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Liberia: It Could Be Awesome But…

Liberia has ideas of creating an economy of budding entrepreneurs, but it must first overcome its infrastructural problems.

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On a small street off Tubman Boulevard, the main thoroughfare in Monrovia, five red and white umbrellas shade stalls tended by five young men, all of them university students. In between classes, they sell mobile phone scratch cards and exchange grubby Liberian and US dollars. One of the students, 27-year-old Lorenzo Garmonyou, wakes up at 6am every morning and retires at around 1am in a cramped room he shares with his five brothers who also toil on the same corner.

Garmonyou is an economics student at the African Methodist Episcopal University. Like many young Liberians whose education was delayed during Liberia’s long and brutal civil war that ended eight years ago, he is struggling to put himself through school. From his small earnings he puts aside $2 a day to pay for his tuition and keeps a dollar to live on. Garmonyou is uncertain about the future in a nation whose economy is yet to create jobs for the few Liberians who are trained and educated.

Many unemployed graduates like Emmett Chea, a 24-year-old with an economics degree, complain that a culture of “nepotism” makes it difficult for qualified graduates to attain experience and jobs. He says they are yet to really feel the benefits of the billions of dollars of investment that came into Liberia during President Ellen Johnson Sirleaf’s first term. Analysts and government officials say that while there is a lot of work ahead to make Liberia’s economy one that benefits ordinary Liberians, the future still looks positive for Africa’s first republic.

Since Sirleaf’s election victory in 2006, Liberia has been relieved of its $4.6 billion debt by the International Monetary Fund (IMF) under the debt waiver of the Heavily Indebted Poor Countries Initiative (HIPCI). The country has drawn close to $19 billion in investment mainly in the form of mining, agricultural and oil concession agreements, from major companies such as ArcelorMittal, BHP Billiton, Union Sime Darby and oil majors like Total and Chevron.

With single digit inflation, a projected economic growth rate of 9.4% for 2012, up from last year’s 6.9%, there is an upward trend. All the more remarkable, so soon after a war that saw Liberia suffer one of the severest economic collapses recorded by any nation.

Despite this significant economic growth, Liberia remains among the poorest countries in the world, according to the United Nations Human Development Index. This is underscored by the extremely low rate of employment: only 15% of workers are employed formally and 79% of those employed are without a steady income, according to the Ministry of Labor. With 70% of the population below the age of 30, youth unemployment is regarded as one of the biggest threats to Liberia’s future.

In the wake of last year’s tense election, Sirleaf, now into her second term, acknowledged the need to create jobs and development.

In her annual address to the 53rd Legislature, she asked:

“How, then, do we transform our old economy from a plantation or concessionaire economy perceived to run for the benefit of a few, to a modern, inclusive economy?”

This big question is one that alludes to the difficulties of the past. Liberia’s 14-year civil war killed 250,000 and left the nation’s infrastructure in ruins. It drew into sharp focus the role economic disparities play in fomenting conflict.

Critics of Sirleaf’s government emphasize that income distribution has remained virtually the same since Liberia’s Poverty Reduction Strategy was introduced in 2008, with recent World Bank figures showing three out of four Liberians are still living below the poverty line. While there have been reports of a growing middle class in Africa—a recent report by the African Development Bank estimated that 4.8% of Liberia’s population can be considered middle class—this is the lowest percentage on the continent. The government is currently undertaking a project called Liberia Rising 2030, to replace the Poverty Reduction Strategy, with the goal of making Liberia a middle-income country over the next 18 years.

Liberia’s economy has been plagued by inequality since the nation was founded by freed American slaves in 1822, known as Americo-Liberians, who returned to Africa to create a new land of Liberty. Instead they ended up subjugating the native population and subjecting them to forced labor on plantations. Under the leadership of President Winston V.S. Tubman during the 1950s, Liberia had the highest economic growth rate in the world through its exports of iron ore, rubber, coffee and cocoa; yet it also had an extremely high poverty rate.

Liberia’s rapid economic growth and lack of national development led Robert Clower to publish an economic study on Liberia titled Growth Without Development that is now a seminal text in the study of post-colonial third world economies. During this time, growth merely benefited the few Americo-Liberians living in major cities such as Monrovia and excluded the rest. Yet even today, Liberia’s recent infrastructural restoration and development—electricity, paved roads, hospitals and running water—can be seen mostly in the seaside capital, Monrovia.

“Liberia traditionally has been a concession-based economy,” says Chairman of the Liberian National Investment Commission (NIC) Natty B. Davis.

“It’s an economy that produces what it doesn’t consume and consumes what it doesn’t produce to a certain extent.”

Davis says that granting major concessions to multinationals is to fuel economic growth to help reconstruct the country’s shattered infrastructure.

The civil war destroyed an estimated 75% of Liberia’s infrastructure, and left behind a generation of lost youths with little education. The war saw the end of the Mount Coffee Hydroelectric Dam, Liberia’s only source of electricity, which looters later stripped. The Liberian Electricity Commission started running again in 2010, but uses costly giant diesel-powered generators and charges 54 cents per kWh: the highest rate in Africa and among the highest in the world. Next month, with the backing of European partners the government will begin a four-year project to restore the dam to pre-war status that will cost an estimated $180 million.

Matt Jones is the director of a USAID-sponsored project called the Sustainable Marketplace Initiative. It works alongside the NIC and focuses on creating entrepreneurs in post-conflict countries. Jones says that energy is key to diversifying Liberia’s economy and creating opportunities for local businesses.

Ebeneezer T. Williams, 34, a university graduate and young entrepreneur who owns a profitable small printing business in downtown Monrovia, faces problems because of lack of electricity

“It would be so much easier and cheaper to start a business here if you had access to electricity. People often rarely break even because their fuel bills are so extraordinary,” he says.

Jones argues that the major concessionaries will not necessarily create the jobs needed to cure Liberia’s unemployment problem, but will yield opportunity.

“Right now is a golden opportunity for Liberia. All of these big multinational companies are coming in and these local businesses have the biggest opportunity they have probably ever had to get contracts. These international organizations are actually very willing to talk to these businesses, work with them, try and get contracts with them, but they are still not going to bend on their standards,” says Jones.

Vaanii Baker, Program Officer for Investment Climate with the International Finance Corporation (IFC), says it is essential that Liberian businesses find a way to link up.

“If the country cannot figure out how to plug those small and medium enterprises (SMEs) into the growth that’s happening with the large concessions, they’re not going to realize the job growth that’s desperately needed in Liberia. The job growth is more than an economic issue in this country. With our recent history, I think it is more of a security issue as well,” says Baker.

Jones and those in government hope that increased levels of foreign investment will help fuel the rise of an entrepreneurial culture in Liberia, and in turn, economic growth. He sees signs of a more stable business climate emerging.

“The post-conflict situation has also played a role in this [lack of an entrepreneurial culture],” says Jones. “I think that people didn’t really have the opportunity to be an entrepreneur even if they wanted to and I think that people here are starting off on a basic level. But I believe that every single month and year after the conflict is just that much more positive for entrepreneurs and the commercial sector.”

Students gather on the University of Liberia campus. University graduates are faced with a high rate of unemployment in Liberia

Chid Liberty is a successful Liberian entrepreneur who co-founded a garment business called Liberty and Justice that exports its products to the States. He argues that entrepreneurship has a fundamentally important role to play in addressing poverty and rebuilding Liberia’s economy. Liberty’s father was the former ambassador to Germany under Samuel Doe, remembered by many as a brutal dictator. During the 1980s, Liberty and his family went into exile, but he returned to set up a business. The business employs 250 women in Liberia and Ghana, and is looking to expand. He says in order to meet his current demand, he would need to employ 2,500 workers.

“One of the core reasons we started our company is because we thought that what every developed economy has done so well is started really large industries that employ masses of people with low skills and education. There is no way that we are going to send all of these people back to university to get degrees to become journalists—give that up; the farm and the factory are the two places I think we need to place this lost generation of people,” he says.

Liberty says that Liberia needs to create an entrepreneurial class to generate jobs and bridge the deep economic divide in Liberia.

“Income inequality and people not having jobs are the biggest threats to Liberia’s security and all of our livelihoods.”

Building this class has become a focus for the Ministry of Commerce and Industry. Last year, the ministry officially launched its first micro, small and medium enterprises (MSMEs) policy called “Poverty Alleviation and Wealth Creation through Small Enterprise and Development” and is working with the NIC and its NGO partners to help entrepreneurs get their businesses off the ground.

Yuri Sobolev, the resident representative of the IMF, says that creating value-adding industries is the way forward for Liberia.

“Only the formal sector can create gainful employment opportunities, and value addition is the only way employment is going to be generated. For that you need better infrastructure,” says Sobolev.

“The government needs to create and enable environment [for the growth of businesses], physical infrastructure such as roads and electricity, to strengthen the rule of law with regard to business, contract enforcement and property rights.”

The government has made efforts to improve the business climate. With the help of the IFC it has set up a Business Reform Committee, with five committees focused on areas of the business environment that need to be reformed: electricity, finance, tax rates and procedures, customs and corruption. Liberia is also expected to connect to the Africa Coast to Europe (ACE) undersea cable system in October, which will bring its slow internet speeds up.

“While Liberia has many challenges ahead of it,” Baker says, “there is no reason it cannot become a middle-income country by 2030 and rival the booming economies of its West African neighbors.

“There is awesome potential for Liberia—it’s limitless. We’ve seen the development Ghana has had over the last few years… Within the next 10 years, if the government does the right things and puts in the right infrastructure, both soft and hard, in place, there is no reason why this country cannot surpass Ghana in terms of economic development and growth.”

Clair MacDougall is a journalist currently based in Monrovia, Liberia.

Monrovia, Liberia

Liberia’s Gold Rush

In Sinoe County, in south-eastern Liberia, a handful of companies are

exploring land which is known to have large gold deposits; but which, due to the 14-year civil war, has remained untouched except by artisanal miners. The exploration area falls within the Biriman Craton, which holds gold and diamond deposits and extends through Ghana, Côte d’Ivoire, Guinea, Liberia, Mali and Burkina Faso. While exploration is in its early stages, companies believe they could strike upon larger deposits in coming years.
“We believe the gold potential here is enormous—just look at other countries that fall in the Biriman Craton. Our target is to be mining by the end of 2015,” says Tim Illingworth, manager of Hummingbird Resources, a company operating in the region.
Hummingbird Resources was founded in November 2005 and was listed on AIM in December 2010, raising $40 million. Hummingbird has a land package of 7,000km2 in Liberia and has currently only explored around 1% of that. The company reported finding 1.765m oz gold in September 2011, which they say dramatically increased on February 1 after a find of 2.052m oz, bringing the current total up to 3.817m oz. The company, founded by Dan Betts, claims it has made the largest gold discovery in Western Africa in the last year. Hummingbird currently holds a three-year exploration license and is in the process of negotiating a 25-year mineral development agreement with the government.

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