Sierra Leone: IMF finds flaws in COVEC deal signed by finance minister

By Lawrence Williams

A recent decision by President Julius Maada Bio to dissolve the Mineral Wealth Fund (MWF) and terminate related management arrangements has cast fresh light on governance weaknesses and revenue risks flagged by the International Monetary Fund (IMF), raising questions about how a flagship state mining vehicle was set up and how a major China-backed iron ore deal was structured.

In a public notice issued on January 8, 2026, the government said the MWF would be wound up and its participation in the Tonkolili North iron ore project halted, with state control of mineral assets reverting to the Sierra Leone Mines and Minerals Development and Management Corporation (SLMMDMC). The government stressed that the move represented a “change in vehicle, not a change in vision,” reaffirming its commitment to establishing a sovereign wealth framework aligned with international best practice.

But the decision came just after the release of an IMF Governance and Corruption Diagnostics report that details significant transparency, accountability and fiscal vulnerabilities surrounding the MWF’s design and early agreements, most notably a framework and supplementary agreement with the China Overseas Engineering Group Company Limited (COVEC).

In July 2025, Finance Minister Sheku Ahmed Fantamadi Bangura as chairman of MWF signed an agreement with COVEC in Beijing covering the Tonkolili North iron ore deposit. Government statements at the time described the deal as transformative, citing commitments of up to $300 million for mine construction, transport infrastructure and beneficiation facilities, structured through an EPC contract, deferred payment arrangements and a joint venture said to be non-recourse to the national budget.

The agreement built on a September 2024 framework deal and was presented as a cornerstone of the state’s new approach to leveraging mineral wealth for development under the Sierra Leone Mines and Minerals Development and Management Corporation Act of 2023.

However, the IMF report finds that the potential fiscal returns from the MWF’s mining activities were constrained from the outset. They uncovered that the framework agreement with COVEC grants joint venture operations full tax exemptions and fiscal incentives available in Sierra Leone, “largely reducing fiscal revenues potential.” At the same time, dividend payments, another key revenue stream, were capped by the MWF’s Articles of Association at a level recommended by its own board, sharply limiting the government’s ability to set dividend expectations.

The IMF warns that this combination of generous tax treatment and restricted dividend policy undermines the MWF’s capacity to contribute meaningfully to the state budget, even as both the MWF and its parent corporation are authorised to borrow and issue guarantees, exposing the government to fiscal risks and contingent liabilities.

Beyond the revenue constraints, the IMF report highlights deep governance vulnerabilities in the MWF’s structure. While the authorities said they sought to avoid elite capture by outsourcing management to a third party, the IMF says it could not identify the sector expertise or professional qualifications of that manager, MountView Konzern Management Services, which was awarded a 10-year contract.

The report describes opaque board appointment processes, the absence of merit-based nomination systems, and a lack of independent oversight mechanisms such as audit and nomination committees. It notes that MountView had been operating since January 2023 without producing financial statements or undergoing a performance review, and that key performance indicators required under its contract had not been developed or disclosed.

“Politically motivated or opaque appointments create governance weaknesses, increasing the risk of corruption, inefficiencies, and conflicts of interest, ultimately undermining public trust, investor appetite, and economic stability,” the IMF said, urging the government to fully align the MWF with public financial management laws, strengthen board independence and transparency, and publish audited financial statements.

The January 2026 decision to dissolve the MWF and end its management arrangements appears to acknowledge many of these concerns. The government said state ownership and custodial control of mineral assets would remain unchanged, and that a new sovereign wealth framework that is legally grounded and guided by standards such as the Santiago Principles would now be developed.

Analysts say the reset underscores the tension between the government’s ambition to assert greater state participation in mining and the practical challenges of governance, capacity and deal-making in a high-value, high-risk sector. With the IMF explicitly warning that key agreements already in place have narrowed fiscal upside while leaving the state exposed to risk, pressure is likely to grow for greater disclosure of past contracts and clearer safeguards in any future sovereign wealth vehicle.

Meanwhile, public pressure is mounting for an official probe into the Tonkolili North iron ore agreement, with some civil society groups and citizens calling on the Anti-Corruption Commission (ACC) to investigate the July 2025 deal with China Overseas Engineering Group Company Limited for possible conflicts of interest involving the minister of finance.

Activists argue that Sheku Ahmed Fantamadi Bangura, who signed the supplementary agreement as both finance minister and chairman of the Mineral Wealth Fund, occupied dual roles that warrant closer scrutiny. They contend that the concentration of authority in the negotiation and approval of the deal raises questions about checks and balances, particularly given the IMF’s findings that the agreement sharply limits potential fiscal revenues while exposing the state to significant financial risks.

Critics point to the IMF Governance and Corruption Diagnostics report, which highlighted opaque governance arrangements, weak board oversight, and constrained revenue streams as grounds for an independent investigation. They argue that these vulnerabilities, combined with the finance minister’s central role in both fiscal policy and the state mining vehicle, create a reasonable perception of conflict of interest that the ACC is mandated to investigate.

Believing that an inquiry would be critical to restoring public confidence as the government dismantles the Mineral Wealth Fund and prepares a new sovereign wealth framework, the ACC is now being urged to examine the negotiation process, the tax exemptions and dividend caps embedded in the COVEC agreement, and whether all decisions were taken in compliance with public financial management, procurement, and anti-corruption laws.

For now, the Tonkolili North project and the July 2025 China deal stand as a test case of whether Sierra Leone can recalibrate its mineral strategy to deliver public value, without repeating the vulnerabilities that prompted the latest intervention.