Why Liberia’s Natural Resource Curse is More Dangerous than Ebola

Ismail Qaiyim Liberia, Sub-Saharan Africa

Liberia's only railroad, built in 1963 to transport iron ore

Liberia’s only railroad, built in 1963 to transport iron ore from the northern mining town of Yekepa to the southern port of Buchanan, stands in Yekepa, Liberia, on Saturday, Feb. 23, 2008. Liberia is the center of ArcelorMittal’s strategy to boost profits by producing its own ore. The company, reacting to a fivefold jump in costs since 2001, is scouring the globe for deposits and plowing $6 billion into nations such as Senegal and Mauritania with histories of civil strife. Liberia was torn by mortar fire and reports of ritual killings five years ago. (Photo by Pauline Bax/Bloomberg via Getty Images)

As the world monitored the deadly Ebola disease in Liberia with heart wrenching concern amidst daily coverage, underlying conditions that entrench Liberia in a deathly cycle of poverty remain detached from the public narrative.

A newly released report on the political economy of the mining sector reveals that Liberia’s heavily militarized extractive industry earns too little from its iron ore exports.  Produced by the Sustainable Development Institute (SDI), a Liberian national NGO that focuses on natural resource governance, the report demonstrates that the general relationship between citizens, the state, and multi-nationals in the mining sector is largely defined by a pattern of systemic intimidation and exploitation.

While the Ebola epidemic represented an urgent threat that required an immediate response, the equally salient crisis in the natural resource sector remains muted to the level of a second class public policy concern.

Exporting iron ore is expected to power broad based development and eradication of poverty in Liberia, a nation whose capital, Monrovia, was recently found to be the most impoverished city in the world. Despite six iron ore mining concessions with an estimated US$13 billion in investment value having been signed into existence following Liberia’s 13 year civil war, the sector has not brought about any real changes to Liberia’s economy.

According to the 2011/12 Liberia Extractives Industry Transparency Initiatives (LIETI) report, mining only accounted for 7 percent of Liberia’s overall GDP. Even though figures from Liberia’s Ministry of Internal Affairs show that iron ore extraction companies have paid more than US$50 million specifically earmarked for communities impacted by mining since 2006. Project impacted areas remain thoroughly impoverished and continue to suffer from the negative environmental and social effects of mining operations.

Liberia’s economy remains chronically dependent on foreign aid, yet its highest grossing industry does not provide for the economic benefit of its populace or act as a catalyst of growth. The three largest iron ore mining giants insulate their respective steel parent companies from the volatile price of iron ore on the global market. In effect, iron ore leaves Liberia for international markets of consumption cheaply, while the country that sources the raw material remains steeped in a matrix of poverty and ineffective governance.

This cycle of induced indigence is sustained through policy mechanisms at the national level that give generous tax breaks to iron ore companies and tax below the suggested limits in the Amended Liberia Revenue Code. Mining agreements in Liberia often include royalty payments on Direct Ore Shipments leaving Liberia and income taxes on annual corporate profits considerably below what is mandated in the national tax code. The three iron ore giants China Union, ArcelorMittal and Putu Iron Ore Mining (PIOM) pay 25 percent income tax on annual corporate profits as opposed to the 30 percent stipulated in the revenue code.

Although providing incentives for Foreign Direct Investment through a lighter tax regimen is a common development strategy utilized by late industrializing countries that rely heavily on exports of raw commodities, policy experts such as those from the Africa Progress Panel maintain that this policy reinforces Liberia’s ‘natural resource curse.’ These inconsistencies in Liberia’s overall policy framework show that there is no coherent strategy for reducing unemployment and creating economic growth that impacts the citizens.

As companies fail to meet legal obligations to communities and consistently engage in abusive practices, those justifiably disaffected communities are subsequently denied redress through the official channels of representation. The end result has been a harrowing cycle of explosive citizen led protests followed by crackdowns from government paramilitary forces. Ultimately community demands remain unanswered and companies are not censured for failing to meet their obligations to communities or even those to the Liberian government.

Protests in the ArcelorMittal concession, one in April 2014 and one in July 2014, over lacking employment benefits, environmental degradation, and promised development benchmarks wherein protesters blocked roads ultimately resulted in peaceful activists being imprisoned and intimidated by government representatives. The July protests in Tokedah were violently dispersed by state security forces.

The existing policy framework that favors foreign investors over the vulnerable Liberian populace and a culture of impunity in the mining sector has created a volatile environment not seen since the days preceding the Liberian civil war.

“The overwhelming support and response to Ebola is encouraging, yet silence in the face of rapid abuses by multi-nationals and government officials tasked with representing communities facing land grabs and intimidation is deafening” says the organization’s Director – Nora Bowier.

If Liberia is ever to transcend its place as a rentier economy and avoid regressing into violent instability, interested parties must act to address the problem of poor governance and chronic exploitation by multi-nationals. The report from SDI provides a useful roadmap for addressing Liberia’s alarming status quo.

This article was co-written by Silas Kpanan Ayoung Siakor who is the founder and lead campaigner of the Sustainable Development Institute (SDI) in Liberia.