Liberia: Senate Debates Fouani Brothers’ $30 Million Controversial Palm Refinery Deal

…. Fouani Brothers, which is expected to benefit from a 15-year incentive agreement if the deal is ratified, has promised to create 25 direct jobs and 50 indirect jobs in Liberia.

The Senate Committees on Judiciary and Concession have commenced debating the US$30 million investment by Fouani Brothers Corporation for the development of a palm oil refinery, sparking intense controversy.

While the investment promises to create jobs and boost the palm oil sector, concerns have arisen over the terms of the deal, specifically the provision allowing duty-free importation of crude palm oil (CPO) into the country, leading some senators to label the agreement as detrimental to Liberia’s economy.

Fouani Brothers, which is expected to benefit from a 15-year incentive agreement if the deal is ratified, has promised to create 25 direct jobs and 50 indirect jobs in Liberia.

The contentious issue  of the agreement arises from Section 11 of the agreement, titled “Importation of Crude Palm Oil.” It stipulates that in the event of insufficient locally available crude palm oil to meet the refinery’s requirements, the investor can import the necessary crude palm oil with prior approval from the Minister of Agriculture. This provision allows for a cumulative importation period of up to thirty-six calendar months within six years, all exempt from import duties.

Additionally, the agreement obligates Fouani Brothers to invest in palm farming in Liberia, purchasing all locally grown crude palm oil at fair market value and actively participating in the Outgrower Scheme while addressing supply chain challenges. Section 11.2 further defines “insufficient supply” as less than 60% of the refinery’s average crude palm oil consumption over the previous six months.

The controversial agreement, which has already passed the House of Representatives, has raised concerns among senators such as Edwin Snowe. They fear that it may undercut the investments made in the palm oil sector in Liberia, as Fouani Brothers, a foreign-owned company, is granted the privilege of importing crude palm oil duty-free.

Critics, including Snowe, argue that this could create a monopoly that would force smaller producers out of the crude palm oil business, potentially resulting in significant losses for investments in plantations and refineries across the country.

Another point of contention is Section 10.1, which exempts Fouani Brothers from import taxes and duties on capital equipment, related materials, and construction materials.

Liberia: Senate Debates Fouani Brothers' $30 Million Controversial Palm Refinery Deal

This exemption is in effect for seven years after the completion of the refinery’s construction. Critics also believe that this extended tax exemption could be exploited, given Liberia’s past challenges in enforcing tax incentive agreements and the potential for loopholes in the system.

Snowe, a leading opponent of the agreement, called on the executive branch to withdraw the deal, describing it as detrimental to the economy and to local farmers and companies that have invested heavily in the palm oil sector.

“This is a bad deal, and I am appealing to the executive branch of the government to withdraw the deal,” the Senator said. “The executive should withdraw this agreement because it is bad for our economy, local farmers, and all companies who have invested millions of dollars in the palm oil sector.”

Snowe further suggested that if Fouani Brothers were serious about their intentions, they should acquire land and start a palm farm rather than relying on imported crude palm oil.

He added that Fouani Brothers have previously benefited from incentives and protective tariffs without delivering on promises to produce vegetable oil for local consumption and export. Instead, they imported vegetable oil and only packaged it in Liberia, leading to higher consumer prices.

“Nowhere in this country that can they produce 13k metric tons CPO a month, and that is why they are smartly asking for a plant for 13K metric tons of CPO because it is impossible to get that amount. For many years, they have had incentives and protective tariffs, where they should be manufacturing vegetable oil/cooking oil for local consumption and export,” the Senator said. “Contrary to what they should be doing, they are bringing in the vegetable oil and only packaging it in Liberia.”

“Today vegetable oil in Liberia is more expensive in Liberia than our neighboring countries. They save more than 1.2 million on every vessel they bring to this country and pay 40K to the Liberian government,” Snowe added.

He emphasized that accepting the agreement would result in job losses for citizens in Capemount, Bomi, and Sinoe counties and called on Fouani Brothers to start a palm farm instead.

The Senate’s deliberation on the Fouani Brothers’ agreement follows a “motion of recall” filed by Rep. Francis S. Dopoh, a senior member of the House Public Accounts Committee and Expenditure.

Dopoh believes the agreement was not sufficiently scrutinized and did not receive the required votes for passage, raising concerns about its potential impact on Liberia’s palm oil production sector.

He noted that some sections of the agreement were “inconsistent” with the intent of granting the incentive and would undermine palm oil production in Liberia by favoring Fouani Brothers.

“The substantial investment in palm oil plantations in Liberia will be destabilized if Fouani Brothers are granted duty-free importation of finished oil in Liberia,” the River Gee County Senator-elect said.