Liberia: Turning the Page from Nearly 100 Years of Raw Material Export

It goes without saying that Liberia is a country with lofty goals.  Chief among the many is the acceleration of a thriving and competitive industrial sector that would result in the country being at a middle-income level by 2030. 

To the faint-hearted, such a goal sounds overly ambitious, given all the daunting vicissitudes of our nationhood. The optimists prefer to forge ahead now or never, bearing in mind that the future will find us further ahead than today.

But to achieve such an ambitious goal — or even a fraction of it — requires diversifying the economy to wean the country off its decades-long overdependence on the exports of raw materials without local processing or value addition. Value-addition would not only just diversify the economy but also mitigate the impact of fluctuating commodity prices, as well as open up numerous downstream opportunities in the local economy.  

One key sector in this category is rubber, on which Liberia’s export earnings have depended for nearly a century. Rubber is one of Liberia’s traditional revenue sources, accounting for 12.5 percent of total export and grew by 33.8 percent to US$109.9 million, from US$82.6 million recorded in 2020, according to the Central Bank of Liberia Annual report in 2021. 

The CBL data shows that rubber production rose by 37.7 percent to 87,777 metric tons from 63,734 metric tons reported in 2020 on account of an increase in the harvest of smallholder farms.

Nevertheless, the export of the commodity has only provided temporary prestige, since the lion's share of revenue is captured at the end of the value chain, in other countries that have the capacity to add value to raw materials extracted from Liberia. 

This age-old paradigm might soon come to an end when the Jeety Rubber Factory, the brainchild of local Indian business tycoon Upjit Singh  Sachdeva, opens in the early half of next year. The US$20 million investment was signed into law by President George Weah a few months ago to address the issue of lack of value addition in the rubber sector to boost exports of high-value products. 

It also turns over a new page from a nearly 100-year chapter during which Liberia helped global superpowers win world wars with its natural rubber. Yet, with nearly 600,000 acres of the crop planted across the country, the country still imports a huge quantity of the finished rubber products yearly, including the bare essentials — tyres, rain boots, rubber bands and latex gloves. 

So the factory is expected to play a significant role in addressing the country’s and the ECOWAS region’s growing need for tyres — a market otherwise dominated by Asian and European countries.  Tyres, particularly those for motorcycles and tricycles (keh-kehs), are in great demand in the ECOWAS area as their use grows. Tapping into this growing demand opens up a new and significant revenue stream, not just for the smallholder farmers but the country, through export earnings.

Value addition for natural rubber in Liberia has never taken off. In the last 15 years, a foreign-owned venture as well as a Liberian-owned venture both fell flat. This is not to portend a similar fate for the Jeety Rubber venture. To the contrary, those who tried before saw the potential that Jeety Rubber is on the verge of unlocking. 

This is why the Jeety Rubber Factory is potentially one of the most important investments in post-war Liberia — more because of its impact than the price tag or the two-decade lifespan.  A successful value addition venture for rubber could see more value-added investments in other raw materials, setting a new standard for foreign direct investment across all extractive industries. 

The case for value-addition is not just about natural resources ‘in’ the ground, but the natural resources ‘on’ the ground — Liberia’s human resources. Opportunities for job creation and professional development must factor into the trajectory for accelerating Liberia’s transition to a middle-income country by 2030.  This is true both from an economic policy standpoint as well as from the value-addition business case.  The factory would not only just boost Liberia's rubber export profits, but also create linkages to the wider economy, resulting in “growth with development.”

Most importantly, the investment disproves the long-held belief that since Liberia is faced with lots of infrastructure problems, it is not in the position to demand value addition to its natural resources before exports.  The truth is that the infrastructure will not appear on its own. Entrepreneurs need to make the first move, and Sachdeva is doing just that. 

Thus, Sachdeva's action has demonstrated that despite the country's numerous infrastructural issues, which raise the cost of production for enterprises, there remains a significant opportunity for the promotion of industrialization.

China and India were in similar positions as Liberia decades ago.  But they took significant governmental moves to turn the tides and transform their economies into industrial hubs. They never had the infrastructure at first, but they knew that it was possible and possibilities are manifested when a move is made. 

Similarly, Schedava has done so, a move that Liberian policymakers should consider as a springboard for the long-term diversification of other industries. 

Diversification of the country's economy to include more industrial activity is the only safe alternative for reducing Liberia's reliance on imports of every finished product consumed here. It would, in turn, lay the groundwork for more sustainable growth and a highly qualified workforce.

And given that Liberia has abundant natural and human resources, attaining such a goal is possible. Other countries have done so from the scratch, so why can’t we? However, we need not reinvent the wheel, since the pioneers of similar growth trajectories have left a trail of research, strategy, experience, and expertise to help us get there. 

In this case, all that is required for policymakers now is to muster the will to transition Liberia from a raw materials exporter to a producer of market-competitive value-added products, which would, in turn, make the country more relevant in the global economy.

This raw material export model has failed time and again and must be dropped. It makes no sense to grant large and wealthy foreign companies more than 40 years of concession deals along with fabulous incentives just to export the country’s resources raw. 

Worse, little is generated in revenue since concessionaires have learned to beat the system with “transfer pricing” — selling to parent corporations instead of to the open market for more competitive prices. Concessionaires have been known to declare artificial losses associated with producing the raw materials, thus minimizing the revenue that should accrue to the state.

Therefore, Liberian policymakers must seize this moment to demand value addition across all natural resource sectors to optimize the usage of the nation's productive capacity and competitive advantage for sustained growth.  Commodity-led value addition is the only means through which Liberia's drive for achieving structural, social, and economic transformation by 2030 can be accelerated into reality. Nowadays, substantial economic growth is primarily supported by value-added exports, not donors and grants.

Until then, and for the time being, Sachedva's investment remains critical to supporting Liberia’s 2030 ambition. Importantly, it does away with the excuse that the country's infrastructure challenge poses a hindrance to value addition for natural resources before export. 

About the author: Robin Dopoe is the Acting Senior Editor of the Daily Observer newspaper and a former ambassador of the Liberia Intellectual Property Office.

Editor’s note: The views expressed in this commentary are solely of the author and do not necessarily represent that of the Daily Observer newspaper.