Sierra Leone needs drastic structural reforms to turn economy around

Prince Jacob Macauley: Sierra Leone Telegraph: 12 August 2019:

People of Sierra Leone have come to realize that we cannot keep on doing the same thing and hope to get different result.

The economic policies that have been followed are not helping; and we have an ongoing economic crisis as a nation. High cost of fuel, the rise in foreign exchange rate and the lack of private sector investment, are all part of the problem.

The sad reality is that we are looking for foreign investors to come and rescue us. But we have never seen anywhere in the world where foreign investment leads and domestic investment follows. It is always domestic investment that leads and foreign investment follows.

As a country, we have to build confidence in our own economic capability. And the way to do that is to provide an economic stimulus, driven by a strong plan to progressively transform our economy from a commodity dependent economy.

In my view, I think the government is getting advise from the usual suspects – like the IMF, for some reasons and for some years, since the global financial crisis.

The IMF was wrong on the issue of capital controls; they were wrong on the issue of inflation targets; and they were also wrong on the issue of trade unions and labour market.

And so as a nation, we all should know that there is a shift that has taken place internationally, including recognition of austerity policies in Europe which is absolutely disastrous.

But it seems as if our treasury and key elements of government – and I am not saying the entire government of President Bio, but there are key powerful members in the Bio government, that are linked to this element because they testify to these rating institutions and agencies; they testify to global financial institutions.

It is high time they stop looking to these institutions for direction; and its time also that we take responsibility and our sovereignty for our own economic direction.

Ordinary people are suffering in the country, there are no jobs for the youth, affording ‘bread and butter’ items have become more difficult for everyone now; not only for the average man alone.

What international experience shows since the global financial crisis in particular, is that countries have taken responsibility to implement large scale public investment programs for example, to implement a degree of capital control, etc.

Doing all these things that are aimed at protecting the population and boost the economy, these countries have managed to weather the global financial crisis; while those that follow the advice of deregulations and regularization – as we are, are facing the worst now.

Also, the central bank long ago should have done better to salvage the country’s economy by cutting interest rates.

One important point the government should take into consideration is that it is because of their policies why the economy is contracting now, and why we are where we are and have been for a number of years.

They need to introduce a counter-cyclical fiscal monetary policy, but what they are doing now is the opposite by tightening our monetary and fiscal policies, making large cut backs.

In other words, public investments suffer and as a result the cost of capital has become too expensive for small businesses and manufacturers to invest in boosting the productivity capacity of the economy.

What we need urgently and critically to help boost the country’s economy is drastic structural reform, and a government investment stimulus package.

12 Comments

  1. ‘JJ BLOOD’

    Today, the eyes of the nation are fixed on the ultimate demise of the country’s energetic and egotistical Chief Engineer of the economy, the Chancellor of the Exchequer as in the United Kingdom; or the Minister of Finance in the highly-trumpeted ‘new direction’ Sierra Leone Peoples Party (SLPP) government of Retd. Brigadier Julius Maada Bio. To a large section of community, they want the head of the country’s Treasury Manager on a plate, for his apparent failure of generating enough power in steering the ‘new direction’ vessel to the intended destination.

    However, many are not convinced in the current euphoria in apportioning most of the blame to the Finance Minister, Jacob Jusu Saffa and his team including: the Financial Secretary, Sahr Jusu; and the Central Bank Governor, Professor Kelfala Kallon.

    Has JJ Saffa actually played a significant role in the formulation and implementation of fiscal and monetary policies since the ‘new direction’ SLPP government came to power in April 2018, about 17 months ago? Who is calling the shots? Can the nation take a broader look at the possible causes that has led to the failure of policy in the present government?

    Were the right policies taken at the right time; and above all, was there any aim for inclusivity? Did the policy makers seek to optimise the multiplier effect of government spending or the fiscal component, when thinking about policy initiatives?

    The guy is nicknamed ‘Blood’, probably because of his strong and no nonsense trait in life; and now emboldened by a paopa philosophy which, in the true sense of the word (at all cost, in the Temne lingua) is a total declaration for the determination of a particular outcome in a two sided coin affair – the other outcome implying death, in any twist of circumstances. Overall, a paopa ideology has an element of a gambler’s mentality in his last throw of the dice – desperation and a high likelihood to chaos.

    JJ Blood, had repeatedly told the nation that he is a competent and seasoned economist. He had boasted on many occasions that the prevailing force of the ‘new direction’ wind of change can easily deflect and stabilise the demoralised and tilting ship of the then All Peoples Congress (APC) administration of Earnest Bai Koroma, to a vibrant vessel that is diversified to firing on all cylinders towards some kind of a visionary ‘promise land’, within a period of six months from taking over the driving seat of governance.

    Within a year in office, in April 2019, JJ Blood became an efficient propaganda machinery as evident on the allegation by the Finance Minister who “says over a billion dollars of state funds cannot be accounted for following a technical audit into government transactions over a period of three years”. Perhaps, Jacob Jusu Saffa was trying to throw a devastating thrust against the main opposition APC party, in an attempt to bankrupt and demoralise them, whilst reploting the voyage of a sluggish ‘new direction’ vessel, now loaded with International Monetary Fund (IMF) conditionalities and other commitments from various donors.

    In office, JJ Blood was faced with many challenges; however, his main objective or foremost challenge was to stabilise the heartbeat of the economy by ‘pegging’ or minimising fluctuations in the exchange rate of the local currency, the Leone.

    Since the ‘new direction’ SLPP came to power there has been a systematic increase in the prices of basic goods and services, and “the value of the Leone has fallen by about 20% … The country’s over-reliance on the mining industry for its export revenue continue to take its toll. Gross Domestic Product (GDP) remains low at about 3%”.

    Apart from grants, aid (or foreign debts), the sustainable inflow of foreign money to any country is driven by foreign direct investment and a capacity to export goods and services. This will also strengthen the economy as local currency would be in high demand – when foreign countries want to purchase the local good, they would first obtain the local currency – and consequently the local currency would appreciate, and become insusceptible to the prevailing inflationary trends/ pressures that may be lurking around. Some kind of a damper to the sensitivity of an increase in the prices of basic local goods and services – the bread and butter issues.

    Sierra Leone is yet to realize the promises made by the Bio-led SLPP government during their campaign: the flagship programme in education is still in its teething stage, with vast challenges in building new schools to limit class size; no new infrastructure to accommodate probable endemic emergencies and improve much needed health facilities; sparingly distributed agricultural projects are yet to yield benefits; the energy expend on tourism has not resulted to a significant increase in tourist numbers – a very important sector that can naturally boost the circulation of foreign currency in any country.

    In this fast-tracked technological age, why would someone be anxious to travel to a destination that would take up to a week to arrive at; without any ease of financial transactions as not many banks are equipped with cash machines; and as well as the fear of sub-standard hospitality and security issues? How many environmental, cultural and momentous sites can a tourist visit in Sierra Leone?

    The lack of priorities, inclusiveness, and the continuous policy mix-up of the present ruling SLPP government is reminiscent of a ship that has lost its rudder, amid great turbulence in a thunderous storm, with the Chief Engineer, JJ Blood standing at the aft end, on the verge of jumping (or being pushed) overboard for circumstances beyond his control.

    It is ironic, in a situation of a country like Sierra Leone, which has limited goods or commodities to export, and which is badly in need of foreign cash in order to maintain her import requirements, to suddenly cancel or suspend great sources of forex earnings such as those from large corporations, as disclosed by the Minister of Mines, Mr Foday Rado Yokie: “I have cancelled Shandong Iron and Steel Group for not paying their dues to the government and people of Sierra Leone … We inherited a challenging economy. So we need every cent to make lives better for the people of Sierra Leone. I have suspended exportation only but operations are ongoing with Sierra Leone Mining.”

    Is JJ Blood a victim of sabotage or merely an intrusive character that lacked the competence to tackle the responsibilities of the central organ of government – The Ministry of Finance?

    What about the impact to the economy of the current paratrooping president and his entourage? It is estimated that within a year in office, President Bio has travelled out of the country more than the combined total of his predecessors, former Presidents Alhaji Tejan Kabbah and Earnest Bai Koroma, in the same time. This love of the sky waves by the president climaxed in mid July 2019; when news spread from various media outlets about the whereabout of the president. Many assumed that the president had renegade the nation, until when he surfaced in Kenya several days later, enjoying a well-earned holiday with his family.

    It has been speculated that, on average, the cost of each foreign trip made by the president and his entourage is at the tune of US$50,000, including per diem. Therefore, for say, 50 trips, this will amount to US$ 2,500,000 of taxpayers money. It might be seen as chicken feed, considering the fact that some of the trips are of high necessity for the president, but some will argue that this amount is a big chunk of much needed foreign cash.

    As the nation increase its focal length, they will encounter the shadow of a powerful Chief Minister, in Professor David Francis. It is rumoured that the Chief Minister carries more influence than the president.

    At the end of July 2019, it was alleged that the Chief Minister even had the audacity to instruct the police to carry out the arrest and detention of the Chief Imam of Grafton Town, Freetown, for taking down the portrait or President Julius Maada Bio from his (Iman’s) mosque.

    So, who is at the helm of the steering wheel of policy formulation and implementation in the ‘new direction’ SLPP government? Who is causing the stagnation or retrogression?

    The ‘new direction’ may be heading towards a conflict of personalities; derived from a paopa attitude, and shrouded with theoretical convictions. Is it fair to push JJ Blood overboard in this seemingly power tussle?

  2. I like the idea that the government is succeeding in combating the loopholes. However the interest rate must be reviewed. The Corey will continue to stride on a tortoise pace if the government continues to ignore that.

    It is true that with all the economic policy reviews the situation could get better but it would take over 8 years. In the meantime, short-term measures must be taken to ease off the tension in the fragile economy.

  3. These are all salient points. There is no gain without pain. The Western world went through all these painful times before righting themselves. All we have done is try to dodge the pain and continue to do so.

    The current administration seems to have a good heart but their action is not working. I am no expert but any fool can see that some of the choices to date are ill advised.

    Free education? That was a huge mistake that will cripple the administration’s functioning. Though it is a good concept, it is definitely not a top priority.

  4. The reality on the ground is that the government inherited the worst economy after the IMF, World Bank and most Mining Investors had fled the country. Most of the tax policies that the New Direction has implemented shocked the business community which were not used to paying taxes which will eventually trickle down to the average citizen.

    The policies of the Anti Corruption Commission which is now being implemented has also shocked many people since the stolen monies that used to flood our economy are now in short supply. We have no option at the moment but to swallow the bitter pills from the IMF and the World Bank since our credibility has been tarnished by the previous government after they waved or forgiven some of the debts during the former SLPP ( late President Tejan Kabba’s) government – and unfortunately no credible investor will come to our country without IMF and the World Bank which has the mandate to rate economic credibility around the world.

    The huge sacrifice that President Bio has made to allocate 21% to education impacted our economy in the short run but political analysts believe that it’s worthwhile in the long term. As a layman I’m appealing to all Sierra Leoneans living in the diaspora to sacrifice at least $1000 a year towards farming to support the “Rice and Palm oil“ project which Feyi Asgill just suggested which I personally believe will complement the government’s efforts.

    As the late President Kennedy said “Ask not what your country can do for you but what you can do for your country“.

  5. I hope that this very sound piece on economic issues knock on the doors of our state governance, among which is the ridiculous interest rate hovering around 20%, in comparison to 0.75% in the UK, an issue that has frustrated me on several visits to my Salone financial advisers.

  6. My take from this brief but well thought-out appraisal of the current state of the Sierra Leone economy under President Bio is that the finance minister and Bank governor seem to be out of their depths in grappling with the economy–never mind they being well- credentialed.

    I also get the sense that consequently, life under the current regime is becoming more intolerable than it was under the predecessor dispensation. And if so, the government needs to urgently course-correct in regard to its prevaling economic framework before its new direction turns into calls for better direction down the electoral road a few years from now.

    Indeed, any Sierra Leonean government that forgets how voters in the country have since become very impatient with the inability of their elected officials to deliver on bread and butter issues, does so at its electoral disadvantage. The finance minister and the bank governor are therefore well advised to take heed of the economic advice contained in this insightful analysis and make the necessary policy adjustment before its too late. Remember: pride comes before the fall.

  7. Do you know you could be anywhere in the world and and apply online for a business license in Rwanda. Making most of government businesses online is transparent and will reduced government officials holding up business licenses for bribes. And it will stimulate Sierra Leoneans to have confidence in doing business in Sierra Leone. This will also help the domestic economy to improve; tax revenue and job hiring will also improve.

  8. When the blind leads the blind both will eventually fall. No two ways about it, Sierra Leone now has a President and Finance minister that do not have an iota of understanding about the basics and rudiments of practical, sustainable economics. They are knee-deep in high interests loans, drowning in the strictest, harshest, biased financial rules and regulations.

    And in case you are not aware, they are being controlled like puppets on a string by an IMF that is blind to the plight of the poor masses, and defiantly deaf to the incessant cries of the most vulnerable and needy in our society. Rest assured, Sierra Leone is not going anywhere close to the horizon of prosperity anytime soon, if such an attitude continues.

    All these Professors, countless Degree holders, being showered and paid huge sums, all for nothing. Always, they are coming empty-handed to our nation’s development table, contributing absolutely nothing. There is very Little to show for their efforts, except their futile, substandard, incompetent attempts to seal and plug a leaking, sinking Sierra Leone ship.

    And what do you expect, when you have a Finance Minister playing a guessing Financial policy game? What other outcome will there be in a country where a President plunges and indulges meager resources in an extravagant Free Quality Education Programme an abject poor nation cannot afford? Priorities? There are no priorities in Mama Salome presently – With this government, everything goes.

    • Yes of course in fact when a thief thieves the next inheritor would actually be confused about the whole mess as to how to fix it. At the end would have no idea. Today we have both the president and the finance minister, not only the two of them, but a whole lot of great people working hard to fix this mess.

      I don’t blame nobody but Bio, for distributing billions of Leones, millions of dollars to thieves after they’ve robbed the country. It makes me sick. Provoking your leaders about their honours degrees doesn’t make sense. What do you want them to do, after they met the treasury empty. We are totally disappointed at Bio, he never acts as if he is a former military official. APC will get away with all their criminal conduct for free.

      APC went beyond even abandoning the diaspora citizens around the world just for win elections. I don’t know what happened to KKY. I can’t even understand that man’s motive. APC went after him till he stripped himself of his US Citizenship.

      If you think that there is no priority right now in the country, please come out and commit a crime. Long live HE. BRG. RTD. DR. JMB. God bless you.

  9. If Sierra Leone wants to bring back the sinking economic crisis into an equilibrium status, we should totally ignore this aid dependency system which has served as a tradition from time immemorial. So ridiculous for a country blessed with natural mineral resources but yet still ranked the poorest in the world index.

    • We talk about ‘bread and butter’ and not ‘rice and palm oil’. By devaluing our products we devalue our currency.

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