The Liberian rubber sub-sector is challenged to a significant extent by sub-optimal performance, brought about principally by its oligopolistic character with few buyers and many sellers. The Liberia Rubber Industry Master Plan (2010 - 2040), prepared with input from all stakeholders in 2010, outlined five strategies to enhance profitability and ensure sustainability: (i) replanting; (ii) a smallholder-concession linkage; (iii) a value addition and industry integration; (iv) investment promotion and; (v) organizational reforms that would ensure the implementation of the plan along with adequate resource mobilization.
The oligopolistic nature of the rubber sector lends itself to consistent underdevelopment. Initial analysis of the various actors in the value chain indicate the need for enhancing both horizontal and vertical integration. The lack of adequate data (spatial and socioeconomic) however, makes fundamental analysis difficult. This framework document proposes the profiling of all the actors so as to determine their depth and scope for action. Agriculture contributes significantly to national GDP, both in terms of employment and output. Given these considerations, it is necessary if the sector is to be managed in a manner that maximizes its utility in the national economy. An objective assessment will provide the basis for any policy which attempts to address the constraints being experienced by the majority of actors who are smallholder producers.
The development of rubber in Liberia is closely aligned with the socioeconomic conditions and livelihood of a majority of the population. A market structure having a small number of processors and purchasers works against generally accepted principles regarding competition and efficiency. The continuous boom/bust earnings cycle acts as a disincentive to local farmers, most of whom operate on landholdings of 50 acres or less.
The plan identified limited processing facilities and low farm gate prices as major constraints to increased rubber production. Despite an estimated planting of 10 million new rubber trees (over 45,000 acres/18,000 hectares) since 2006, which are now available for production, low local market prices continue to discourage farmers from opening their farms. Continued closure of farms and limited value addition facilities have led to the inability of the local economy to stabilize export earnings from this strategic national resource.
The recommendations of the master plan are that emphasis be placed on resolving the two major constraints -- the pricing constraint and the processing constraint relating to the operation of local processors -- experienced by small holders, if this critical subsector is to resume its viability and importance in national economic growth and development. The sectors' relevance in achieving the sustainable development goals make such an initiative quite timely for a post conflict fragile economy. This initiative will provide stability of national revenue and income while addressing some of the sustainable development objectives of Liberia's postwar economic goals.
Impacted negatively by a prolonged slump in international rubber market prices, unpredictable reductions in purchases of raw rubber by local processors and the effects of the Coronavirus pandemic, the rubber sector of Liberia has fallen into a recession since 2012. At the same time, many rubber farmers were forced to either stop or reduce production, while a considerable acreage of new plantings that had matured and are ready for production has not been opened. Liberian-owned plantations and processing plants became burdened by huge debts from local banks, nonbank financial institutions, suppliers' credit, and salary arrears, which they have not been able to settle without considerable intervention by the Government. The Government of Liberia is therefore compelled to step in, due to a notable decline in export earnings from natural rubber, a notable increase in effective unemployment in the rubber sector, and the associated social impacts.
The Rubber Development Fund Act of 2017 has provided a means for sector empowerment, although it continues to face operational challenges. The Act has as its purpose to ensure the development and modernization of the industry in all its aspects, including capacity building and manufacturing of rubber based products while improving the performance and competitiveness of the Liberian rubber supply and value chain. In the financial sector, the absence of a robust supervisory regime and industry specific financing mechanism reinforces a general lack of technical capacity for smallholders regarding agriculture and remains the Achilles heel for increasing smallholder production whereas large foreign concessions maintain access to finance either from their parent firms or due to their significant cash flow. The long gestation period of up to 7 years for farm development and maturity of tree stands suggest that farmers may need 7-10 years' grace period to begin loan repayment and another 8 to 10 years to service crop loans in full, depending on interest rate. This turns off many commercial banks who often cannot lend for more than 2 years. Low farm gate prices for unprocessed rubber and the lack of transparency on how those prices are determined, have up to now been a constant feature of the landscape.
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In 2020 and 2023, the largest local processor announced moratoria on purchases of rubber on the market, which placed the sector and small holders in particular at risk. The outgoing government has placed a ban on the export of unprocessed rubber to assist the local processors, leaving farmers at a disadvantage by keeping local prices artificially low. The negative effect of such actions by market players on national income generation cannot be over emphasized. Given the dominance of the local market by the multinationals, small and large producers are unable to sell their production, posing an imminent economic threat both in terms of foreign exchange earnings and local employment and livelihood on individual farms.
