Corporations in Liberia: Big Contracts, Not So Big Impact

Oct 7, 2011 at 12:43 pm Leave a comment

This article originally appeared on the blog at Africa.com on September 12, 2011.

“Concessions.” Talk to Liberians about the future of the country and that’s one of the first words you’ll hear. Rightly so, because within the past five years major multinationals like BHP Billiton and ArcelorMittal have invested over $1.5 billion into the country.

The next word you’ll hear is “jobs,” and when tied with concessions, the word is talked about with hope. The standard notion that large multinationals will generate large-scale employment creates a palpable excitement.

Jobs won’t occur in the way most Liberians think, that is, directly through employment with those corporations. This is where the nonprofit organization Peace Dividend Trust has a large role to play, with the goal of unleashing the development, and job creation, power of Liberia’s private sector.

It would be silly to say that multinationals will have no impact on job creation. Most will hire about a few thousand locals, but that is a small drop in a bucket of 3.7 million people, 80 percent of which are not formally employed. Significant job creation linked to multinationals will occur through the conduit of local small- and medium-sized enterprises (SMEs) that already exist – albeit many in nascent form.

Multinationals, like oil and mining companies, have tremendous opportunity to source the goods and services they need from local businesses. Think of the needs of a huge mining operation like ArcelorMittal with 2,500 employees. They need trucks and drivers – and gas stations along the way – to take the iron ore to processing factories then on to ports. Mittal needs beverages and food to feed their employees working onsite. They need everyday goods and services, like laundry and office supplies. Rather than import all of these things into the country, hiring a local business would bring double the economic dividends to the country.

Putting more profits into the hands of Liberia’s SMEs means more money invested within Liberia, through activities like hiring more workers, expanding or creating new businesses or training the next generation. PDT will help local business owners build their capacity, access contracting opportunities and ensure their products and services meet international standards so they can successfully fulfill orders.

But it doesn’t end there. Large corporations create a business environment that an entrepreneur can capitalize on through business creation, such as hotels and restaurants. One resident of Duala Community, Mohammed Konneh, noticed how his currency exchange business picked up after Sime Darby moved into town. Most of his customers are local Sime Darby employees.

Multinationals aren’t the only ones that can have a large economic impact by buying local products. Dozens of international NGOs work in Liberia, all with the opportunity to buy local. The UN Peacekeeping Mission provides one good example of this, an example that helped motivate PDT to launch in Liberia.

In 2006, PDT conducted an Economic Impact of Peacekeeping study, which looked at the spending of ten UN Peacekeeping Missions, including UNMIL in Liberia. It found that UNMIL spends only 4 percent of its entire budget directly into Liberia’s economy. This was the second lowest of the ten missions. Despite such a low number, the mission still impacts the country’s GDP by almost 10 percent.

PDT sees this as a huge opportunity to help the businesses of Liberia grow. The demand is there; Liberians just need to learn how to fulfill it.

Learning to properly fulfill orders is one of the biggest challenges businesses in Liberia face. According to PDT’s Liberia Program Director Jenna Slotin, meeting international standards and quality will be difficult at first.

“There will be initial purchases, but this will take time,” Slotin says. “It is a process that involves education in order to improve production quality.” This is one reason why PDT’s training programs will be one of the most important services provided.

As local businesses slowly increase their ability to capitalize on the many players in the Liberian economy, Liberians expecting big rewards straight from multi-billion dollar contracts will be disappointed. Whether it’s growth in service industry jobs or entrepreneurs like Konneh catering to new workers, empowering SMEs will be the real driver of economic change in Liberia.

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Entry filed under: Africa, Economic Development, Liberia. Tags: , , , , , , , .

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