MASTERING YOUR MARKET UNDER AFCFTA (THE CASE OF THE LIBERIA)

OVERVIEW OF LIBERIA

Liberia is situated along the Atlantic Ocean, sharing borders with Sierra Leone, Guinea, and Cote d'Ivoire. Its capital is Monrovia, and it has a population slightly exceeding 4 million people. The country boasts a coastline spanning 579 kilometres. With a predominantly Christian population of 88.6%. Liberia's official language is English.

The literacy rate in Liberia stands at 48.30%, and over half of its population resides in urban areas. As of 2018, Liberia ranked as the 162nd largest economy globally in terms of GDP and the 114th most complex economy based on the Economic Complexity Index. Key impediments to economic growth include inadequate infrastructure, limited access to finance, complex tax regulations, falling global market prices for export commodities, weak institutional capacity, and a shortage of skilled labour.

Liberia's economy is driven by heavy reliance on natural resources, foreign aid, and foreign direct investment.

ECONOMIC SNAPSHOTS

Situated in the West African region of sub-Saharan Africa. Liberia is classified as a low-income country, scoring below 50% and holding the 175th position in the ease of doing business index. The nation operates primarily as an agrarian economy, cultivating crops such as cassava, sugarcane, oil palm fruit, rice, bananas, vegetables, plantains, rubber, and maize. Additionally, Liberia boasts abundant mineral resources and sustains a limited number of industries, including mining (iron and gold), rubber processing, palm oil processing, and diamond extraction.

With a GDP surpassing $ 3 billion (USD), Liberia's economic structure is composed of agriculture (34%), industry (13.8%), and services (52%). The inflation rate stood at 12.4% in 2017, influenced by factors such as the depreciation of the Liberian dollar against the United States dollar and the global increase in petroleum prices. Notably, over 60% of the country's population is under the age of 25.

The growth in Liberia's GDP is primarily attributed to heightened activities in mining, agriculture, fisheries, and services. The country's per capita exports amounted to $271, while imports reached $892. Liberia's major exports include gold, passenger and cargo ships, crude petroleum, iron ore, and rubber. On the other hand, key imports consist of passenger and cargo ships, refined petroleum, rice, iron structures, and boat propellers. Despite exporting $ 1.3 billion worth of products, Liberia faces a trade deficit exceeding -$3 billion.

Liberia engages in international trade with various partners, including Switzerland, Germany, India, the United Kingdom, China, South Korea, and Greece, for both exports and imports. The country experienced an average annual inflation rate of 12.4% in 2017, up from 8.9% in the previous year, underscoring the economic challenges posed by currency depreciation and rising global petroleum prices.

MARKET CHALLENGES

Investing in the Liberian market poses significant challenges due to various economic obstacles. Exporting companies are likely to encounter major issues, including widespread poverty leading to low purchasing power, high tariffs, inconsistent tax administration, poor physical infrastructure, weak judicial system, and institutional corruption. With over 50% of the population living on less than $1.90 a day and a per capita income of $580, the economic landscape is challenging.

Moreover, opaque procedures for obtaining clear property sites, insufficient legal protection for legal protection contracts, limited awareness of intellectual property rights, logistical constraints, and an overall lack of investor-friendly conditions add to the complexities. The Freeport of Monrovia, the primary external trade gateway, offers slow and expensive services. Additionally, the 2010 Investment Act restricts market access for foreign investors in specific economic sectors or industries. These combined factors make navigating and succeeding in the Liberian market a formidable task.

MARKET OPPORTUNITIES

Liberia offers a plethora of investment opportunities spanning various sectors, including agriculture, aviation parts, agro-processing, aquaculture design and construction services, education, energy storage and transmission ICT, and healthcare equipment. The reconstruction of damaged infrastructure, such as roads, bridges, seaports, airports, and storage facilities, as well as the expansion of power generation, presents significant investment prospects that align with the government's development plan.

The National Investment Commission identified opportunities in agro-processing, energy, infrastructure, information and communications technology, port management, housing, logistics, manufacturing, tourism, waste management, education, and health. For those considering investment in the Liberian market, several factors make it an attractive option. Liberia's membership in ECOWAS provides access to a regional market of over 340 million customers. Additionally, the cost of labour is relatively low, there are minimal restrictions on the repatriation of profits and no constraints on currency exchange. Furthermore. Liberia boasts a rich and largely untapped natural resource base, including gold, diamonds, iron ore, and timber.

MARKET ENTRY

Companies aiming to penetrate the Liberian market typically opt to engage the services of an agent or distributor while also enlisting the expertise of legal counsel. This strategic approach is taken to cultivate local partnerships and ensure adherence to legal requirements. In addition, most investors conduct thorough market research to evaluate the business landscape, the potential for their products or services, and the existing legal and regulatory frameworks.

Successful investors often go a step further by embarking on a field visit or a market research tour within the country. This hands-on approach allows them to assess the feasibility of their investment, gain firsthand insights into the on-the-ground dynamics, and establish valuable in-country relationships.

For valuable insights and guidance on conducting business in Liberia, investors can refer to the websites of the National Investment Commission and the Ministry of Commerce and Industry.

IMPORT DOCUMENTATIONS

The implementation of the Cargo Tracking Note (CTN) system for all shipments, including transit through Liberia, has been initiated by the Liberia National Port Authority Shippers, exporters, and forwarders are mandated to obtain a validated CTN through the online platform and submit the requisite documentation. The Port Authority has designated Bureau Veritas or BIVAC as the exclusive pre-shipment provider for Liberia, with the associated services costing 1.5% of the shipment value. Pre-shipment inspections are mandatory for goods valued at $3,500, and importers failing to complete this inspection may face penalties ranging from 10% to 30% of the shipment value.

Certain products are exempt from import duty, including those valued below $1000, a reasonable amount of personal effects, supplies for diplomatic missions, gold, precious stones, explosives, arms, fresh fish caught by fishermen, and local goods imported by parcel post not exceeding $1000. Imported products must adhere to labelling requirements, displaying information such as net weight, manufacturing dates, expiry dates, ingredients, origin, and price.

Liberian law prohibits the importation of counterfeit goods and aligns with international regulations on narcotics and other contraband. Importation of specific goods is strictly prohibited including illegal drugs, weapons, ammunition, knives, and other deadly weapons.

SELLING FACTORS

In Liberia, the majority of retail goods are brought in through a singular seaport before being transported by vehicles to various locations in the capital city and across the nation once they are cleared. Franchising is not a widely embraced business model in Liberia, mainly because it deviates from the country's conventional business culture.

Ensuring effective representation in the consumer market in Liberia necessitates the engagement of a reliable agent. Whether a business operates locally or as a branch of a foreign entity, adherence to association laws mandates the presence of a registered agent or office in the country. Exporters and investors are strongly advised to exercise due diligence when enlisting the services of agents, partners, distributors, or legal counsel. Selection criteria should be based on familiarity with the business environment and established relationships with relevant business and economic stakeholders.

Alternatively, businesses may explore direct sales to consumers in Liberia. However, this approach presents challenges due to limited internet penetration, ineffective postal services, lack of electricity, and low literacy levels. To overcome these obstacles, some businesses resort to advertising products through SMS messaging, leveraging the reach of mobile phone operators.

PAYMENT & EXCHANGE DOCUMENTS

Liberia operates under a managed floating exchange rate system, allowing foreign investors unrestricted flexibility in converting, transferring, and repatriating funds linked to their investments. Local laws facilitate the transfer of dividends and post-tax net profits to investors' home countries. Additionally, the law permits the unimpeded transfer of capital profits and dividends In a freely convertible currency through authorized dealer banks. Consequently, funds tied to any investment can be freely converted into any global currency. However, for such transfers, the amount must have resided in an entity's bank account for a minimum of 3 banking days. Banks are mandated to publicly display the official market exchange rates. Liberia employs internationally accepted payment modes, including Letters of Credit, Bills of Collection, and Open Accounts.

...Liberia's membership in ECOWAS provides access to a regional market of over 340 million customers. Additionally, the cost of labor is relatively low, there are minimal restrictions on repatriation of profits, and no constraints on currency exchange...

BUSINESS CULTURE

When engaging in business activities in Liberia, it is crucial to comprehend certain unspoken norms to ensure smooth operations. In casual situations, men typically greet each other with a handshake accompanied by a finger snap, while a traditional handshake is more prevalent in formal and business settings. Women often employ a gentler handshake with a finger snap, a practice also observed in mixed-gender greetings.

Communication in Liberia is characterized by people expressing their thoughts directly, although the process may take a considerable amount of time. The concept of punctuality is viewed relatively, with minimal expectations for meetings to commence on time. While arriving promptly is commendable, it's not uncommon to find oneself as the sole attendee at the scheduled start time.

In meetings, it is customary for the boss to initiate and conclude the proceedings. Natural greetings are anticipated, and while small talk is generally discouraged, it may be introduced into business discussions to emphasize key points. Bargaining is a common practice, even when the initially proposed price is deemed acceptable. Negotiating to reach a mutually agreeable price can often be accomplished efficiently.

IN CONCLUSION

In conclusion, Liberia presents a complex economic landscape marked by both challenges and opportunities. With a population exceeding 4 million, the nation's economic structure relies heavily on natural resources, foreign aid, and foreign direct investment. Key impediments include inadequate infrastructure, limited access to finance, and complex tax regulations. Despite these challenges, Liberia's GDP surpasses $3 billion (USD), driven by activities in mining, agriculture, fisheries, and services. However, the country faced a substantial trade exceeding -$3 billion deficit.

Investing in Liberia requires a strategic approach due to economic obstacles, including widespread poverty, high tariffs, and weak institutional capacity. Nevertheless, Liberia offers investment opportunities in various sectors such as agriculture, energy, infrastructure, and ICT. The implementation of the Cargo Tracking Note system aims to streamline the shipping process, albeit with associated costs.

For potential investors, understanding Liberia's business culture, engaging reliable local representation, and navigating unspoken norms are essential. While challenges persist, Liberia's membership in ECOWAS, low labour costs, and untapped natural resources make it an attractive option for those willing to navigate its complexities and contribute to the nation's development.

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