Robtel Neajai Pailey and Silas Kpanan Ayoung Siakor argue that the most important factor in Liberia’s economic recovery following the Ebola epidemic will not be debt relief and an infusion of aid, but rather an overhaul of the country’s mining sector.
A recent report by the Sustainable Development Institute (SDI) reveals that Liberia earned too little from its mining operations long before Ebola coincided with the steep slump in iron ore prices in August 2014. With iron ore figures at their lowest since 2009—largely due to decreased demand for steel in China—Liberia must look to diversify its economy while holding mining companies accountable.
Six iron ore concessions have been signed in Liberia since the end of armed conflict in 2003, with an estimated value of $13 billion. According to a 2011-2012 report by the Liberia Extractives Industry Transparency Initiative (LEITI), mining alone accounted for 7 percent of the country’s overall GDP and 57 percent of all tax revenue from the extractives industry. While these figures are unlikely to increase in the short-term, there is massive potential to scale upwards in the long-term to improve the living conditions of citizens affected by mining operations.
There has been a call for debt relief and an infusion of aid in the form of grants and loans to mitigate the loss of revenue during Liberia’s bout with Ebola. Yet, the most important formula for economic recovery will be value addition, rigorous tax assessments, collection, and oversight in the country’s mining sector.
Although major investors in iron ore mining shut down operations during the Ebola outbreak, post-Ebola policy and planning must improve conditions under which Liberia attracts foreign direct investment. During a recent visit to the U.S., Liberian president Ellen Johnson Sirleaf said her government would offer Ebola-induced financial reprieve to investors in the form of reduced fuel prices and tax waivers. Yet, Liberia already gives overly generous tax breaks to iron ore investors, which grossly violates the country’s revised Revenue Code. While the Code requires multinationals to pay 30 percent income taxes on all corporate profits, ArcelorMittal, China Union, and Putu Mining—Liberia’s major investors in the iron ore sector—only pay 25 percent.
Liberia must also improve monitoring and evaluation of the iron ore sector. According to the LEITI, the Liberian government relies too heavily on figures reported by iron ore investors. Rather, it should conduct independent assessments of revenues that should be generated from mining operations. Similarly, the legislative review process requires major reforms. In one mining district, residents were only notified of a mining contract signed after it was ratified by the national legislature. This is simply unacceptable.
Too often concession agreements, particularly in mining and agriculture, have led to violations of workers’ rights and conflicts over land. Furthermore, relations between mining companies and the communities in which they operate have become severely strained. Concession companies have hired Liberians as contract laborers, even though mining agreements provide for permanent employment and workers’ benefits such as housing, healthcare, advanced training, and the right to collective organization. Communities also complain about losing access to their farmlands and crops, and the increased militarization of the mining sector.
The recent spate of demonstrations against mining companies led to violent repression by state security forces. Two incidences in 2014—one in April and another in July—marked the increasingly volatile nature of relations between local communities, ArcelorMittal and the Government of Liberia. In each case, peaceful protests turned violent when citizens’ groups blocked access to mining operations because they were concerned about issues of employment benefits, environmental degradation, and infrastructural development. Special security services were deployed to disperse the crowd, and in the case of the July protest, some community members responded by looting and destroying equipment belonging to ArcelorMittal. Armed guards were deployed. The standard practice of the Liberian government has been to silence any form of dissent with the threat of lethal force.
That ArcelorMittal will be downsizing 20 percent of its workforce should be a major cause for concern. Before Ebola, communities impacted by ArcelorMittal’s mining operations often complained that they were not reaping benefits from the company’s social contributions nor were some relocated with proper compensation.
Local communities in Liberia are not the only ones calling for a change in their relations with mining companies. After the war in Sierra Leone, the promise of prospects from mining was fever pitch. In 2013 alone, the country’s 20 percent growth rate was largely due to mining, yet this growth has not translated into better livelihoods for the vast majority of Sierra Leoneans. The Chamber of Mines in Sierra Leone, John Bonoh Sisay, recently urged mining companies to live up to their corporate social responsibility by supporting healthcare systems now and after Ebola. Like Sierra Leone, Liberia could boost the living standards of its 4 million population by improving the management of its iron ore sector.
Although Liberia has not been declared Ebola free, it is well on its way to eradicating the disease. Now is as good a time as any to go back to the negotiating table with mining companies. This time, local communities must be seated at that table.
This post was first published on World Policy blog.
Robtel Neajai Pailey is a Liberian academic, activist and author based at SOAS, University of London. Silas Kpanan Ayoung Siakor is founder and lead campaigner of the Sustainable Development Institute (SDI) in Liberia.
The views expressed in this post are those of the author and in no way reflect those of the Africa at LSE blog or the London School of Economics and Political Science.