Dr Ishmail Pamsm-Conteh.
Sierra Leone’s economy is largely reliant on foreign aid, rather than on national investment or Foreign Direct Investment (FDI). Suffice it to say that in other to attract investments certain things must change. They include an improved human rights record and an attractive legal environment. This is because there is a direct correlation between all of these issues.
Foreign investors without a doubt create many job opportunities for Sierra Leonean thereby reducing the country’s ever increasing unemployment rate. The country ranked 181 out of 189 countries in the human development index in 2018. That did not mark much improvement considering the fact that post war in 2002 it was ranked 189 out of 189. This shows that since the war ended in 2002 the country has not changed much as far as its economic prospects are concerned. No two ways about that!
So, when reports are published by national and international human rights organisations are almost always critical about our human rights record and our legal environment then questions need to be asked: How attractive is our country to foreign investment?
One only has to read a few of these reports to hazard a guess. For example, Amnesty International’s 2019 report on Sierra Leone states: “violations of the rights of human rights defenders were reported. Police used excessive force and committed other human rights violations.”
This report finds strength in the United Kingdom Guidance on Overseas Business on Sierra Leone, updated 4 July 2019. It states: “The most significant human rights problems include a lack of access to justice; and widespread official corruption in all branches of government.” The Guidance continues: “Other major human rights problems include heavy handed treatment by the police…issues remain with regards to gender equality and ensuring media independence.”
These reports are all too similar to other reports going back many years. The issue seems to be perennial. Take for example the United States’ Department of State Human Rights 2017 report which state: “The most significant human rights issues included: unlawful killings and abusive treatment by police; harsh and life-threatening prison conditions; official corruption; lack of accountability in cases involving sexual and gender-based violence against women and girls”.
Further back to 2010, the United Nations High Commission for Refugees’ report highlighted similar issues. It states: “Major human rights problems included security force abuse and use of excessive force with detainees, including juveniles; harsh conditions in prisons and jails; official impunity; arbitrary arrest and detention; prolonged detention, excessive bail, and insufficient legal representation.”
These reports, though not the only factors that are considered when making decisions about investing in a particular country, do certainly go a long way to influencing such decisions. A strong human rights record, a favourable legal environment conducive for business are intricately linked together, without any doubt, as experts would agree. Take the 2010 and 2019 reports which have nine years in-between them yet they all make the same findings. This is a stark reminder that our human rights record is not changing much.
The fact that some of these reports serve as a business advisory to potential overseas investors, it connects the dots between these issues. Is this not time to change things?
It is without doubt that Sierra Leone is trying to attract investments through public private partnerships (PPPs) to undertake major infrastructural projects, particularly in the areas of energy, water, roads, ports and telecommunications, among others. The country’s substantial mining wealth, the absence of any arbitrary discrimination against foreign companies and restrictions on the repatriation of profits, as well as the sale of assets (guaranteed by the new investment code) make Sierra Leone attractive for Foreign Direct Investment. This is according to Santander trade.com in its 20 June 2020 report.
However, the shortage in skilled labour, the lack of infrastructure, a weak legal system, the high level of corruption, political violence and social disorder due to socioeconomic disparities are major obstacles to FDI, according to the same report. It is little wonder Sierra Leone is ranked 163rd out of 190 countries according to the “World Bank’s Doing Business, 2020 report.”
My personal experience regarding a favourable legal environment as a precondition for foreign investment lies with an enquiry that I made two years ago to a multinational company called, “Subway.” This is a sandwich company that operates in many countries around the world, some in Africa. It is this personal account with “Subway” that has warranted me to pen down this article.
Excerpt of their responsive email to my enquiry aimed at bringing the franchise to Sierra Leone stated that doing business in Sierra Leone is on hold at the moment. The reasons they highlighted for that decision were thus:
“We evaluate a number of different factors including economic (i.e. disposable income), infrastructure (relating to supply chain), banking, legal environment, real estate conditions, consumer behaviour, current fast food market and competitors (Western), etc.”
Can we in all honesty say that we do meet those above-mentioned conditions?
That is why we should be aware of the true implication of the relationship between legal environment and foreign direct investment. To capture the seriousness of this, it is evident that besides the mining industry there is a huge absence of multinational companies operating in the country: from manufacturing, financial services, industries, fisheries, tourism, technology and agriculture, to name but a few investment opportunities.
No doubt there are huge potentials for investment in our country in all of these areas which have not yet been able to attract such investments. Additional to our human rights record, our rules and regulations laid down in our national laws – which companies and individuals should abide by when operating in our country – also need to be reviewed.
To support this assertion, I borrow a statement from the 2020, Index of Economic Freedom report on Sierra Leone which states: “Serra Leone has made starting a business easier by combining redundant registration procedures and eliminating some unnecessary procedures, but the overall business environment is very challenging and lacks transparency.”
Addressing these issues should, without doubt, encourage investment and consequently make our economy to be less reliant on foreign aid and loans from international financial institutions such as the World Bank and the International Monitoring fund (IMF). We should also be aware that these loans are debts which have to be repaid within a specific period of time. So, when we receive loan packages from lenders, we should be wary of the consequences.
According to a 2018 report by the Jubilee Debt Campaign, a UK based charity working to end poverty, “too much debt causes poverty and inequality.” To that end, it is worth highlighting our country’s debt situation, as it currently stands.
This is why the issue of debt should also be a point of focus when writing about our economy. Prior to the Ebola outbreak of 2014-15, Sierra Leone had one of the fastest-growing economies in the world. However, the twin shocks of Ebola and the fall in iron ore prices in the world market changed our country’s economy from that period to now.
Following international campaign the IMF agreed to cancel $29 million of Sierra Leone’s debt payments for 2015 and 2016 in response to the Ebola outbreak. That disease left a significant contraction of economic activities in the country’s finances.
According to the latest World Bank and IMF data, 27% of Sierra Leone’s debt is owed to the IMF, with a further 17% owed to the World Bank and 29% to other multilateral institutions. That was the reason why in November 2018 the IMF agreed a new $172 million loan programme spreading over the next 3 and half years, until mid-2022. Whilst the IMF increased its rating of Sierra Leone’s risk of debt default from moderate to high. At the same time, our external debt payments will be over 13% of revenue in 2019, rising to 19% by 2020. Sierra Leone’s new IMF loan means $43 million will be disbursed every year until mid-2022.
With that, it is also important to consider the country’s Gross Domestic Product (GDP) which denotes the aggregate value of all services and goods produced within a country in any given year. GDP is an important indicator of a country’s economic power. According to H. Plecher, writing on Statista.com, in its May 26, 2020 edition, Sierra Leone’s gross domestic product amounted to around $ 12.24 billion in 2018. It is projected to be US $ 12.87 this year (2020), and $13.64 in 2021.” This gradual increase is worth noting.
It is also encouraging to note that, according to some reports, and if these reports are correct, China’s Kingho Investments is to start shipment of iron ore from its Tonkolili site from October to December this year, employing over 2,000 Sierra Leoneans. If other mining companies continue to invest in the country, that will be a good thing indeed. However, it is not only in the mining sector that our country has the potential to attract investments in, as already argued above. The economy needs to be diversified if we are to increase growth in our GDP.
This is why we need to attract investment whether it is national or FDI. But to attract such investments, there should be an improvement in our human rights record and a better legal environment. Otherwise attracting investment would continue to be a serious challenge, whilst our national debt continues to be a burden on our economy.
The author is a faculty member at the Ernest Bai Koroma University in Makeni, and at the University of Makeni (UNIMAK) where he teaches business law amongst other law modules.
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