Less than three years after the start of commercial oil production, some have been listening, beady-eyed, as the Guyanese Government cites the growing balance in that nation’s sovereign wealth fund from oil and announces plans to improve the welfare of approximately 800,000 citizens.

By comparison, Jamaica is like a crone with a broken purse and disembowelled lands filled with mined-out red dirt. Seventy years after the first commercial shovel of bauxite was turned in Jamaica, technocrats are still scratching their heads on how to provide affordable education and retain talent; how to finance new road networks and new cities needed; and where to source funding for a better health system.

Views on the efficacy of the bauxite levy, an additional tax on corporations engaged in mining and production in the bauxite-alumina industry are mixed, and so, over different administrations the tax has been added, subtracted, or failed to be implement periodically.

On their part, mining companies point out that not much that is lasting has been accomplished from previous contributions, with many mining communities still in need.

Following the onset of the novel coronavirus and the contraction in tax revenues, the bauxite levy was again implemented, with the Government of Jamaica extracting promises from UC Rusal for future payments for balances owed. But, not all involved in the industry are convinced that the bauxite levy is an efficient tax.

Coy Roache, industry historian and former general manager of Jamaica Bauxite Mining Limited, which controls the Government’s share in Noranda, asserts that the levy is a factor which drove away investors in the 70s and remains a negative factor as no other producer of bauxite has a levy.

Falling under the Bauxite (Production Levy) Act, 1974, the bauxite levy is set at a rate of US$1.50 per metric ton plus a US$0.50 per metric ton in royalty payments. Roach suggests that an alternative source of increased sector revenue could come from increased production, thus more employed and more income tax. He notes that, if Alpart is reopened, this will increase royalty take as well employment and tax.

Notably, he said, up to 2019 mining accounted for 90 per cent of our traditional export and 50 per cent of overall export. Roach commented, “Our traditional export of coffee, cocoa, and sugar have all declined drastically. We shipped only 6,000 tonnes of sugar last year and expected to ship 5,000 mt this year. We learnt from COVID that we can’t put all our eggs in the tourism basket.”

The answer he said is to solve the puzzle of increased production, which would boost earnings and employment. Indeed, in the last decade, employment numbers in the mining sector have doubled from 2,000 in 2010 to nearly 4,000 in 2018, according to data from the Jamaica Bauxite Institute (JBI). Noranda has outlined, in response to the Jamaica Observer, how the company sees itself as contributing.

Management told Sunday Finance, “Noranda spends over US$80 million annually in the Jamaican economy in wages, taxes, and purchases of goods and services. We are responsible for approximately 1,000 jobs directly related to our operations and over 2,000 other indirect service and support-related job opportunities.

“We positively impact local communities in many areas, including health and wellness, education and scholarships, social, sports and youth programmes, and environmental and agricultural initiatives.”

The company cites activities such as funding of the COVID-19 field hospital expansion (University Hospital of the West Indies) and additional support to St Ann’s Bay Hospital; COVID-19 vaccination blitzes for employees and the community; commissioning of the Belle Tierre Water Reservoir for enhanced dust mitigation in areas around its mining operations; and establishment of community water stations in operating communities.

New Day said as well that it has funded the commissioning of a cold room facility for greenhouse operations/farmers to preserve their produce for market; commissioned operations of an aquaponics/ornamental fish project on restored lands; successfully implemented a root crop (yam) production project on restored lands; continued expansion of greenhouse clusters in partnership with Jamaica Social Investment Fund (JSIF) and JBI, with over 136 greenhouses built.

Noranda said that in the area of education over 150 Noranda scholarships are awarded to college students and Primary Exit Profile (PEP) awardees annually; established community skills training centres plus mechanical and welding training programmes at Water Valley and Discovery Bay skills training centres. It has also launched project discovery tree, a tree nursery on restored lands as part of its commitment to planting over 200,000 trees.

From the revived levy, Minister of Finance and the Public Service Dr Nigel Clarke has indicated that Jamaica collected $2 billion in late 2021.

The $2 billion included US$13.7 million paid by UC Rusal in December and an asset usage fee debt of US$3.4 million, owed to Jamaica Bauxite Mines by New Day/Noranda Bauxite, paid in full by Concord Resources Limited. Concord Resources Limited, which is headquartered in London, acquired 49 per cent shares of New Day Aluminium (Jamaica) in July 2021.

UC Rusal operates from Ewarton Works, Swallenberg, Port Esquivel, and Kirkvine. The company has agreed to pay off the backlog owed over the next 30 months. Minister Clarke said in Parliament that dwindling company support for the levy by the bauxite industry, which was linked to the fact that the communities in proximity to the bauxite mining and production areas continue to be “communities in need” despite their efforts. The finance minister has given the commitment that this will be addressed and that wastage of the proceeds of the levy will cease.

Coy Roach, the former general manager of Jamaica Bauxite Mines indicates that the creative management of bauxite investors has always been needed as Jamaica cannot afford the level of investment needed to run the capital intensive operations in bauxite mining and alumina processing and sale.

He commented that, aside from the challenge of marketing alumina and bauxite, “Mining and processing bauxite is capital intensive. The price of oil and caustic soda can move drastically on you. My experience is that the profit cycle is not long enough for you to save for the days when price is below production cost.

He proposes, “If we can reduce the cost of energy for the plant then we would be able to have sustainable operations. There have been times when Jamalco has to call on the public purse. Capital injection requirements can be very large. Years ago it cost Jamalco over $100 million to build a new mud lake.

Roach, considering future possibilities said: “A purely mining operation like Noranda is less risky and less capital intensive and would be better for us to get into.”

He clarified in relation to the bauxite levy: “I don’t believe in totally removing the levy as the royalty is small and multinationals know how to get around paying profit tax. The country would not get much.

“I think companies will pay some levy, but the present formula is asking too much. Reducing it to a nominal amount would increase investments.”

Taxation, he added, was not the only issue, noting that environmentalists were becoming intolerant of mining, leading to the “Government compromising to expand cockpit way beyond what is normally known as the Cockpit Country.” As an investor, he said, “ I would be wary of investing in mining in Jamaica.”