<\/p>\n
The Zestaponi Ferroalloy Factory is one of most important industrial enterprises in Georgia \u2013 the fifth largest silicomanganese-producing country in the world.Half of the silicomanganese imported into the US in the recent years was produced at the Zestaponi plant, making it a highly covetable target for entrepreneurs.In the first part of this investigation, Studio Monitor discovered how, in the turbulent and corruption-blighted years after Georgia became independent in 1991, the factory\u2019s ownership changed hands several times, sometimes in questionable deals, while small shareholders and workers entitled to dividends were never paid what they were owed.<\/p>\n
In December 2006, the plant again got new owners after it was sold for 30 million US dollars, more than three times the price it had been sold for by the previous government of Eduard Shevardnadze.
\nIn the following two years, according to the Tax Service, it made a 154 million US dollar profit.
\nBut despite its apparent wealth, the plant remains a major polluter that threatens the health of the local population, violates regulations on toxic emissions and breaks the law by operating without a legally-compulsory environmental impact permit from the authorities.<\/p>\n
Ukrainian oligarchs take charge<\/strong><\/p>\n The Zestaponi Ferroalloy Factory was bought in 2006 by a company called Georgian Manganese, which also went on to buy the cash-strapped company Chiaturmanganum at auction for 14 million US dollars. Then the state privatised the Vartsikhe Hydroelectric Plant to Georgian Manganese for 57 million US dollars. According to ukrrudprom.ua, Gennady Bogolubov and Igor Kalamoyski, the billionaire founders of PrivatBank, Ukraine\u2019s largest commercial bank, were the new owners. In an interview with the same website, Bogolubov confirmed this. Workers demand pay, not promises<\/strong><\/p>\n In 2006, the new Ukrainian owners said that their mission was clear: to revive the three companies and, as a result, boost the local economy and its people\u2019s living standards. The disappearing silicomanganese<\/strong><\/p>\n In 2010, the Tax Service carried out another inspection at Georgian Manganese. An interim report on the inspection, seen by Studio Monitor, said that this time the company was fined 202 million Georgian lari for various violations. The stench of pollution<\/strong><\/p>\n The other major problem facing the ageing Zestaponi plant is pollution. The plant operates two workshops, whose air filters were installed in the 1980s. According to Zestaponi workers, no substantial renovation has been done since the 1990s. Condemned for contamination<\/strong><\/p>\n Zestaponi is at the top of the list of the worst contaminators in the country, according to Georgia\u2019s National Environmental Agency. High-risk labour<\/strong><\/p>\n Inside the factory, it is even harder to endure the dust that is emitted by the production process, workers insist. The Zestaponi Ferroalloy Factory is one of most important industrial enterprises in Georgia \u2013 the fifth largest silicomanganese-producing country in the world.Half of the silicomanganese imported into the US in the recent years was produced at the Zestaponi plant, making it a highly covetable target for entrepreneurs.<\/p>\n","protected":false},"author":1,"featured_media":156,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[3,6],"tags":[7],"journalist":[16],"editor":[],"acf":[],"yoast_head":"\n
\nThe business symbiosis that inspired these purchases was clear: ores are extracted by Chiaturmanganum from mines in the Georgian town of Chiatura and then processed and turned into alloys at Zestaponi, while the Vartsikhe Hydroelectric Plant produces cheap power.
\nGeorgian Manganese is an offshore company registered in Cyprus, about which there is little information in the public domain.
\nA Ukrainian website, ukrrudprom.ua, proved to be the only public source of information about the company.<\/p>\n
\nAccording to the same source, the owners of PrivatBank also own Felman Production (Highlanders Alloy), which produces silicomanganese in the US; Consolidated Minerals Australia; Ghana Manganese in Ghana; Ferral in Romania; and the Zaporozhe, Stakhanov and Nikopol ferroalloy factories in Ukraine.
\nAs well as metallurgical enterprises, the PrivatBank shareholders control dozens of companies in Ukraine in the fields of oil, aviation, medicine, football, food production, mechanical engineering and agriculture.
\nIn 2013, Georgian Manganese changed ownership again and became the property of Georgian-American Alloys, a company founded in Luxemburg with its headquarters in Miami, Florida.
\nGeorgian Manganese never answered Studio Monitor\u2019s question about the identities of the Georgian-American Alloys owners. The authorities in the US state of West Virginia did however provide information about its shareholders.
\nThe Public Service Commission of West Virginia said that \u201cIgor Kalamoyski and Gennady Bogolubov are the largest shareholders of PrivatBank\u201d, and that \u201cMr. Kalamoyski and Mr. Bogolubov are ultimate minority shareholders of Felman Production\u2026 and Georgian Manganese\u201d.
\nA 2010 court case file at the district court in West Virginia in the US established that Felman Production was owned by Haptsic Investments, a Cyprus-based company owned in turn by Divot Enterprise. The representative of Felman in the case said that Kalamoyski owned Divot Enterprise in full.<\/p>\n
\nWhen asked to outline Georgian Manganese\u2019s goals, Chiaturmanganum director Alexander Silberman responded: \u201cTo rebuild all three enterprises. To make them close to a European level. To provide work for at least 7,000 people. To upgrade the economy\u2019s technology up to the best examples of the world\u2019s production. To reach good results, to increase employees\u2019 salaries. In short, to give life to this region.\u201d
\nHowever, when pressed by workers who gathered outside the Zestaponi plant when he visited it after Georgian Manganese took control, Silberman quashed workers\u2019 hopes of immediate pay rises.
\n\u201cI am a representative of the owner today. And to make a decision about raising salaries on these steps of this building is not realistic,\u201d he told the disgruntled employees.
\nTheir discontent about pay and working conditions erupted into a series of protest rallies and several hunger.
\nAt one rally in July 2013, workers demonstrated holding placards with slogans like \u2018We refuse to be slaves\u2019 and \u2018We demand a raise\u2019.
\n\u201cWe want a 50 per cent raise, overtime pay raised by 20 per cent, and a collective contract,\u201d said one protesting worker who was taking part in a hunger strike.
\nPay rates had increased since the 2006 takeover but workers insisted that they remained inadequate.
\nThe 2013 hunger strike ended with an agreement to link pay rises to production output.
\nThe director of the Energy Department of Georgian-American Alloys, Davit Chanturia, said that the workers have been given a fair deal.
\n\u201cNow we produce more, so we have a larger percentage per worker at Zestaponi Ferro,\u201d Chanturia said.
\nThe employees, however, said that this was still not enough reward for tough and potentially dangerous work in a polluted environment.<\/p>\n
\nThe report also revealed how the company lost huge amounts of silicomanganese – between 2007 and 2010, these losses were worth 438 million Georgian lari.
\nNinety-four million lari worth of silicomanganese (116,000 tons) were lost in 2007; 224 million (143,000 tons) in 2008; 43 million (64,000 tons) in 2009, and 78 million (58,000 tons) in 2010.
\nThe report described how manganese was first lost during its extraction and processing in Chiatura and then during its transportation to and production in Zestaponi.
\nThe authorities considered these losses excessive and fined the company.
\n\u201cExpenditure caused by the loss of pure manganese is primary here. It qualifies as the loss of goods,\u201d said tax expert Zviad Rogava.
\n\u201cAccording to the then applicable legislation, it was taxable. These goods were lost in the process of production and delivery,\u201d Rogava said.
\nThe authorities believed that the company was actually lying about how much manganese had gone \u2018missing\u2019 in transit.
\nThe interim report also revealed that Georgian Manganese had violated other provisions of the tax code as well.
\nThe company borrowed materials to produce their goods. Then it provided its goods on credit, but never received payment in return, accumulating a debt of 119 million Georgian lari.
\nThis led to Georgian Manganese LLC taking loans from its founders \u2013 who are not identified by name in the report – but it failed to generate enough revenue to repay these loans, simply borrowing and paying the interest.
\nThe unnamed founders received over 20 million GEL in interest alone. Abendale Management is one of the companies, registered in the British Virgin Islands tax haven, that owes Georgian Manganese 119 million Georgian lari for silicomanganese that it never paid for.
\nOne contract seen by Studio Monitor shows that Abendale sold 5,000 tons of manganese to the Alcor trading company for 1,600 US dollars. The contract specifies that the goods should be shipped \u2018FOB\u2019 (\u2018free on board\u2019, meaning that the buyer pays for the transportation) from the Georgian port of Poti, thus giving Abendale more financial benefit.
\nThe contract also reveals that goods produced by Georgian Manganese are sold through a number of intermediary companies. After having been loaded on board at the port in Poti, silicomanganese would be sold by Georgian Manganese to Abendale, then Abendale would resell it immediately to Alcor Trading. Alcor Trading, in turn, would subsequently sell the goods to the end users – Turkish companies.
\nHowever, according to the interim report, the Tax Service did not fine Georgian Manganese for running an illegal \u2018transfer pricing\u2019 scheme in order to dodge tax.
\nTransfer pricing is typically used to shift profits to countries with low tax rates, such as the British Virgin Islands, and avoid paying taxes in countries where companies have substantial trading operations \u2013 Georgia, in this case.
\nGeorgian-American Alloys also denies using such illegal schemes to avoid Georgian tax.
\nThe interim report was completed on February 11, 2011. On March 8, 2011, one of the company\u2019s owners, Kalamoyski, visited Georgia. According to Studio Monitor\u2019s information, he met senior Georgian officials, but it remains unknown whether or not his visit was followed by any changes to the company\u2019s tax debts. Studio Monitor addressed the Ministry of Finance, Tax Service and Georgian-American Manganese in an attempt to find out, but never received an answer.<\/p>\n
\n\u201cOne of the main tasks of the administration is to improve results. However, progress is very slow. Let us bear in mind that the factory is 80 years old,\u201d admitted Chanturia, speaking on behalf of Georgian-American Alloys.
\n\u201cThe main point is the configuration of the furnace which we simply cannot replace, yet it doesn\u2019t meet today\u2019s standards. Nonetheless, we are trying to wed modern technology and our outdated furnace configurations. We are producing additional equipment to keep contamination from entering the ventilation system. In 2012 and 2013, the handle filters in all 11 furnaces were replaced, so have positive results in this regard,\u201d Chanturia said.
\nBut locals in the area around the factory alleged that the Zestafoni management has been cutting corners on pollution reduction to reduce costs.
\n\u201cThey don\u2019t have these filters on 24\/7. They turn them off at night. So you are sleeping at night and breathe this poisonous smoke. This is how they save money,\u201d said one, Omar Nebieridze from the nearby village of Zemo Sakari.
\n\u201cThis smoke is unbearable. You cannot raise children here. Nobody cares about this problem,\u201d he said.
\nAccording to experts, the milky-white smoke that rises from the factory is caused by the pouring of slag into water. During this process, sulphur dioxide is emitted into the air.
\nNebieridze said that the smoke was emitted \u201cthree or four times a day\u201d.
\n\u201cThe smoke is white, but it is saturated with sulphur and it stinks,\u201d he said.
\n\u201cThis dust stings just like fibreglass. The milky-white smoke emits this dust,\u201d said former Zestaponi worker Leri Nebieradze (no relation to Omar).
\nThe management however said it had changed its working practices.
\n\u201cTechnology has been replaced. We no longer produce friable slag. This is why you cannot see the milky-white smoke anymore,\u201d said Chanturia.
\nHowever, photographs that Zestaponi workers said they took after Chanturia made this statement showed that the white smoke was still being emitted into the air.<\/p>\n
\nThe agency says that the dust emitted by the plant exceeds the Georgian legal limits three times over, sulphur dioxide two and a half times, and manganese dioxide seven times.
\nThe Minister of Environmental Protection and Natural Resources, Khatuna Gogaladze, confirmed this was true.
\n\u201cYou too have seen that the limits are violated,\u201d Gogaladze said.
\n\u201cExcess manganese dioxide is emitted into the air with the dust. Manganese dioxide is the main contaminator. Naturally, the lion\u2019s share in this type of contamination goes to ferroalloy factories,\u201d she said.
\nBut the truth about this pollution could be more even disturbing than these statistics suggest.
\n\u201cThese facts have been mitigated. The situation is much worse in reality,\u201d said Oleg Abashidze, a municipal councilor in Zestaponi.
\nAbashidze explained that the hydro-meteorological station in the town, which is supposed to monitor air pollution, had been allowed to become dilapidated and its staff had been reduced in recent years.
\n\u201cIn addition, they use outdated equipment from the 1990s, which prevents us from learning what is going on in reality,\u201d he said.
\nEnvironment minister Gogoladze also admitted that the station in Zestaponi was \u201coutdated\u201d.
\n\u201cIn addition, one station is not enough to have a full picture. There must be more,\u201d she said.
\nAccording to the law, Georgian Manganese was supposed to submit a document on its environmental impact to the Ministry of Environmental Protection before the end of 2011, but has so far failed to do so.
\n\u201cWe carried out an inspection more than once,\u201d said Gogoladze.
\n\u201cFirst they were fined for unlicensed activities in May 2012, then again in December 2012 or early 2013, so we were legally obligated to refer this case to the Ministry of the Interior. This case was supposed to be investigated. They can have their own analysis results and they can turn to the courts,\u201d she said.
\nThe ministry told Studio Monitor that \u201cthe investigation is underway\u201d but said it was unable to provide more information.
\n\u201cI don\u2019t know why this investigation is dragging out so long,\u201d said Nino Gujaraidze of the campaign group Green Alternative.
\nBut the facts of the case are clear, she said: \u201cThe factory has no [environmental] permit. In fact, it has been operating for four years with no permit, illegally.\u201d
\nThe company did not deny this.
\n\u201cThe environmental impact permit is the toughest issue. In this regard, we are in close cooperation with the Ministry of Environmental Protection. We are facing this problem in Zestaponi,\u201d said Chanturia.
\nBut although he admitted that the case had been referred to the interior ministry a year earlier, he hinted at hopes that, after a change of government in Georgia in September 2012, negotiations with the new administration that came to power could yield positive results for the company.
\n\u201cWe have a new government now, so we are discussing certain issues with the new government,\u201d he said.
\nThe losses detailed in the 2011 Tax Service report on Georgian Manganese, if transformed into profits, could have been used to address Zestaponi\u2019s problems, suggested Gujaraidze.
\n\u201cThese sums mentioned in the report \u2013 I mean these losses \u2013 would probably benefit the factory tremendously and change the situation,\u201d she insisted.
\n\u201cYet when we are talking about profits and technological re-equipment, companies often profit bypassing the law and avoid solving concrete problems. Unfortunately, this is reality, and it is especially true of Georgian Manganese,\u201d she said.<\/p>\n
\n\u201cI work right where all the smoke, exhaust and gases are. There is no visibility a few feet away, and I end up working there eight hours in a row,\u201d said one.
\n\u201cSanitary conditions are horrible. Moreover, the factory is a danger zone. There are no safety rules, and contamination is all over the place,\u201d said another.
\nMost employees are at high risk and workplace safety rules are ignored, according to an analysis at the plant conducted in 2011 by the Labour Medicine and Ecology Scientific Research Institute, which was commissioned by Georgia\u2019s National Centre for Disease Control.
\nThe experts divided workplace risks into four categories.
\n\u201cThere are several criteria, such as dust, noise, sanitary conditions, etc,\u201d explained Amiran Gamkrelidze, director of the National Centre for Disease Control.
\nAll of the jobs at the Zestaponi plant fell into highest or second-highest risk categories, the analysis found.
\nChanturia insisted that problems with a vacuum system used to extract dust from the area around the furnace had been solved, but admitted that other risks remained, such as noise.
\n\u201cWe cannot avoid it [noise], of course, but our equipment has been renewed in the past few years. Although there were complaints, the situation is much better today,\u201d he said.
\nLocals in Zestaponi fear meanwhile that the plant\u2019s emissions could cause long-term damage to their health.
\n\u201cI live on the territory adjacent to Ferro and three of my family members died from cancer, my wife of 38, my grandmother and my aunt. In addition, my mother has stage-four cancer,\u201d said local councillor Abashidze.
\n\u201cThis is the environment we live in. It\u2019s horrible,\u201d he said.
\nHowever the director of the National Centre for Disease Control said he believed that such fears are exaggerated and possibly groundless.
\n\u201cZestaponi and Chiatura have always had a bad reputation as contaminators. Yet if we browse through basic statistics, we\u2019ll see that Zestaponi is no different from other regions in terms of disease outbreaks,\u201d said Gamkrelidze.
\n\u201cIf we carry out comprehensive epidemiological analysis, I am convinced we will see that the level of the spread of diseases is much lower here than in other districts,\u201d he said.
\nBut no large-scale analysis has even been carried out in Zestaponi that could allay local people\u2019s fears.
\nLike the murky financial situation of the company that runs the plant, and the way its products are sold, what is really happening to Zestaponi residents\u2019 health remains yet another mystery.<\/p>\n","protected":false},"excerpt":{"rendered":"