What direction Sierra Leone’s economy? Dr Kandeh Yumkella speaks out

Anthony Kamara, Jnr: Sierra Leone Telegraph: 17 August 2019:

Sierra Leone’s Finance Minister – JJ Saffa, was at the studios of Radio Democracy 98.1 last Monday. By all indications, his performance during a live interview did not offer Sierra Leoneans much hope for an improvement in their economic wellbeing, as rising food prices and the rapid fall of the value of the Leone take their toll.

The interview left many labelling Saffa as “arrogant”, “condescending” and “insensitive” to the plight of the suffering masses – the same people he was appointed to work for, on behalf of the Julius Maada Bio administration.

On a previously scheduled call I had with Hon. Kandeh Yumkella (KKY), I took the opportunity to ask him about the state of the economy, given that I had just listened to Minister Saffa’s interview.

This is what he said:

Question: The common topic of discussion for Sierra Leoneans at home and abroad is about the economy and the “Bread and Butter” issues. What is your view about our economy?

KKY: Well, macroeconomic fundamentals can be very stubborn and they cannot be fooled by good intentions and propaganda.

Question: What do you mean? Help the man at the Ataya Base and the market woman along Kissy Road understand your response.

KKY: That is to say, success in economic management is ultimately measured by GDP growth rate, inflation, interest rates, jobs and the exchange rate, among other variables. Ok, may be you can go further to consider the social or developmental or welfare impact of these variables on poverty, health, education.
So the minister’s, and by extension the government’s, performance in managing the country’s economy must be assessed against these variables and not just their rhetorical flourishes.

Question: So how would you frame the debate on the economy?

KKY: The debate on the economy today should examine how the indicators I mentioned earlier changed? Remember, I talked a few minutes ago about exchange rates, interest rates, jobs etc.

Thus, during the period 2017-2019, have the indicators changed for the better, or have they remained stagnant? Have they gotten worse? For now, all indicators tell us that the economy is in deep trouble.

The fact is, we witness the catastrophic depreciation of the Leone due to the absence of any export activities in the country, high inflation, high taxation of the private sector, and more importantly, the absence or paucity of foreign investment due to the unstable and risky governance environment.

It is not too late for the government to take a deep breath, recalibrate, and do a course correction.

Question: There is a lot of talk about the revenue being generated today under the Bio administration compared to President Koroma’s. That was one of the things the minister tried strenuously to stress during his interview. Does that not factor in the state of the economy?

KKY: Well, revenue collection is a necessary condition, but it is what we do with the money we collect that matters. Economies are similar to our household budget; if you receive a high salary every month but you spend it on jingoism and hedonism instead of investments, you will be poor in your old age.

Economies are the same, raising revenue and spending on the wrong things, without deep structural and institutional reforms, will simply postpone the crisis for a bigger meltdown in the future. It is like putting new wine in old wine skin.

Question: Is the New Direction economic management different from what you aptly referred to as “Rankanomics”?

KKY: (laughs) Without a doubt, a NEW Direction was and is NECESSARY! However, we expect the current regime by now to put us in the right pathway to growth. The question then, becomes, in which direction are we heading? Are we on the RIGHT direction/trajectory?

Question: Where do you think they are getting it wrong?

KKY: The managers of the economy have basically maintained all the structures left by the previous regime. I am yet to see radical shifts from business as usual. For example, the wage bill has not reduced. In some sectors there is over-hiring and huge expenditures in other areas, and the same parastatals and agencies exist.
Furthermore, still over 80% of our revenues go towards wages and debt payment and this must change. This fiscal capture or overhang trumps all the efforts at enhanced revenue collection.

Question: What would you advise President Bio to do?

KKY: a couple of things: first, appoint a 15 member Council of Economic Advisers (CEA) – on a PRO-BONO basis comprising of businessmen, some bankers, former credible bank governors and former Sierra Leonean IMF staff to hammer out his own economic blue-print. Past leaders in Malaysia, Singapore among others have maintained such an advisory group during their tenure.

This same group can monitor implementation of the president’s economic agenda which should be aligned with private sector aspirations and investment plans.

More importantly, they will give him sound apolitical advice rather than just what he, the president, wants to hear. Second, end inflated procurement and government contracts. Third, aggressively lower the cost of doing business by making it easy to clear goods at the port and lower some import duty and private sector taxes. We need deeper changes in the productive sectors – agriculture, fisheries, mining, etc.

Question: Even before his interview, there have been calls from the public for Finance Minister and the Bank Governor – Kelfalla Kallon to be replaced. Your thoughts?

KKY: I think that question should be addressed to the President. However, don’t forget that it is the President’s prerogative to hire and fire those appointed to serve in his administration. It is the President’s prerogative to hire competent people to help him run his administration so every Sierra Leone can benefit from his stewardship. It is the president’s responsibility to seek the best untainted advice, beyond his immediate circle.

Question: As an MP, have you discussed these concerns over economic management with the government?

KKY: The locus of my discussion with government has been Parliament. But our concerns as MPs or as an opposition are always ignored. If you go to our first budget debate, I raised strong concerns about frivolous spending, and the danger of “jobs for the boys”. I called for rationalization of institutions and more aggressive fiscal consolidation.

The tendency in our country is that ruling parties acquire hubris immediately they are in power (they suddenly seem to know-it-all and damn every other point of view). Another example is that as a party the NGC went to Bintumani-III as a genuine attempt to promote social cohesion. But after that event we have seen the rise in selective justice; we see an increase in political violence and other actions that will cause investors to be cautious about bringing money to the country.

As we head into three bye elections over the next few weeks, we are concerned about the trend in political violence and whether our people will be allowed to exercise their right to vote. If these bye elections are marked by violence, intimidation and fraud, then the world will know that this is not a country where the rule of law, property rights and good governance prevail.

Sometimes I even wonder whether the Sierra Leonean people want genuine change. The deep seated Pull-him-Down syndrome, Do-me-ah-Do-you Syndrome, and Nah-We-Turn Syndrome will make economic management very challenging.

Question: What is your take on the recent floods?

KKY: First, our thoughts and prayers are with the victims. It is a sad spectacle every time.
We hope the impact of climate change will be taken seriously.

This nation still exports massive amounts of lumber in spite of all the expert advice of uncontrolled deforestation. I myself did an article and a video on the latter last year. The Speaker of Parliament hosted a briefing to enlighten members about the long term impacts of deforestation. The recent episodes of flooding in Freetown shows that we are putting bandages on a bad sore.

The Mayor is trying her best efforts; this has to be backed up with bigger public investment to direct the flow of water from the hills to the sea (via ducts); we must move some folks from various disaster-prone areas.

Building climate resilience for infrastructure, agriculture and other development projects is expensive. However, there are many climate funds to help countries undertake such projects. (END)

3 Comments

  1. One can only admire economics with Dr Kandeh Kolleh Yumkella (aka KKY). Yes, there are other variables that can be brought in as symptoms in analysing the state of health of an economy. But as KKY asserted, the five fundamentals: – the exchange rate, inglation, interest rates, jobs and (the yearly growth of what a country produces) the Gross Domestic Product, GDP – will suffice in having a quick diagnosis of any economy.

    With a glance at these fundamental variables, one should be able to capture the present state of the economy in Sierra Leone.

    i) – The Exchange Rate: the Leone is currently trading at Le10,000 for US$1. This is like virtually giving the country’s goods and services away to the US, for free.

    ii) – Rate of Inflation: at 17% and over, it simply means the loaf of bread that Ormor bought for Le10,000 last year is now only about 80% of its original size. If it continues like that, and Ormor’s circumstances didn’t change for the better, then Ormor would have problems feeding her family soon. On the other hand, and like it was in Zimbabwe, Ormor would have to take a sack of Leones to buy the loaf of bread.

    iii) – The Interest Rate: at 17%, it is not good for business. It is not an expansionary policy, but a recessive one; it is a bad policy for a developing country like Sierra Leone. Those with big chunks of money would prefer to live on the interest that their money is accruing (in banks) rather than taking the risk of involving in business activities. Bad for the economy.

    iv) – Rate of Unemployment: at 70%, this is laughable. Apart from some parts of Africa, in most parts of the world, it is a recipe for chaos; people will be demonstrating on the streets for their rights to a job. Tt simply means the economy is idle – or operating under capacity. A compete waste of human resources.

    v) – Growth Rate: now hovering at 3%, it is like a farmer, Pa Mormor, producing 100 bushels or rice a year ago, but can only produce 103 this year, even though his manpower (labour force) had increased. Pa Mormor will be convinced he is not developing or growing as anticipated – his rate of productivity is very low.

    So, what is the prognosis of Sierra Leone’s economy?

    From his way of thinking, one can presume that Dr Yumkella is a left of centre politician, with an inclusive objective in mind. The problem is, can Dr Yumkella bounce back after he had been ruffled by the outcome of the past 2018 elections. Out of a total of 146 parliamentary seats, his party can only secure 4 seats; and he was a dismal third in the presidential race.

    As the saying goes: first impressions count. Like the Coalition for Change (C4C), it will be difficult now for Dr Yumkella’s National Grand Coalition (NGC) to create any meaningful impact in breaking the deadlock on the duopoly of power between the All Peoples Congress (APC) party and the Sierra Leone Peoples Party (SLPP).

    Dr Yumkella should recall that many brilliant politicians, the likes of late Dr John Karefa Smart (and his United National Peoples Party, UNPP), had tried to defeat these two giants in the ballot box without any success. Like in the US, there is always going to be an alternation of power between the Democrats and the Republicans; or as in the UK, between Labour and the Conservatives.

    Perhaps, such a phenomenon can be traced from the fact that in these societies (as in the US, UK or Sierra Leone) the populace can be easily be divided and ruled by exploiting their social identity. In the US, Politicians use the racial card to manipulate election outcomes; in the UK, it is a class struggle between the workers and the middle class; and in Sierra Leone, it is a regional or tribal struggle.

    In this regard, what would KKY be thinking about resurrecting his political career and goals in life?

    From the unexpected poor show of his party in the 2018 parliamentary and presidential elections, Dr Yumkella and his other three colleagues in parliament have been walking towards a crossroad in politics, at which they would have to choose their permanent colours – either red on the left, APC; or green on the right, SLPP.

    Choosing the right, the SLPP, which had been the party of his birth, as his father was a founding member, would be a daunting task for Dr Yumkella. As the origin of the NGC is as a result of his failure to win the flagbearership of the SLPP before the elections. It will be an uphill battle for Dr Yumkella to reestablish his previous status in the party – especially with its present paopa tendencies.

    Many would agree that Dr Yumkella would be a credible candidate for the country’s foreign ministry in any SLPP or APC government. He is a prominent development economist, and as well as a former UN Under Secretary-General and Director General of United Nations Industrial Development Organisation (UNIDO). With his vast knowledge of economics, his experience and international recognition Dr Yumkella could probably be the best senior diplomat of Sierra Leone, at this moment.

    Unfortunately, all over the world, there are engenious and conceited individuals who never attained the ultimate seat of power in their communities/societies, but had played important roles in other areas of development.

    Dr Yumkella should turn left, onwards to the APC if he wants to play a notable role in the development of the country. The APC is on the road envisaged to democratise and mofernise its party. KKY can anchor alongside the APC comfortably, and revitalise his political career and aspirations.

  2. Almost in all democracies around the world, a newly elected regime will always defame its predecessor of managing the affairs of the country wrongly. In many cases, these charges are true — that is the very reason the old regime has been kicked out of governance to usher in better governance, promised by the newly elected regime. Consequently, the voters will always have a sense of hope and higher expectation, thinking that things will soon change for the better.

    In most cases, the voters will give the new regime a probational period ranging any where between 6 months to a year or so before valid assessment are issued. As a reminder, before the new regime assumed governance, they diagnosed the ailing issues of the nation and by extension, they formulated a plan which by their own conviction believed will solve the outstanding problems.

    In the case of Salone, the APC lost power due to all the bad things you can imagine — corruption, tribalism, injustices, hardship, unemployment, a terrible economy, etc etc. The SLPP promised the people of Sierra Leone that they have the solutions to these problems. The party won the election and took over governance.

    According to the regime, they have hired the best and brightest talent to implement their plan, so by all indications, we should have started noticing some positive results 16 months later. Disappointingly, the economic situation has worsened.

    At the very least, the economic situation should have remained the same as inherited from the previous regime. However, this is not the case. Things have got worse than when this new regime took over. When voters complain or ask questions, the regime points fingers at their predecessor. A few of the lame excuses are: things are bad because of the APC; the dollar is in decline because APC sympathizers are smuggling the currency; there are no jobs because APC left bad policies; there are no investors because APC is creating chaos at the nation; Blah, blah, blah, blah.

    The SLPP regime need to accept that, they are now in charge. The APC left governance 16 months ago, so stop pointing finger at them. Whilst in opposition, the SLPP told the nation that, they can solve the nation’s problems if given a chance. You are now in charge now, prove yourself to the nation. All that the citizens care about now is positive results. The blame game or scapegoating will not pass the smell test.

    • Indeed. The economy has worsened more than it was during APC rule. That’s the perfect conclusion at this moment. ARGUE.
      I said it in the very beginning that, we don’t need these highly so called educated elites and Sierra Leoneans outside the country to run the country. These people employed outside the country need foreign currencies to meet their financial commitments. They don’t need the LEONES. You tell me what they need and how they can get it.

      What we needed was to have PATRIOTS to rule the country and more importantly, our leaders must rule the country as a GOVERNMENT and not as a POLITICAL FOOTBALL PARTY.

      Do you remember the 6 months that some promised to turn the economy around if elected? Now we hear him in the radio stations saying people don’t understand about the economy. They need five years to turn the economy around. Stop the BLAME GAME and FIX the economy as promised. PERIOD. Or else, keep thinking of the POLITICAL WILDERNESS.

      Let them don’t forget that the POLITICAL AMMUNITION for the OPPOSITION come 2023 is almost filling the POLITICAL AMMUNITION DUMP less than halfway into 2023. With the POLITICAL AMMUNITION in stock, the 2023 CAMPAIGN will be very aggressive with no option but to put the right ECONOMIC POWER HOUSE in STATE HOUSE. GOD BLESS OUR ECONOMY. AMEN AND AMEN.

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