President Bio, Leadway Trading, and Sierra Leone’s timber export devaluation

By Chernoh Alpha M. Bah, Anne Baber Wallis, and Matthew Anderson

A few weeks ago, we reported in the Africanist Press how Leadway Trading Company used standard 20-foot shipping containers rather than cubic meters as a unit of measurement to value timber exports. This measurement difference has resulted in calculations that show a massive loss of export revenues to Sierra Leone and much higher profits for Leadway, a company with strong links to President Julius Maada Bio and senior members of his administration.

Use of the 20-foot container measurement instead of the cubic meter measurement is contrary to Section 3 of the Finance (Amendment) Act of 2018. Section 3 of the 2018 law stipulates that “an exporter of any timber or timber products shall prior to exportation pay to the National Revenue Authority, a timber royalty of US$2,500 on every cubic meter of such timber or part thereof.’’ An internal government audit has shown that Leadway violated the country’s finance and trade laws when undertaking its timber export operations in 2019. We have highlighted, in previous articles, how the company’s deliberate action to bypass the export laws and trade regulations of the country resulted in a massive undervaluation of timber export revenues by US$5.5 billion in fiscal year 2019 alone.

What cabinet officials – officials of the Finance Ministry in particular – have ignored is the fact that even where Section 3 of the 2018 Finance Amendment Act could be a mistaken provision, Leadway’s use of containers instead of cubic meters as a unit of measurement nonetheless violates the Weights and Measures Act of 2010.

A 20-foot container is usually 20 feet long (6.1m), 8 feet (2.4m) wide, and 8 feet 6 inches (2.59m) in height, and has an internal volume capacity of 1,172 cubic feet, the equivalent of 33.2 cubic meters. By using 20-foot containers instead of cubic meters to assess export levy, Leadway deprived the country of US$80,000 of export revenue on each 20-foot shipping container of timber exported in 2019. With a total of 2,201,024.88 cubic meters of timber exported by Leadway in 2019, the company only paid US$25.7 million in export revenues, depriving the country of more than US$5.5 billion dollars in export revenues.

These significant discrepancies in the accounting of timber export revenues by Leadway Trading were discovered by officials of the Audit Service Sierra Leone, the country’s legally authorized auditing agency during their 2019 audit. The audit report, which is yet to be officially released, states explicitly that Leadway Trading only paid US$25,729,500 as timber levy for an export volume of 2,201,024.88 cubic meters valued at US$5,502,562,188, leaving a difference of US$5,476,832,688, that was neither recorded in the National Revenue Authority (NRA) docket nor paid into the Consolidated Fund.

Audit Service officials have called for an investigation of Leadway Trading to discover why the company used containers rather than the cubic meters as a unit of measurement in contravention of the 2018 Finance Amendment Act, and most importantly, why Leadway’s timber transactions were not recorded completely.

Africanist Press first reported these discrepancies in the accounting of timber revenues discovered by the Audit Service, but supporters of the Bio administration immediately denied that Leadway Trading violated the finance laws of the country. They argued that the company did not cheat the country of any revenues. Leadway’s publicity agents have defended the company’s export contract, even though it was awarded without either a tender or bidding process. Leadway also argued that the container valuation process was legal. Some members of government have suggested that Leadway had, in fact, paid unprecedented revenues, amounting to millions of dollars that surpass the combined total revenues generated from all timber sales over the ten years of the Koroma administration. Agents of Leadway, in both the private media and in government, have relentlessly muddled the conversation to purposefully confuse the public in their efforts to defend the company’s trade violations.

Export Devaluation and Cabinet Complicity

In a letter dated October 20, 2020, Finance Ministry officials called the gross undervaluation of exports a “seeming discrepancy due to an unintentional error.” This week, Finance officials argued that it is improbable that any exporter of timber would pay US$2,500 per cubic meter. “[The volume of] a standard 20-feet container is equivalent to approximately 33.2 cubic meters. This means that if we are to go by the apparent error in the Finance Amendment Act, 2018, an exporter of timber would have to pay US$83,000 for a standard 20-feet container, which is quite impracticable,” they said, arguing that the measurement for 20-feet container was inadvertently stated as cubic meters instead of container. This statement dismisses Section 3 of the 2018 Finance Amendment Act, which requires timber exporters to pay US$2,500 per cubic meter as export levy, calling it an unintentional legislative mistake. They now seek to replace it with a new provision inserted in the 2021 Finance Act that now proposes to value timber exports at US$2500 per each 20-feet container instead of the customary cubic meter valuation. All previous legislative amendments dating back to 2008, when the 1988 Forestry Act was first amended, provide that timber export levy be assessed as cubic meters.

Leadway’s initial contract assignment was only granted temporarily for the shipment of existing timber deposits at the Freetown Port and other depots across the country (an estimated 13,000 containers). Yet, the company’s export contract was renewed by the State House in February 2020, 18 months after it was first granted, again without a competitive bidding or tender process.

It is of interest that Finance Ministry officials, who are responsible for drafting the 2018 Finance law, would only now realize that the legislation that they proposed in cabinet – and which parliament passed into law in 2018 – contains this supposed legislative error only after the said law has been flouted by a private business company run by a business agent of the president.  It is clear from their argument and defense, that Finance Ministry  officials – and indeed other senior cabinet officials in the Bio administration – seek not only to cover-up the export devaluation by Leadway, but they are now working to legally sanction the apparent violation of the country’s trade and tax laws in defense of a company in which they have a vested interest.

To suggest that the cabinet’s position that Section 3 of the 2018 Finance Amendment Act is a legislative mistake, one would first have to equally question how such a legislative error escaped the attention of both the cabinet and parliament in the first place? Secondly, why did Leadway proceed with assessing timber export levies without following existing laws and regulations? It should be emphasized that the 2018 Finance Amendment Act, the only legislative instrument that authorized Finance Ministry officials to implement the budgetary estimates for fiscal year 2019, was first proposed and discussed in cabinet. Assuming or agreeing that Section 3 of the 2018 Finance Amendment Act is a mistake, is it the place of the Finance Ministry to simultaneously direct interpretation and application of the said legislation? Or would it have been the job of parliament to clarify both the spirit and object of the said legislation?

What cabinet officials – officials of the Finance Ministry in particular –  have ignored is the fact that even where Section 3 of the 2018 Finance Amendment Act could be a mistaken provision, Leadway’s use of containers instead of cubic meters as a unit of measurement nonetheless violates the Weights and Measures Act of 2010, the law that governs measurements of length, area, volume, capacity, temperature, and pressure, including the machines for determining weights. Section 2 (1) of the Weights and Measures Act 2010 provides that “the units of measurement to be used throughout Sierra Leone shall be the units known as the international system of units”, otherwise known as the “metric system of measurement.” It is the shift from imperial to the metric system of measurement – the international system of units adopted by Sierra Leone in 2010 – that actually prohibits Leadway Trading from using containers as a unit of measurement in Sierra Leone. Thus, Section 3 of the 2018 Finance Amendment Act that provides for timber products to be measured and valued on cubic meters corresponds with Section 2(a) of the Weights and Measures Act 2010 and could not be argued away as a mistake.

Finance officials interviewed by the Africanist Press in early March 2020 expressed disbelief that Leadway Trading and Babadi Kamara were made sole agents for all timber exports from Sierra Leone without a competitive bidding process.

By refusing to address the obvious legal violation of the 2018 Finance Amendment Act and the other trade laws governing weights and measurements, the Ministry of Finance is shielding Leadway from scrutiny. The only rationale for why leading government officials in Bio’s cabinet are adamant in probing Leadway rests with the simple fact that the company represents the vested business interests of the president. Also, the fact that Finance Ministry officials who are supposed to enforce compliance with the country’s trade and export laws have actually come forward to defend Leadway, a supposed private company that has flagrantly violated both the trade laws and tax regulations of the country, makes it more than urgent for the country to now examine the actual ownership of Leadway and how, in fact, the company became the only authorized exporter of timber from Sierra Leone in the nearly three years of the Bio administration.

We must boldly ask: Why was Leadway given an unprecedented monopoly license over all timber exports from Sierra Leone by President Bio? We must also ask what is the relationship between President Bio and Babadi Kamara, the chief executive officer (CEO) of Leadway Trading?

Legalizing State Corruption

Leadway Trading, operated by CEO Babadi Kamara, was granted this unprecedented monopoly over timber exports by President Bio in 2018, three months after the presidential order to centralize government revenue mobilization. In early March 2020, Africanist Press highlighted how the president’s relationship with Babadi Kamara influenced the presidential order to accord Leadway the monopoly license on timber exports. Finance officials interviewed by the Africanist Press in early March 2020 expressed disbelief that Leadway Trading and Babadi Kamara were made sole agents for all timber exports from Sierra Leone without a competitive bidding process. The only rationale for such a trade monopoly arrangement in a supposed free market economy is that the financial operations of the arrangement are directly profiteering the president and other senior administration officials.

In a letter dated October 20, 2020, Finance Ministry officials called the gross undervaluation of exports a “seeming discrepancy due to an unintentional error.” This week, Finance officials argued that it is improbable that any exporter of timber would pay US$2,500 per cubic meter.

In previous publications, the Africanist Press discovered that Babadi Kamara has a close relationship with Bio and helped him raise campaign funds in 2018. It is of great interest that Leadway’s initial contract assignment was only granted temporarily for the shipment of existing timber deposits at the Freetown Port and other depots across the country (an estimated 13,000 containers). Yet, the company’s export contract was renewed by the State House in February 2020, 18 months after it was first granted, again without a competitive bidding or tender process. A government press statement issued in February 2020 acknowledged the payment of US$37,140,000 from Leadway Trading, but provided no details on how much each exported container was sold for; neither has there been a disclosure of Leadway’s total profit from the shipments over the 18 months.

This week, we have witnessed how leading officials of the Bio administration, realizing that Leadway robbed the country of much needed revenues and acted without regard to the finance and trade laws, are now seeking to legalize the undervaluing of timber exports by proposing to amend Section 3 of the 2018 Finance Amendment Act, the very law that Leadway has already violated. The Finance Ministry officials have now proposed legislation to value timber exports in containers, disregarding the Weights and Measures Act of 2010. The new amended provision in the 2021 Finance Act that was taken to Parliament on Thursday November 12, 2020, by the Finance Ministry asks parliamentarians to vote into law a provision that violates the 2010 Weights and Measures Act and equally devalues the country’s timber exports. This means that leading political actors, including the president, who materially benefit from the operations of Leadway Trading, are now giving a free pass to a company run by one of their party agents.

This statement dismisses Section 3 of the 2018 Finance Amendment Act, which requires timber exporters to pay US$2,500 per cubic meter as export levy, calling it an unintentional legislative mistake.

Are we not witnessing open state robbery orchestrated by rogue politicians acting in concert with corporate gangsters and domestic business individuals to defraud the country of much needed domestic revenues?

For nearly three years now, Leadway has operated without scrutiny or accountability. It is now time for citizens to call on their respective parliamentarians to answer why they failed to reject the new provisions of the 2021 Finance Act that undervalues the country’s timber exports, and why they also failed to review the unprecedented monopoly export license granted to Leadway Trading by the president without due process. Most importantly, parliamentarians must now call for officials of Leadway Trading, and the Finance Ministry, to explain why they violated the provision of the 2018 Finance Amendment Act and the other accompanying trade laws. Finance Ministry officials must also explain why they adopted a unit and method of measurement that conflicts with the country’s weight and measurement laws and which undervalues the country’s export earnings and revenues. Parliament must equally help citizens investigate the real ownership of Leadway Trading and its actual relationship with the president.

A full-scale probe into the business operations of Leadway Trading covering the nearly three years since its trade monopoly license was granted must now be undertaken by parliament.

 

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