Liberia to Lose if the MDA is not Extended & AML Walks Away…… A Case for the Passage of the Extended MDA
By Democracy Watch News Desk
Monrovia Liberia: Since the birth of Liberia’s democratic republic, there is no doubt that natural resources have been the premium source of Liberia’s economy and as well vastly contributed to the improvement of livelihoods. And one of such natural resources has been iron ore.
Undoubtedly, iron ore mining was the main backbone of the Liberian economy from the early 60s to the near end of the first Liberian republic in 1980. During such time, some economists estimated that iron ore contributed more than 60 percent of export earnings and roughly 25 percent of GDP – placing Liberia on the global pedestal as the largest exporter of iron ore in Africa and third in the world. But dispiritingly sad, the 14 years of brutal civil upheaval witnessed Liberia’s productive infrastructure – mainly mining virtually collapsed and decimated.
After the cessation of the 14 years of horrendous civil war, Liberia lapsed into a dire economic situation – making life so unbearable for struggling citizens as the government herself was heavily challenged in raising the needed financial resources to support economic development, attract investments in the mining sector that would onward create employment opportunities for its workforce and boost the country’s revenue envelop and underpin growth.
In no time, ArcelorMittal, the world’s leading steel and mining company, significantly stepped in to wipe away some of our country’s economic woes when she in 2006 announced to Liberia and the world over, to commit a billion-dollar investment in Liberia. This singular commitment on the part of ArcelorMittal in no small way monumentally restored Liberia’s lost investment climate and helped to boost donors’ trust in the political leadership and our country that was once tainted and branded as an epic center of conflict and a pariah state amongst the comity of nations, due to the bloody civil unrest.
AML’s billion-dollar investment in Liberia at the time when we were in such dire economic situations represented a huge gateway that unlocked the door for private sector investment support to Liberia’s socio-economic recovery.
Background to AML Operation in Liberia
It would interest you to note that ArcelorMittal came to Liberia in 2006 but didn’t export iron ores until 2011. Sadly, after three years of exporting ores, in 2014 the Ebola virus disease struck the country – slowing down productive economic activities but when the nation was recovering from the scourge of the epidemic, the global price of iron ore on the market plummeted thus impeding the company’s prospect of recovering its investment, let alone talking about profits. So, it goes without contradiction that mining iron ore at the time was like losing.
Since the company started mining ores in 2011, they have not recorded their investment yet before even making profits due to all the turbulences they have been facing. The company was spending more on mining than it was selling. However the situation then, ArcelorMittal has always been one of the biggest contributors to Liberia’s economic development since post-war. Others would have folded up and leave Liberia in crisis but AML chose to stay even at the peril of their investment.
Some of AML Achievements in Liberia
From 2006 up to 2008, the company created over 3,000 jobs for Liberians both directly and indirectly through several construction projects. By 2013, the total number of jobs created by the company rose to 5,000 because of the phase two construction – thus narrowing the unemployment gap in Liberia which portended danger for the country’s future. It was only when the country was badly hit by the Ebola disease that caused a decline in the number of jobs but again, after the country recovered from the scourge of Ebola in 2015, the number of jobs that dropped to 2,000 increased to 3,500 in 2021 just from AML’s operation alone.
Besides providing jobs to Liberian citizens, the company is providing 45 million towards the budget per annual as payment to the government of Liberia to support economic development. Also, AML is providing 3 million dollars as a corporate social development fund to affected counties per annual where the company operates. Interestingly, up to date, it is no secret as public record is available to prove that the company has paid $45 million towards the corporate social development funds for the affected communities.
As Liberia struggles to build the human capacity of its youthful citizens that account for more than 60 percent of the country’s population according to LISGIS’ 2008 population and housing census report, ArcelorMittal, the largest foreign investment company in postwar Liberia, has disbursed $1.7 million to support its scholarship program that has so far sent 29 Liberian students to seek advanced education oversea. Besides, the company also constructed the Science College of the Nimba Community College and paid 50,000 per annual as support to the Science College in Nimba.
To address the vocational and technical gap in the labor market, the company reopened the Yekepa Vocational and Technical College in 2017 and has spent over US $7 million to refurbish a state-of-the-art training facility. The enrolment has surged to 159 students with the first batch of 45 students that recently graduated in 2021.
With the unending desire to give more to education in Liberia, something other mining companies before AML or any other companies that existed for over 5 decades have not done. The company also reopened two elementary schools and a high school in Yekepa that are providing quality education to ArcelorMittal employees’ children and as well students who live around the surrounding communities. Also, employees who live in Buchanan, receive reimbursement for their children’s tuition fees.
Why we think the Extended Mineral Development Agreement must be Ratified
The government under the stewardship of President Weah is heavily challenged economically as the living condition of the people is worsening day-by-day. Unemployment is skyrocketing and poverty is quadrupling – evident by the World Bank data released on July 30, 2020 – which placed the poverty rate at 68.9 percent in 2020 as opposed to 55.8 percent in 2019. Most indices have echoed that more people are to fall below the poverty margin if the right policy measures are not taken. Foreign aid to Liberia and many other African countries have dropped. Recently, Liberia failed on indicators or benchmarks to access the US government Millennium Challenge Compact grant for developing countries that would have helped to boost our economy and lessened the constraints on our budget. Now, we are left with no alternative than to heavily depend on domestic revenue collection.
In the face of all these pressing challenges slowing socioeconomic progress, ArcelorMittal, the largest contributor to Liberia’s economic development, MDA will end in a few years. AML has asked for an extension of the Mineral Development Agreement (MDA) between the government of Liberia and her.
The extended Mineral Development Agreement since September has been languishing in the Legislature waiting on our honorable lawmakers to ratify such an agreement that would extend AML’s investment by additional two decades.
It is no doubt that when the agreement is ratified, it would bring lots of economic dividends to Liberia and help the government address some of its pressing challenges and help alleviate poverty and close the unemployment gap. But sadly, it seems that some state actors and non-state actors are playing regular politics with the ratification of the MDA.
The ore that AML is mining is a low-grade ore. So, the company has decided instead of refining the ores in another country, they are trying to build a concentrator in Liberia to refine iron ores. When that is done, it would create more jobs for the people of Liberia.
To build the concentrator requires additional investment in the tone of 800 million that AML will be investing in Liberia. The refining of the iron ores will add value to the ores AML is getting out of Liberia and correspondently will also increase the revenue and the royalty to the government of Liberia and as well create additional 2,000 new jobs for Liberians to add to the already 3,500 jobs the company has created since 2006.
When the extended MDA before the Legislature is ratified, the current 45 million dollars per annual AML is paying as revenue to the government of Liberia will increase to 80 million dollars per annual, and when the concentrator is built – which will constitute 20 percent of our national budget. Also, AML is increasing the county community development funds from 3 million dollars to 3.5 million dollars given to the three affected counties where they are operating. This, without gainsaying, is going to have a spillover effect.
Currently, 52 percent of all the local businesses AML does that go to Liberia-owned businesses – when the agreement is passed and concentrator built, that percentage stands the chance to increase dramatically.
Economic Ramifications when the deal is not ratified
When the MDA is not extended, Liberia stands the chance of embracing looming economic danger that we are failing to see simply because of the usual political lens we are using to see things that will have a far-reaching toll on our economic development. If AML walks away from Liberia today, over 3,500 Liberians will be out of jobs immediately with the already worsening economic situation ravaging the country. And besides, the 45 million dollars our government is receiving from AML per annual, which is already embedded in the budget, will also disappear immediately. Also, the 3 million dollars that the three affected communities or counties AML is operating are receiving will not come anymore to these communities, and the spillover to the 52 percent local Liberian businesses that AML is giving opportunities to, will be cut off automatically. The annual money AML gives in payment is a huge contribution to the economic development of Liberia that we must not risk losing.
The company is beginning to think that they have been harassed and intimidated by people within the country who are making all sorts of outlandish claims and spewing negative things. The majority of the issues against the company being raised are not national issues but politics.
It has been rumored that some top managers of the company from the UK have begun to think differently giving the impression of what they are getting from Liberia about the company with all the investment they have made without even recording their investment, let alone profits.
This, we believe, is a sad development for our country’s image and for potential investors that may want to come to Liberia.
If we allow those communities issues that can be solved plus the usual politics to renege on ratifying the extended MDA, we are going to be denying over 2,000 new Liberians additional job opportunities and the country over 80 million new revenues to the government for development purposes.
The recent growth in the mining sector has the potential to contribute significantly to employment, income generation, and infrastructure development in Liberia, but if we are not extra careful to treat the issues with AML with almost delicacy, we risk losing the benefits that we would get from the ratification of the extended agreement.
With all the benefits Liberia has enjoyed from ArcelorMittal since its investment in Liberia, and what the country stands to reap if the agreement before the Legislature is ratified, I strongly urge the Legislature to pass the extended agreement without delay.