Wed | Mar 21, 2018

Peter Espeut | Jamaica should benefit from mining

Published:Friday | May 20, 2016 | 12:00 AM

There is no doubt that mining generates huge profits. Mining companies make so much money that they are able to relocate whole communities resting on top of bauxite reserves, providing land and fully built homes. Mining companies can afford to construct an alternative road network - including bridges - for their vehicles to haul bauxite ore, such that there is no or little interconnection with public roads; and they can operate railways that the State cannot afford. The mining sector generates huge profits. And over time we are talking tens of billions of US dollars - not millions.

There was a time when Jamaica was the largest producer of bauxite in the world; now, I believe, we have fallen into sixth place. Since we began mining bauxite in 1950, more than half the available reserves have been mined. Fifty years from now, Jamaican children will know about the bauxite industry only from a study of history.




Aside from the scarred landscape, the red mud lakes, and the painful dislocation, in 2060 when we look back, what will we be able to identify as the legacy of the days when we had a bauxite industry? How does Jamaica benefit from the mining sector?

Trinidad will one day run out of oil, but all the people of Trinidad and Tobago benefit from their petroleum industry; their citizens pay less at the petrol pump than we do here in Jamaica, and their electricity costs are much lower than ours.

As a result, their manufacturing sector can produce goods much cheaper than we can, increasing their employment and depressing Jamaican employment, and driving our productive sector to the wall. Trinidad will one day run out of oil, but they will be able to look back at the benefits their nation obtained from once having an oil industry.

Currently, oil exploration is taking place off the south coast of Jamaica. What are the arrangements being put in place for the disposal of the product should any oil be found? Will we have access to the petroleum, or will the foreign companies be given the licence to explore and extract solely determine where that oil goes?

If we will have access to the oil, will we have access to it at concessionary prices, or will we have to pay the full market price? Will we Jamaicans be able to obtain the same or similar benefits from any future petroleum industry we might have, as Trinidadians receive?

The truth is that the licences to explore and to extract are shrouded in such secrecy that the Jamaican public does not know who will benefit. We need transparency here!

Some years ago, an Australian-Jamaican mining company operated a gold mine in the hills of Clarendon. They mined their gold bullion, made their millions, then closed down. How much money did Jamaica make from that gold mining operation? What, or where, is its legacy? Who were the Jamaican partners to the Australians? Did they have any partisan political connections? The truth is that the gold mining licences are shrouded in such secrecy that the Jamaican public does not know who has benefited. We need transparency here!

Back to bauxite: How does Jamaica as a country currently benefit from the bauxite mining sector? Remember, it is Jamaican soil that contains the bauxite that is processed into alumina. Before the bauxite levy imposed by Michael Manley's government in the 1970s, Jamaica was paid a royalty of one shilling (1/-) per ton, and that's all Jamaica got for our mineral wealth, except for statutory deductions withdrawn from the salaries of the workers.




The transnational mining companies resisted paying the bauxite levy and punished Jamaica for wanting more than one shilling per ton. Even today, there is strong resistance, and some do not pay.

Requiring part state ownership of the bauxite sector was a good way to ensure that some profits accrue to Jamaica. What the vertically integrated bauxite companies do to counter this is to sell the bauxite or alumina cheap to their parent company abroad (transfer pricing), thereby declaring a loss (or only a small profit) on their Jamaican operations; therefore, their Jamaican partner makes very little, while the parent company makes billions. Companies who do this are not our friends!

This leaves us with the PAYE and other statutory deductions from bauxite workers as our only real benefit. When the Government reduces and removes income tax from Jamaican workers, the bauxite industry will benefit us even less.

Mining is not a sustainable activity; our mineral resources are finite, and will one day run out. Jamaica must not give away our bauxite, gold, copper, silver and petroleum resources cheaply. It might be best to save our resources for a time when we can exploit them ourselves.

- Peter Espeut is a sociologist and rural development scientist.