New Beginnings
Sierra Leone’s President Ernest Bai Koroma has implemented an agenda of sweeping reforms to attract new investment. Three years into the plan, what are the results?
When Tony Blair stepped into the Sierra Leone Trade and Investment Forum held in London last November, there was every reason to sense something positive had begun. The former British prime minister had teamed up with Sierra Leone President Ernest Bai Koroma to convince the business world that the war-torn nation had entered a new era and was ripe for foreign investment.
“By transforming agriculture, investing in energy and infrastructure, and creating a level playing field for investors, President Koroma is laying the foundations for a strong, stable, dynamic economy with sustainable growth,” said Blair. “Investors looking for exciting, high-return opportunities in a stable, pro-business climate need look no further than Sierra Leone.”
The international media ran stories of unbridled enthusiasm, extolling the virtues of President Koroma’s reform agenda. But now that the reforms have been in place for some time, the question needs to be asked: Are the results living up to the initial optimism?
Immense potential
International organizations, including the World Bank, believe Sierra Leone’s potential for economic development is profound. It seems all the ingredients are there. The nation holds a smorgasbord of mining opportunities, with deposits of iron ore, rutile, bauxite, gold, diamonds and many other minerals.
Experts see the potential for a tourism boom (Lonely Planet rated Sierra Leone in its Top 10 Destinations for 2009). And after Anadarko Petroleum Corp. announced last September that it had discovered oil at the Venus exploration well, the nation is now on the cusp of entering the ranks of the world’s oil producers.
Perhaps Sierra Leone’s most exciting economic resource is its underdeveloped agriculture sector. With a diverse climate, good soil and plentiful rain, conditions are said to be perfect. Despite this capacity, according to Sierra Leone Export and Investment Promotion Agency (SLIEPA), the country has been unable to produce enough food to meet its own domestic needs, importing $68 million and $116 million of food in 2007 and 2008, respectively. It is for this reason that the Koroma government has signaled its desire to stimulate private enterprises in the sector.
Hurdles
The problems facing President Koroma when he took office in 2007 were ominous. The country was struggling to recover from a civil war, which ended in 2002, and faced endemic problems such as corruption, electricity shortage and a critical lack of infrastructure.
Having campaigned on a promise to tackle these problems, attract foreign investment and foster private enterprises, the onus was always going to be on Koroma to come through with the goods.
Sweeping reforms were introduced through legislation. In 2007 the government amended investment laws and created the SLEIPA to facilitate interested investors. In 2008 it significantly strengthened the Anti-Corruption Act, and a floating exchange rate was introduced. The list of reforms goes on, but have the results followed?
Mohamed C Bah
Mohamed C. Bah, a Sierra Leonean social commentator, said that while he is convinced of the president’s intentions, the rate of change has not met expectations. “If the youth unemployment rate is [still] as high as 70 percent and Sierra Leoneans cannot find work to support their families, if the basic utility systems such as light, water and roads are still inadequate and deplorable, [that means] the rate of change is stagnant,” he said.
Progress
Others are more optimistic.
“I would say there is light at the end of the tunnel,” said Raymond Kai Gbekie, Director of Investment Promotion at SLEIPA. Gbekie said that there has been a visible increase in the amount of private investment in his country. (On the day he spoke to ChinAfrica, Gbekie had just finished hosting investors from the Czech Republic, and was preparing to meet an Italian group the next day).
In particular, he pointed to the infrastructure sector as having seen a huge amount of activity. The government has made a $1 billion commitment to infrastructure development, $900 million of which is earmarked for roads, with 700 km of roads being under construction and the past two years seeing completion of numerous road projects, such as the major rehabilitation of the Masiaka-Bo highway. Many more road projects are underway and infrastructure companies such as Salini (from Italy) and China Railway Group are among those joining in the road construction and rehabilitation projects.
One company that bears witness to improvement in the nation’s business environment is palm oil producer Goldtree. The Sierra Leone registered company is a subsidiary of Goldtree Holdings, a Mauritian company owned by investors from the United Kingdom. Having started up in Sierra Leone just one month after Koroma took office, Goldtree’s story in Sierra Leone could be viewed as a case study of the government’s agenda to foster investment and entrepreneurial initiative.
“We came in October 2007 and started looking around for a suitable place for palm oil cultivation,” said Mustapha Turay, one of the company’s directors. “We found a place in the southeast of Sierra Leone, a place called Daroo.”
The company has planted 105,000 seedlings in a nursery and they will eventually be replanted on the main property. Like the recovery of the Sierra Leonean economy, Goldtree’s plan is a long-term one. Turay says it will be four years before the fresh trees are ready and five by the time the plantation reaches peak production.
He and his colleagues were already planning the project before the change of government in September 2007, but Turay says the new government’s policies have made a big difference along the way.
“Even before [the change of government] we were determined to do agricultural business in Sierra Leone, because agriculture is a necessary aspect of the growth of our country,” he said.
“[But the Agenda for Change] has made it easier for us, because the president has given a lot of encouragement to carry on with this project.”
He stresses that entrepreneurial ventures such as Goldtree bring enormous benefits in the economy’s road to recovery.
“At peak production Goldtree will be employing over 1,000 people and our purchasing and processing operation will put $250,000 a month into the local community.”
Seeds of growth
There are other examples of new foreign investment coming into Sierra Leone. In February, the government signed a $400 million deal with a Swiss-based energy corporation, Addax Bio-energy. The project is the most valuable agricultural deal in the nation’s history and will produce fuel ethanol and renewable electricity.
In the mining sector, Netherlands-based aluminum producer Vimetco NV has bought a bauxite mine for $40 million. Titanium Resources Group, London Mining and Cluff Gold PLC are all either expanding or starting up new projects.
These are just a few examples among a plethora of new business projects. But for Sierra Leoneans, there is a balancing act between the willingness to be patient and the insatiable hunger for change.
“The general environment has improved,” said Turay, who emphasizes his support for the government’s agenda. “But they still have to put a lot of legislation in place. And also the infrastructure, the road network, has to be established properly. The capacity of electricity and energy also has improved tremendously, but we still need more.”
Bah acknowledges “modest” improvements, but remains critical. He said the investment forum in London and the support of Tony Blair are clear evidence that the Koroma government sees foreign investments as an opportunity to improve the social and economic lives of Sierra Leoneans at home. “But, changes are coming too slow and many investors seem to be on the wait and see mode, “ said Bah.
Perhaps Bah’s view reflects the mood of a population desperate to see rapid improvements on the ground. But at the SLEIPA, Gbekie argued that change is a slow beast and things are moving as fast as is reasonably possible, especially when it comes to the nation’s jobless. “By the end of the year I am confident the employment figures will have improved,” he said.
BACKGROUND BOXAGENDA FOR CHANGEIn 2009 the Sierra Leone Government introduced investment incentives across all major sectors: General incentives Three-year exemption on import duty for plant, machinery and equipment Reduced duty rate of 3 percent on the import of raw materials 100 percent tax loss carry forward can be utilized in any year 125 percent tax deduction on R&D and training spend Three-year income tax exemption for skilled expatriate staff, where bilateral treaties permitAgribusiness For agri-investments meeting certain criteria: Exemption on import duty for farm machinery and equipment, agrochemicals and other key inputs Exemption from income tax up to 2020 for companies, individuals and partnershipsMining Tax rate reduced to 30 percent for all companies with audited accounts Losses allowed to be carried forward for 10 years following the date of initial production Capital allowance of 100 percent in the first year for prospecting and exploration expenses 100 percent of reclamation, rehabilitation and mine closure costs can be deducted in the year incurredInfrastructure Projects in excess of $1million will be exempt from income tax up to the year 2020 Many other incentives exist in these and other sectors. See SLEIPA for details.Source: www.sleipa.org |
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