Favoritism or Special Interest! President Dwight Eisenhower, in his farewell speech, on 01/17/1961, warned Americans about many issues such as protecting special interest.
In Liberia, the warning about special interest came by way of three separate violent actions: the Rights and Rice Demonstration on April 14, 1979; the military coup on April 12, 1980; and the fourteen-year civil war launched on December 24, 1989.
Well, instead of instituting policies that would create a level playing field, President Ellen Johnson Sirleaf government has, for example, allowed real estate owners to inflate rent charged to residents, businesses and government, say her critics.
Are her critics right? Sadly yes, if rent payment is analyzed by using the cost of living of all countries in Africa prepared by Global Poverty Guide. For example, the numbers within in the chart imply that an apartment that rents for $1,000 in New York City will cost $540 in Liberia, $330 in Ghana, $440 in Sierra Leone, and $270 in Gambia.
Certainly, the cost of living in Liberia, one of the highest in Africa, does indicate that elites demand more money from tenants. Source:
How come Liberian tenants pay more money for housing than all of the countries on the list in the West Africa sub region as indicated above? First, there is a family or business relationship between political authorities, and key property owners in the country where government is willing to pay exorbitant high rent for overvalued properties. Second, the government does sometimes waive taxes owed by the landlords and in effect gives public funds (welfare payments) to Monrovia-landlords.
Third, instead of the Ministry of Commerce exercising its authority to monitor rent charged to residents and businesses, it allows Monrovia-landlords to include replacement cost within rental payments. Fourth, real estate owners do pay minimal real estate tax because they deduct replacement cost from real estate taxable income generated from rental buildings that have been in business for over 28 years and, or 40 years. Source:
What is a replacement cost? It is the amount that an owner sets aside to recoup his/her investment and, or replace the original property. However, investors should exclude replacement cost from profit-making buildings on Camp Johnson Road, Down Waterside, located in Taylor Major Compound, etc. (i.e., not personal homes) that have been in business for more than 28 (residential) and, or 40 years (commercial) in accordance with the International Financial Reporting Standards and Generally Accepted Accounting Principles. The Central Bank of Liberia did use the 40-year-rule as per page #15 of its 2015 Audited Annual Report.
Now, as explained above, real estate Investment, unlike investment in diamond, gold, etc., has domestic clients that are easily exploited for different reasons. While Liberian officials do not own any of the 28 governmental rented buildings as seen in the pre-1980 era, real estate owners still wield influence within government circle. Importantly, real estate investment does not only yield quick and huge return, but its “Investment” can be inherited, unlike “Labor Investment,” according to Thomas Piketty, author of a book called “Capital
In The Twenty-First Century.” For instance, the 10 billionaires of Africa such as A. Dangote, $13.8B; Nicky Oppenheimer & Family, $7B; N. Sawiris, $5.6B; etc. got their wealth from real estate and others, but not from Labor Capital such as law, medicine, etc., (Forbes 2011). I have yet to read about any Liberian who is wealthy because of earnings from law, medicine, etc.
Investing to make a profit is good, if the source of the funding is not from government’s coffer. Regrettably, public reports do indicate that many officials used ill-gotten funds to purchase real estate, diamond, gold, etc.
If there is any doubt about officials siphoning government’s resources, please read President Sirleaf’s last State of the Union Address. She stated that she has failed to fight the war on corruption, which she did call as enemy number one in 2006.
Worse, officials do not only use ill-gotten wealth to purchase real estate, but government do not discourage Monrovia- landlords from inflating rent when many expatriates and nongovernmental agencies are in search for residential homes and business-offices. Well, guess what, inflating rental payment does not end with a few landlords, because landlords are now demanding more money from tenants.
The Sirleaf government did not end the practice of awarding favor to real estate owners. In 2006, while asking foreign creditors to forgo Liberia’s US $4.7 B debt, it did use portion of the money received from international donations to give two separate sets of money to real estate owners. But her government did layoff poor salary-earners.
The government saw reason to pay real estate owners arrears in rental payment and abate property taxes investors owed the government, but did not see reason to keep poor salary earners on the payroll or compensate families of doctors, lawyers, engineers, etc. who lost their lives due to the civil war.
Government will always end up increasing income inequality, when it donates financial benefits to one group of society, but at the same time reduces the purchasing power of another group.
So, President Sirleaf did indirectly empower the Monrovia-landlords when her government gave them a portion of the peace-dividends, but did deny poor-salary earners a portion of the peace-dividends. When government pays US $375,000 per year ($15M after 40 years) to a landlord, as per public report and FrontpageAfrica, is an example of how landlords effectively use government’s largess to exert influence such as inflating rent charged to tenants.
Since elections do not guarantee that a democratic government will enforce “Price Control of essential…commodities…” as evidenced by the failure of the Sirleaf government, Liberians should exclude replacement cost from rental payment of qualified buildings. Tenants will benefit and Liberia will minimize chaos and catch up with the cost of living ($0.27) in Gambia, a peanut producing country, that Mr. Adama Barrow, a successful real estate agent, is now the President.
J. Yanqui Zaza, Contributing Writer,