# **I. OVERVIEW**

# **Introduction**

In Ghana’s footsteps, Liberia and Sierra Leone are likely to experience ample mineral resource<sup>1</sup> booms in the very next years. In Ghana, growth in gold production combined with surging world prices led to a massive increase in gold export receipts, from US$0.7 billion in 2000 to US$4.7 billion in 2011. Since late 2010, Ghana has also become an oil producer, and exported US$2.8 billion worth of crude oil (24 million barrels) in 2011. The opening of new mines and the construction of a pipeline to exploit petroleum gas should bring up these numbers to higher levels before 2015. Beyond 2015, Ghana anticipates to operate new petroleum fields, in which significant discoveries were made.

In both Sierra Leone and Liberia, the exploitation of large iron ore mines will commence in 2012, leading to a surge in mineral exports. In Sierra Leone, the exploitation by African Minerals Ltd. and London Mining of two mines could generate export receipts of about US$4.1 billion by 2015. In 2010 in comparison, Sierra Leone exported US$360 million worth of goods and services. In Liberia, the exploitation of several iron ore mines started in 2011 by Arcelor Mittal, combined with the opening of two other mines by China Union and BHP Billiton in 2014 and 2015 respectively, could generate export receipts around US$2.0 billion in 2015. In 2010, Liberia exported US$250 million worth of goods and services. Beyond 2015, the likelihood that Sierra Leone and Liberia will be able to exploit oil in commercial quantities is also high, as exploration is ongoing in both countries, and commerciality was already declared in Sierra Leone. According to a recent geological assessment (US Geological Survey, 2011), the West African Coastal province, comprised of Liberia, Sierra Leone and Guinea, has a mean estimated 3.2 billion barrels of oil and 23.6 trillion billion cubic feet of gas.

Emerging from conflicts, mineral activities in Liberia and Sierra Leone are considered absolutely central to any medium term poverty reduction strategy. As civil conflicts ended in Liberia (2003) and Sierra Leone (2002), both countries made huge efforts to re-gain political and macroeconomic stability. In both countries, peaceful elections were held regularly and substantial debt relief was granted. Thus, Liberia and Sierra Leone were both able to enjoy positive per capita GDP growth rates since 2005, benefiting from a catch up effect and the return of some human and physical capital. But return to some form of normalcy – including for foreign assistance, after post conflict grants are being exhausted - will certainly not suffice to trigger the break out from poverty and vulnerability citizens expect,<sup>2</sup> unless the huge mineral resources are harnessed for it. Measured at current prices, Liberia’s and Sierra Leone’s iron ore reserves are respectively worth about 75 times and 38 times their GDP in 2011. Thus, in all likelihood, the dependence of Liberia and Sierra Leone to mineral resources will significantly increase in the foreseeable future.

In Ghana, new mineral finds are relatively less important, but have significant bearings on macroeconomic stability and prospects for diversification. Following the revision of its national accounts in 2010, Ghana accessed to the lower middle income country status (with a GNI per capita at US$1,250 in 2010). While still primarily a natural resource based economy (gold, oil, cocoa, timber),

> 1 Mineral resources are defined here as concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. In Ghana, Liberia and Sierra Leone, this definition applies, among others to diamonds, gold, iron ore, oil and gas.

> 2 In Liberia, the proportion of people living with less than US$1.25 a day is estimated at 83 percent in 2008; and at 45 percent in Sierra Leone, down from 50 percent in 2005. The estimated evolution of poverty in Sierra Leone suggests that a large proportion of the population is clustered around the poverty line, thus highly vulnerable.

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