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Liberia’s Growing Pains
Published 09/04/2012 by Global Communities
Liberia’s Growing Pains
By Tamasin Ford
This article originally appeared in The Africa Report.
President Ellen Johnson Sirleaf faces a fractious political environment and gaping infrastructure deficits as her government tries to attract foreign investors to boost employment.
In the past six years Liberia has seen unprecedented levels of transparency, democracy and press freedom. The small West African nation with a population of just over four million people and a pitted history of dictatorship and corrupt regimes brought Africa’s first democratically elected female head of state, Ellen Johnson Sirleaf, to the helm in 2006, after 14 years of a devastating civil war. Every facet of society, from infrastructure and human capacity to the rule of law, needed rebuilding. ‘Ma Ellen,’ as she is fondly called by some, had an enormous task ahead of her.
She has not always taken everyone with her. November 2011’s tense and violent election, which ended with opposition candidate Winston Tubman boycotting the second round, hardly delivered a ringing endorsement. For Liberia to extricate itself firmly from the past, where the freed American slave elite who ‘founded’ the country skimmed riches for themselves and educated their children in the US, Sirleaf’s government has to promote inclusion. There is a long way to go. Two peacebuilding projects, the National Palava Hut Programme and the Liberian Reconciliation Initiative headed by fellow Nobel laureate Leymah Gbowee, are yet to take off.
But despite the political differences, Liberia’s economy continues to thrive. It was one of the fastest-growing economies in the world with a real gross domestic product (GDP) growth rate of 6.9% in 2011, the highest in West Africa after Ghana’s. The national budget has quadrupled, and the country reached the Heavily Indebted Poor Countries initiative completion point in June 2010, ridding Liberia of most of its crippling $4.9bn in foreign debt. Economists expect the real GDP growth rate to climb to 9% in 2012. Vaanii Baker of the International Finance Corporation (IFC) says: “If you look at the resources that Ghana has, Liberia has everything Ghana has and even more.”
Much of Liberia’s economic growth has been propelled by the expansion of the mining, timber, rubber and palm oil sectors. Milton Weeks, the head of advisory company Devin Corporation, says that local businesses must be involved to spur growth. “If we’re going to develop the private sector, we can’t leave out the indigenous section, the Liberians,” Weeks says. “It is critical that we get the indigenous private sector developed to create economic opportunities. If we can get that going, then all the other issues – jobs and capital formation – will be much easier.”
He also points to the issue of capacity building. Fourteen years of civil conflict not only took the lives of around 250,000 people, it created a ‘lost generation’ of young people. Around one-third of the population was deprived of access to education and skills training.
The 2008 census shows that seven out of 10 people in Liberia are below the age of 30. This population is struggling to find work.
The latest rubber and palm oil deals have the potential to create a lot of unskilled employment, but not until the trees reach maturity, which means waiting at least another decade. As for the promise of $19bn much of this is just on paper. “It won’t be until 2015 that money starts coming in from mining and then another 20 years for the palm oil,” says Yuri Sobolev, the resident representative of the International Monetary Fund (IMF).
Liberia’s thriving economy is not translating into a strong job market. Just 20% of the labour force is employed in the formal sector, according to a report by the World Bank in 2010, leaving the majority of people to work informally as street sellers, market women and wheelbarrow boys.
An entrepreneurial spirit is, however, blossoming as a result, according to Ciata Bishop, executive director of Liberia’s National Investment Commission. Micro finance loans are on the rise.
Government figures suggest total loans and advances rose by 28% by the end of November 2011 compared to the previous year. The Central Bank of Liberia launched a credit stimulus initiative for Liberian-owned businesses in 2011 and in the same year the government launched the Micro, Small and Medium Enterprises (MSME) Policy to further increase access to finance and training opportunities. “People are now going into banks, something they were afraid to do seven years ago,” says Bishop.
The lack of new jobs will damage the ruling Unity Party, which will go into the next elections in 2017 without Sirleaf as its standard bearer. The next five years should bring vigorous positioning from presidential hopefuls. For the opposition Congress for Democratic Change (CDC) to pose an electoral threat, it will need to stem its own internal divisions. Soccer star George Weah is once again in charge, and another former footballer, George Solo, Weah’s cousin, is the chief organiser of the party. His attacks on the CDC national chairperson, senator Geraldine Doe-Sheriff, caused her to resign in late May.
One issue that the CDC has been campaigning on is graft. In her inaugural address, Johnson Sirleaf declared corruption as the “major public enemy,” calling it a “national cancer that creates hostility, distrust and anger.” In the ensuing years, Liberia’s position on Transparency International’s Corruption Perceptions Index improved from 137th out of 158 countries in 2005 to 91st out of 183 countries in 2011.
However, corruption is still seen as one of the major obstacles to doing business in Liberia. The IMF’s Sobolev says: “Issues of good economic governance will gain more prominence with the discovery of oil,” something that looks inevitable in the next few years. Exploration of the country’s oil blocks is underway, and earlier this year African Petroleum announced a significant find. It may be an uphill struggle for Liberia’s Anti-Corruption Commission. Its commissioner, Frances Johnson Allison, warns that the legislature is not likely to pass an anti-corruption law before 2021.
On the starting blocks
Reform is smoother in other sectors. The IFC’s investment-climate team has been working with the government to introduce reforms in areas of tax, customs, trade, business inspection and investment generation. Organisations like CHF International and Building Markets are working with the commerce ministry to develop and support the growing number of small businesses, and there are several incubation and training initiatives including two specifically aimed at women. A Building Markets study in April found that a quarter of the businesses surveyed have supplied an international buyer. It states there is “a potential for local enterprises to meet the needs and standards of international organisations,” if the government “continues to improve the business climate in Liberia by investing in infrastructure.”
Infrastructure is the key for Liberia’s economic growth, says the IFC’s Baker: “I would say power is the most critical thing holding back improvements in the business climate in Liberia.” Less than 1% of the population has access to modern fuels, the lowest percentage in the world according to the United Nations Development Programme. Before the war, Liberia’s energy supply relied heavily on the hydropower plant at Mount Coffee, 30km northeast of Monrovia. It was completely destroyed in the fighting and what remained was looted, along with the country’s transmission and distribution network.
Reconstruction of Mount Coffee is expected to start this year. In the meantime, the Liberia Electricity Corporation (LEC) generates power with huge generators, and the cost of electricity is exorbitant. At close to $0.60 per kilowatt hour, “our tariff could be one of the highest in the world at this stage,” says LEC chief executive Shahid Mohammed.
The lack of paved roads – little more than 5% of the country’s network is paved, according to Liberia’s 2011 Investment Guide – adds to the cost of doing business, whether for the roadside vendor spending the profits from her soft drink business on ice to keep them cold, or the farmer in Lofa County who wants to transport rice to the capital. “In short,” says Bishop, “There isn’t just one economic challenge facing Liberia.” It is an assemblage of problems related to infrastructure, capacity and economic inclusion that can only be addressed in the long-term.