31 January 2018

Liberia: Shrewd Lebanese Businessman - Key Contributor to Election Victory, Enjoys Near Monopoly On Rice

Monrovia — During his recent inaugural address, President George Weah went to great lengths to pledge that under his watch, he will do all within his powers to ensure that Liberian businesses are not marginalized.

"As we open our doors to all foreign direct investments, we will not permit Liberian-owned businesses to be marginalized," the President declared.

/pyj-writes.jpgWe cannot remain spectators in our own economy."

"My government will prioritize the interests of Liberian-owned businesses and offer programs to help them become more competitive and offer services that international investors seek as partners."

One area that is likely to come under scrutiny is the country's staple food, rice and one businessman who has enjoyed near monopoly during the course of the Sirleaf-led government is George Nehme.

Nehme is the CEO of Supplying West Africa Trader Inc (SWAT) and the Harbel Supermarket Corporation.

Multiple sources have confirmed to FrontPageAfrica that the businessman was a key contributor to Mr. Weah's election victory.

SWAT is supplied by Louis Dreyfus (LD) Company and mainly sells rice that is 50% and 5% broken kernels.

A diversified food import company, SWAT also operates the Harbel chain of supermarkets and has used its ties in government to contemplate new investments in food processing, including palm oil and cassava.

Rice is the only important source of cereal carbohydrates in the Liberian diet and imported rice is the lion's share of rice availability in Liberia, having gone up 75% since 2011, now comprising almost 70% of rice consumption.

Under current policies, the Government Issue import licenses for rice and sets a maximum sales price. Consequently, it can exert some control over the market.

Because Liberia faced food shortages during the Ebola epidemic, the Ministry of Commerce and Industry began requiring the four major rice importers to maintain minimum stocks (up to 50,000 MT in the case of SWAT), and to report their rice stocks weekly.

The minimum stock requirement for each import varies according to their annual volumes and appears to be a minimum four to six-month supply.

Liberia's rice importing industry is consolidated - four importers control around 95% of all rice imports.

Domestic production of rice in 2016 rebounded back to its previous peak in 2012, after a dip in 2014 due to the Ebola epidemic.

Almost all domestically grown rice is husked at the village level, either mechanically or by hand pounding.

Currently, less than 3% of domestically grown rice is industrially milled; there is one small privately-run industrial mill built (30 MT/day paddy capacity) and two Ministry of Agriculture mills with similar capacity.

In recent years, the Ministry of Agriculture has plans to add four more similar sized mills that could increase domestic capacity to up to 10% of domestic production if all mills run at full utilization.

Since the second civil war ended in Liberia in 2003, rice has grown significantly in consumption as the staple cereal grain, with FAO reporting only 60 g/c/d in 2001 but 248 g/c/d in 2011.

Prime Gateway Access

In addition to rice, Nehme is also linked to the recent purchase of some 8.5 acres of prime land previously owned by Western Cluster to be used as a route to ship iron ore.

The property was previously owned by Western Cluster Limited (WCL), which in October 2012, signed a port lease and operating agreement with the management of the National Port Authority (NPA) for the rehabilitation and construction of infrastructures at the Freeport of Monrovia for WCL's export of iron ore.

The WCL Mineral Development Agreement signed with the government of Liberia in August 2011 for the development of iron ore mines in Bea, Bomi and Mano River Mines in western Liberia required the company to enter into a Port Lease and Operating Agreement with the NPA for the shipping of its iron ore through the Freeport of Monrovia.

At the time, the agreement allowed WCL to construct loading and unloading facilities including rehabilitation of the former Liberia Mining Company (LMC) and National Iron Ore Company (NIOC) piers. Under the agreement, 43.29 acres of land was earmarked for use by WCL for developing the port facilities.

Apart from the infrastructure development which will be undertaken by WCL, the National Port Authority is said to be receiving annual lease rental for the land.

FrontPageAfrica has learned that the lease of the prime property shortchanges much-needed revenues for Liberia.

"They took the entire - in the middle of it at the front of the waterfront where they will build a pier and have the key front which is the waterfront portion."

"It is a multi-year lease deal set at US$150,000 per annum and anyone looking to lease it will have to go through Nehme," one source told FrontPageAfrica.

The revelation comes in the wake of the President's first Annual Message in which he called for the removal of a "racist" clause in the constitution which restricts citizenship to people of Negro descent while also pledging to scrap the law that prohibits foreigners owning land.

The clause was "unnecessary, racist and inappropriate", President Weah averred.

The constitution defines black people in the language of the time, as "persons who are Negroes or of Negro descent".

Other communities, like the estimated 4,000 Lebanese people who have lived in Liberia for generations, are barred from citizenship and, by extension, land ownership.

Nehme's near monopoly of the rice market and ownership of the prime gateway property is raising new questions about how serious the new administration is toward curbing the marginalization of local businesses.

Currently, there are four companies licensed to import rice by the vessel load.

They account for about 95% of all rice imports (SWAT and UCI each bring in over 100,000 metric tons (MT) per year and the third company, Fouta Corporation, does about 70,000 MT.

K&K is the fourth licensed importer and does only about two vessels (40,000 MT) per year. Small traders, who import rice in 20- foot ocean containers, apparently have different licensing requirements.

UCI buys from Ameropa and Swiss-Agri Trading, selling mainly 100% broken kernels.

The UK company, DRUM Commodities, provides collateral management services on behalf of the banks that finance UCI imports.

UCI is a sister company of Group Carre d'Or/SDTM, the dominant rice importer in Côte d'Ivoire. In Côte d'Ivoire, Group Carre d'Or/SDTM buys exclusively from LD Company.

The Lebanese Ezzedine family owns UCI and now does only rice imports by the shipload, having given up palm oil and sugar imports.

K&K also has a warehouse but its capacity is unknown. SWAT policy is now to keep a minimum inventory of 50,000 MT.

It is studying a project to build 30,000 MT of milled rice silo capacity at its port site to make importation in bulk vessels possible.

Such a storage arrangement would make destination fortification feasible but this would be limited to rice imported by SWAT.

DRUM Commodities controls UCI warehouses at the port as part of its collateral management arrangement to support trade and inventory financing to UCI from a number of local banks.

SWAT was last year engulfed in a major scandal after being linked to a consignment of Bella Luna Indian Parboiled Long Grain Rice contaminated with harmful substance

It can be recalled that a 2013 FrontPageAfrica investigation uncovered how the Government incurred losses resulting from dubious transactions.

The documents show that scanty transactions between the Ministry of National Defense and the Supplying West African Trading, Incorporated (SWAT) led to acute cut-down of food supplies meant for the country's new soldiers encamped at military barracks.

According to the documents, an amount of US$282,000 was paid as first installment to SWAT-a Lebanese business rice supplier- for 9,400 bags of rice for the soldiers without full delivery. Investigation further revealed that only 800 bags were delivered.

Payment Without Full-Delivery

A receipt dated February 14, 2011 with voucher number MOD: 203-000146 shows that the amount of US$282,000 was paid to SWAT.

A delivery note with two different dates of February 14, 2011 and February 18, 2011 confirmed the rice was delivered

However, delivery of the 9,400 bags of rice could not be confirmed to auditors of the General Auditing Commission (GAC), who had gone to commission an audit of the Ministry.

The revelation was a major violation of both the regulations of the 2009 enacted Public Finance Management (PFM) and the 2005 approved Public Procurement and Concessions Commission (PPCC), which require that full payment must be made only when delivery is made in full for work duly performed.

Part 10 of the PFM Act captured under 'Responsibility for Accuracy of Vouchers' states: "Any public officer, including a Minister and head of any government institution, commission, board who signs a voucher, a check, a document or record pertaining to accounts shall ensure that:

(a) There is sufficient evidence that payment is being made for work duly performed, goods delivered or services duly received in accordance with the contract and the price to be paid is also in accordance with the contract.

The PFM's procurement method used is in line with the provisions of the PPCC Act.

Section 34 of the PPCC under 'Description of Goods, Works and Services' states: "(1) To the extent possible, any specifications, plans, drawings, designs and requirements or descriptions of goods, works or services shall be based on the relevant objective technical and quality characteristics, and performance of the goods, works or services to be procured."

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