UNFAIR BUSINESS PRACTICE’: Liberians Struggling as Foreign Firms Get 70% Break


Rodney D. Sieh

Source: FrontPage Africa

Saye Zubah has been unable to pay his employees for some three months now. The daily water production at his Mama Liberia Safe Drinking Water plant in Sinkor is piling up. Most days, the striving businessman is lucky to sell five sachets of water. With many mouths to feed, Mr. Zubah is nearing boiling point, the edge of uncertainty where he’ll soon have to decide whether to stay in business or call it a day. Pretty soon Mr. Zubah would be forced to send his workers home, unable to have them continue working without pay.

These days Pam Taylor, owner of the Kpatawee Fresh Water located in Congo Town, has to rely on occasional contracts from loyal companies to make ends meet and pay a skeleton staff at her fading business, unable to withstand the “unfair” advantage thrown the way of foreign competition.

AQUA HAS THE EDGE

“When we import our raw materials, we have to go and exchange the Liberian dollar to U.S. dollar. Therefore we are losing. Aqualife has brought into Liberia, the machinery to produce the raw materials, it enables them to be able to drop their prices from LD75 to LD40 that is proposed by the organization to forty dollars.”

Pam Taylor, owner of the Kpatawee Fresh Water



When we import our raw materials,
we have to go and exchange the Liberian dollar to U.S. dollar.
Therefore we are losing.
Aqualife has brought into Liberia,
the machinery to produce the raw materials,
it enables them to be able to drop their prices from LD75 to LD40 that is proposed by the organization to forty dollars.”

Pam Taylor, owner of the Kpatawee Fresh Wat

 The plight of Mr. Zubah and Mrs. Taylor is a reflection of the dilemma scores of struggling entrepreneurs of the Liberia Water Producers Association are enduring, forcing many to put their businesses at a standstill or simply shut down, losing out to Foreign companies who some say came in through the back door with lucrative incentives and tax breaks packages at the disadvantage of local water producers.

Says Mr. Zubah: “I once owned five (water distribution) vehicles but right now because of the price on the market I am not able to control all of the vehicles that I have. I decided to sell three of the vehicles and right now I only have two on the market.”

Mr. Zubah and the members of the local water producers are pointing the blame at the National Investment Commission, the Ministry of Commerce and Aqualife, one of several foreign companies involved in the sale of bottled and sachet water in Liberia.

70 percent waiver dampens competition

The local water producers are angry at the Liberian government for giving foreign companies selling water a better treatment. For example, according to the notary certificate and investment contract of Aqualife was granted a whopping 70 percent of the dutiable value of the Approved Machinery, Equipment and 70 percent import duties on five(5) industrial vehicles, for a period of two calendar years commencing from the effective date of the contract signed on March 19, 2007.

The company is also granted import duties at a rate of 70 percent on spare parts and raw packaging materials. “The approved investment project shall be exempt from duties at the rate of 60 percent of the dutiable value approved imports of related spare parts necessary for the machinery and equipment,” according to the agreement.

Ironically, the Investment Act of 2010, approved May 15, 2010, printed and published by the Authority of the Ministry of Foreign Affairs, Republic of Liberia in scheduled 2 count (g), states that “operation of water purification or bottling by 100 percent foreign company (excludes the production and sale of water in sachet)”. But the same act states “where an enterprise in existence immediately before the commencement of this Act has duly complied with the investment incentive Act of 1973 and other applicable legislations, the enterprise shall be deemed lawful not withstanding any provision of this Act to the contrary. Any transfer of ownership rights must conform to this act.”

No protection from government

Zubah says his main problem is that the government of Liberia is not protecting the local water producers. “There is a law that says Sachet water should only be done by Liberians. We have found out that they have foreigners in it, a lot of foreigners but we decided to deal with it as long as they were being fair. The law had not been passed until July of this year. And then we went to Commerce to let commerce know that there are some foreigners that you have given incentives that are doing predatory pricing. Predatory pricing is to make sure that Liberian businesses go out of business and fall by the way side. “

The local water producers’ fight against unfair practices, according to Pam Taylor, started about a year ago. We started this fight against Foreigners in the water industry in Liberia and our sole purpose was to protect Liberian businesses and Liberian water producers. We also establish the Liberia Water Producers Association. We have had workshops, we’ve had a series of meetings with the relevant government agencies.”

But along the way, Mrs. Taylor says, the group realized there was a proliferation of water companies which to their knowledge were not registered with the Ministry of Commerce.

The group undertook its own initiative and due diligence and discovered that there are at least over 85 water companies existing or working in Liberia. “Out of the 85 companies we have over 30 of them which are foreign-owned businesses,” Taylor laments.

“In fact, she continues, “in the sub-region, a lot of countries do not allow certain business for non-nationals, mainly so for example in Ghana. I know for a fact that the water industry is protected in Ghana and it is for Ghanaians only.”

The local water producers contend that the law is on their side. The new investment law of 2010 clearly states that the production of Sachet water is set aside exclusively for Liberians. Aqualife, like Mr. Brandy has the investment incentive of 70 percent duty free.”

Christopher Gardour, Saye Zubah and Elvina Dennis are all owners of struggling Liberian businesses claiming unfair advantage from foreign companies and no protection from the Liberian government

As a result of their claims of unfair business practices, the Liberia Water Producers Association on October 15, 2010 filed several counts of complains against Liberia Investment Ltd., producers of Aqualife Mineral Water. The complainants among other things accused Aqualife of involving in unfair business practices with attempts to destroy the local water producers through predatory pricing. The complainants further noted that the incentives granted by the investment contract were especially for bottled water production, yet Aqualife has not restricted itself to the bottled water business. The local producers also complained that the Aqualife had engaged in an active pursuit and expansion of its packaged water business, an area that is exclusively reserved for Liberian owned companies.

Commerce rules against locals

But the commerce Ministry ruled that the local producers had no case against the firm because the Liberian government had allowed the company to bring into the country plastic bags and rolls for sachets water which was a recognition of the company’s sachet water production. Therefore the company could not be held liable. The ministry, in its ruling further notes that the local producers may have known that the company was going to expand its activities as perpetual entity and thus entered into a Memorandum of Understanding with the entity. The ministry also ruled that Aqualife did not violate the incentive granted it by government because it would not be allowed to bring those items on duty free without hindrance. The ministry did hold the company liable and warned the firm to desist from under pricing the sachet water and adhere to the terms and conditions of the MOU.

But despite the findings, Aqualife, according to the local producers, is still selling below the agreed price.

Elvina Dennis, owner of Jake Frost Water Company says she too has a problem with the government not protecting the interest of local businesses. “There is a law that says Sachet water should only be done by Liberians. We have found out that they have foreigners in it, a lot of foreigners but we decided to deal with it as long as they were being fair. The law had not been passed until July of this year. And then we went to Commerce to let commerce know that there are some foreigners that you have given incentives that are doing predatory pricing. Predatory pricing is to make sure that Liberian businesses go out of business and fall by the way side. “

Melvina says Aqualife decided to go the route of predatory pricing because they have 70 percent duty free incentives. “This 70 percent duty free incentive allows them to pay less for the imports they are bringing into Liberia then we are. We have to be worried because we are paying 70 percent. So because of that they are put into position now where they can drop the prices way below which we cannot afford to go. If we go that low then that means we will not even be breaking even or falling below the red line.”

Continues Melvina: “If our government wants to help us, they would come out and do something about the law or they would either enforce the law or they would do something about Aqualife. If Aqualife is going to take over the market then I think the Liberian people would like to know what the government can do for us.”

Melvina is not alone. Mr. S. Christopher C. S. Gardour, owner of Street Water says he was forced to shut down and put several of his workers out of work. “At present my business is down due to the unfair business practice by Aqualife and at present we are not operating at all, we are non-functional due to this problem. All of our equipment are all down and at the present we are awaiting the government intervention.”

Circumventing the issue

Water processing machines at the Kpatawee facility in Congotown lays idle. The owner, Pam Taylor was forced to lay all 27 workers off due to unfair edge to the foreign Aqualife company.

John Brandy, President of the Twin Business Group says what made the local producers angry was that Aqualife boldly boasted that it would push Liberian businesses off the market. Brandy went on the suggest that perhaps someone in the Ministry of Commerce was helping Aqualife stay above the competition. “It stems from the fact that Aqualife came to a meeting of the water association and signed a memorandum of understanding that we will all abide by certain price within the water industry. Aqualife, after a week decided that they were not going to abide by it and told us openly that they do not have to listen to anything that Liberians say because they can go to our government and circumvent the issue and we all agree to sell water for LD75 a sack.”

Brandy, who was away on business, says he was disgusted to learn that the Ministry of Commerce had ruled in favor of Aqualife now is selling water for as low as $LD40 a sack just to put Liberian businesses out of the competition and as a result a good number of us are out of business. “To our greatest surprise when I came back, I had been away for a while, I found out that the ministry of commerce had rule in favor of Aqualife, I mean disgustingly, asking Aqualife to give us 30 percent of the Chelsea water market of which they should not be in at all according to the Act that was just passed by the National Legislature. But the Commerce Ministry I don’t know what their dealing is with Aqualife manipulated the process and asked us to in fact give Aqualife 30 percent of the industry.”

Meanwhile, Brandy says, Aqualife is given 70 percent duty free credit whereas Liberians have no incentives on their operation.

Brandy says it is important for the government to look into the plight of the local water producers because they have nowhere else to turn. “We are just asking the government to look into this. This is the only place we have. We cannot go to any other country and do what Aqualife is doing to us.”

Brandy says the unfair practices have to stop. We are asking that this is our government and our country, we should all have some sort of loyalty to one another. This has gone too far and these are some of the things that caused the problems in this country. The government is not giving any incentive at all to Liberians and this is the only place we have.”

During her recent shakeup of her Cabinet, President Ellen Johnson-Sirleaf urged the Richard Tolbert, former head of the National Investment Commission to go into the private sector. It was under Tolbert’s watch that Aqualife enjoyed whopping duty-free privileges. Said Sirleaf: “So, I encouraged him (Tolbert) in the process of this restructuring to consider that he should step out, go and find a particular entity, an investment of his choice, create those partnerships and go there and be a successful proud investor, a proud member of the private sector. Thank you for accepting that challenge.”

‘Need sector to grow’

While commending Tolbert for the services rendered the post-war government, Sirleaf said the attention now needs to be shifted to developing a proud Liberian private sector. “We need that sector to grow and we need for you to cease the opportunity of using your talents, go into the private sector and succeed there as you have succeeded in helping us to mobilize for the public sector”.

But for local business owners like Taylor, Dennis, Saye and Gardour, the venture into the business arena has been one they would likely want to forget, because of their past experiences. Says Pam Taylor the currency issue has also added more insult to their injuries. “When we import our raw materials, we have to go and exchange the Liberian dollar to U.S. dollar. Therefore we are losing. Aqualife has brought into Liberia, the machinery to produce the raw materials; it enables them to be able to drop their prices from LD75 to LD40 that is proposed by the organization to forty dollars.”

Nowadays, Mrs. Taylor’s Kpatawee Fresh Water company is closed for business, since June of 2010. Looking back she says she was forced to let all of her 27 employees off the employment line and that is only a portion of Mrs. Taylor’s problems. In the last year, she has gone from having five water and ice-making machines to just two machines. “I’ve sold three,” she says pointing a visitor to what’s left in her production room. “I have gone from three vehicles to just one. One of the vehicles was even sold to my counterpart here. So these are some of the problems here we are facing. Some people here in the business have huge loans and are indebted to the bank and they are about to lose their homes as collateral or vehicles or what have you.”

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