House Approves Withdrawal of Funds from CDF

The House of Representatives has approved the withdrawal of $715.687 million from the Capital Development Fund (CDF), to provide budgetary support to the Jamaica Bauxite Institute (JBI), among other things.

Minister of Finance and the Public Service, Hon. Audley Shaw, who moved the Withdrawal Order in the House on July 18, said the JBI is to receive $223 million in budgetary support for the 2017/18 financial year.

“This figure being requested represents 86 per cent of the $259 million required for operating expenses and capital expenditure in 2017/18,” Mr. Shaw noted.

In addition, some $487.367 million is to be reimbursed to Jamaica Bauxite Mining (JBM) for advanced payments made to Glencore AG on behalf of the Government.

The Minister explained that Cabinet, by way of decision dated May 2013, approved the repayment of obligations to Glencore of US$33.8 million plus interest, through authorised withdrawal orders from the CDF and a one-off payment by JBM of US$4 million.

Mr. Shaw pointed out that the obligation to Glencore resulted from the divestment of JBM’s bauxite segment to the West Indies Alumina Company (Windalco), which resulted in the termination of a supply agreement between JBM and Glencore, and consequently JBM’s failure to fulfil its supply quota.

“All obligations of the Government have been settled in accordance with the commitment letter between the Government of Jamaica and JBM and Glenore and the final payment was made in January this year,” Mr. Shaw said.

He noted that during 2015, JBM was requested to advance a total of $487.37 million to Glencore AG on behalf of the Government towards the April 30, 2015 quarterly payment of US$3 million (J$346 million) and to clear prior advances made by the Accountant General of $141 million.

The Minister said the requests were made due to insufficient funds in the CDF. He said the advance by JBM has created a gap in the cash resources needed to finance its operating and capital programmes, which include the planned refurbishment of the wharf
in St. Ann.

The Development Bank of Jamaica is to also receive $5.32 million for its administration of the CDF and reimbursement of audit fees paid to the Auditor General.

In his remarks, Leader of the Opposition, Dr. Peter Phillips, said there was no objection to the withdrawals from the CDF.

However, he argued that the country needs to take stock of the future of the bauxite industry and “our expectations of it.”

“The industry is at a crossroads and the earnings are uncertain. We are still not clear what the policy in relation to the bauxite levy is. Are we abandoning it totally?

Because right now, one company that is just beginning (new owner of Alpart) has no levy attached to it,” Dr. Phillips said.

In his response, Mr. Shaw said the bauxite industry continues to be an important sector for the economy of Jamaica.

“It is to be admitted that in relation to the bauxite levy, this is an issue that crosses Government lines. These requests for the easement of the levy have come on occasions with the declining fortunes of the industry as a whole. So, I readily agree that we have to seek to get the levy back on track as soon as possible. I want to give the country the assurance that the Government has not abandoned the levy programme,” he added.

The CDF was established under the Bauxite Production and Levy Act.

It was promulgated in 1974 at the time when the bauxite production levy was imposed, and the proceeds of the levy directed to the CDF.