Tackling climate change in Africa is too serious an issue to be left to national governments, Jean-Pierre Elong Mbassi, secretary general of United Cities and Local Governments (UCLG) Africa, said in an interview.
Liberia: President Weah on a yellow as economic woes mount
Investors and international partners are increasingly worried about Liberia’s governance and the attitude of the former football star who became its president. George Weah faces several hurdles, including a negative business climate, political uncertainties, and suspicions of favouritism.
It is 5:20 p.m. in Libreville on October 12, when George Weah addresses some 60 Liberian expatriates in Gabon.
He responds to accusations from the opposition who are planning mass demonstrations on December 21 to demand his resignation, while also defending his plans around infrastructure, a free university and respect for freedoms. Weah is preaching to the converted as he calls for civility.
- “Liberians must remain peaceful and give us a chance to show what the government can do,” he argued.
2,400 km away, there were mixed reactions from Liberians in Monrovia to the live broadcast on Facebook.
This is the fifth official trip – in as many months – of the Head of State, alongside several controversial figures, including remnants of Ellen Johnson Sirleaf’s presidency and former protectors of Charles Taylor – whose former wife, Jewel Taylor, is George Weah’s vice-president and constitutional successor.
The diverse collection of people who accompany the Liberian leader on his travels, and in his conduct of the State, is not the result of chance. It reflects the alliances that led him to the presidency in January 2018 (winning 61.5% of the votes), after three failures.
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“An inadequate business climate”
Indeed, the private sector is bogged down, confronted with “an inadequate and uncompetitive business climate, political uncertainty, and concerns about governance and corruption,” according to the International Monetary Fund (IMF). Between unexpected tax evasion, increased intermediaries, and delays in decision-making, companies are suffering.
- “Doing business here is becoming ruinous…I had started a beverage company, but it had to shut down because of the poor health of the economy,” laments Amin Modad, head of the MI Group which saw turnover fall by 40% this year.
“Political uncertainty and slippages” have had “a considerable impact on the economy over the past two years,” the IMF points out. An illustration of these “slippages” is the government’s impulsive decision to increase internet fees from $2 to $10 per gigabit as of March 2020.
- “We pay an average of US$20 million in taxes each year. This surcharge alone represents $32 million out of a turnover of $63 million,” explains Mamadou Coulibaly, Orange Liberia’s general manager. The firm has filed a complaint with the Supreme Court against the decision.
This hostile climate has already led some companies to reduce their exposure.
Ivorian agro-industrial group Sifca, or Firestone, one of the country’s largest private employers and a historical pillar of the local economy, plans to lay off 13% of its workforce before the end of the year.
Firestone, a subsidiary of Japanese tyre manufacturer Bridgestone blames the move on falling rubber prices, excessive overhead costs, and low production. In 2016, the multinational estimated that it had paid $1 billion in tax revenue to the country over 12 years.
Malaysia’s Sime Darby, a palm oil giant which has operated in the country since 2009, announced its outright withdrawal in August. The firm claims it’s no longer able to make its investments grow due to stricter standards after Ebola. Out of the 220,000 ha of palm and rubber plantations, only 10,000 ha have been planted.
- “We were unable to provide them with the necessary land. If they cannot develop, they cannot reinvest,” admits an official of the Local Investment Agency.
Other firms are no longer hesitant about their decision to leave Liberia.
“At the time of the elections, more than 200 entities had expressed interest in investing. The list has since been significantly reduced,” says the same official from the Local Investment Agency. Moreover, Ivorian employers are unsure about plans to embark on an economic mission in mid-November.
Suspicions of influence peddling and favouritism
Is this avalanche of bad news due, exclusively, to the mistakes of Weah’s team?
- “It’s a complicated country, and I’m not sure that under Sirleaf or any other [person] the situation would be better,” notes a business lawyer who is critical of Weah, whose style, personality, and entourage attract criticism.
In addition to his many official trips in private jets, and his taste for luxury, the president is accused of rarely being the first one into the office in the morning…
His loyalty to those who supported him throughout his career, and his long journey to the presidency, has multiplied the circles of power around him, aggravating suspicions of influence peddling.
Shops at Roberts International Airport have allegedly been promised to Ghanaian entrepreneur Angela Diala List, while road concessions were granted to Lebanese businessmen Shawki Fawaz and Mohamad Bittar, or offered to Bukinabè Mahamadou Bonkoungou. Rumours of favouritism towards George Weah’s friends and acquaintances regularly make headlines in the press.
- “You can’t blame the president for everything, and you have to give him time too,” says Amin Modad, the head of the MI Group.
Liberia’s civil war killed more than 250,000 people between 1989 and 2003 while Ebola killed another 4,800 people between 2014 and 2016, plunging the small economy ($3.25bn in GDP in 2018) into recession.
Falling international aid
Liberia is also suffering from the decline in international aid – from 19.3% of GDP in 2016 to 14.3% this year – and the departure of UN soldiers, who “injected nearly $150 million a year into the economy and supported many small businesses,” said an entrepreneur in Monrovia.
- Growth declined from 2.5% in 2017 to 0.4% this year, according to the IMF.
- Inflation jumped by 11 percentage points over the same period to 24.5%.
- Barely 5% of the country’s roads are paved.
- 51% of the population live below the poverty line.
The agricultural, manufacturing and service sectors are all in the red. “These three sub-components have shrunk by 3.4%, and as the economy is in decline, this drop is putting pressure on the government’s ability to generate taxes,” says Daniel K. Boakye, World Bank country manager.
“The recovery of agricultural activity remains difficult in Liberia after the war and the Ebola crisis, particularly because infrastructure has been destroyed. This has nothing to do with Weah’s government,” warns Luc Boedt, general manager of the agro-industrial group Socfin, which has two plantations in Liberia and 5,000 employees.
- “In many concessions, the services [medical care, schools, rural infrastructure, etc.] that are the responsibility of the state must be provided by the private sector. This is not new. But this comes on top of a difficult economic situation, low commodity prices and very aggressive activism on the part of some NGOs that discourage investors,” says Boedt.
The mining sector, the only survivor
According to the World Bank, only the mining sector posted growth of 7%, thanks to the presence of groups such as gold specialist Hummingbird Resources and steelmaker ArcelorMittal. In September, the latter had indicated that it would invest $500 million to extend the life of its Yekepa iron mine near Guinea.
The Indian group Sethi Ferro Fabrik recently invested several million dollars in the construction of the first steel bar plant in Gardnersville.
- “It will meet the country’s steel needs for reconstruction and export, especially to nearby countries,” says Upjit Singh Sachdeva, Consul General of India.
Despite low debt levels (38% of GDP), the government has no room to manoeuvre.
Its limited budget is only $526 million for 2019/2020, compared to $570 million for the previous financial year. The choices and transparency of the Weah administration raise questions about why 53% of public spending is made outside the officially approved budget.
The proposed reforms are slow to take shape. This is the case with the free undergraduate university, announced in October 2018 at the same time as an ambitious Pro-Poor Prosperity and Development Programme (PAPD).
A “historic” law of 2018 to give Liberians access to property has also progressed slowly, while the legal vacuum around the land has so far benefited private groups and the American-Liberian elite.
The reforms cannot be implemented without the financing of a national register of community lands, which faces much uncertainty.
In this context, outsize spending commitments can shock.
This is the case for the huge loan contracts worth a total of $956 million for the construction of 800 km of roads with Eton Finance – a financial company registered in Singapore, and later Hong Kong – and the Burkinabe company Ebomaf. At present, no one knows if they have been cancelled.
Fall of the Liberian dollar and inflationary spiral
Moreover, the remedies administered have not stopped the fall of the Liberian dollar and the inflationary spiral. To contain the depreciation of the local currency, the number of banknotes in circulation must be reduced by repurchasing a portion with US dollars borrowed from the Central Bank of Liberia (CBL).
But, of the US$20 million mobilised between July and October 2018 to be injected into the economy, US$5 million was used for other operations, according to the American firm, Kroll. This has raised fears of embezzlement.
As for the Liberian dollars thus recovered, which were to be kept for one year, they were put back into circulation six months later, limiting the effect of this measure. This was done without the agreement of the CBL.
To reduce inflation, the President wants to print new notes and replace counterfeit notes in circulation.
Here again, Liberians and international institutions do not hide their concerns.
In 2017-2018, senior CBL officials, including Charles Sirleaf, son of the then-President, had printed Liberian $16 billion “for their own use and benefit”.
Charged in March, former CBL Governor Milton Weeks and his collaborators, Doctor Hagba, Richard Walker and Joseph Dennis, are in prison, while Charles Sirleaf was released on health grounds.
The president opened a consultation space at the beginning of September. He asked his advisor, a former World Bank official and former Foreign Minister Toga Gayewea McIntosh, to organise a national dialogue on the economy.
At the end of the debates, a series of recommendations were issued, which the President undertook to follow within three years.
Among the most immediate are the adoption of the Customs Code, the renegotiation of external debts, the valuation and payment of domestic debt, the recapitalisation of the Central Bank, and the improvement of the management of external aid.
Finally, a high committee of national and foreign experts, not yet appointed, will have to carry out a quarterly review of the progress of the measures.
A reform programme developed with the IMF
Will this be enough to stabilise the country? In any case, time is of the essence.
“The authorities face the possibility of a forced and abrupt adjustment when domestic and external financing options are exhausted,” the IMF teams warn.
At the end of October, the IMF agreed on a reform programme with the government. The implementation of these reforms will be a condition for the granting of an extended credit facility.
Among the measures requested by the IMF are: “vigorous efforts” to strengthen governance and reduce corruption; rationalisation of the public wage bill, which absorbs two thirds of the budget and 10% of GDP; formulation of “realistic budgets”; reduction in the use of debt and tightening monetary policy, “with a view to reducing inflation to a single figure by 2021”.
Will IMF pressure change the situation? There are some indications that this is the case. After five months of procrastination, George Weah accepted Nathaniel R. Patray’s resignation as Governor of the CBL at the end of October. Patray was promoted to Governor in 2018, after Milton Weeks resigned.
His replacement is to be appointed soon. The Bank’s workforce, which according to some sources has doubled since 2018, will also be reduced.
“CBL’s workforce level is not sustainable, but the final figure [for post reductions], which has not yet been decided by the Board of Governors, should not exceed 10% of its total payroll,” the institution said in early November.
The press had reported the departure of 50% of the teams, but the new limit suggests that the IMF’s message has been heard.
Donors are concerned. Ambassadors from the United States, Germany, Norway, Sweden, France, Ireland, the United Kingdom, Japan, and the European Union warned President Weah about the misuse of donations.
The World Bank has ordered Finance Minister Samuel Tweah to repay nearly $3.3 million to fight Ebola.
The UN, for its part, has asked the Minister of Presidential Affairs, Nathaniel McGill, to clarify suspicious transactions surrounding the use of the organization’s funds.