School's out in Blenheim Town. The south Manchester community is disappointed with the lack of developmental support it gets from bauxite interests which have been mining in that area for years. -Ian Allen/Staff Photographer
MINING MINISTER Derrick Smith has said that the situation in the bauxite/alumina industry is worsening as the girth of a wicked economic recession tightens the demand for the product on the world market.
"There is tremendous uncertainty right now," Smith told The Sunday Gleaner yesterday.
Bauxite-producing companies have already asked Government to waive the levy payable on bauxite as they struggle to survive.
"The whole global recession is impacting in a most negative way on the bauxite industry locally, and it would be a major catastrophe if the industry should shut down," said Smith.
Senior officials of Rusal, a Russian company which owns Aluminium Partners of Jamaica (Alpart), are now in the island and are scheduled to meet with Prime Minister Bruce Golding and Smith this week.
The mining minister has said that the meeting could give Government a clearer picture of the short-term future of the industry.
Demand for aluminium has dropped significantly as the housing and motor car industries - two of the greatest buyers of alumina - continue to welter under the flames of the economic recession.
low demand
The low demand has resulted in what Smith has called a "tremendous stockpile for alumina and aluminium", which has forced local players to consider cutting back on production.
Minister Smith insists that Government is not taking the situation lightly and has been proactive trying to work out potential solutions to save the industry.
"The Government will never be caught flat-footed in this situation. We are very proactive - we are sitting on it daily - and in the event of any worst-case scenario we would have a contingency ready to move forward," Smith said.
The minister, however, refused to divulge the contingency plan and has ruled out a full takeover of the multi-billion dollar industry.
"Government would be prepared and willing to go a far way to save the industry, but the Government will not be able to go all the way in these difficult times," Smith said.
Meanwhile, Opposition Spokesman on Mining, Michael Peart, is hoping that the bauxite/alumina industry will recover so that the Government can have a chance to make amends on the way successive administrations have treated the bauxite-producing communities.
"Based on what is happening in the bauxite/alumina industry now, due to the economic recession, we have to hope that this thing blows over so that we will be able to do something substantial the next time around," Peart said.
Sunday Gleaner insiders have also said that at least two of the country's four bauxite companies now have unhealthy balance sheets, which could compound fears that the bauxite/alumina industry could further nosedive or even fold.
According to Peart, a second chance at bauxite will give government an opportunity to make a greater contribution to the development of bauxite communities from the Capital Development Fund that was set up to help them.
In the last eight years bauxite-producing communities have had approximately $24.6 billion scalped from a fund that was set up to help in their development.
At the same time, only $727 million has been allocated to the Jamaica Bauxite Institute over the same period, for both the running of the organisation as well as community work.
Already, Finance Minster Audley Shaw has dipped into the Capital Development Fund three times for budgetary support, withdrawing a total of $5.668 billion in the 15 months that the Jamaica Labour Party (JLP) has been in office.
At the time of the first withdrawal in November 2007, Prime Minister Bruce Golding said that between 2000 and 2007, $18.9 billion was taken out of the Capital Development Fund and placed into the Consolidated Fund.
In December, Parliament gave approval for the Ministry of Finance to withdraw $1.10 billion of the $1.174 billion that was in the Capital Development Fund at the time. However, Government's drawing down from the fund for budgetary support tugs at the heart strings of South West St Ann Member of Parliament Ernest Smith.
"It is disgraceful what the Capital Development Fund is being used to do. The fact is that the money is being used for budgetary support, which is often debt servicing," Smith told The Sunday Gleaner.
The Capital Development Fund (CDF) was established in 1974 to reinvest some of the returns earned from the industry into communities located in the bauxite belt. The CDF is funded from the bauxite levy but has, for the most part, been used for budgetary support by Government.
When the House gave the approval for the withdrawal of $1.10 billion from the CDF, Peart lamented that communities in which bauxite was mined often do not benefit enough from money in the CDF.
"The original concept of the Capital Development Fund was that the earnings from the bauxite/alumina industry were to be used to develop the communities but, unfortunately, we have been using it consistently for budgetary support," Peart said.
"History will not be kind to us if we had a situation where we have a closing down of these bauxite/alumina plants and these communities are left desolate," said Peart.
The four-term MP has said that in the event of a recovery for bauxite, Government must move to implement a policy which would require that any withdrawal from the Capital Development Fund is accompanied by "a withdrawal of a substantial amount that would go towards development in bauxite-producing areas".
governments lambasted
Meanwhile, Ernest Smith has lambasted governments over the years for not putting the Capital Development Fund to the use for which it was intended.
"No capital development has taken place in my constituency out of the Capital Development Fund.
"Successive governments are going to pay dearly eventually to the unborn children of the constituency because the constituency has been allowed to be ravished and nothing has been done," Smith argued.
According to Smith, despite the billions of dollars earned from bauxite mining, "the Alexandria Hospital was allowed to be reduced to a community clinic ... the constituency has been turned in sections into graveyards, and we can't even point to a cemetery that is a direct result of bauxite mining."