Liberia – a peaceful transition
Africa’s oldest republic has seen its first peaceful transition of power in seven decades, as the respected Ellen Johnson Sirleaf hands over the role of President to George Weah, following the run-off election on 26 December 2017. Whereas Ms Johnson Sirleaf was a political veteran with significant economic nous before becoming head of state, being both a former Finance Minister with World Bank experience, Mr Weah is acknowledged to be a relative novice in governmental affairs, despite holding a Liberian senate seat for the Montserrado County for some years. Mr Weah is, however, no stranger to the limelight, having been awarded both FIFA World Player of the Year and the Ballon d’Or in 1995.
Mr Weah inherits a relatively peaceful, but fragile, country from Ms Johnson Sirleaf after her 11 years in office. Still feeling the effects of the Ebola crisis of 2014, Liberia remains one of the world’s poorest countries. Mr Weah’s election promises for increased spending on much-needed public infrastructure need to be seen against the backdrop of the weak economy and constraints imposed by its arrangements with the IMF.
Foreign aid and development finance has supported much of Liberia’s major infrastructure development, such as the recent US$200m investment by JBIC on the Somalia Boulevard dualisation, which will reduce traffic bottlenecks on Monrovia’s northern bypass. While this type of project does represent inward investment in Liberia, the funds are typically tightly monitored by the fund providers and so sit outside of, and in fact exceed, the country’s overall budget derived from traditional sources such as taxation and royalties, effectively creating two parallel budgets within the country. As the Economist noted, the inability of the government to directly manage this wider inflow of funds to meet its own changing political requirements effectively hobbles it, which creates a mismatch of expectations between the populace – who expect the government to provide all manner of public services for them – and the politician – who has to promise to provide these services, but has a stark choice between accepting the aid that is available for those projects that the agencies wish to fund, or refusing it.
Nevertheless some investments have been taking place on a self-funding or project-finance basis. APM Terminals’ investment in new terminal facilities at the Port of Monrovia demonstrate a willingness to take commercial risks to secure a strategic position; other similar projects underway include a proposed cargo terminal at Monrovia’s international airport and a hotel and leisure complex at Marshall. Internationally-funded mining projects have been underway for many years, with our experience including advising Aureus Mining on the New Liberty gold mine, in operation since 2015, and advising BHP Billiton in connection with a development agreement for iron ore deposits on the Buchanan rail corridor.
In many other African jurisdictions, governments offer significant debt guarantees, even in the event of investor default, to entice investment. Based on our recent advice on a prospective toll road project in Liberia, we have seen that this is effectively impermissible due to the government’s commitments to the IMF, and in any event, impractical. For example, in 2017 the Liberian government’s entire (non-aid derived) budget for road improvement and maintenance amounted to about US$30m. Accordingly, such projects can only go ahead where the strongest business case exists. Funding from “new” sources, such as tolling to fund new road projects, is constrained as an option given the low income levels in the country, in particular given development agencies’ expectations that an untolled route should always remain available for the public, making it difficult to guarantee a clear revenue stream.
Moving forward, a lot will depend on Mr Weah’s first executive acts as President; namely, to build a cabinet that is suitably skilled and committed to give comfort to international agencies and proposed investors that Liberia will maintain a steady path to build on the relative successes and stability of the previous regime.
 Fading faith in good works, Economist, 1 July 2017