A DIAGNOSTIC INQUIRY INTO SMALL AND MEDIUM FOREST ENTERPRISES IN LIBERIA

1. A DIAGNOSTIC INQUIRY INTO SMALL AND MEDIUM FOREST ENTERPRISES IN LIBERIA

2. Introduction Rationale Forests are a vital pivot in the quest for improved living standards and poverty alleviation They directly contribute to the livelihoods of approximately 90% of the world’s poorest people (products, services) Non-timber forest products provides the bulk of raw materials that support SMFEs SMFEs constitute 80-90% of all forestry enterprises and 50% or more of forestry-related employment world wide SMFEs represent one of the faster-growing industrial sectors in the world In Liberia, SMFEs largely exist in the informal sector that contributes at least four times more to employment than the formal sector Very little information about SMFEs in Liberia exists with respect to their identity, status and their contribution in the forest sector, to livelihood, food security, poverty reduction and employment

3. Introduction Methodology Study was carried out in two phases (desk phase involving a thorough review of published and unpublished information on the subject- 96 papers, local, national ,international).This phase informs and shapes the second) Field phase (during which a number PRA and RRA techniques and methods were employed, including focus groups discussions (followed by plenary sessions),key informants, semi-structured interviews, a series of general assemblies (village-based), and transect walks

4. Introduction Scope and Limitations A sample (representative) of the various types of SMFEs, involving 404 individuals in 6 counties (Bong, Bomi, Grand Cape Mount, Montserrado, Nimba, Sinoe) was the focus Individuals included heads of associations, harvesters and collectors of raw materials, processors, traders, and representatives of NGOs and pertinent government agencies and ministries

5. Introduction Forest Resources and Threats Logging, fuelwood and charcoal production Shifting cultivation and hunting Dysgenic effect of selective logging Timber-centric forestry that pay no respect to the biocultural approach to forestry management Mining and industrial tree plantations (oil palm,rubber,etc) Lack of appreciation of the ecosystem value of forests Lack of incentives among locals to value forests and biodiversity Cosmestic reform in the forest sector

6. Current Status of SMFEs in Liberia Definition of SMFEs Small and medium enterprises (Sawyer & Mayson,1978)(NIC 2006) Micro-,small and medium sized enterprises (MSMEs)(MCI 2008,NIC 2007,ILO 2008) “Forest-based enterprises, usually employing members of the family or close relatives and neighbors and where salaried labor is negligible”(FAO 2005)(This description best fits the definition of SMFEs for purposes of this study

7. Current Status of SMFEs in Liberia Typology Chainsaw logging Charcoal production Rattan (and at times combined with bamboo) furniture making Woodcarving Others: (i)wild meat harvesting and sale,(ii)harvesting and sale of chewingsticks,(iii)Collection and sale of medicinal plants (parts such as roots, leaves,bark,etc), (iv) Collection and sale of seeds and nuts, (v) Firewood collection and sale, (vi) Palm wine tapping and sale and (vii) Palm oil production (home consumption,sale)

8. Current Status of SMFEs in Liberia The criteria of choice for focus of the study Availability in relative abundance Ability to provide employment security for many individuals, households and groups Stronger market potential The SMFEs must depend only on plant, not animal products as source of raw materials (These enterprises therefore fall under the two main sub-sectors of non-timber plant-based and timber products

9. Current Status of SMFEs in Liberia Ownership and economic signicance Charcoal (largely everyone’s business, no particular group, organized or not , nor individual, is in overall control) Rattan and bamboo furniture manufacturing (Like charcoal producers, individuals and groups claim ownership as private entrepreuneuers) Chainsaw logging (Most respondents claimed to own their own chainsaw (76%),with businessmen owning 23% and communities,1%.On the average 67 % of the workers come from the communities,32% are other Liberians and 1% is foreign(Blackett et al 2009)

10. Current Status of SMFEs in Liberia Ownership and Economic Significance Woodcarving (Individuals and groups engaged in this activity do feel it is theirs).It is an important part of the handicraft industry that , for example in Ghana, had garnered USD2.3 million in 2004, and USD18.9million the next year.It employed 3,500 wood carvers in Ghana. The total number of woodcarvers in Liberia is currently not known,but the estimated number for 3 counties (Margibi,Montserrado and Nimba) is 1500

11. Obstacles SMFEs Face Globally Insecure natural resource ownership and access rights Weak social stability and cohesion Little access to capital and poor market information system Weak bargaining power Lack of technological know-how Geographical isolation and poor infrastructure Limited knowledge of administrative and business standards and procedures

12. Governance Issues Influence and Effectiveness of Policies and Regulatory State Institutions Land tenure ( a dual land tenure system creates confusion and denial of basic rights to land and its resources ) Regulations on NTFPs (Impose penalties for collection/production, transport and trading of certain NTFPs Over taxation (in the form of waybills, permits, registration fees and fines) on NTFP collectors, processors and traders

13. Governance Issues Forest Policies and Legislation Forest management strategy seek to integrate the 3C Policy ojectives embrace participation of every Liberia in all aspects of forestry management and to benefit from them Expropriate land through schemes such as national forests, protected areas, energy plantations, concessioned forestry, nature reserves which communities see as a means to outlaw their existence around forests A community rights law (with respect to forest land) that defines the rights and responsibilities of communities to manage, have access, use and benefit from forest resources

14. Governance Issues Forest Policy and Legislation (CRL) Establish mechanisms to promote informed and representative community participation in matters related to community forest resources Define the roles and responsibilities of the FDA (all powerful)as the regulatory authority, promoter, and protector of community rights in respect to community forest resources

15. Governance Issues Decentralization Marginalization has been perpetuated by urban-biased policies and concentration of political power in the hands of a racial minority Government is committed to decentralizing recovery and hopefully development and political liberalization (as it emphasizes the role of the counties in the process of national recovery) The current process of decentralization is about creating a new governance structure, not reestabnlishing old power relationships which were among the root causes of the conflict

16. Governance Issues Decentralization The current process of decentralization is about creating a new governance structure, not re-establishing the old power relationships which were among the root causes of the war In the NFRL 2006 and the CRL laws are concrete examples of state policy supporting the rights of communities to forests and fodrest resources and te importance attached to decentrlaied management and use of these reourxcesl

17. Governance Issues Impact of the Various Governance Issues on SMFEs Local logging elites and their local counterparts continue o reap huge benefits from forest resources (timber-centricism) The forest sector , in spite the news about reform, continues to be a feudal sector It is overly regulated in comparison to other sectors such as agriculture So-called industrial development and related policies about other land uses (energy plantations,other huge monocultural plantations,etc) re-inforce inequity and limit local rights without necessarily increasing government revenues or income for small-scale producers

18. Governance Issues Impact of Various Governance Issues on SMFEs Unfair taxes (in the form of costly permit processes on SMFE products) require costly approvals and rent-seeking by government secturity agents (check point vs cash points) Criminalization of large segments of the market place(taxes on processed products, NTFPs collection and transport fees,limitations on collection and transport of certain NTFPs ) Confused and insecure land tenure system that discourages investment in forest land,encourages over-exploitation and can lead to conflict over access and use

19. Governance Issues Impact of the Various Governance Issues on SMFEs Confused and insecure land tenure discourages investment in forest management , encourages over-exploitation and can lead to conflict over access and use Competing land uses continue and include agriculture (small, large-scale) and mining concessions, rubber, and oil palm and other monocultural plantations that are a form of land expropriation in areas SMFEs source their raw materials

20. Finance and Market Issues Credit Links(Informal) Rotational Susu –Organizations of businessmen and women where agreements are made to pay a certainamount of money each month.The amount is given to a member of the club, and the process continues until all members of the club get paid Yearly Susu/Savings club – Group of business individuals and other interested persons organize themselves to contribute and save money monthly.The Susu is then given out as loans to members and non-members

21. Finance and Market Issues Credit Links (Informal) Daily Susu Club.This is normallya one-man scheme, usually a well-known business person may organize a daily susu Lebanese and Fula merchants. These merchants assist the petty traders with goods on credit.They also serve as bankers of the petty traders

22. Finance and Market Issues Credit Links UNDP micro-grant , micro-credit shcemes and other opportunities USA programs to support investment in small and medium Liberian companies (i.e. Overseas Private Investment Corporation , and Liberian Enterprise Finance Corporation Commercial Banks – EcoBank,Liberian Bank for Development and Investment (LBDI) Service/support providers , microfinance institutions (MFIs) in Liberia, including NGOs,International lending agencies,Private individuals,and Banks (commercial,non-commercia)(Table 15)

23. Finance and Market Issues Tax Regimes Liberia’s tax rates are quite high (the top income and corporate tax rates are 35%).Other taxes include a property tax and a goods and service tax). Taxes are often imposed on NTFPs as they are being transported or at primary processing state (with little or no value addition) Market information –there is no marketing information system for SMFEs

24. Finance and Market Issues Impact of Finance and Markets on SMFEs Efforts to address marketing issues (market intelligence, price formation, marketing information system, etc) are either non-existent or at their weakest) SMFEs are viewed by government as not being economical and hence merit less interest to financial institutions Some SMFEs are declared illegal and so government institutions are not prepared to support them Lack of financial support feeds into the lack of capital and the lack of insurance for majority of SMFEs (Table 16 lists and describes 21 SMFE associations in 3 of the six counties

25. Labor Issues Labor Legislation and Employment The 2007 revised labor law repealed a decree that prohibited workers from skriking and another piece of legislation that authorized dismissal of employees without a cause Employees enjoy freedom of association Labor desputes are subject to arbitrariness, in which Liberians are favored over foreign investors The Liberian labor force is predominantly illiterated and unskilled Employment rate in the formal sector is estimated at 15% (85% of unemployment and underemployment)

26. Labor Issues Salary,age,health and safety No laws specifically exist about salary,age, health and safety for SMFEs,but there are laws about SMEs in general National law requires a minimum wage of LD15(about USD0.25/hour), not exceeding 8 hours/day, excluding benefits for unskilled workers The law fixes non minimum wage for agricultural workers (but requires that they be paid at rates agreed through collective bargaining) Skilled labor has fixed minimum wage for civil servants(raised in 2008 from LD3,300 (USD55) to LD4000(USD 70) per month

27. Labor Issues Salary,age, health and safety Ministry of Labor lacked the ability to enforce government-established health and safety standards (but enforcement targets foreign firms that generally observe these standards) There is a national law on child labor and minimum wage for employment.It is not inclusive to SMFEs but equally affects them The minimum wage law prohibits employment and apprenticeship of children under the age of 16 Child labor is widespread in almost every economic sector in Liberia, but particularly in the rural sector

28. Labor Issues Impact of Labor Issues on SMFEs Nearly all of Liberia’s current labor force is ignorant of labor laws The handful of leaders who knows such laws have no authority to improve the dire straits into which the Liberian workers find themselves( for example, labor unions are at liberty to form but have no right to demand any change in their situation) There is a department at the Ministry of Labor that is charged with protecting kids against child labor, but it remains understaffed, thus relegating its functions only to awareness creation Safety and health measures are not adopted by SMFEs

29. Opportunities and Threats Changes in Forest and Environmental Sector Policies National Forest Reform Law (NFRL 2006) –the CRL gives access,use, management and benefit rights to communities,but denies them the right to own forest land;it also makes representation of politicians in community decision-making forum a requirement Certain areas of forest land are gradually being put under the control ,use and management of communities, but giant sizes of forest are,at the same time, open up more to interest groups-rubber,oil plantations,logging and mining concessions,etc Liberia’s land tenure system is the most confused at best; worst, it remains a recipe for a disastrous conflict

30. Opportunities and Threats Trade Policies, Especially Trade Liberalization Liberia’s approach to trade liberalization is through tariff reduction but this approach is not being cautiously pursued Liberalization could be positive or negative if it leads to : (i)increase in competition, (ii)lowering of production costs due to cheaper imported goods, (iii)increase in export opportunities and (iv)reducing availability of inputs(Talus 2007) Clearly,SMFEs in Liberia are highly unlikely to be as competitive as those of neighboring countries

31. Conclusions and Recommendations Conclusions SMFEs in Liberia are informal and not clearly defined SMFEs are not regulated (collection, transport, processing and trading of the various resources supporting SMFEs are not under any control, and where any form of control exists, its absolutely inefficient and not in the interest of SMFEs The 4 SMFEs of focus are, at varying degrees, successful and lucrative enterprises (they constitute more than 60% of SMEs which employ about 4 times as many people as do the formal sector

32. Conclusions and Recommendations Conclusions No specific forest areas have been demarcated by government to serve SMFEs’ needs for raw materials and no attempts are underway to domestic these resources SMFEs are competing with state-registered contract loggers in the formal sector for the same resources in the wild(a recipe for conflict/a brewing conflict) Current forest management policy and sgtrategy do not support SMFEs(forests are to be managed and used to benefit all Liberians,but hundreds of thousands of hectares of forests are contracted to foreign timber mechants and their local elites Credit and tax regimes offer little home for SMFEs

33. Conclusion and Recommendations Conclusions NTFPs,as natural products supporting SMFEs , are intrinsically variable and are location-specific and location-dependent- this leads to the impossibility/difficulty to develop common methods for their collection, handling,processing and valuation The traditional technologies that are mostly used to collect/harvest/handle NTFPs vary from location to location, making standardization hence management difficult if not impossible Promotion of NTFPs is difficult because those with known international market value are dominated by international trade forces which establish prices beyond the influence of national institutions,and producer groups and their organizations

34. Recommendations Capacity Building Marketing information systems Improved harvesting (collection,extraction) methods of NTFPs The husbandry of bees, livestock and organic farm Agroforestry (systems and component technmologies)and rural energy (biogas digesters) Ecotourism and strengthening of SMFE association

35. Recommendations Participatory forest Management Schemes and Practices(socialforestry,joint forest management,rural forestry),Genuine Decentralization and Tax Reform Support participatory forest resource management Design and implement genuine decentralization and pro-poor policies(make decentralization real) Create and support viable internal credit schems that could serve SMFEs best and which they are capable of promoting and sustaining Undertake and support genuine tax reford

36. Acknowledgements SAMFU Team of data collectors for all the counties FAO Representatives from the 21 SMFE associations in the 6 counties who sacrificed the only resource they have, time, to have interacted with my fact finding team Government officials in some agencies and ministries who were supportive of this work by allowing the author and his team to enter their offices