Friday, August 24, 2007

Liberia's Abundant Natural Resources: A Blessing and a Curse and Surf's Up

For my dear friend Steve who through his own courage and support from the government of President Ellen Johnson-Sirleaf can begin the long journey home to help rebuild Liberia.

“In Liberia, there is an immense territory
rich with resources. Notwithstanding this,
there are no improved or advanced methods
of agriculture; the soil is scarcely stirred;
there are no carts, wagon or other wheeled
vehicles, no railroads; the mineral wealth
remain almost untouched; and I am told on
good authority that, in spite of all this
wealth right at the very door steps of these
people, even school teachers and ministers
wear clothing manufactured in the United
States or Europe, and eat canned goods that
come from Chicago or Germany.”

– Booker T. Washington, The Negro in the
South: His Economic Progress in Relation to
his Moral and Religious Development, 1907

I have been working on a piece about Chinese investments in Africa and the resource curse that continues to plague the people of the countries where China is most active on the African continent when a BBC News article caught my eye. Anything that can help the government of Liberia’s President Ellen Johnson-Sirleaf gets my immediate and undivided attention.

BBC News World Affairs Correspondent Mark Doyle published an article about the resource curse and challenges facing the country of Liberia recently. This small West Africa nation is of very special interest to me (and hopefully many other people) for a great number of reasons, not least of which is the leadership and courage of Liberia’s President Ellen Johnson-Sirleaf and the Liberian people who helped get her elected to office.

In my opinion America, Europe, and democratic nations worldwide strong economic and diplomatic support for the country of Liberia at this critical stage is as important as any other challenge facing us in Africa or the Middle East. The same goes for the people of Sierra Leone who have just completed the first round of a violence-free, democratic election for the country’s parliament and the presidency. Congratulations to the voters of Sierra Leone and especially to my good friend Bimbola of the Visit Sierra Leone website and blog.

Mark Doyle’s article for the BBC summarizes a July 2007 study “Land Grabbing and Land Reform: Diamonds, Rubber and Forests in the New Liberia" co-authored by the Canadian advocacy group Africa Partnership Canada and the Association of Environmental Lawyers of Liberia.

Excerpts from "‘Curse’ of Liberia’s Resources" by Mark Doyle, 22 August 2007

A few miles outside Monrovia, capital of the West African state of Liberia, the humid scrubland gives way to seemingly endless vistas of tall, geometrically spaced rubber trees.

This is one of the largest rubber plantations in the world. Drive on, and after a few hours you will find yourself in deep virgin forest full of tropical hardwoods. It is the largest remaining portion of the once-great Upper Guinea Forest, which used to spread across West Africa.

Look carefully through the forest cover and you will find miners panning for gold and diamonds. Soon enough, you will then come across a railway that was built solely for the evacuation of iron ore. It leads to a vast iron-ore mountain range in the north of the country that is currently being rehabilitated with a $1bn investment. Welcome to a resource-rich, but still dirt-poor Liberia.

A new report has highlighted the economic dangers facing countries that rely heavily on the export of raw materials. The report concentrates on Liberia, but other economists say it highlights a problem prevalent in countries as diverse as Venezuela, Burma and Russia.

The study of Liberia - by the Canadian lobby group Partnership Africa Canada and a group of Liberian lawyers called Green Advocates - looks at the country's history of plantation-style and mining-camp exploitation of tropical timber, rubber and minerals.

It concludes that the raw materials sector requires a major re-organisation so that more of the population has a stake in it. And it warns that Liberia has an urgent, once-in-a-lifetime opportunity to address this issue, with its first democratically-elected government protected by a temporary United Nations peacekeeping force.

End - Begin New Excerpt----------------------

Liberia's modern-day economy was developed and exploited by expatriates and the small elite of "Americo-Liberian" freed slaves who colonised the country in the 19th Century and ended up dominating the indigenous Africans.

"The elites and the government structures they erected," the report says, "came to be seen as illegitimate, engendering first resentment, and in time hatred. "The support given by rural youth to several of the militia groups early in the civil war," the authors write, "is testimony to this fact."

In this sense, the war was not the cause of the poverty of Liberia but a consequence of it, and the reliance on the export of raw materials was a factor in creating that poverty. Some economists go further, saying the endowment of natural resources in both poor and middle-income countries is one of the "traps" that prevents them from growing as rich as developed nations.

In his recently-published book The Bottom Billion, British economist Paul Collier argues that resource riches are rarely a path to sustained growth - except perhaps in places with a low population and massive windfall wealth such as the Gulf oil states. More typical examples of the so-called "resource curse" are in countries like Nigeria, Venezuela or Russia.

Here, oil and gas resources - relatively easy pickings for the governments and elites - have "crowded out" the potential for economic growth brought about by manufacturing or service industries that have created so many jobs in countries like China and India.

Economists have a term for this crowding-out. They call it "the Dutch disease" after the effects of North Sea oil on the Dutch economy.

"It goes like this," explains Mr Collier. "The resource exports cause the country's currency to rise in value against other currencies. This makes the country's other export activities uncompetitive." Yet these other activities - manufacturing for export, for example - might have been the best vehicles for sustained economic growth. The volatility of prices of other raw material exports from poorer countries - especially but not exclusively in Africa - is also not conducive to long term investment and growth.

End BBC News Excerpt (external links to above article added for clarity)

Excerpts from “Land Grabbing and Land Reform: Diamonds, Rubber and Forests in the New Liberia”, edited by Ian Smillie and Alfred Brownell. July 2007

Liberia’s Natural Resources: A Blessing and a Curse

Liberia is a country blessed with natural resources. Its natural endowments include diamonds, gold and iron ore, extensive stands of tropical timber, abundant water and cropland, and a climate and soil conditions conducive to the cultivation of cash crops such as rubber, cocoa and coffee. Thanks to very recent discoveries, Liberia can even boast oil and gas reserves, of undetermined but potentially sizeable proportions.

And yet despite this vast storehouse of natural wealth – or because of it – Liberia remains one of the poorest and least developed places on earth, with per capita GDP income of US$152 (2004), 40% of the adult population illiterate, and life expectancy at birth of under 40 years.

Liberia, arguably more than anywhere in the world, is a darkly resplendent example of the resource curse, the phenomenon by which countries blessed with natural resources grow more slowly, stay poorer and offer less to their people than their comparatively resource poor neighbours.

The mechanisms driving this counterintuitive situation include the volatility of revenues from the natural resource sector, currency appreciation that renders non-resource sectors uncompetitive, and the political corruption that often results from the continuous inflow of windfall resource sector revenue. All of these conditions – especially corruption – are or were present in Liberia, and all contributed in greater or lesser measure to its impoverishment. But to all these can be added one other, greater than the rest: war. This too was arguably a result of the very richness of the country.

Widespread public anger at the mismanagement of the country’s natural resources was one of the proximate causes of the Liberian civil war. In the capital an economic and political elite, many though not all of American descent, grew wealthy from resource contracts, or by appropriating in a variety of questionable ways the funds derived from resource royalties. In the Liberian hinterlands, the broad mass of people saw resources vanish, with no roads, schools, or health care clinics coming back in return. The elites and the governing structures they erected came to be seen as illegitimate, engendering first resentment, and in time hatred. The support given by rural youth to several of the militia groups early in the civil war is testimony to this fact.

While the corrupt appropriation of natural resource wealth helped engender the civil war, the sheer richness of Liberia’s natural treasures served to prolong it. Diamonds and especially timber provided Liberia’s various warlording factions with the hard currency for continued weapons purchases, providing the means to sustain their control over these resource-rich areas, and a reason to continue fighting.

The fighting which began in 1989, ceased only in 2003, with the departure of Charles Taylor and the arrival of UN forces. The peace, however, remains fragile, threatened by ethnic divisions, generational and gender strife and, most importantly, the unresolved issue of who will exploit, and who will benefit from Liberia’s natural resources.

The election of Ellen Johnson-Sirleaf as President of Liberia has provided a brief window of opportunity, during which reform of Liberia’s natural resource sector can be undertaken. Given the clear link between natural resources and conflict, the importance of these reforms cannot be underestimated.

But just as the importance of reform should not be underestimated, neither should the challenge facing the president, nor the power of the opposition arrayed against her. For the country’s elite, the civil war was a tragic aberration, a nightmare best forgotten. Well-represented in the Liberian congress, and installed in many of the key posts in Liberia’s civil service, many in the Liberian elite see the return of peace as simply a chance to return to business as usual, an opportunity to re-create the Liberia they and they forebears knew, and exploited, for more than a century.

Resource Sector Reform

In its first year in office, the administration of President Ellen Johnson-Sirleaf made significant progress in reforming Liberia’s resource-based and other industries. A key executive agency, the Public Procurement and Contracts Commission (PPCC), reviewed 95 of the 98 contracts signed by the 2003-2006 National Transitional Government of Liberia (NTGL).1 Of these, the PPCC recommended approving 52 contracts unchanged, canceling 27 outright, and renegotiating 16 contracts, including those for Mittal Steel, Firestone rubber, and a further eight contracts involving Liberia’s nascent oil industry.

In the forestry sector, the Forest Concession Review Committee examined all of the numerous outstanding concessions and claims to Liberian public forest lands, and determined that not one conformed to Liberian law. Accordingly, on February 6, 2006 as one of her first acts in office (Executive Order #1) President Johnson-Sirleaf declared void each and every one of the numerous “concession agreements”, “management contracts”, “non-concession operator permits”, “forest management utilization contracts”, and “salvage permits”.

End excerpt – Begin new excerpt


When the UN Security Council imposed sanctions on the export of rough diamonds from Liberia in 2001, it did so in the knowledge that diamonds were being used to keep the murderous regime of Charles Taylor in power, and to finance destabilizing incursions into Sierra Leone. The sanctions would be lifted only when Liberia could show significant progress towards compliance with the Kimberley Process Certification Scheme (KPCS), which has governed all international rough diamond transactions since 2003.

In the years since the sanctions were imposed, continued monitoring by a UN Panel of Experts and local civil society organizations, and periodic inspections by the Kimberley Process, were largely successful in bringing an end to medium and large scale mechanized mining in Liberia. The end of hostilities in Sierra Leone meanwhile and the resumption of legitimate exports from Freetown seem largely to have ended cross-border smuggling of Sierra Leonean diamonds.

Small scale alluvial mining continued in Liberia under the sanctions regime, at times disguised, other times in plain sight. In Sinoe County, miners at the BOPC site mined and sold diamonds openly, with little or no fear of government interference. Alluvial miners in more accessible parts of the country such as Lofa and Nimba counties also continued to mine for diamonds, making use of the cover of class C (artisanal) gold mining licenses. Diamonds and gold often occur together in Liberia, so the pursuit of gold provided a convenient cover, even when it was clear from the equipment being used that the main target of the operation was diamonds. Inspectors from the Ministry of Lands and Mines seemed to turn a blind eye to such activity.

The sale of rough diamonds does fall under government scrutiny, with the result that – at least in Lofa and Nimba counties – the rough diamond trade went underground during the sanctions period. Diamonds mined in these counties still travelled to Monrovia, where the usual collection of exporters shipped them out to overseas markets, or held onto them until the sanctions might be removed. With the end of sanctions, the hope is that most of these diamonds will re-surface and will be exported legally with Kimberley Process certificates attesting to their origin.

How many diamonds will surface is an open question. The lack of accurate statistics makes estimating the size of Liberia’s diamond sector an exercise in guesswork. Data from the 1980s – the last decade before war broke out and before statistics-gathering broke down – show annual exports of 200,000 – 300,000 carats per year, worth approximately US$20 million to US$30 million. About half of these diamonds are thought to have been smuggled in from Sierra Leone and other parts of West Africa.

A best guesstimate then, following sanctions, and assuming that most of Liberia’s diamond production comes out into the open, is that the diamond sector is likely to produce on the order of $10 million to $15 million worth of rough diamonds each year. The export tax has been set at a rate commensurate with those of neighbouring countries to discourage smuggling, particularly from Sierra Leone. Combined with permit fees and assorted other levies, total government revenues from the diamond sector are likely to come in at around $500,000 to $750,000. This will be enough to cover the costs of regulating and administering the sector, but not much more.

Barring the discovery of a major new diamondiferous Kimberlite pipe, the diamond sector is thus unlikely to greatly enrich government coffers. Managed improperly, however, the artisanal diamond sector has a vast potential to negatively affect both the external image of Liberia and the internal peace and security of the country. Avoiding the latter two outcomes will require careful management by the Ministry of Lands, Mines, and Energy, and much greater coordination and cooperation with the diamond sector’s civil society stakeholders.

End excerpts from "Land Grabbing and Land Reform: Diamonds, Rubber and Forests in the New Liberia". Download the full report from the Partnership Africa Canada website to read more.

08/26/07 This Just In: Tell Charles Taylor We Are Surfing!

While double-checking links and content in my post above I came across a blog by a development worker in Liberia named Kevin. In my additional resources links below there is a article by Johnny Dywer titled
Postcard from Robertsport: Tell Charles Taylor We’re Surfing. The piece is about the great surfing to be found at Robertsport, Liberia and how some of the local youth are trying to get involved in the sport despite their problems with poverty and lack of materials to build high-quality professional surfboards. Note in the article how the surfers from the various NGO's and UN staffers treated the locals during Dywer's visit to the area.

My Liberian friend Steve and I have discussed Robertsport ever since I had read that June 2007 article at TIME, as I have been fascinated with how beautiful it must along that coastline and the commercial development potential for the area. Robertsport for me exemplifies the outstanding tourism potential for both Liberia and Sierra Leone along the Atlantic Coast, home to some of the finest tropical sandy beaches and most beautiful coastlines to be found anywhere on the planet.

Kevin (the lucky dog) has been down to Robertsport in Grand Cape Mount County and has posted photos and text about this former seaside resort at his blog. To boot he has a great video trailer (YouTube) of a soon-to-be-released documentary film about surfing the fantastic waves off the coast of Liberia at Robertsport. Don’t miss Kevin in Liberia posts
Sliding Liberia Trailer, Surfing Robertsport, and The South African Concept of ‘Ubuntu’ Present in Liberia. Thanks Kevin, thanks loads for these valuable photos and your insights.

The background story about the documentary Sliding Liberia, a film produced by Stanford Ph.D. candidate Nicholai Lidow and undergraduate student Brian Caillouette can be found at Stanford University’s The Cardinal Enquirer. Both of these guys grew up near the Pacific Ocean in California and are avid surfers who are using their love of the sport to help generate interest in sustainable tourism in Liberia. They organized a small but world-class team of filmmakers and professional surfers and kayakers for this project. Read “A Distant Shore: For two socially-conscious surfer dudes, Africa is more than just a perfect wave” by Marissa Osterkamp.

Also visit the Sliding Liberia project blog at MySpace for video trailers, photo slideshows and info on how the documentary post-production and release is progressing. The pro surfer news site Mixed Plate Special published an article about the documentary Sliding Liberia this past August. The Afro-Jazz soundtrack for the documentary is from the Chicago Afrobeat Project, and they really rock along with Liberia’s “perfect waves” off the coast of Robertsport.

“Tell Charles Taylor we’re surfing off Robertsport dude, where the Liberian people and the waves are just perfect without him!”

Related articles, blog posts and other online resources

Partnership Africa Canada – The Diamonds and Human Security Project
Diamonds and Human Security Publications: Occasional Papers Series
Land Grabbing and Land Reform: Diamonds, Rubber and Forests in the New Liberia

BBC News
Curse of Liberia’s resources by Mark Doyle, 08/22/07

Association of Environmental Lawyers of Liberia
Green Advocates Liberia

Global Witness: breaking the link between natural resources, conflict, and corruption
Natural resources in conflict: Liberia
Global Witness media library: Liberia

To Have and Have Not: Resource Governance in the 21st Century
War crimes trial of Gus Kouwenhoven to commence in the Hague
Timber, Taylor, Soldier, Spy

Dangerous Liaisons Liberia

Center for Global Development (CGD)
Address by Liberian President Ellen Johnson-Sirleaf, 03/20/06
Liberia’s Progress, Potential, and Challenges for the Future (video and text)

Council on Foreign Relations
A conversation with Ellen Johnson-Sirleaf (audio and text), 03/21/06
CFR Liberia reports and articles
Postcard from Robertsport: Tell Charles Taylor We’re Surfing, 06/05/07

The Entrepreneur (Cameroon)
Liberia joins Extractive Industries Transparency Initiative

The Extractive Industries Transparency Initiative (EITI)

Global Policy Forum
Timber in Conflict: The Dark Side of Natural Resources
New Dawn for Liberia’s Forests (BBC News, 08/12/06)

E-LAW Impact Newsletter
Protecting Natural Resources in Liberia (features Green Advocates Liberia)

UNMIL (United Nations Mission in Liberia) – Environment and Natural Resources

Natural Resource Issues in Liberia

Financial Times (UK)
Book review of Oxford economist Paul Collier’s “The Bottom Billion”

Special reports on natural resource extraction and armed conflicts in the DR Congo

Mvemba Phezo Dizolele (fellow at Pulitzer Center for Crisis Reporting)
In Search of Congo’s Coltan, 08/08/07 (Pambazuka News)
Pulitzer Center for Crisis Reporting: Mbemba Dizolele
Pulitzer Center for Crisis Reporting: Africa projects
Mvemba’s personal blog Eye on Africa and his bio

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Monday, August 06, 2007

African Economics 101: George Ayittey and Ngozi Okonjo-Iweala address the freshman class of 2007

Some of you may remember the excitement expressed by many of Africa’s bloggers and friends over the TED Global conference held at Arusha, Tanzania in June 2007. I included several references to some great blog posts and other online resources about this conference Africa: The Next Chapter here at Jewels. Well the TED Talks video crew has completed the post-production work for the presentations delivered by some of Africa’s and the world’s leading thinkers and videos are now available at the TED Talks website for everyone to enjoy. TED has provided file types for viewing the videos online and offline including high resolution downloads for people with high bandwidth Internet connections (Note: the high-resolution MP4 files > 200MB).

I highly recommend that you have a look at Dr. George Ayittey’s talk titled “
Cheetahs vs. Hippos for Africa’s future” and Euvin Naidoo’s opening address “Africa as an investment”. If you haven’t already done so please view Dr. Ngozi Okonjo-Iweala’s March 2007 talk in Monterey, California “How to help Africa? Do business there” and her June speech at the Arusha, Tanzania conference titled “Let’s have a deeper discussion on aid”. As a matter of fact have a look at all of the TED Talks featured on the Africa: The Next Chapter site. This is African Economics explained like you’ve never heard it done before, with passion and frankness and no holds barred, in a way that (almost) everyone can understand___ unless you are a Hippo and don’t want to know. This is Economics in Africa 101!

In case you are not aware of exactly who these people are I have provided brief bios below along with additional online resources about the speakers and the TED Global conference in Arusha. I don’t know about you, but as I work hard to learn more about economic challenges for African countries and examine the many investment and business opportunities that exist in Africa, I find myself wishing that I had paid much more attention in my Economics 101 classes back at university. A good basic education in economic theory and practices has become a must for business and political leaders in the 21st Century, and some outspoken economists have become the equivalent of media stars on the Net and in the blogosphere. Economics today has become downright sexy.

Euvin Naidoo: Africa as an investment (TEDTalks)
BIO for Euvin Naidoo

Euvin Naidoo is a VP of South Africa's Standard Bank. He's also president of the South African Chamber of Commerce America; in this capacity, he works with leading corporations and governments to strengthen trans-Atlantic economic ties.Euvin Naidoo wants to change your mind about Africa. Much of the investment banker's work centers around reversing false or misleading impressions of the continent, which are widespread through the western world. Armed with facts, figures and a philosophical outlook, Naidoo helps his clients -- and the wider public -- see a more nuanced picture of the Africa he knows: one that's large, diverse and full of potential. He offers persuasive reasons why the continent's challenges should be reframed as opportunities, and why investing in Africa can make great business sense.Based in Manhattan, Naidoo focuses on acquisition finance and private-equity transactions for emerging markets in Latin America and Africa. A third-generation South African, he spent four years as a consultant with McKinsey & Co., and holds an MBA from Harvard.

George Ayittey: Cheetahs vs. Hippos for Africa's future (TEDTalks)
BIO for Dr. George Ayittey

Ghanaian economist George Ayittey was a voice in the wilderness for many years, crying out against the corruption and complacency that -- more than any other factor, he believes -- are the bedrock problems of many troubled Africa states. "We call our governments vampire states, which suck the economic vitality out of the people," he says.

His influential book Africa Unchained has helped unleash a new wave of activism and optimism -- especially in the African blogosphere, where his notion of cheetahs-versus-hippos has become a standard shorthand. The "Cheetah Generation," he says, is a "new breed of Africans," taking their futures into their own hands, instead of waiting for politicians to empower them. (He compares them to the previous "Hippo Generation," who are lazily stuck complaining about colonialism, yet doing nothing to change the status quo.)

Ayittey is a Distinguished Economist in Residence at American University in Washington, DC.

Ngozi Okonjo-Iweala. Let's have a deeper discussion on trade (TEDTalks)
BIO for Dr. Ngozi Okonjo-Iweala (Brookings Institution press release)

Ngozi Okonjo-Iweala, a fellow at the Brookings Institution, was Nigeria's Finance Minister and then briefly Foreign Affairs Minister from 2003 to 2006, the first woman to hold either position.

During her tenure, she worked to combat corruption, make Nigeria's finances more transparent, and institute reforms to make the nation's economy more hospitable to foreign investment. The government unlinked its budget from the price of oil, its main export, to lessen perennial cashflow crises, and got oil companies to publish how much they pay the government. Since 2003 -- when watchdog group Transparency International rated Nigeria "the most corrupt place on Earth" -- the nation has made headway recovering stolen assets and jailing hundreds of people engaged in international Internet 419 scams. Okonjo-Iweala is a former World Bank vice president who graduated from Harvard and earned a Ph.D. in regional economics and development at MIT. Her son Uzodinma Iweala is the celebrated young author of Beasts of No Nation.

"Ngozi Okonjo-Iweala is a heroine not just of Nigeria, but of the entire continent. Her crusade against corruption has put her life at risk."
The Independent (UK)

Related blog posts, articles, and online resources

TED Global 2007 Conference in Arusha, Tanzania – TED Blog
TED Global bloggers look back at worldchanging days, 06/07/07
TED Global in Africa: Day 4, reports from the bloggers, 06/07/07
TED Global 2007 aggreagated articles from bloggers-in-residence
George Ayittey’s critique of Coconut Republics vs. Banana Republics, 06/04/07

Ethan Zuckerman (co-founder Global Voices Online)
Ngozi Okonjo-Iweala with the last word on aid, 06/07/07
Bono vs. Mwenda, 06/04/07
Getting Rowdy with Andrew Mweda, 06/04/07

White African
Dropping the Bombshell on Aid Development in Africa, 06/04/07
We can take Africa back one village at a time, 06/05/07
Bono and George Ayittey at TED Global, 06/05/07
Meeting the Inventors, 06/06/07

The Center for Global Development
2nd Annual Richard H. Sabot Memorial Lecture (June 2007)
Dr. Ngozi Okonjo-Iweala's keynote lecture "Corruption: Myths and Realities in a Developing Country Context"

Foreign Policy Passport blog
An astonishing fact about Africa, 08/01/07

iPenso by Pablo Halkyard (New York University)
China could buy every public traded firm in Africa, 07/29/07

The Economist
Into Africa: investors eye globalisation’s final frontier, 07/29/07
The aid evasion: raising the ‘bottom billion’ by Professor Paul Collier

Paul Collier, Professor of Economics, Oxford University Dept. of Economics

Director of the Center for the Study of African Economies

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