Jesmed F Suma: Sierra Leone Telegraph: 30 May 2020:
The success of the proposed new social compact would be predicated on recognizing the intricate link between agriculture and economic development, driven by the application of the necessary technology in business and industry.
It is the recognition of this intricate link that dictated the industrialization strategy of the developed nations. Historically every developed industrialized country of the world from those in Europe and North America to those in Asia – particularly China, started by investing greatly in their agriculture sector, which stimulated growth in the non-agricultural sectors.
Therefore, part of what would dictate Sierra Leone’s National Development Plan should start from financing businesses in the agricultural sector, running the whole gamut from food and cash crop, to the processing, packaging, distribution and marketing industries.
Financing support should target the entire value chain, to facilitate access to needed materials for the production, processing, and distribution of these products and their by-products to the final consumer.
We need to be able to identify what the country imports in large quantities that can be produced and processed locally; and the cost of developing such industries, and the length of time it will take to scale production to replace the quantities imported. I will attempt to name a few:
COOKING OIL PRODUCTS
Sierra Leone imports a large quantity of cooking oil, which could be produced and manufactured locally.
From the Central Bank stimulus finance, loans should be offered – up to 50% of the capital investment, not exceeding two hundred and fifty thousand dollars ( $250,000) per business for investing in the cultivation, manufacturing and processing of food products at a commercial scale – such as Palm oil, Peanut oil, Coconut oil and Avocado oil plantation and processing.
On attainment of production levels that can meet local demand, government can impose stiff tariffs on all foreign cooking oil imported into Sierra Leone.
Details of the type of support that could be provided for such businesses – including technical and financial support, can be defined in the country’s Agricultural Development Strategic Plan.
ANIMAL BASED PROTEIN PRODUCTS
These include beef, mutton, chevon (goat meat) and chicken. Government should have an aggressive goal to stop importing beef and chicken. Businesses should be financially supported to produce enough to meet local consumption levels and probably export the surplus to neighbouring countries.
FUNDING FOR LIVESTOCK FARMING
To reduce import levels of animal based protein, such as cows, goats, chicken, and sheep, government should fund and provide technical support as well as other related assistance for local livestock farmers across the country, ranging from subsistence level to commercial scale.
These businesses will also need guidance on how they can establish partnerships with other farmers in the industrial economies in areas such as largescale poultry to meet local demand for eggs and protein; cattle ranching and fish farming.
FUNDING FOR COMMERCIAL PLANTATIONS
This should include investing in organic nursery plantations to grow, nurture and/or produce seedlings for individuals and businesses wanting to go into commercial farming. A central location to produce and sell seedlings of fruits, grains, vegetable and herbs is absolutely needed.
Funding should go to Commercial Fruit Juice production – High Quality and affordable fruit juices, including Mango, Orange, Guava, etc.
Rice – Focussing on increasing and improving the quality of rice production, using methods like destoning to replace imported rice.
Distribution and supply chain infrastructure – Refrigerated trucks, and other tools and equipment to address distribution challenges.
Exploring options to increase the efficiency of the Sierra Leone Post Office, with a view to rehabilitating and bringing back into use its existing infrastructure.
Packaging – Provide additional funding for new and existing packaging companies that can produce different types of paper and plastic products for agriculture and process industries.
The financial support plan should have both short and long-term solutions to address the supply and demand shock triggered by the pandemic, thus requiring that the implementation be guided by these facts. In the short run the country may not be able to immediately grow enough food to meet national demand.
Therefore, in addition to the incentives provided for food importers to ensure sufficient supply of key basic food items, direct cash in the form of soft loans should also be given to the petty traders and local vegetable sellers to boost the supply of locally produced items.
Loans given for the short term could be to finance inventory, either of imports or locally produced goods while long- term financing could cover capital expenditure for both new businesses and the expansion of existing businesses.
Since the informal economy constitutes a larger percentage of the country’s economy, microfinance businesses could be instrumental in providing funding to these businesses, as well as bringing them to the formal economy. A commitment of at least three trillion (Le 3 Trillion) of the stimulus to microfinance businesses over the next five years will be a good start to provide loans ranging from $50 – $50,000 equivalent in Leones per business.
This is an opportunity for microfinance businesses to expand their operations and must come with additional responsibilities and conditions. Government could also use this as an opportunity to get informal businesses into the formal economy by getting them to register, as a condition to access funds. They should be required to pay taxes annually, to maintain access to additional funding.
The micro finance companies could be helpful in facilitating this process through an online registration process which would ensure each informal business is provided with a unique registration number for both tracking and transactional purposes.
The registration fee could be as low as $ 10 per business. All businesses will be required to register annually for a nominal amount.
Micro finance businesses should be required to provide continuous support services for these businesses in addition to funding. If done right, this could bring petty traders, farmers, plumbers, carpenters, welders, tailors, vegetable gardeners, retailers, motor vehicle operators and many others into the formal economy by getting them to register before accessing funds and get them to pay taxes annually based on their incomes. This could help boost the GDP and increase government’s revenue base.
The participating microfinance agencies must be required to sign a loan agreement that includes the following conditions:
1.They must ensure that individuals and small businesses they finance are registered. If not registered they should help them do so.
2.They should have a robust debt collection program to ensure these businesses meet their obligations. A quarterly report must be submitted to the monitoring unit setup by the Central Bank.
3.They must ensure that the businesses they finance pay taxes to the state.
4.They must ensure that all disbursements are made through the businesses’ bank accounts and should facilitate set-up for those without.
5.They must ensure that these loan recipients report on all new hires and their salaries.
The micro businesses should only qualify for additional loan if they meet the above stated requirements.
We could also identify and finance businesses that are already in and/or provide services to the agriculture industry such as suppliers of implements, chemicals, machinery and more.
Locally owned companies with significant potential to provide machinery for many areas of the agricultural industry should be identified and prioritized for such help.
The above proposals in no way purport to solve the fiscal crisis we face as a nation. It was written with the intent of starting a robust conversation on a way forward, as it pertains to the country’s overall financial health.
My hope is that it will not be viewed through partisan lenses but in the true spirit in which it was written. I look forward to engaging both government officials and private citizens, as we continue the arduous task of rebuilding our nation.
About the author
Jesmed F Suma is President and CEO of BRIMCO Consulting LLC a US based Investment Management Consulting firm in Princeton, NJ. Tel: +1908-759-4332, Email: BrimcoConsultingLLC@outlook.com