The Proposed US$2.5B Mineral Swap, Driven by Desperation or Exasperation or Both?

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The September 11 Ministry of Information Press conference announcement by Finance Minister Samuel Tweah revealing that the Government of Liberia (GoL) has recently entered an agreement with a Chinese company to swap the country’s mineral resources for an amount of US$2.5 billion is, to say the least, is most disturbing. The announced deal has left the public wondering whether such is being driven by exasperation or by desperation.

Minister Tweah declared: “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 $US2.5 billion for financing the country development over the next five years.” The Minister furthered, “No restriction, all the natural resources,” he said of the planned assessment. “The feasibility study will determine the viability of the project.”

The Minister also disclosed that agents from the firm will arrive in the country in the next few months to conduct an assessment on Liberia’s various natural resources.

The Miriam Webster Dictionary defines exasperation as having or showing feelings of irritation or annoyance. On the other hand, desperation is defined as loss of hope and surrender to despair or a state of hopelessness leading to rashness.

Perhaps Minister Tweah, having earlier made stentorious boasts about the Eton and EBOMAF proposed loan arrangements which would have made possible, implementation of a multibillion-dollar road project in the southeast region. Critical media coverage of those developments at the time and the fizzling out of the loan deals appeared to have exasperated the Minister as he spared no quarters blaming the media and lambasting his critics for casting aspersion on the entire deal, which may have very well led to its very short shelf-life.

This newspaper recalls that the matter which, at the time, received more than adequate media coverage unquestionably served to raise public hopes and expectations of what was being portrayed as the beginning of a new and prosperous beginning for residents of that part of the country. The rather unprecedented speed with which the deal was passed by both Houses of the Legislature left the public with a distinct but mistaken impression that the money was already here.

Later, the loan deal would fall flat on its face and officials, out of embarrassment, would resort to hurling accusations against those described ‘detractors’ for its failure. Faced with the embarrassment of having to admit to failure or error of judgment, desperation apparently has set in.

And such desperation for money appears to be the main driver of this newly proposed mineral swap. From all indications this newly proposed deal smacks of a virtual surrender of the country’s entire unexploited mineral wealth to a Chinese company for “peanuts” from which only cronies of the Minister and of President Weah will stand to benefit.

According to information contained in official Ministry of Mines reports including the 1980 Planning and Development Atlas, minerals of commercial value occurring in Liberia include barite, copper, lead, zinc, nickel, tin, uranium  and aluminum. Other minerals include gold, diamond, bauxite, clay, kyanite, phosphate, iron ore, nickel, palladium, platinum, silica sand and not forgetting oil and natural gas.

Liberia’s gold reserves are for instance estimated at 3 million ounces. At a current market price of US$1,209.00 per ounce, three million ounces of gold is worth placed at 3.627 billion dollars. Without even including other minerals such as iron ore with reserves estimated at between 2 to 5 billion metric tons of iron ore.

Thus, it appears inconceivable that Finance Minister Tweah, an economist by training, would float the outlandish idea of swapping the country’s mineral wealth worth several billions in exchange for a paltry amount 2.5 billion dollars. In the opinion of this newspaper, this is a non-starter and is tantamount to a complete sellout of the interests of the Liberian nation and people.

According to World Bank Policy Research Paper 6089 entitled: “Investing Mineral Wealth in Development Assets Ghana, Liberia and Sierra Leone” (Authors: Daniel Boakye, Sébastien Dessus, Yusuf Foday, Felix Oppong), a recent assessment of the mining sector showed that there are still gaps with respect to the government’s readiness to harness the full potential of the prospective mineral boom in Liberia.

The report furthers add that the “legal, regulatory and fiscal framework of the mining sector suffer from several shortcomings, including (i) a lack of harmonization in tax regime (sign-off bonuses, royalties, community tax and corporate are subject of negotiations); (ii) no progressivity in the tax regime (no windfall tax, hence no possibility to capture rent during booms and protects activity during busts), (iii) a weak institutional capacity to audit mining activities and ensure compliance with regulatory and fiscal regimes, including with the Kimberley Process for diamonds”.

Moreover, according to the report, “in Liberia, and possibly Sierra Leone, the capacity of the government to manage and implement investment programs is very limited, and the size of public investment plans small compared with that of foreign investors in mineral sectors”.

From all indications, and given all the above, this newspaper remains convinced that this newly proposed deal does not augur well for the future of Liberia and the Daily Observer, like the public is also left to wonder whether this idea is being driven by exasperation induced by the vacillation of the proposed lenders that have led to the petering out of the Eton-EBOMAF loan deal or whether it is being driven by desperation to make good on promises which were not well thought through enough to have enhanced successful actualization.

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5 COMMENTS

  1. Since we’re not smart enough to develop our own country, perhaps we should allow the Chinese to run our government for 10 years to develop the country into a modern state, then we can take over. South Africa is the most modern country in Africa because it was developed by European settlers. I doubt any amount of money can develop Liberia if that money is handed over to our very corrupt government. It seems to me our civilization is still too crude to build a modern state. Imagine simple discourse as civility doesn’t exist in our country. We disrespect one another, lie, and cheat. There is something seriously wrong. Why are we so self-destructive?

  2. My understanding of the story is that the government has an agreement or is entering an agreement for a 100% swap of the nation’s natural resources for a US$2.5 billion strategic investment by China. I stand to be corrected if I’m mistaken. If true though, it might be unconstitutional, and I’ll certainly need to acquaint myself with the laws of Liberia to make a legal argument, if I was commenting in a court. But from my limited exposure to the Constitution, and my general reading of it, I believe a case can be made to challenge such a deal if it has already been signed.

    I am particularly concerned that there doesn’t seem to be a policy that restricts foreign ownership in sensitive industries. Every country I’ve dealt with, including Latin America, there are limits on foreign ownership in domestic sensitive industries, with time sensitive public reporting requirements for even meeting the required ownership thresholds for foreign ownership. Some countries even prohibits direct ownership by foreign investors in certain industries. That’s why I’m surprised many are scapegoating Mr. Cummings assessment from a narrow political and ideological perspective while undermining the more important economic analysis. Certainly, one cannot deny the fact he is experienced in such analysis.

    It’s important that the transaction is legally halted until there’s transparency around what due diligence was conducted, an understanding of the value of the resources and the legal authority to pledge all a nation’s resources to a single sovereign nation, as well as the liabilities of both sides.

    • This government is reckless. They don’t seem to care about due diligence. They don’t have a development plan but they’re searching for anyone who will give them billions of dollars. The Ebomaf & Eaton loan agreement were a fiasco. The Legislature will have to eventually repeal those laws. The EJS administration was far superior to this craziness.

  3. Well, Liberia, embrace yourself for the Chinese slave trade. Anyone who understands the act of war would know what china is doing and would not make that mistake. But Liberians or Africans believe that everybody loves them and everybody is a friend. We are the only people who don’t have enemies and if we do, we don’t know who they are. This is why Liberians, in fact Africans (blacks), will always be at the bottom of everything.

    They might as well hand over the nation to China as Phil George ignorantly stated in his comment. And after 10yrs china can develop the nation and hand over to us. Man, why waste time on education when we are still going to remain dumb.

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