Liberia's mining sector: Stimulating post-war reconstruction?

Prior to the year that civil war broke out in Liberia in 1989, one of the major sources of income and employment – especially among local people – was the country’s rich and vast iron-ore mining sector. The sector accounted for almost 60 per cent of the country’s revenue in the national budget annually, with ordinary Liberians with no formal education especially heavily dependent on the sector for their livelihoods since it was a major source of employment in the country.

But the civil wars in 1989 and subsequently in 2003 interrupted this formal access of employment and ravaged the sector, thus scattering the hopes of most Liberians who heavily depended on the sector for their survival, with almost 85 per cent unemployment and a large section of the population dependent on external aid.

Not only were ordinary Liberians victimised, but the central government was incapacitated in several ways since mining accounted for a large portion of the country’s total budget. It became impossible for the government to meet its social responsibility to the people such as building schools, hospitals and paying civil servants.

Following the civil war – which ended in 2003, subsequently enabled the elections in 2005 and ushered in the first African woman President Ellen Johnson-Sirleaf – the new democratically elected government took steps to revive the sector.

President Johnson-Sirleaf, in announcing her government’s plans to resuscitate the sector, said: 'We are trying to open the mining sector to create employment for our people and boost revenue generation. As some of you are aware, unemployment is a problem and not just for our country but the sub-region as a whole, and one way we can change this is to provide job opportunities. For me, I think the mining sector is one way out.'

Putting her words into action, the Johnson-Sirleaf government continued with the deal that was negotiated with ArcelorMittal by the regime in power five months before the Sirleaf government took office. With the investment estimated to be close to US$1.5 billion, the deal set the stage to create 3,000 jobs, 20,000 indirect jobs for ordinary Liberians and the refurbishing of a port and roughly 250km of derelict railway that was once considered to be the economic lifeline of the Liberian economy. But this was interrupted by the global recession, thus delaying operations, especially towards creating the much-needed employment.

Nevertheless, the contract was renegotiated in April 2007 after it emerged that its terms were not as economically favourable as originally anticipated. The terms of the new contract include: market prices for iron ore (which addresses one of the main concerns that allowing the company itself to set the price might have effectively given it control of royalty rates and tax payments); and the removal of a five-year tax holiday (an exemption through a ‘stabilisation clause’ from new human rights and environmental laws).

In February this year, ArcelorMittal also unveiled a broad corporate social responsibility framework that includes the following:

- Contributing US$3 million per annum to benefit local communities through an innovative community development fund
- Carrying out environmental studies and producing the first ever biodiversity map of parts of the unique rainforest of the Nimba mountain range, information that will now be made publicly available to researchers and NGOs
- Implementing a robust compensations programme for communities affected by the rehabilitation of its railroad
- Creating an annual scholarship fund of US$200,000 that will be for advanced studies for Liberian college graduates
- Support the development of a mining and geology department at the University of Liberia
- Providing free medical care and education for all Liberian employees and their dependants as well as providing the local community access to its schools and hospitals
- Working with the Liberian Extractive Industries Transparency Initiative (EITI) to help Liberia become the first African nation to be designated EITI compliant

But the Indians are the not only actors interested in Liberia’s mining sector.

What many may consider to be the biggest concessions deal ever in the history of the country was signed between the governments of Liberia and the People's Republic of China (PRC), a deal to enable China Union to mine in Liberia's central mining region signed during the recent visit by the PRC top brass in April 2010. The agreement, valued at US$2.6 billion, is believed to provide a major boost to the once thriving mining sector that will set the stage for massive employment of ordinary Liberians and provide the government with local revenue capacity.

Deputy Minister of Commerce of the People’s Republic of China Fu Ziying, who led the high-powered Chinese government delegation, including business executives, committed and demonstrated China’s interest in the reconstruction development of Liberia.

Apart from the China Union agreement, Chinese Deputy Commerce Minister Fu signed five other agreements with the Liberian government amounting to US$8.8 million. Other agreements include:

- An Agreement on Economic and Technical Cooperation providing 60 million yuan of gratuitous assistance to the Liberian government
- Exchange of letters – zero-tariff treatment with import duties of 60 per cent of commodities originating from Liberia to China to have total exemption
- Exchange of letters – technical cooperation project with the Liberia Broadcasting System, with the Chinese providing five experts to the broadcasting system to provide maintenance of the facilities and training for the station’s technicians
- Exchange of letters – for the provision of 10 million yuan by the Chinese government for additional medical supplies to a regional hospital in northern Liberia to support its operation
- Exchange of letter – provision of 1.5 million yuan in medical equipment to the China–Liberia Malaria Prevention and Treatment Center by the Chinese government
- Exchange of letter – provision of 3 million yuan of malaria medicines to the Liberian government by the Chinese government.

These agreements are something which many ordinary Liberians consider as a clear demonstration of Chinese commitment to assist the country to recover from the ashes of its 14-year civil war and revive hope among economically marginalised Liberians who depend on mining for their livelihood.

Samuel Mulbah, a miner with 20 years experience, is one of those who expresses relief that the signing of the agreement would improve his material circumstances through the mining sector, since the civil war forced him out of a job for several years. 'I am happy over the agreement because this is good news for our country, especially for those of us who are professional miners. I consider the agreement as a dream come true for someone like me, because I am sure to get employment now and should this happen, I will have earning to take care of my family.'

Others, like Jennie Gayflor, who resides in central Liberia where China Union’s operation will be concentrated, see the signing of the agreement as a move that would reduce the vulnerability of the youths to be used by politicians for selfish reasons.

'Since this agreement will absorb most of our youths here in Bong County [central Liberia], it will reduce the risk of violence and theft because it will benefit the youths to get employment and place in the position to earn and care of their needs. Most of these youths are self-supportive and to start such a major concession operation here would actually reduce their vulnerability to get involved in crime,' Gayflor, a primary school teacher for many years, said.

During the signing ceremony, Deputy Minister Fu emphasised that this proved the long-standing bilateral relations between the two countries and assured the post-war nation of China’s continuous assistance to the recovery efforts of the nation.

For her part, the Liberian leader said that the presence of the 42-member Chinese delegation and the agreements signed signalled the interest of Chinese President Hu Jintao and the commitment and dedication China attaches to Liberia as a country emerging from war.

The timing of the Chinese visit and the signing of the iron-ore deal is strategic for Liberia’s post-war reconstruction. While both the Indian and Chinese deals signal a significant moment in Liberia’s position in attracting foreign direct investment towards revitalising the war-torn economy, it also indicates that the Liberian government does not mortgage assets over 25-year concessions and the wealth of country which does not benefit ordinary Liberians.

At the moment expectations are running high among locals, who are exhausted from the war and who also want to rebuild their lives, that such deals are going to change their material circumstances. While this demonstrates a positive attitude among ordinary Liberians, our government must be emphatic that the terms of the deal with the Chinese benefits all and not only a few political and economic elites. Like we have seen in the ArcelorMittal contract that was renegotiated, we must also ask for transparency with the Chinese and be willing to renegotiate certain terms of the deal which are not favourable to the social and economic benefits of Liberians.

Moreover, while it seems that there will not be any competition among the two companies because they have separate areas to operate their concessions, this does not mean that there will be no implicit competition between the two companies, and hence China and India to gain favour from the Liberian government. Indeed, this means that the Liberian government needs to be on its guard if it does not want to lose the advantage and capitalise on the gains to be made out of this deal, even if it means exploiting the rivalry between China and India.

In the end it is not how much investment Liberia attracts to resuscitate post-war reconstruction but ensuring that such investment is channelled in the right way so that Liberia does not become vulnerable to another civil war, which must be avoided at all costs.

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* Patrick Wrokpoh is a journalist based in Monrovia, Liberia. He was one of four journalists selected for the African Journalist Study Tour conducted by the Fahamu's Emerging Powers in Africa programme in April 2010.
* Please send comments to [email protected] or comment online at Pambazuka News.