonds into wealth, NGOs say the government must raise the 3 percent royalty rate while closely monitoring company production; increase revenue targets from mineral exports to 10 percent; and boost the allocation to the Diamond Area Community Development Fund (DACDF) from the current 0.75 percent to 1.5 percent.
Jacob Quee, ex-head of administration at the Ministry of Minerals, now transferred to the Ministry of Lands and Planning, told IRIN the 3 percent royalty is “likely” to increase when new legislation is passed in 2010, though he stressed the need to maintain favourable conditions for foreign investors.
“This time around all mining companies will be expected to embark on infrastructural development in their communities of operations, and to also make sure they rehabilitate the land so that it can be used for farming activities,” he told IRIN.
Decentralization
Local authorities must have more say in how this money is spent, said Kono district chairman John Yambasu, who calls on the Mineral Resources Ministry to decentralize power from federal to district level.
A process to devolve power to the regions has been in place since 2004, but has been "slow to take hold" in the minerals ministry, Anti-Corruption Commission chairman Abdul Tejan told IRIN.
Kono has no paved roads, no electricity, no clean water on tap, and one ill-equipped hospital and two ambulances to serve 300,000 people, Yambasu said. Most women give birth at home, unable to reach a doctor, and malaria is on the increase.
The authors of Breaking the Curse noted that diamonds from Kono contributed $142 million to government coffers in 2008, of which 0.75 percent goes directly to local chiefdoms via the DACDF Diamond Development fund. However, the low level of transparency, and reporting requirements made it unclear where the money had been spent or how communities had benefited, said critics.
All reform discussions take place at federal level, meaning that local government is excluded. "How can I deliver my promises to my people if I don't know where the money goes, how long [mining] companies’ lease periods last, and what their contracts say? We have had mining here for 80 years, but conditions have not improved, and proceeds go to the national level, or disappear," said Yambasu.
"I have a district development plan that I need the government to achieve, but I am not involved in talks as to where these revenues will go." His plan includes building connecting roads, laying water pipes, providing the local hospital with basic laboratory equipment, setting up clinics in schools and having mobile health units to reach rural communities.
Providing clean water to Koidu's residents would cost $5 million, he estimates, a fraction of the $140 million it costs Koidu Holdings, the largest diamond mining company in town, to sink a shaft. "Koidu [Holdings] has a 2.5 megawatt power plant - I need just 1.5 megawatts to give everyone here electricity!"
Ibrahim Kamara, spokesperson for the company, told IRIN that it was willing to negotiate revised contracts, including tax reform and greater transparency, but did not go into detail.
"If you work at Koidu you get a good salary, you get medical coverage for you and two children, you can get a loan from the company. We offer the best opportunity for youths in this district." The company also contributes to school scholarships, helps polio victims, has small infrastructure projects in the area, and plans to rehabilitate its vast pit-mine once it is exhausted.
More transparency
In February 2008 Sierra Leone signed up to the Extractive Industries Transparency Initiative (EITI), a coalition of governments, companies and civil society, which aims to increase transparency of company payments and government revenues from mining, gas and oil.
Sierra Leone must comply with its conditions by March 2010 – meaning mining companies, the government and civil society must set up an independent body to call on companies to report the taxes, royalties and bonuses paid to government; and the government to declare revenues received.
EITI deputy head Eddie Rich said this was a sign of progress, even though the public affairs ministry, not the ministry of minerals, was leading the process, giving rise to fears that the result would be a public relations display rather than a substantive commitment.
The minerals ministry is still widely believed to be the "most corrupt" in government, said an expert who preferred anonymity. Sierra Leone was ranked at 142 out of 163 countries in Transparency International's 2008 perception of corruption index.
Rich warned that the EITI often "comes back to bite" governments, and non-compliance would bring a public relations disaster.
The local extractives grouping, NACE, said real change would not only come down to government's contracts with mining companies, but also to its contract with the people. Though the diamond industry is currently in the doldrums, NACE estimates that minerals - including diamonds, rutile and bauxite - could bring in $1.2 billion annually by 2020, of which 10 percent should end up in government coffers if it manages reform properly.
The grouping noted optimistically: "Studies suggest that with significant institutional and capacity reform, and good government spending, nearly a million people could be lifted out of poverty."
Disclaimer:This material comes to you via IRIN, the humanitarian news and analysis service of the UN Office for the Coordination of Humanitarian Affairs. The opinions expressed do not necessarily reflect those of the United Nations or its Member States.
Photo: Copyright IRIN
