Sierra Leone at Economic Standstill President Koroma vs. Ebola

(An Analytic Evaluation of the Economic Effects of Ebola on Trade, Tourism and Agriculture)

The signing of multi-million dollars project by the Government of Sierra Leone with the Russian Government Authority for the construction of a railway in Sierra Leone and the successful recruitment of candidates for the implementation and development of the Local Content Policy in Sierra Leone last week may have been overshadowed by the Ebola crisis facing Sierra Leone, but for the wise decisions and consequential effects that will flow from these historic development could determine how swiftly the country will recover from the emergency. (Photo: Author-Alhaji K. Tarawally )

While the virus has killed hundreds of people and thousand still being incrementally affected, most Sierra Leoneans will never contract the disease or know anyone who does. But the economic impact of the Ebola’s virus will affect the whole nation. When this crisis ends, Sierra Leone and her neighbouring countries will need an immediate international economic rescue package to rebuild their battered economies—help that the World Bank, Africa Development Bank and other international partners are uniquely placed to provide.

The reason this economic threat is so great is because of the controls needed to fight the disease. Save for the Lungi International Airport were Arik, Kenya, Asky and other major international airlines had stopped flying into Sierra Leone; Zambia, Senegal, Ivory Coast and Ghana had closed their borders to travellers from Ebola hit nation like ours; embassies had evacuated non-essential staff, it was clear to note that night clubs, restaurants, hotels and all forms of tourist attractions has been comated. Tourism Minister, Peter Bayuku-Konte estimated that Sierra Leone’s tourism sector had lost over $6 million in revenue as a result of the Ebola virus.  “Investors are leaving and visitors and tourists are staying away. Some flights have been cancelled while the rest arrive half empty,” said the Tourism Minister.

In addition to the economic malaise, there are also restrictions on commercials vehicles, motor bikes, movement of people, military and OSD stationed on strategic periphery of the communities. Internal travel has been restricted, Kenema and Kailahun quarantined. Virtually all borders have been placed on heavy security alert as if we are in conventional war. These measures are starting to contain the spread of Ebola; but because they are so restrictive, they have the side effect of halting much day-to-day economic life.

If the biological threat the virus poses has often been exaggerated, the economic risk has if anything been underplayed. All of this means a virtual economic standstill for Sierra Leone, as for most Sierra Leoneans, the real fear is that Ebola will claim, not their lives, but their livelihoods.

President Koroma in economic dilemma

The closure of centre’s of business, such as Congo Market, weekly village lumor, markets along our borders where farm produce, clothing and household goods are sold is unavoidable. But it is hitting rural communities hard. The current economic indications by the Minister of Finance and Economic Development, Dr. Kelfala Marrah during the usual Government press briefing organized by the Ministry of Information and Communications disclosed that, the economy has collapsed due to the Ebola virus and that Government needs $70 billion to close the funding gap to support the 2015 budget. He said the Government has disbursed more than 60 billion Leones to contain the outbreak, positing that all the sources of Government revenue have stalled as a result of the closure of major revenue generating foreign companies and other sectors including tourism, mining and agriculture.  He added that about 24,000 jobs are at risk while the livelihood of 600 farmers that supply sorghum to the Sierra Leone Brewery is hanging in the balance. “The economic outlook is gloomy that the outbreak has also interfered with the country’s culture and tradition such as handshaking and hugging adding that Sierra Leone that was rated among the top ten economies in the world has been ravaged by Ebola,” says Dr. Marah.

The growth has already declined below the 11% – 7.9% forecast by the International Monetary Fund for this year. In the three months since the crisis began, the government has lost revenue equivalent to 7% of our annual receipts. This figure could grow many times greater before the outbreak is fully contained. To make matters worse, our reduced budget will have to stretch further, threatening spending on schools, security and other priorities.

But the economy has boomed in recent years, with gross domestic product growth of 15.2 percent in 2012 — the fastest in sub-Saharan Africa — driven largely by its rapidly expanding mining sector.

It is very pathetic for one of the world’s poorest countries where half the population lives on less than $1.25 a day, that had been steadily recovering from the economic damage done by the eleven years of brutal civil war where between 1991 and 2001, about 50,000 people were killed. Hundreds of thousands of people were tortured, raped, and brutal maiming of thousands of civilians, including countless children; amputation by machete was the horrific signature of the war as many Sierra Leoneans fled their homes and became refugees in neighbouring Guinea and Liberia. By January 2002, late President Ahmad Tejan Kabbah declared the civil war officially over. By 2004, the disarmament process was complete.

Now, after years of peace and stable economic growth, Late President Kabbah’s and the Ernest Koroma’s Government has made some significant strived to encouraged thousands of Sierra Leoneans home, including our professionals and foreign investors. Gross economic growth through the mining sector has help fuels an estimated averaged more than 15.2 percent in 2012 — one of the world’s fastest growth rates, and 4.5 percent of which the mining industry accounted for the country’s GDP in 2007. The mining sector for the past years had accounted for about 79 percent of total export revenue with diamonds and Iron ore accounting for 46 percent of export revenues.

Despite the accelerating growth, yet still, it was a fragile recovery, even before Ebola hit the country. Youth and urban unemployment remains high; and, having seen how the powerful led our nation to war, people are suspicious of authority. In the face of such distrust, with many initially choosing to ignore public health warnings, the government has moved to protect the population.

The first cases of the Ebola Virus were reported on 25^th May 2014, in the Kailahun District, near the border with Guéckédou in Guinea. By 20 June, there were 158 suspected cases, mainly in Kailahun and Kenema district, but also in the Kambia, Port Loko and Western districts in the north west of the country. By the 17^th July, the total numbers of suspected cases in the country were rapidly accelerating to an estimated figure above 442, and had overtaken those in Guinea and Liberia.

The economic impact is already being felt. Sierra Leone’s hotels are emptying of international business executives, tourists and staff from non-governmental organizations. British, Kenya and other International Airways have suspended flights to Sierra Leone. Concession operations from agriculture has already been severely hit-as Sam Sesay, the Minister of Agriculture, Forestry and Food Security puts it, “The economy has been deflated by 30% because of Ebola, adding that, the agricultural sector is the most affected by the epidemic, as 66 % of the country’s people are farmers.” Mary Hawa John-Sao, the Vice President of the National Farmers’ Federation in one of her interviews with the Politico Newspaper disclosed that about 75% of those killed by Ebola in Sierra Leone are farmers in especially Kailahun and Kenema districts, the two hardest-hit areas. She added that, this would heighten hunger in the country as most farmers were without farm to harvest and enough food to eat.

It is crucial that, as the government work to contained the spread of the virus, the international community puts in place plans to support Sierra Leone return to the path of economic recovery as to where, we were successfully following before the crisis began. None of this is permanent and the underlying fundamentals of the economy remain strong. But it places considerable strain on an already stretched government trying to lead the country back to strength. With help from international partners we are tackling the immediate health emergency – but our economic room for manoeuvre is tight. It is crucial to remember that the disaster does not end when Ebola is defeated.

We have now started receiving massive international support from China, UK, USA and other domestic and foreign partners. The World Bank and World Health Organization have established a special Ebola Fund to provide the three affected West African states, Liberia, Guinea and Sierra Leone, with $200 million in support. Initially these monies will be used to pay medics and essential security personnel and to redouble public-information efforts aimed at making citizens aware of how they can help prevent the spread of the disease.In the medium term these funds will support basic economic-recovery measures. Yet once the immediate outbreak is contained and the threat to public health has ended, we will struggle to recover from Ebola’s wider impact without significant assistance and short term economic recovery measures by the finance ministry. What we need—and what our international partners can offer—is economic growth that creates stable jobs and decreases the number of itinerant, semi-employed citizens who wander from village to village seeking work and—through no fault of their own—may well have increased the spread of the disease.

Ultimately, stable and long-term employment delivered through foreign investment and the effective utilization of the Local Content Policy will be the only way to effect a significant economic change. More employment—full-time and permanent in location—would significantly limit the spread of a disease such as Ebola, which is spread through direct bodily contact. That is why we are so hopeful about the Implementation and development of the Local Content Policy and the signing agreement for the construction of a multi-million dollars railway project in Sierra Leone. Sierra Leone needs an economic kick-start immediately after the Ebola menace. The railway signing agreement, according to the Minister of Transport and Aviation, Balogun Koroma said that, the successful implementation and completion of this project is expected to provide about 15,000 jobs for Sierra Leoneans and also improve on technology within the transport sector in the country.

The Sierra Leone Local Content Unit on the other hand is expected to promote growth and development of the domestic private sector by creating linkages with the large domestic and foreign firms through the utilization of local resources and products, and to promote the integration of Sierra Leoneans in all economic activities by allocating 20% of the managerial and 50% of intermediate positions to Sierra Leonean citizens and manufacturing industry shall be required to use at least 10 % of domestically produced inputs; for bakery and confectionery industry in particular 10% inclusion of Cassava flour produced locally from locally grown Cassava is a requirement, while 20% of locally produced sorghum for the beer industry.

For our economy to fully recover, we will continue to need access to foreign markets for our goods. New tariffs being imposed on African goods by China, USA and Europe because of stalled trade talks would be bleak news for an economy left lurching by the dangerous Ebola epidemic. So would U.S. failure to renew the African Growth and Opportunity Act, which expires in September 2015, when customs and duty-free tariffs for 39 African countries, including Sierra Leone might have lapse.

Despite President Ernest Koroma was unavoidably absent during the US-Africa Leadership Summit in Washington as a result of the Ebola fear factor, it is still crucial for Africa’s development that political disagreements in Washington are overcome, the leadership summit in Washington last month raises the prospect of the U.S. more broadly cementing its role in Africa not just a generous donor in times of emergency but as a trading partner creating jobs on both sides of the Atlantic. It is a regular criticism of other major investors, such as China and Europe, that they do not create jobs in Africa apart from those for their own workers. While this is an exaggeration, it is not a charge that can be leveled at America, as the U.S.-Africa Summit demonstrated. The Coca-Cola Co. KO +0.38% announced that it would invest an additional $5 billion over six years in manufacturing lines and production, as well as sourcing more agricultural ingredients from Africa. General Electric -0.69% pledged to invest $2 billion by 2018 and double the number of its workforce on the continent. The Ford Motor Co. F -1.01% announced plans to expand manufacturing into Africa, with sales forecast to grow by 40% by 2020.

The commitment by corporate America to job creation and investment will significantly help Sierra Leone addressing the Post Ebola Economic Crisis on the source of many challenges facing the nation: In the end, from Ebola to low life expectancy, the origin remains poverty.

Author-Alhaji K. Tarawally

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