By Tanu Jalloh
In the last year, Sierra Leone’s economy experienced mixed fortunes, reflecting a global context of economic uncertainty exacerbated by lingering effects of the COVID-19 pandemic, regional instability, and domestic structural challenges. Yet, within these challenges lies an undercurrent of resilience, particularly in the informal sector, which continues to serve as a cornerstone of the country’s economy. Despite its enormous potential, the informal sector remains largely underdeveloped and underregulated, presenting both opportunities and obstacles.
Sierra Leone’s economic growth rate in 2024 was projected at 3.5% by the International Monetary Fund (IMF), a slight rebound from the previous year, driven by agricultural output and increased mining activities. However, inflationary pressures remained high, with inflation averaging 26%, significantly eroding consumer purchasing power. The leone experienced further depreciation against major currencies, making imports more expensive and exacerbating the cost-of-living crisis.
Despite these challenges, government interventions such as targeted subsidies on essential goods and investments in energy infrastructure have provided some respite. Public projects, including the construction of renewable energy plants and the rehabilitation of roads, have not only created jobs but also stimulated local economies. Yet, these measures remain insufficient to address the vast structural problems affecting the economy, particularly in the informal sector, which accounts for over 70% of employment and GDP.
Sierra Leone's informal sector is diverse, encompassing smallholder farmers, market vendors, artisans, transport operators, and informal financial services providers. Women dominate this sector, constituting about 60% of informal workers, particularly in petty trading and agriculture. However, the lack of formal recognition and support systems has kept this sector from reaching its full potential.
Take Mariama, 48, a vegetable seller at the Kroo Town Road Market in Freetown, who represents countless Sierra Leoneans in the informal sector. She earns a living selling fresh produce daily but struggles with challenges like inconsistent supply chains, lack of storage facilities, and exorbitant transportation costs. With no access to formal credit, the mother of 5, who has been a trader for over 30 years, says she relies on informal savings groups (osusu and microcredits) with high interest rates, struggling with contributions and repayments, limiting her ability to expand her business.
In contrast to Sierra Leone, countries like Ghana and Rwanda have made significant strides in formalising and supporting their informal sectors. Ghana, for instance, has implemented policies such as the National Entrepreneurship and Innovation Programme (NEIP), providing financial support and training for small businesses. Rwanda has established microfinance institutions and cooperative banks to provide affordable credit to informal workers.
Sierra Leone can draw lessons from these experiences to develop its informal sector. A national program tailored to the unique challenges of Sierra Leone's informal economy, such as improving market access, providing affordable credit, and offering business training, could significantly enhance productivity and economic stability.
Looking Forward: Innovative Ways to Grow Informal Industries
To unlock the potential of Sierra Leone's informal sector, especially in 2025, innovative approaches must be adopted to include the following:
- Digital Financial Inclusion: The widespread adoption of mobile money platforms such as Orange Money, AfriMoney, Vult and online banking, have shown the potential of digital tools in enhancing financial inclusion. Expanding these services in the coming years to provide microloans and savings options tailored for informal sector workers could significantly boost their financial stability.
- Market Infrastructure Development: The government, in collaboration with the private sector, should continue to invest in building and modernising markets with storage facilities, clean water, and sanitation. This would reduce post-harvest losses for traders and enhance market efficiency.
- Skills Development and Training: Partnering with NGOs and educational institutions to offer free or subsidised vocational training in areas such as carpentry, tailoring, and food processing could create opportunities for informal workers to enhance their skills and expand their businesses.
- Policy Reform and Tax Incentives: Streamlined policies for business registration and reduced taxes for micro-enterprises would encourage more informal businesses to formalise, enabling them to access government support and credit facilities.
- Leveraging Technology: Establishing digital platforms for connecting buyers and sellers. The Sierra Leone National Innovation and Digital Strategy is an ambitious and feasible vision that charts how the Government, development partners and citizens can use science, technology and innovation to achieve the National Development Plan, the African Union's Agenda 2063, and the Sustainable Development Goals.
Despite these opportunities, Sierra Leone faces significant challenges, including weak institutions and limited access to finance. Infrastructure deficits, such as unreliable electricity and poor road networks, further hinder economic growth.
To address these challenges, a multi-faceted approach is needed:
- Government Regulations: Enforcing anti-corruption measures and implementing transparent public financial management systems are critical for creating an enabling environment for businesses.
- Private Sector Interventions: Collaborations between private companies and informal sector actors can foster innovation and efficiency. For instance, companies can invest in affordable solar-powered refrigeration systems to reduce post-harvest losses in agriculture.
- Bilateral and Multilateral Support: Development partners like the World Bank and African Development Bank can provide financial and technical assistance for infrastructure projects and capacity-building programs targeting the informal sector.
Prospects and Regional Integration
As Sierra Leone works to rebuild its economy, integration into the African Continental Free Trade Area (AfCFTA) offers immense opportunities. By enhancing its production capacities in agriculture and mining, Sierra Leone can position itself as a competitive player in regional trade. The informal sector, if adequately supported, can contribute significantly to this effort by supplying goods and services for export.
The country’s economy remains at a crossroads, with the informal sector offering a pathway to inclusive and sustainable growth. By addressing systemic challenges, adopting innovative solutions, and fostering regional integration, the country can transform its economic landscape. As Mariama and countless others continue to drive the informal economy, their resilience underscores the untapped potential that lies within Sierra Leone's entrepreneurial spirit. With targeted interventions, this potential can be harnessed to create a prosperous future for all Sierra Leoneans.
© Copyright (2024) Politico (23/12/24)
