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More Power to Sierra Leone's Economy: 'Mind the Gaps'

The Sierra Leone Telegraph Editorial Team
23 June 2009

In its latest report, the World Bank is warning that “developing countries will be hit hard by falls in private investment.”  The Washington-based agency predicted nearly $1 trillion less in foreign investment this year than they did in 2007, leaving developing countries, such as Sierra Leone, hundreds of millions of dollars short of the money they need to finance their obligations.

This grim message from the World Bank will most certainly call into question President Koroma’s government spending plans, as taxation from personal income and business corporations are set to decline quite significantly by the end of 2009. The World Bank is also forecasting a significant reduction in donor funds, which no doubt will add to the worsening economic downturn caused by the sharp fall in Sierra Leone’s exports.  

Amid these grim predictions, Sierra Leone’s government borrowing requirement continues to rise alarmingly.  Expectation from the donor countries is for President Koroma to increase productivity, by embarking on tough public sector finance efficiency management, especially with regard to improving the performance of the utility services, such as water and electricity. But will President Koroma instead, continue to borrow and spend his way through the current economic downturn? The President is surely at cross-roads; which way will he turn?   

It may be recalled that during the reign of the previous government, President Koroma served as Chairman of the Board of Directors of the Guma Valley Water Company. Throughout his time in office as Chairman, the performance of the company was on a downward spiral - poor management, under investment and the lack of government commitment.

With President Koroma now in control of the country, the expectations of the people of Freetown in particular and the nation in general are very high, with respect to the management of the country’s public utilities. Indeed President Koroma is the first head of state in Sierra Leone, to have served as the head of the national water company prior to taking over the reigns of power at State House.

Critics may argue that during his stewardship of the water company, there was no strategic management plan put in place by his Board to halt the rapid decline, nor to improve the supply of clean and safe drinking water. Hence it is not surprising that today there is the continuation of that very same lethargic and inept approach to water supply management and provision in the country.

However, it could also be argued that if ever there is anyone in the current government who ought to understand what needs to be done to resolve the problems of water shortage in the Capital, it is the President himself.

Ironically, the frequency of water shortage in the Capital has gone far beyond embarrassing levels.  It has now become a matter of life and death, especially for those in the poorest areas of Freetown, trying to access clean, safe drinking water.   

To be elevated from the position of Chairman of the Board of Guma Valley Water Company to that of Head of State is mercurial to say the least. But not being seen to be rising to the challenge that such responsibility now place on the President, is difficult to comprehend.   

The provision of clean, safe drinking water is one of the 2007 election campaign promises that brought President Koroma’s government to power. The people of Freetown gave their overwhelming support to the President at the 2007 elections. This was the people’s investment, and now they want their return on that investment. Can the government now rise to that challenge?

Recently, a delegation of European and Sierra Leonean experts visited Sierra Leone to discuss the capital city's water requirements. Unfortunately, all requests by the team to have meaningful discussions with the relevant ministries were declined, because money had not changed hands – it was alleged.

Whilst the Sierra Leonean members of the delegation interpreted this hopeless response as typical of the establishment, for the European delegates, it was incomprehensible. The team was hoping to approach the EU for funding to address the problem of water supply in Freetown after their visit. And if those discussions with the respective ministries had gone ahead, there was every chance that work to rehabilitate water supply in the capital would have gone ahead.

Several commentators on Sierra Leone's politics have mentioned that the President is surrounded by a small group of people that are frustrating his efforts to accelerate the pace of economic development. But this is hard to believe, because leadership is about delegating and accountability.  Sadly, very few people in the country are now holding their breath, after recent announcement by the government that the World Bank is ready to invest millions of dollars in fixing the water crisis in the capital city.   

Others have argued that the absence of a comprehensive and coherent National Development Strategy is responsible for the patchy and incremental approach to tackling key development issues facing the country. The lack of innovative thinking by the public sector may also be explained by the fact that the government appears to be strapped on to the tailcoats of donors.  As the saying goes – ‘who pays the piper calls the tune’.

The Millennium Development Goals, the Poverty Reduction Strategy Paper, and the UN Peace Building Fund – they all come with strings attached, and the government does not seem to have the courage to remove the shackles of economic bondage.

Of course no one is suggesting that the government should ditch the donors, because that would be foolish. But there is reasonable expectation for the government to renegotiate the terms and strategic direction of those funding programmes, to take into consideration the current global economic downturn, and Sierra Leone’s need for industrial development.  Without this bargaining power, the country’s economic future remains bleak.

As the government and people of Sierra Leone prepare to celebrate the switching on of Bumbuna electricity, honest, patriotic and serious minded economists from across the political spectrum are asking the same question: given the current difficulties faced by the private sector in raising investment capital, needed to expand industrial production, how will the sudden increase in electricity supply in the country increase the country's GDP?

“In 2007, poor countries took in $1.2 trillion in foreign investment. This year the figure is likely to be $363 billion -- less than a third of the record 2007 amount, and just over half last year's total of $707 billion. Industrial production has fallen sharply in the past year, as companies in the developed world worry that people will not have the money to buy their wares”, says the World Bank. One therefore has to wonder how President Koroma’s government hopes to afford the nation’s consolidated spending plans without embarking on stringent cuts in the public sector.

Critics of the government’s policy to immediately electrify the entire country with the supply of 50 megawatts of electricity, without a coherent industrial development plan in place, are beginning to doubt the country’s ability to repay the $600 million loan that was borrowed to finance the development of Bumbuna, not to talk of meeting its operating costs.  The government does not seem to have a plan as to how the 50 megawatts of electricity will be economically utilised.

It is also argued that the need for Bumbuna should be driven by the demands of a government that is hungry for industrial and economic development, rather than the social and political capital gains that it seeks to achieve at the 2012 elections.

Questions as to the viability and sustainability of Bumbuna, are now also being asked by those concerned about the level of debt burden on a country with such low industrial base, and an economy that is largely donor driven. But of course supporters of the government would argue that an immediate increase in the supply of electricity will accelerate the growth of small service sector businesses, such as night clubs, restaurants, and hotels. But is this economically sustainable? The tourism sector continues to be in decline.

The government is hoping that the new surge in electricity supply would encourage the growth of manufacturing production. But this argument appears weak, given the current state of the global economy, the decline in market demand and production outputs.

China has promised to develop a series of hydro-electricity dams, adding to the 50 megawatts output of Bumbuna. The Japanese are building a new electricity sub station at Regent to supply the Peninsular and its environs.  But what does President Koroma intend doing with all this electricity, if there is no coherent national industrial development plan in place? 

The supply of electricity is one driving factor in the economic development mix. The country lacks skilled workforce to meet any increase in new jobs created by the manufacturing sector that may want to take advantage of the increased supply of electricity.  Although the government has commissioned a review of vocational skills development provision in the country, there is concern that this review does not seriously reflect the economic challenges at hand. 

Some of the major trunk roads are now being constructed, but the pace of rehabilitating  existing feeder roads destroyed by the war is grinding too slowly, to keep up with the pace of industrial development needed, to make Bumbuna a cost effective enterprise venture in the next three years.

The country’s industrialists and potential foreign direct investors would regard the ‘snail’s pace’ of infrastructure rehabilitation as one that is adding to the cost of doing business in Sierra Leone.  The call for the creation of devolved regional assemblies and regional economic development agencies in Sierra Leone is laudable. This may well be the answer to the political paralysis, caused by tribalism that hinders economic progress.  

The rehabilitation of the country’s sole international airport has become politicized and mired in controversy. Decisions as to the financing and contracting of the immense expansion work that needs to be done are held in abeyance. It appears the government does not appreciate the importance of the national airport serving as the gateway to everything that Sierra Leone has to offer to investors, visitors and tourists.

The reality is that very little has changed at the airport since it was built. But allegations of mismanagement, corruption, and incompetence are destroying investor confidence. Although new logistics and customer service systems are being installed to improve baggage handling and passport checks, staff productivity, morale and pay remains alarmingly low.

The Government lacks the finance needed to invest in developing the airport into a modern infrastructure meeting the high standards expected by the international traveller.  And if ever there is a strong case to be made for the privatisation of state enterprises, the airport ought to be the first in line for private sector ownership. In the meantime, sadly, the airport and the ferry terminals continue to symbolise the chaos that awaits visitors upon their arrival in mainland Freetown.  

What is clear is that the uncertainty of the country’s economic future is becoming greater, as the world’s economy goes into deep recession and Sierra Leone’s debt burden continues to mount.  And as the government continues to rely heavily on donor funds and public sector borrowing to meet its budgetary requirement, the President no doubt will be asking himself this question:

“Should my government continue to borrow more money to spend on building social and political capital in anticipation of 2012, or should we take painful decision to cut back on public spending? 

President Koroma is now at cross-roads - which way would he turn?

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