Dauda A. Kuyateh (PhD)
Head, Private Sector Development Unit & Lecturer, University of Makeni
BACKGROUND
Sierra Leone’s economy experienced overlapping stumbling blocks during 2022 as external spillovers from the Russian invasion of Ukraine aggravated domestic macroeconomic vulnerabilities. This led to high levels of inflation, a substantially weaker currency, greater imbalances in public finances, and lower foreign exchange reserves. GDP growth slowed in 2022 (from 4.1% in 2021 to 3.5 %) bringing the average GDP growth since the onset of the COVID-19 pandemic to only around half of the pre-pandemic trend (World Bank Report, 2023). High global energy and fertilizer prices coupled with a weaker currency translated into accelerating inflation which rose from 12% in 2021 to 27% in 2022 and further to over 50% by August 2023, threatening the welfare of households and worsening food insecurity and poverty. These harsh economic realities and high cost of living reflect the impact of the unfavorable global economic environment and weak growth. Thus, a healthy and friendly business environment and investment incentive policy reforms are crucial to unlock the potential of the Sierra Leonean economy. There is no better time than now for more constructive discussions and engagements with the business community to forge a common ground to improve the business environment. During such engagements, emerging bottlenecks/ red tape of taxation, foreign exchange, high inflation, interest rates, customs duties, freights, asymmetric information, and infrastructure will be discussed. Private businesses have a critical role in growing the economy, creating employment, reducing poverty, and boosting foreign and domestic investment in the country.
This article seeks to assess the commitments of the Government to create a way for economic growth, investment opportunities, and job creation through public-private partnerships and engagements. The outcome is to foster partnerships and synergy in finding solutions to addressing the challenges and identifying opportunities for the effective participation of the private sector in the recovery of the Sierra Leone economy.
INTRODUCTION
The Medium-Term Budget Policy Statement (2024-2026) and the economic policy and development models of the Government are reflected in the policy priorities –BIG FIVE GAME CHANGERS which include;
- Feed Salone: An Initiative to Boost Agricultural Productivity to Ensure Food Security and Inclusive Economic Growth,
- Human Capital Development: Nurturing Skills for 21st Century Industry,
- Youth Employment Scheme (Yes): A Presidential Initiative To Create 500,000 Jobs For The Youth In Five Years,
- Revamping The Public Service Architecture: Delivery, Efficiency and Professionalism,
- Tech and Infrastructure: Pathways For Sustained Economic Growth (TIPEG) to stabilize public finances, improve revenue, create jobs, and reduce poverty with the expectation of a vibrant, inclusive, and sustainable economy that works for all Sierra Leoneans which is an achievable endeavor.
To implement the above strategic plan priorities coupled with energy access for the next five years, substantial blended finance is needed to achieve the pro-poor Agenda and the ambitious development programs, goals, and objectives of the Government. The Government of Sierra Leone remains focused on providing job opportunities and better livelihood for its citizens captured in the BIG FIVE GAME CHANGERS.
As the Hon. Minister of Finance Sierra Leone Mr. Sheku Ahmed Fantamadi Bangura delivers the budget speech on the 10th of November, 2023 the commitments and strategic decisions to allocate funds to sectors aligning programs to policy priorities are firmly on course to achieve steady growth and revenue to implement the BIG FIVE GAME CHANGERS.
The Government has exerted consideration efforts and commitments to increase the role of the private sector in the economy to reduce the footprint of the public sector in the economy and to give more room to the private sector to grow. The macroeconomic instability caused by the continuing global compounded crisis is a cause for concern and Sierra Leone is not excluded. However, to achieve accelerated infrastructural development in this complicated and uncertain world, the enabling policy framework should be developed and the role of the private sector clearer to support economic and social development agendas.
It is important however to point out that, given expanding budget constraints and fiscal imbalances coupled with high debt servicing costs, spending adjustments based on policy priorities are critical to anchor a fiscal policy that will improve revenue performance in both the in-year and over the medium term.
The fiscal consolidation and strategy would help redirect financial resources to priority areas to stabilize public finances and reform the economy to generate and strengthen higher GDP growth. However, the most effective way of funding the government is through an effective tax administration and by broadening the tax base which could be a strategy for avoiding a fiscal crunch and preventing the build-up of systemic risks to the economy.
Sierra Leoneans are patiently looking forward to resolving the acute economic challenges confronting the country especially the high cost of living, foreign exchange imbalances, food insecurity, climate change disruptions, rising food inflation, high interest rates, freights, and tariffs.
The budget speech reflects the challenging public finances and how it has affected the delivery and performance of the Sierra Leone economy and the need to fast-track revenue and growth-enhancing reforms to create jobs through new, innovative, and sustainable financing mechanisms. Building a strong framework for tax policy and revenue mobilization efforts can help open human and physical capital needs.
However, having a conversation and charting the way forward for a dialogue presents a unique opportunity for THE GOVERNMENT AND THE PRIVATE SECTOR to adopt pragmatic and sustainable ideas to create jobs and sustain economic growth.
It is my candid opinion that given the global economic environment and the emerging geopolitics, economics, and current wars- Ukraine –Russia and now Isreal –Palestine, public finances and budgets to fund the SUSTAINABLE DEVELOPMENT GOALS 2030 and the AFRICA UNION AGENDA 2063 would be fiscally challenged.
We can achieve these ambitious initiatives with the private sector by creating a conducive business environment and de-risking the investment climate to stabilize the GDP growth, exchange rate, inflation, interest rates, and debt levels. A strong and stable macroeconomic policy presents the private sector and the government with the opportunity to play a key role in economic growth and job creation.
Improving the macro environment and increasing stability can be leveraged when private businesses and private investment are encouraged, mobilized, and incentivized to create jobs. That is the reason why it is significant for the private sector and the government to continually discuss, listen to each other, and seek suggestions that can all mutually make Sierra Leone grow more prosperous and stable sooner and better.
The Government’s commitments and policy framework to support private sector development have been positive and promising. The establishment of institutions like Small and Medium Enterprises Development Agencies (SMEDA), the National Investment Board(NIB), the Sierra Leone Investment and Export Promotion Agency)SLIEPA), the Sierra Leone Economic Diversification Project(SLEDP), the Local Content Agency, and the Private Sector & Special Project Unit (PSSPU) in the Ministry of Finance are amongst the great strides of the government to improve the policy environment for private sector growth in Sierra Leone, attract more FDI, and enhance the country’s competitiveness.
This year’s budget commits the Government to continue to support the economy, stabilize the public finances, promote private sector investments, and create jobs.
By fostering collaboration and appropriate partnerships between the public and private sectors, the country can be able to unlock investment opportunities, promote economic growth, and support resilient, sustainable, and inclusive growth.
THE PARTNERSHIP AGREEMENT BETWEEN THE GOVERNMENT OF SIERRA LEONE AND ARISE INTEGRATED INDUSTRIAL PLATFORMS (IIP)
Arise Integrated Industrial Platform is a Pan-African developer and operator of world-class industrial ecosystems across the African continent. Arise IIP identifies opportunities in commercial and industrial value chains, finances, builds, and operates the necessary infrastructure, playing a catalytic role in countries’ transition to an industrial economy. They design tailor-made solutions to enable the sustainable and local transformation of raw materials, boost exports, and promote trade.
The Public-Private Partnership is aimed to, catalyze Sierra Leone’s industrialization, stimulate job creation, and position Sierra Leone as a leading investment hub. The Sierra Leone Industrial Zones (SIZ) in Koya is a vertically integrated special economic zone that would be equipped with world-class infrastructure, promoting seamless integration and increased efficiency to access a large local, regional, and international market.
SIERRA LEONE’S POTENTIAL
- GDP growth: Sierra Leone’s steady GDP growth rate has averaged 5.2% from 2016 to 2020.
- Tax incentives: Sierra Leone offers a range of tax incentives to investors tax holidays of up to 10 years for companies operating in certain sectors.
- Stable political environment: Sierra Leone has had stable political leadership since the end of the civil war in 2002, creating a peaceful environment for business and investment.
- Foreign direct investments: Sierra Leone has seen a rise in foreign direct investment (FDI) with FDI inflows increasing from $ 63 million in 2015 to $139 million in 2019.
- Young population: Over 60% of Sierra Leone’s population is under the age of 25, representing a potential workforce and consumer base for businesses in the country.
- Business opportunities: 5.4 m ha of arable land, emerging industries, and development opportunities are prime for investments.
- Attractive incentives regimes: Favourable fiscal and non-fiscal investment incentives include reduced tax rates and tax exemptions for key sectors such as agribusiness.
THE WAY GOING FORWARD
The Government of Sierra Leone remains committed to good governance, transparency, jobs, reducing poverty, and infrastructure development, but should be able to mobilize the much-needed resources (public and private) to cater to the BIG FIVE GAME CHANGERS.
CONCLUDING THOUGHTS
There are clear signs of sustained economic recovery and resilience in the near term in Sierra Leone amid the uncertain global economic developments. However, to meet the financing gaps and lessen macroeconomic imbalances, the impacts of climate change, high debts, constrained revenues, weak investment flows, and the overstretched fiscal stance, it is imperative to mobilize and leverage innovative private financing mechanisms for development to provide rapid and inclusive growth which will be the solution to unemployment, high cost of living, economic instability, currency depreciation, food insecurity, poverty, and inequality.
Partnerships and engagements with the private sector are imperative to develop platforms that will facilitate growth, investment, efficiency, and development. The government should continue to encourage and create the environment and conditions for them to strive.