British mining companies’ exploitation in Sierra Leone

British mining companies’ exploitation in Sierra Leone

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Our guest blogger today is Isabella M, an undergraduate student at the London School of Economics. Last summer, she spent 3 months in Sierra Leone working for Restless Development. Since returning to the UK, she has started to run a campaign to stop British mining companies’ exploitation of Sierra Leone.

The Ebola crisis has drawn attention to the poor state of the public healthcare system in Sierra Leone. There is a critical shortage of healthcare workers, with fewer than 100 doctors practicing in the public sector. 60% of people live below the poverty line.

Despite this hardship and despite the brutal civil war that devastated the country between 1991 and 2002, the people are full of strength, tolerance and perseverance. Having recently spent three months there , I discovered the beauty of the country and its people which is rarely covered by western media.

The people of Sierra Leone are full of potential, and the country is rich with natural resources. What has hindered its development is corruption and foreign exploitation. The wealth its natural resources create fails to reach the poor.

The blame cannot be solely placed on the government. British mining companies’ exploitation of Sierra Leone also plays a major role. If mining companies demonstrated more corporate social responsibility, they could significantly improve the lives of 6 million people.

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Economic exploitation

A major concern about the practices of foreign mining companies is their failure to pay adequate levels of tax.

Christian Aid estimates that Sierra Leone will lose US$131m from 2014-16 alone due to corporate income tax incentives granted to five mining companies – an average of $44m a year. Nearly all of these losses are, according to Christian Aid, the result of agreements with two British mining companies: African Minerals and London Mining.

The Mines and Minerals Act of 2009 is a legal framework created to ensure that foreign mining companies operated in a responsible way. But both companies have negotiated agreements in which they do not pay the statutory corporate tax rate. London Mining is also completely exempt from both taxes on imported capital goods, vehicles and equipment, and the Goods and Services tax.

The National Revenue Authority estimated that Customs and Goods and Services tax exemptions lost the government $224m in revenue in 2012, which amounted to 8% of GDP.

While proponents of tax incentives argue that they attract foreign direct investment, an IMF report establishes that the most successful countries in attracting foreign investors have not offered large tax incentives. Factors such as good quality infrastructure, which Sierra Leone cannot have without increased tax revenue, carry much more weight.

Joseph Ayamba from Christian Aid Sierra Leone states: “The granting of tax incentives to mining companies, especially African Minerals and London Mining in the country has resulted in massive revenue losses to the government and largely hinder the government’s capacity to support its development priorities such as health, education and agriculture.”

For example, the $44m a year that Sierra Leone is estimated to lose in potential taxes from the mining industry is enough to provide an education for 2.9 million children.

London Mining stated that it has been operating for less than two years and that it does not expect to make a profit in early years because of high start-up costs and high levels of investment, which generate tax losses from capital expenditure. Accordingly the tax rate during years where there are no profits is irrelevant because no tax is payable and indeed the low tax rate means that London Mining is saving tax on start-up losses at only 6% rather than 30%.

Pascale Hall, an aid-worker who lived in Sierra Leone, points out “the worst thing is that they show no guilt, no remorse”.

An opportunity

Sierra Leone now faces the huge additional problem of the Ebola crisis. Given the vast revenues that mining companies earn, they face a moral imperative to help communities cope with the health emergency.

The Ebola crisis is an opportunity for foreign companies in Sierra Leone to demonstrate they can be a positive force in the country’s development. But to date, as Professor Banerjee notes “there has been an obsession with ‘supply-side corporate social responsibility’, which is about managing reputation and the financial benefits without much consideration for how effective it might be“.

It will be instructive to examine whether help provided by companies investing in Sierra Leone towards Ebola is designed to deliver effective results or simply gain a reputational advantage.

‘They can do better’

“I know they can do better for our country.” Mohammed Papa Bangura, a radio presenter in Makeni stated.

When I explain these problems to people in the UK, the usual response is: “someone has to exploit the resources – if it wasn’t them it’d be someone else”or “it would be impossible to change”. Well for once instead of accepting society as it is, I have decided to call upon British corporations to take social responsibility. To dismiss change as “impossible” seems a feeble excuse to condone the exploitation occurring worldwide.

Getting foreign companies to act responsibly and pay their fair share in taxes in developing countries could make a major contribution to poverty eradication.

Join my campaign to Stop British Mining Companies Exploitation in Sierra Leone, and give all these wonderful people a chance to achieve the hopes they deserve.

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