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Much remains to be done – Mr President!

A rejoinder (Courtesy of Bintumani On-line forum)

7 July 2010

One of the missing link to Sierra Leone’s economic problem is the tacit neglect of the stock market project that former president Kabbah left uncompleted that should have been forcefully followed through by the APC government.

This is because the stock market has an important role to play in economic development. It is an important wheel for economic growth, as there is a long-run relationship between stock market development and economic growth. Stock market development has direct impact on corporate finance and economic development.

This institution is important because financial intermediation supports the investment process by mobilizing household and foreign savings for investment by firms. It ensures that these funds are allocated to the most productive use by spreading risks and providing liquidity, so that firms can operate the new capacity efficiently.

Financial markets, especially stock markets, have grown considerably in developed and developing countries over the last two decades, and several factors have aided in their growth. Amongst them, are improved macro-economic fundamentals, such as monetary stability and higher economic growth.

General economic and specific capital market reforms, including privatization of state-owned enterprises, financial liberalization, and an improved institutional framework for investors, have encouraged capital markets development.

Unfortunately, the APC government is not interested in doing honest work that will create the necessary macro-economic, socio-political environment that will engender the confidence and trust for honest people to participate in the economy of Sierra Leone.

The publicly owned - moribund state enterprises, whose sale the IMF recommended, managed by political cronies and relatives of the president, are a drag on the economy because of their colossal inefficiencies.

Instead of these people establishing an investment company that can market the sale of these companies to serious investors, there was this talk about DENI, and the nirvana and paradise it was going to offer Sierra Leone.

What happened to DENI?

Unless and until the macro-economy improves, our economic future is doomed. It is market forces that channel investments to those who have the wherewithal and entrepreneurial spirit and know-how to invest, not the invisible hand of the government, like president Koroma is doing. It is the market that selects winners and losers not politicians for parochial and selfish interests.

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