Close the Mines in Liberia – All of Them!

The Perspective
Atlanta, Georgia
February 27, 2022

No concession has benefited Liberia in a meaningful way in the last 70 years! Why does Liberia continue down this path when concessions only take from us and add nothing substantial to the country but destroy everything that protects us? Natural resource management must have a locally grounded, sustainable utilization component to it; extraction and exportation cannot be the only options.

There must be a confluence of mutual benefit when natural resource extractions and people interact where total consideration is given to locals, land, water, air, minerals, forests, fisheries, environmental consequences, and not just to these foreign firms who are here temporarily.

What plans have been instituted to ensure sustainability when these natural resources are depleted?  Natural resource extraction cannot be done on a whim; decisions related to this most important national issue must weigh the totality of the benefits, costs to people, future generations, and the environment. Better yet, have we built and strengthened our governing institutions to protect us from these predatory, multi-national corporations who exploit every weakness in systems such as ours? Is Liberia positioned to even begin negotiating these deals? The answer is no! Then why not close the mines until we are equipped to negotiate on an even playing field?   

There is an appreciation that some will naively argue that the mines give us the revenue we cannot get from elsewhere. That’s not true – we have so many options but are unwilling to explore them. Please read “A Guide to Increasing Liberia’s $500M Budget to over $2B in Ten Years” or “Common Sense Economics for Liberia” to consider presented options that do not necessarily involve mining.

Moreover, these extractions cost us way more than the illusion of a fair contract agreement that is associated with these transient companies.  Compare this to how much they have taken from us over the last 70 years – almost 210 billion dollars (this is a conservative estimate of about $3B/year total, excluding the costs of environmental degradation, and people.) – to the pittance they have given in return! How can society continue to accept such grand theft without any resistance? Liberians must open their minds and eyes now and change course or prepare to face a hellish form of poverty, the violent consequences of global warming, and be permanently relegated to the bottom of every developmental indicator!

Natural resource extractions come with so many burdens that the typical Liberian is yet to understand.  There are real costs far above what is quantifiable – think “deindustrialization”. Take for example the pollution of our air and waters, displacements of entire communities, increased unexplained sicknesses, the lack of opportunities to develop real skills that’ll begin lifting our people out of poverty, etc. Liberians intentionally put themselves in a disadvantageous position while still expecting the results of diligence. Why do we think profit-seeking multinationals will care about us and not their bottom line?  
Most responsible countries with large natural reserves such as ours institute sustainable resource management processes before any extractions begin. Countries that maximized the benefits of natural resource wealth first build the platforms to protect them against exploitation and economic chaos – Liberia has done the opposite. It is not too late, however, to reverse course and look at concessions in a different light. Luckily, there are great resource management institutional platforms like Botswana’s and Norway’s that we can model ours after and set up a more robust system that ensures we get the most out of our natural resources.

It is no secret that in the absence of adequate institutions to govern our natural resource extractions, negative economic growth becomes the result – compare countries from the chart below. The stronger the governing institutions the higher their growth potential – there is a direct correlation. Liberia ranks on the bottom and experiencing negative growth by comparison because we are not prepared for extraction.
This phenomenon or the causation of the Natural Resource Curse happens because of complacency in leadership and the influx of unmanaged, free-flowing natural resource monies without future considerations or a clearly defined national agenda. Countries do not develop under poorly managed conditions in resource-rich countries because they have not leveraged their position to counter against “long-term economic trends, price volatilities, local currency devaluation, permanent crowding out of manufacturing” – refusal to diversify the economy, autocratic and oligarchic institutions that lack adequate controls to adjust for long-term adverse effects on locally developed export commodities against stronger foreign currencies. The question becomes: How well are you positioning your domestic market to compete using your resource monies as a buffer? Or are countries such as ours just depending on natural resource revenue to keep flowing in perpetuity? What is your plan when the natural resources are fully depleted? Case in point: the Bomi Hill debacle.

Consider what the likes of Botswana and Norway have done. Botswana, realizing the serious economic consequences and volatility associated with not planning to manage your natural resource wealth, mitigated this by establishing the Public Service Debt Management and Revenue Stabilization Fund, a nationally legislated profit-sharing arrangement that benefitted all involved. They recognized that resource wealth was not just for the current generation, but for their children as well. Botswana protected the flow of revenue from their resources by spreading it out and not receiving it all at once; income is received in stages throughout the future with serious consideration given to “land and water management, biodiversity conservation and future sustainability of industries like agriculture, tourism, fisheries”, etc. The country planned to continue and sustain its economic growth even in the absence of natural resource revenue.  Botswana has planned so well that they have built a robust system, respectfully positioned itself on every human developmental index, increased their purchasing power parity (PPP) from $365 in 1960 to over $18,000 today! Liberia stands at around $1300. What can Liberia learn from this?

Norway, on the other hand, was more progressive in its approach to resource management. In fact, they slowed and, in some instances, entirely halted extractions until strong mechanisms were established to prevent the worst manifestation of the resource curse. The Norwegian System was built to ensure their sizeable petroleum resources were protected and preserved to sustain local poverty reduction outcomes.

This approach has led to higher economic growth and a higher GDP per capita, measured in purchasing power parities with arguably the highest standard of living in the world. This is not magic; it is planning done right and consistent execution with a singular intention: Economically lift the Norwegian Population and create a balanced society where every citizen benefits from the proceeds of natural resource wealth while at the same time giving full consideration to the environment!

Furthermore, they built local capacity and industry, signed no lopsided concession deals with predatory multi-nationals, promoted, and funded local industrialization schemes with total inclusion of all their people. Consequently, the Norwegians recognize that concessions that heavily lean towards extractions and exportation do not work! So, they legislated and compelled companies to add value, develop domestic resource generation, industrialize using locally available human capital – develop people where needed, focused on managing that value locally with full appreciation of the direct effect on their economy and how those resources squarely improve the lives of their people. All of this was organized through institutional guidelines not controlled by an anarchical faction. The lessons here are simple: Do not extract your resources until your institutions are developed enough to protect and manage them.

Conversely, a country that is heavily reliant on rent-seeking as a major contributor to its revenue base is usually bound to fail, especially when the rent is entirely used to run government and support the lifestyle of kleptocrats as in the case of Liberia. Liberia continues its downward spiral because we entirely seek to develop using natural resource wealth without any reciprocal contribution to production, local value addition, and appreciation that this “hand-to-mouth” style of governance disrupts market efficiencies and creates pricing fluctuations that largely disadvantage a larger sector of the population. This is exacerbated by the elections of those least prepared to fix the problems, thus further collapsing the systems and increasing the level of ineptitude, corruption, and embezzlement throughout the governmental structure!  

Compare Liberia’s Total natural resource rent as a percentage of GDP. Source World Bank

With that said, what can Liberia do now to stop the bleeding and reorient the country to protect the remaining resources we have left? There are several things we can do but first, we must close the mines where we have not committed, revisit every concession agreement with the intent to renegotiate/close them if there’s a breach on the part of these concessionaires, and sign no new agreements until we do the following:

1. Institutionalize resource management with limited intrusion from politicians and decentralize government operations where local people have a big say in who operates in their backyard.
   
   
2. Delegate a department to concession contract monitoring and enforcement; make sure this department reports to the public quarterly with updates on pertinent completions relating to concession agreements.
   
   
3. Design a nationally scrutinized and approved vision around natural resource extractions – ensure people improvement and national elevation are the centerpiece of this vision.
   
   
4. Immediately pass is 50/50 profit-sharing legislation for all-natural resources; make this heavily slanted to local value addition, human capital improvement, and push for domestic industrialization where locals control the lion’s share. Ensure that this profit-sharing is non-negotiable. Leave the minerals in the ground if these agreements are not going to benefit us.
   
   
5. Strengthen your hand by capping natural resource revenue usage at 20%; diversify your economy by putting the greatest focus on human capital development, expanding industries such as agriculture, fisheries, local production, industrialization, and national self-sufficiency. Adopt fiscal rules where structural budget surplus from natural resource wealth go directly to capital investments to develop national infrastructure and expand your revenue base – your policies should ensure zero dollars from natural resource go towards running the government.
   
   
6. Hedge proceeds from natural resource wealth on the open international market and get your best and brightest financial minds to monitor and establish a competitive bidding system for our resources – remove all politics from specialized areas to build strong institutions.
   
   
7. Establish a transparent sovereign wealth fund and invest those monies in secured, foreign securities that will guarantee a share for our children and guard against price volatility and domestic inflation
8. Create a self-sustaining domestic market and a revenue generation base large enough to fund government operations absent natural resource monies
   
   
9. Clearly define your developmental agenda and be uncompromisingly aggressive in your execution – ensure your plan is poverty alleviation focused and its core centerpiece be the protection of the Liberian People.

Despite what some think, Natural Resource Curse is not inevitable. It can be mitigated with strong institutional mechanisms that are focused on poverty eradication, resource protection, and national development while at the same time considering future generations. Significant social, political, and economic challenges are brought about in resource-rich countries mainly due to artificial reasons that are exacerbated by the lack of strong governing institutions, corruption, and in the case of Liberia, a poorly educated ruling class who cannot fully comprehend the ramifications of their bribe-taking actions. We must move away from this “you eat, I eat” school of thought before it comes to the point where we do not eat at all.  

Liberians must awaken to the realization that our resources are going fast with near-zero benefits and never to be replenished: from Mount Nimba in the North, logging companies scattered all over the Southeast, to rubber plantations in Central and Lower Liberia, to gold and diamond mining by foreigners at Bea Mountain, Masawo-Zolowo-Zorzor, Bukon Jedeh, Cestos River, Putu Range-Zwedru, and Saint John’s River-Kokoya. We are being pillaged and yet we sit unbothered.  The effects and consequences of depletion of natural resources are numerous including water shortages, the global effects of deforestation, pollution, higher death rates, destruction of farmlands, etc. Liberia must reverse course now or prepare to be turned into a wasteland filled with disease, bone-crushing poverty, and a people left to the mercy of hand sanitizer-carrying NGOs.

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References:
Amin, M. (2021, December 21). Dutch Disease vs. Nigerian Disease. World Bank Blogs. https://blogs.worldbank.org/psd/dutch-disease-vs-nigerian-disease
Fetzer, T. and Kyburz, S. (2021, December 19). How Can Countries Escape the Natural Resource Curse? Center for Global Development. https://www.cgdev.org/blog/how-can-countries-escape-natural-resource-curse-answer-democracy
Frankel, J. (2021, December 16). The Natural Resource Curse: A Survey of Diagnoses and Some Prescriptions. Harvard Kennedy School of Government. https://wcfia.harvard.edu/files/wcfia/files/jfrankel_natural_resource_curse.pdf

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