Claim: Western Cluster doesn’t have an existing concession agreement with the government.
Verdict: Correct, Western Cluster operates on a MOU and not a concession agreement with the government of Liberia.
Full Text: Deputy Information Minister Daniel Sando, in a radio appearance on Prime FM (37:22) on Tuesday, May 14, said Western Cluster doesn’t have an existing concession agreement with the government of Liberia but rather a Memorandum of Understanding.
Western Cluster-Liberia Limited (WCL), a concession company operating in Bomi County, is a subsidiary of Sesa Goa, a Vedanta group company, that engages in iron ore mining in Western Liberia.
There are many foreign iron ore mining companies operating in Liberia, with the largest including ArcelorMittal, the world’s leading steel and mining company, a British-Indian company, Vedanta Resources PLC, Hummingbird Resources, etc. Yet, they gain little tax revenue from the extraction of their resources, leading to lost opportunities to invest in public services such as education, health, agriculture, and roads, which are essential in tackling poverty.
WCL, a subsidiary of Vedanta Iron & Steel, requested the government of Liberia to cancel its $23.5 million debt it incurred more than 12 years ago due to the cessation of operations in 2011 due to certain circumstances after acquiring Western Cluster Iron Ore deposits from Elenilto.
The western cluster concession agreement negotiated with Vedanta by the Liberian government in 2011 gave it a 4.5 % royalty rate along with the ability to offset capital expenditures against tax and carry forward losses. These generous tax terms mean that Vedanta will pay very little corporate income tax.
Verification: On June 4, 2022, it was announced that the Government of Liberia and WCL had signed a Memorandum of Understanding (MOU) for the commencement of the iron ore project, according to the concession agreement between Liberia and WCL.
The MOU consequently gave rise to a groundbreaking ceremony on June 8 for Western Cluster to start operation. The MOU specifically states that its provisions ‘supersede all provisions of the Agreement which are contrary or in conflict hereto… It further states that this MOU forms the entire agreement between the parties for resuming the company’s operations.
There is an act to ratify the concession agreement, but that has not occurred. According to the Memorandum of Understanding (MOU) signed on April 12, 2022, a staggering sum of US$23.5 million owed to the Liberian Treasury by West Cluster Limited was canceled by the George Weah-led administration without legislative approval.
The issue of the current operational status of Western Cluster Liberia prior to signing the MOU is not referenced anywhere in the MOU. For example, the status of MDA’s requirement that WCL pay US$2.8 million annually in Social Development Funds to the affected counties of Bomi, Cape Mount, and Gbarpolu, in addition to government taxes and royalties, is not stated. The MOU has not given a status of critical responsibilities.
We then asked former Bong County representative Atty. George Mulbah about the distinction between an MOU and a concession agreement. He said a concession is the right granted to a concessionaire to use state-owned property by the government through the legislature.
“A concession is a law or agreement ratified by the legislature. Changes in concessions can only be made by the legislature. A MOU is an understanding or contract between parties without ratification by the legislature. Any change or amendment is only subject to the parties to this MOU. In most cases, it is for a short duration.
Additionally, Cllr. Negbalee Warner said an MOU is a statement of “understanding; a full contract or concessions agreement is generally better and/or superior to a MOU
Conclusion: Western Cluster does not have a concession agreement; the company operates under an MOU signed in 2022. The deputy information minister is correct on the claim.
