Sierra Leone Diamond Production Up 19% in H1 2016, Little Tax Revenue to Show For It

Mining and Exploration
25/10/2016 08:00

Sierra Leone, the seventh largest diamond producing country in Africa by volume and eighth by value, increased its diamond production by 19% in the first half of 2016, according to Sierra Leone newspaper Awoko. Diamond production in the first six months of 2016 was 359,080 carats valued at $101.9 million, compared to 290,380 carats valued at $60 million produced in the first six months of 2015. The country ended up producting 500,000 carats in 2015, good for $154,253,129. The price per carat fell a full $40 compared to H1 2015, from $324 to $284. Diamond exports are still the country's largest contributor to its Gross Domestic Product (GDP). The major player in the diamond industry in Sierra Leone is Koidu Limited, a subsidiary of Octea Mining Company. Some of the diamond exports also come from artisanal or small scale miners. However, as Awoko adds, of the $101.9 million produced, the government of Sierra Leone only gets 3% which is the tax paid on the sale of the diamonds, though it also receives 6.5% of royalties from mining companies, which the newspaper fails to mention.

Another issue that boiled over earlier this year is that Sierra Leone receives no property tax from its largest diamond mining companies, Octea Mining Company and its subsidiary Koidu. In 2015, Koidu city council sued Koidu Limited’s parent company Octea Limited, claiming that the company owed $684,000 in unpaid property taxes. Last April, Awoko wrote that a Sierra Leone court in Freetown ruled that Octea Group Limited is not a registered company in Sierra Leone, does not own a mining license to operate in the country and therefore is not liable to pay property tax to Koidu City. Justice Bintu Alhadi ruled that Octea's office in Freetown is actually the address of Koidu Limited and not Octea. Furthermore, the same court determined that Koidu Holdings, though mining its diamonds in the Kono District of Sierra Leone, is also exempt from paying taxes to the local community. As the International Consortium of Investigative Journalists discovered that Koidu Ltd is a company set up in the British Virgin Islands in 2003 for $750 by Mossack Fonseca, the law firm at the centre of the Panama Papers scandal. Octea Mining Limited in turn is a company owned by a series of offshore companies in the British Virgin Islands, Guernsey and Liechtenstein that are controlled by billionaire Israeli mining magnate Benjamin (Beny) Steinmetz and his family.