Mortgage Or Leverage: Liberia’s US$2.5bn ‘Swap’ Deal Ignites Concerns About The Future
Monrovia – The “envelope from Beijing,” as dubbed by Finance Minister Samuel Tweah, has some goodies in it but a certain deal is now generating pockets of concerns about the future of Liberia’s natural resources.
Report by Alpha Daffae Senkpeni, [email protected]
The deal, which appears to be a barter and at the same time revel as a landmark agreement by the government, would require rigorous due diligence and scrutiny by the Legislature to avoid missteps of the past, some observers say.
On the other hand, it gives the eight-month-old government a lifeline for its ambitious pro-poor agenda, while sparking debate about the susceptibility of the country’s future.
The new deal comes on the back foot of a suspected failed attempt by the Weah-led government to obtain closed to US$1 billion loan from two private lenders to fund road projects.
It evolves from President George Weah and lieutenants recent trip to China to attend the Forum on China Africa Cooperation. FOCAC was the Weah administration’s first major multilateral engagement with Beijing – a gathering that was expected to have set the stage for deepening ties and cooperation with the world’s second largest economy.
Chinese President Xi Jinping pledged a US$60 billion package to African countries’ sustainable development, but beneficiary countries would have to pitch proposals to lure a chunk of the fund to their respective economies.
Some African countries have attracted huge Chinese investments; others are still legging and the new framework of cooperation, some economists say, would further solidify China’s influence on the continent.
While Liberia appears prepared to tap into massive opportunities from Beijing, experts say deals should be scrutinized to avoid errors of the past.
At a press conference on Tuesday September 11 in Monrovia, Liberia’s Finance and Development Planning Minister Tweah disclosed that some of the recent deals sealed with China are still in the making; however, he provided scanty details of the “swap” deal that will see Liberia exchange its natural resources for US$2.5 billion as financing for the country’s development for the next five years.
What’s In the Deal?
Little is known about the deal with the Chinese, which the government is describing as an “Investment facility – a framework entered into between China Roads and Bridge Corporation and the government of the Republic of Liberia.”
The agreement, Tweah said, is a sort of monetization that would leverage the country’s natural resources for hard currency. Chinese company will extract resources after conducting a feasibility study to determine the exact value.
Said Minister Tweah: “Let me be very clear on it, this is not a loan. It is an investment facility; a framework enters into between the China Road and Bridge Corporation and the Government of Liberia under the FOCAC arrangement to unveil $US2.5billion dollars for financing the country development over the next five years.”
Semblance of Ghana, Guinea ‘Barter Trade’ With China
Minister Tweah describes the deal as “revolutionary”, while comparing it with agreements similar to what were signed by the Republics of Guinea and Ghana with China this year.
In Ghana, the parliament has approved “a cash for bauxite” barter trade that will see the West African nation get US$2 billion to fund its infrastructure projects. According to the deal, which is dubbed the Master Project Support Agreement, Ghana will setup a processing plant to add value to raw bauxite into alumina before exporting. Sinohydro Corporation will provide funding for the building of the plant.
However, some Ghanaians including MPs are weary of the piling up of the country’s debt, which stood at US$142 billion by 2017. The opposition has also been alarming over the deal, seeking the International Monetary Fund’s (IMF) intervention.
“It is our strong belief that the Synohydro deal is a loan which is coming to add to the debt stock and we are concerned about the burden of additional borrowing cost on the over-burdened taxpayer, “ Haruna Iddrisu, minority leader in the Ghana parliament, told Reuters last month.
In Guinea, a similar “swap deal” worth US$2.9 billion in exchange for bauxite was signed and approved by the government with major Chinese firms. The firms agreed to build an alumina refinery and its revenue will go toward the reimbursement of the debt. Guinea, Africa’s leading bauxite producer, is expected to generate US$406 million a year.
Unlike Liberia, the aforementioned countries were knowledgeable of the exact mineral resource that is being exchange for cash based on available data and the respective deals clearly outline how the investments would impact the local economies.
‘No Restrictions on Natural Resources’
In the next few months, the Chinese are expected in the country to conduct assessment on Liberia’s various natural resources and there will be no restriction on the kind of natural resources. The feasibility study by the Chinese will then determine the viability of the agreement and the subsequent exchange of the US$2.5 billon.
The lack of details about the deal to the public is also drawing ire, and some critics say, giving absolute privilege to a foreign firm to put a price tag on the country’s most valuable natural assets casts a gloomy shadow on the future of the country.
Mortgaging the Future?
In Liberia, the new agreement is already generating concerns, and some say without rigorously rectification process by the Legislature, it would mirror failed situations of concession agreements in the past years.
Critics say it is an attempt to mortgage the country’s most valuable natural assets at the detriment of the next generation, considering the nominal impact many foreign direct investments have had on the development of the country.
Emmanuel Gongweh, leader of the Economic Freedom Fighter – an opposition movement, describes the deal as a “total miscarriage of leadership and lack of patriotism”.
Gongweh said the government doesn’t have geo-scientific data of the country, which makes it a “terrible situation and poses a lot of risks to the country.” He warns that the deal doesn’t limit the investors’ access to the country’s resources.
“There is no way for us to establish the value of our resources, sector-by-sector, county-by-county to determine the mineral assets that we have,” he said.
“Look at that kind of terrible situation, the government goes and signs an agreement with a company that will come in to do their own study… you are telling the country that the group will come gather geo-scientific data and determine the assets, what if the data is compromised in the interest of the investors?”
He said it would have been a feasible plan if the government had hired an independent firm to gather data, which could informed such a mineral swap deal.
“What happened in China is a complete sale of our country,” he said; adding “the government put our country on the billboard and sold it to the China.”
In an open letter to President Weah, a native of Lofa County who seems weary of the deal, called on the Liberian leader to show the research and business case for the 2.5 billion dollars Resource-swap.
“If your government is depending on Mount Wologisi for this scheme, then, please be aware that our people will be guided to request such evidence,” writes Samuel Sakama.
“The fact that Wologisi is a resource that our forefathers have preserved for centuries at the expense of their own development must be highly considered by your government. Mount Wologisi won’t be passed on loosely to any foreign power without proper research and consultation with our people. We will stand up for our people!”
Earlier, Tweah’s justification for the deal appeared unconvincing, and some observers have asserted that the deal would have to translate into tangibles for the long term in order to validate the move.
Said Tweah: “Twenty years ago this was the future, 50 years from now that will be the future, so we will extract our resources but our experience show that the monies we have used over the last 75 to 100 years – not just in Liberia but the entire Africa – we’ve not been able to enjoy any development.”
While the CDC-led government keeps it sight on such a massive deal for the country to “enjoy development”, some say missteps would lead to recurrence of the past that have already plunged the country into its current state of infrastructure deficit despite recording some impressive economic statistics in the early 1960s.