• The mining sector made real GDP growth leap from 6% in 2011 to 16.7% in 2012, with support from agriculture, services and construction; it is projected to stabilise in 2013 and 2014.

  • Sierra Leone has risen eight places in the latest World Bank report Doing Business (140th out of 185 countries) and ranks as one of the top reformers since 2005 in improving business regulation for domestic firms, property registration and “narrowing the distance to frontier”.

  • The 2013 Human Development Index (HDI) ranks Sierra Leone at 0.336, near the bottom (180th out of 187 countries), and below the regional average of 0.463.

Overview

Driven by the mining sector (particularly iron ore), real gross domestic product (GDP) growth accelerated from 6% in 2011 to 16.7% in 2012 as a consequence of iron ore production. It has also been supported by agriculture, services and an expansion in construction. GDP growth is projected to stabilise around 7.2% in 2013 before reaching 12.1% in 2014 as iron ore projects become fully operational.

This robust economic growth has been accompanied by a tight monetary policy that has reduced inflationary pressures. As a result, inflation has dropped from 18.5% in 2011 to 11.6 % in 2012 and is projected to return to a single-digit 7.1% in 2013 and 6.9% in 2014 as agricultural production recovers and international food prices fall, aided of course, by the tight monetary policy. Indeed, the government implemented several reforms to contain inflation and has taken appropriate monetary policy measures. Policies to strengthen fiscal discipline in 2012 have helped to reduce the fiscal deficit from 4.5% of GDP in 2011 to 1.8% in 2012, and is projected around 2.3% in 2013, and 2% in 2014. The current account deficit as a percentage of GDP has also been reduced from 52.3% in 2011 to 44.0 % in 2012 as a consequence of an expansion in the minerals and cash crop exports. It is projected to shrink to 11.6% in 2013 but to slightly increase to 12 % in 2014.

The restrictive fiscal and monetary policies contributed to a reduction in the government expenditure and thus the domestic debt burden. This has been supported by strong reforms aiming at fighting corruption, improving the ease of doing business in Sierra Leone and reducing poverty. The Poverty Reduction Strategy Paper (PRSP) II is being succeeded by a new strategy called Agenda for Prosperity 2013-17, which aims to scale up inclusive green economic growth, employment and value addition in various sectors and to accelerating progress towards the Millennium Development Goals (MDGs).

Recent discoveries of iron ore mines and the expansion of the extractive sector in Sierra Leone have initiated a structural transformation of the economy with a shift of productivity from agriculture to mining and construction activities that are now the main driver of GDP. However, labour transfer to these sectors is still low due to the fact that extractive activities and construction are capital intensive. Under its new development strategy, Agenda for Prosperity 2013-17, the government plans to improve its management of natural resources and to enhance revenue collection.

Figure 1: Real GDP growth 2013 (West)

Table 1: Macroeconomic indicators

 2011201220132014
Real GDP growth616.77.212.1
Real GDP per capita growth3.814.55.110.1
CPI inflation18.511.67.16.9
Budget balance % GDP-4.5-1.8-2.3-2
Current account % GDP-52.3-44-11.6-12

Recent Developments & Prospects

Table 2: GDP by Sector (percentage of GDP)

 20072012
Agriculture, forestry & fishing--
Agriculture, hunting, forestry, fishing55.653.9
Construction1.91.2
Electricity, gas and water0.40.2
Electricity, water and sanitation--
Extractions--
Finance, insurance and social solidarity--
Finance, real estate and business services3.93.1
General government services--
Gross domestic product at basic prices / factor cost100100
Manufacturing2.62.2
Mining5.412.1
Other services11.610.3
Public Administration & Personal Services--
Public Administration, Education, Health & Social Work, Community, Social & Personal Services4.34.5
Public administration, education, health & social work, community, social & personal services--
Social services--
Transport, storage and communication7.95.1
Transportation, communication & information--
Wholesale and retail trade, hotels and restaurants6.57.4
Wholesale, retail trade and real estate ownership--

Supported by the expanding mining and extractive sector, real GDP growth (including iron ore) leapt from 6% in 2011 to 16.7% in 2012 but is projected to slow down to a more sustainable rate of 7.2 % in 2013. It is projected to rise to 12.1% in 2014 mainly on account of the expected commencement of new iron ore projects and improvements in infrastructure. The economic expansion has also been strengthened in 2012 by a robust growth of agricultural production (particularly crop production) and high international prices for diamonds and aluminium, Sierra Leone’s major exports. Real GDP growth depends on weather conditions and is likely to be dampened by power distribution that continues to be inefficient and poor infrastructure linking mines to port facilities (despite some improvements). Sustainability of real GDP growth will also depend on governance and good management of the new iron ore projects’ revenues.

Agriculture continues to be the largest contributor to GDP although its share decreased from 55.6% of total output in 2011 to 53.91% in 2012 (Table 2). The sector has been an important driver of “inclusive growth” given the inclusivity of agricultural activity, and is expected to grow robustly in 2013 and 2014 as a result of the new foreign financed projects such as a major bio ethanol programme and the government’s focus on self-sufficiency in rice production, which will in turn improve the productivity of the sector and the livelihoods of farmers. However, agriculture still suffers from inadequate rural financial services, limited irrigation facilities, weak rural infrastructure, weak extension services, and heavy reliance on rain-fed agriculture. The Assessment of the African Development Bank (AfDB)/ World Bank (WB) joint assistance strategy for Sierra Leone (JAS) 2009-2012 showed that the agriculture sector has benefited from a number of projects supported by international donors, especially those financed by AfDB and the WB1 aiming to improve efficiency and transparency in agriculture and fisheries. The fisheries sector is also expected to be another driver of growth, as the government has started to cope with the challenges related to weak governance in the sector and illegal fishing.

The mining and quarrying sector is a booming sector and will continue to be one of the main drivers of GDP growth over the next few years as its share in GDP has more than doubled in 2012 (12.1%) compared to 2011 (5.4%). The three large mining projects (Tonkolili, Marampa and Bembeye) started in 2012 will boost iron ore exports in 2013 and 2014 and make Sierra Leone one of Africa's largest iron ore producers within five years. This will in turn improve the country’s trade balance and enhance the country’s tax collection efforts. In addition, the expansion of this sector will contribute to upgrading infrastructure as the foreign mining company operating the Marampa and Tonkolili iron ore mines, African Minerals Limited, is planning to invest in transport facilities linking the mines to the country's maritime port.

While the mining sector is gaining a growing share of GDP, the contribution of the tradable service sector at current prices (wholesale and retail trade, hotels and restaurants, transport, storage and telecommunication and finance, real state and business services) in GDP has been reduced, although it continues to be the second dominant sector with a share of 15.6% of GDP in 2012 against 18.3% in 2011. Trade, transport and logistics are suffering from weak infrastructure, especially roads and poor land-based telecommunications. To address the latter problem, Parliament approved the privatisation of the state-owned, fixed-line Sierratel in 2012 with a new, three-year management contract. Sierratel has benefited from assistance by the Indian government and has already started to rehabilitate its fixed-line infrastructure, taking the first steps towards the rollout of a national fibre backbone network.

Sierra Leone is endowed with beautiful beaches and has a reasonable potential for tourism. Indeed, tourism is one of the four pillars of the country’s first national export strategy launched in mid-2010. According to the World Travel and Tourism Council (WTTC),2 the direct contribution of travel and tourism to GDP has grown by 6.6% in 2012 compared to 2011 and its contribution to employment has also grown by 3.3%.

Manufacturing is the weakest sector, playing a minor role in the economy. Its share in GDP decreased from 2.6% in 2011 to 2.2% in 2012. The sector is undermined by insufficient investment from the private sector and labour diversion to the mining sector. The diversification of economic activities in Sierra Leone will be essential to creating jobs and improving livelihoods, as mining is unlikely to generate sustainable large-scale employment.

 

Macroeconomic Policy

Fiscal Policy

The overall fiscal deficit (including grants) is estimated to have shrunk from 4.5% of GDP in 2011 to 1.8% in 2012, mainly because of the rigid fiscal policy followed by the government since 2011 and its efforts to strengthen fiscal discipline. The fiscal deficit is projected to stabilise around 2.3% of GDP in 2013 and 2.0% in 2014. Indeed, restrictive fiscal policy and appropriate policy actions taken by the government in 2012 have succeeded in improving the fiscal balance and in reducing domestic bank and non-bank financing from the estimated rates of 1.1% and 0.3% of GDP to 0.9% and 0.2%, respectively. The relatively tight fiscal policy will be maintained in 2013 and 2014. The main fiscal challenge for the government is to close the infrastructure gap, and expand social services while maintaining macroeconomic stability.

In order to enhance fiscal policy implementation, the government has taken several measures since early 2012 such as: i) the creation a high level Cash Management Committee (CMC) made up of representatives from the Ministry of Finance, the Accountant General’s Office, the National Revenue Authority, and Bank of Sierra Leone and aiming to improve short-term liquidity management and guide the expenditure commitment process by enhancing budget execution monitoring and improving co-ordination between fiscal and monetary policy; ii) preparation and execution of monthly cash flow statements reflecting expenditure priorities and financing constraints; iii) renegotiation of payment arrangements with project contractors to ensure that the submission of payment certificates on completed infrastructure projects is aligned with budgetary resources; iv) postponement of a wage increase originally planned for 2012 pending the assessment of savings from the implementation of the pay reform; and v) tightening of the expenditure commitment process to contain non-priority spending. As a result of these measures, current expenditure has been decreased from 10.7% of GDP in 2011 to 8.5% in 2012 and is projected to decline further to 7.4% in 2013 and 6.6% in 2014.

Revenue collection has improved although the increase in revenue was at a slower pace compared to GDP growth. Tax revenue increased from 11.5% of GDP in 2011 to 12.2% in 2012 on account of the government’s success in raising royalties on diamond production and in eliminating subsidies on fuel prices as well as the signature bonuses on exploration of iron ore projects granted to eight companies in June 2012. The Government of Sierra Leone plans to continue its revenue mobilisation efforts. Domestic financing will also be limited to SLL 166 billion (Sierra Leonean leone) in order to reduce borrowing costs in the domestic securities market. 

Table 3: Public Finances (percentage of GDP)

 200920102011201220132014
Total revenue and grants15.315.317.2171514
Tax revenue8.78.711.512.21111
Oil revenue------
Grants6.15.45.65.74.53
Total expenditure and net lending (a)17.320.121.718.817.316
Current expenditure11.712.310.78.57.46.6
Excluding interest10.510.88.876.45.7
Wages and salaries4.95.35.14.13.73.3
Interest1.31.61.91.61.10.9
Primary balance-0.7-3.2-2.6-0.2-1.2-1.1
Overall balance-2-4.8-4.5-1.8-2.3-2

Monetary Policy

As a result of the tight restrictive monetary policy followed by the Bank of Sierra Leone (BSL), inflation decelerated from 18.5% in 2011 to 11.6% and is anticipated to follow a downward trajectory, returning to single digits in 2013 and 2014 as a consequence of the decline in food prices and the continuous corrective actions taken by the Central Bank to achieve price stability on one hand and the relative stability in the value of the leone, on the other hand.

To ease inflation and achieve its liquidity target, the Central Bank continued its efforts in 2012 to contain the growth of monetary aggregates within limits consistent with the programmed inflation target. Reserve money has grown by 13.9% in 2012 with broad money growth of 20.4% in the same year and credit to the private sector increasing by 15.7%. BSL has also planned to use its money market instruments more actively and to strictly respect the new regulations on direct central bank financing of the Government budget adopted in late 2011, prevent its participation in the primary securities market and deepen secondary market operations, providing an opportunity for the BSL to increase its T-bills in the secondary market and in turn enhance its development. The Monetary Policy Committee (MPC) has maintained in 2012 the Bank’s Monetary Policy Rate (MPR) at 20%, the reserve repo rate at 21% and the standing facility rate at 30% from January to November before reducing it to 28% in December 2012.

The BSL is planning to build international reserves but will maintain a careful balance between reserve accumulation and liquidity management. While maintaining a floating exchange regime, BSL's interventions in the exchange market will be limited to smoothing exchange rate volatility. As a result, the nominal exchange rate stability will be maintained and the real effective exchange rate will remain constant. To strengthen the Central Bank’ autonomy, new legislation was enacted in 2012 providing security of tenure for the Governor of BSL which means more autonomy for BSL in exercising monetary policy and in supervising the financial sector. Additionally, the government of Sierra Leone received in 2012 support from the African Development Bank (AfDB) and the World Bank (WB) to finance the Financial Sector Development Plan Support Project (FSDPSP). The objective of this Project is to strengthen technical assistance and thus enhance the capacity of the Bank of Sierra Leone to take a leadership role in implementing financial sector reforms.

Economic Cooperation, Regional Integration & Trade

The trade deficit fell from 43.2% of GDP in 2011 to 35.5% in 2012 and is projected to tumble down to just 4% in 2013 and 2.6% of GDP in 2014 mainly due to an anticipated mineral export expansion (Table 4). While exports slightly accelerated from 12.7% in 2011 to 13.0% in 2012, they will climb even more steeply to 44% of GDP in 2013 and 2014 following the exploration of the iron ore projects. The current account balance has improved from a historically high deficit of 52.3% of GDP in 2011 to 44.0% in 2012 but is projected to recover to 11.6% in 2013 and 12% in 2014 as exports of extractive products increase.

According to the World Bank report Doing Business 2013, Sierra Leone ranked 11th among the top 50 economies for “narrowing the distance to the frontier the most since 2005” with an improvement factor of 14.7%. Several actions helped to achieve this result: Parliament passed Credit Reference Bureau legislation in 2011; and a National Minerals Agency was established that facilitates customs and trade. The agency supported the country’s second attempt to achieve EITI-Compliant status (with a target date of December, 2012), as yet unsuccessful.

At the regional level, Sierra Leone is a member of the West African Monetary Zone (WAMZ) and consequently will be part of the new currency (the eko) if it is introduced in 2015. Implementation of the Economic Community of West African States (ECOWAS) Common External Tariff (CET) has been in progress for some time. The country stands to benefit from multi-national projects such as the on-going WAMZ payments systems project financed by the AfDB and interventions planned for the Manu River Union (MRU). FDI has increased recently in Sierra Leone, particularly following the discovery of the iron ore mines. China and South Africa remain the major contributors.

Table 4: Current Account (percentage of GDP)

 2004200920102011201220132014
Trade balance-6.2-7.8-14.6-43.2-35.5-4-2.6
Exports of goods (f.o.b.)13.111.314.212.7134444
Imports of goods (f.o.b.)19.319.128.955.948.54846.6
Services-2.2-2.6-10-12.4-9.4-9.5-10.4
Factor income-4.3-1.5-1.9-2.4-3.5-2.3-2.6
Current transfers8.45.47.35.74.54.23.6
Current account balance-4.4-6.5-19.3-52.3-44-11.6-12

Debt Policy

Sierra Leone continues to be a highly indebted country. The share of its external debt in GDP decreased slightly from 29.7% in 2011 to 28.3% in 2012, but remains well above the threshold of 20%, which defines, according to Sachs and Warner (1995), a highly indebted country. It is projected to ease to 27.8% in 2013. The share of public domestic debt to GDP has eased from 11.3% in 2011 to 10.7% in 2012 and is expected to reach 10.1% in 2013 as the authorities reduce the debt burden and the debt relief received under the HIPC and MDRI initiatives.3 The government has also demonstrated a willingness to resolve arrears to commercial creditors accumulated before and during the civil war and to launch a debt-buy-back operation.

Results of the IMF debt sustainability analysis (applying stress tests) show that the risk of debt distress is moderate and that debt burden indicators will stay below the HIPC qualification thresholds. However, in the medium to long term, the country’s debt outlook is vulnerable to fiscal, growth and exports shocks. Borrowing conditions could also turn unfavourable.

Debt management capacity has been weak with poor reporting on the contracting of non-concessional external debt. To address this problem, the authorities have requested technical assistance from the IMF and World Bank for preparation of a medium-term debt management strategy (MTDS) for 2012–13. The government has also undertaken preparatory work to link the Debt Recording and Management System (CS-DRMS) with the integrated financial management information system (IFMIS). In this regard, the authorities have prepared a procedure manual alongside the Public Debt Management Act of 2011. To improve the external debt management capacity, the following measures were introduced in 2012: i) the re-assessment of the grant element of any loan prior to signing, in consultation with IMF staff; ii) steadfast adherence to the procedures for recording all stages of external loan contracting; iii) preparation of a quarterly report on the stock of debt outstanding, and loan agreements under discussion; and iv) improved co-ordination and information sharing between all government agencies involved with external debt contracting. These measures should have a positive impact on debt management policies if the authorities push to preserve long-term debt sustainability by consolidating their efforts, removing obstacles to growth, promoting export diversification and pursuing prudent borrowing policies.

Figure 2: Stock of total external debt and debt service 2013

Economic & Political Governance

Private Sector

The Government of Sierra Leone is making strong efforts to promote private sector activity by establishing a one-stop shop for investors, the Sierra Leone Investment and Export Promotion Agency (SLIEPA), and through the implementation of key trade-promotion activities under the Integrated Framework, as well as the modernisation of the legal and regulatory framework. The success of these reforms has improved Sierra Leone’s ranking by 9 places between 2011 and 2012 according to the World Bank report Doing Business 2013. Indeed, the country moved from 150th place in 2011 to 141st in 2012 and to 140th in 2013, out of 185 countries. The number of procedures, the amount of time and cost required for licensing a business, have all improved in 2012.

In addition to the reforms undertaken by the government in 2011 such as: i) making access to credit easier by creating a public credit registry to improve the credit information system; ii) making trading across borders faster by implementing the Automated System for Customs Data (ASYCUDA); iii) making contract enforcement easier by launching a fast-track commercial court; and iv) resolving insolvency by establishing a fast-track commercial court in an effort to expedite commercial cases, including insolvency proceedings. Two major reforms have been introduced in 2012 by the authorities to improve the ease of doing business in Sierra Leone. These reforms are related to the areas of registering property and getting credit. Indeed the government of Sierra Leone made property registration easier in 2012 and succeeded in increasing administrative efficiency at the Ministry of Land by digitising records and hiring more personnel. These steps have reduced the time required for property registration by 19 days.

In addition to creating the above-mentioned public credit registry at the BSL, the authorities also improved the sharing of credit information in 2012 by guaranteeing the borrower’s right to inspect their personal data. These notable regulatory improvements, if successfully implemented, will enable growth of the private sector. While credit to the private sector remains among the lowest in the world (10.2% in 2011), it increased by 6.5% in 2012 and is projected to grow by 6.8% in 2013, according to BSL.

Financial Sector

Sierra Leone’s financial sector is less diversified and its development remains low compared to other countries in the region. The sector faces numerous challenges: i) small size of the banks (total assets of the banking industry is SLL 3.62 trillion in 2012); ii) low efficiency (non-interest expense averages about 10% of total assets and interest rate spreads are around 11 percentage points); iii) high banking concentration - the three largest banks (out of the thirteen operating commercial banks) hold over 50% of total bank assets; iv) poor commercial bank infrastructure; v) low capacity building of bankers and lack of training; and vi) underdevelopment of the financial-sector associations. However, the liquidity position of the banking industry is very satisfactory and some progress has been reported in bringing the prudential guidelines in line with the Banking Act.

The payment system continues to be underdeveloped, with no interoperability across the ATM system and cash-dominated domestic payment transactions. To address these challenges, the authorities are progressing in their efforts to set up the Payment Systems Project (with support from the AfDB and in the context of WAMZ).

Financial sector reforms are beginning to have an impact and financial soundness indicators are showing good progress in the banking sector. For instance, the capital–asset ratio of the banks is a healthy 15% and non-performing loans, as percentage of total gross loans, decreased from 15.1% in 2011 to 14.7% in 2012 on account of aggressive recovery efforts by some banks. Moreover, the introduction of the Credit Reference Bureau — commercial banks are obliged to refer to it prior to making loans — has encouraged caution and helped minimise the number of multiple borrowers.

With regard to the monitoring and protection of the financial system, the parliament passed in 2012 a law against money laundering and combating the financing of terrorism (AML/CFT Act). This law criminalises money laundering and the financing of terrorist activities. In addition, it established the Financial Intelligence Unit as an independent body responsible for the monitoring and protection of the integrity of the financial system.

Public Sector Management, Institutions & Reform

Several measures have been adopted by the Government of Sierra Leone to improve governance and fight corruption. With donor support, government has initiated a civil service reform programme aimed at restoring efficiency in the public service and increasing its capacity for service delivery. Recent activities undertaken include management and functional reviews of fourteen ministries. With the support of the United Nations Development Programme (UNDP), a set of structural and operational reforms has been undertaken to strengthen decision-making and execution in the office of the President. A chief of staff was hired in 2010 to ensure that central decisions are informed, consultative and collaborative — and that those decisions are implemented.

The enforcement of laws that protect property rights in Sierra Leone is a serious challenge. According to the World Bank report Doing Business 2013, the country is ranked 167th out of 185 countries with regard to the protection of property-rights. However, there has been an improvement in property rights for mineral exploration and production as the mining cadaster is implemented.

The 2012 Ibrahim Index of African Governance (IIAG) shows that Sierra Leone achieved significant improvement in governance between 2000 and 2011. Sierra Leone is ranked 10th out of 16 West African countries and 30th out of 52 African countries overall. There have been notable achievements in fighting corruption in recent years. The increased efforts by the Anti-Corruption Commission (ACC) and the implementation of the National Anti-Corruption Strategy (NACS), launched in 2008, have helped Sierra Leone to improve its ranking in the corruption perception index (CPI). Transparency International ranked Sierra Leone 158th out of 180 countries for perceived corruption in 2009. In 2010, the country’s ranking improved to 146, then further to 134 in 2011 and, in the latest (2012) survey, to 123 out of 176.

Natural Resource Management & Environment

Sierra Leone is endowed with immense natural resources such as diamonds, aluminium, iron ore, petroleum and gas as well as large beautiful coasts rich in marine life. The extractive industry contributes a large share of public revenues in the form of royalties, taxes and profit sharing (mining royalties and licenses contributed 20.3% of domestic revenues in 2012). This contribution increased in 2012 following the government’s success in raising royalties on diamond exploration and the signature of new contracts related to the exploration of iron ore projects that will have significant potential economic benefits. However, they have a negative impact as well on the environment and the welfare of the people living around the mining areas.

To address these challenges, the government of Sierra Leone has undertaken work on a Strategic Environmental Assessment (SEA) of Potential Oil and Gas Development. A national steering committee has been constituted to move the entire process forward. In addition, The Environmental Protection Agency (EPA) has officially launched the 'Environmental Governance and Mainstreaming Project' with support from the EU. Despite this progress, Sierra Leone is likely to achieve only the water resource component of MDG 7 related to ensuring environmental sustainability, as 55% of population had access to water in 2010. The sub-component of forest area is on track. It should be noted that the country failed to achieve EITI-compliant status by end 2012 as originally planned. This is the second time the country has failed. Two out of 21 benchmarks were not achieved, one of them being “lack of political will”.

Political Context

Sierra Leone had its third post-war elected government in 2012. Not surprisingly, incumbent President Ernest Bai Koroma has been re-elected with 58.7% of votes cast and his party, All People’s Congress (APC), also won 67 of the 112 elected seats in Parliament.

Carter Center Observers report that the election process was fair and transparent with a strong security presence along with the political party agents, international observers, and citizen observers from the National Election Watch (NEW) who visited all the polling centers. The latter were calm and well organised and their personnel, including managers, data entry clerks, and observer facilitators, fulfilled their responsibilities with professionalism; they were receptive to observers' inquiries about the vote tabulation. A few demonstrations took place during the post-election period but were calmed down quickly.

As a post-conflict country, Sierra Leone has made significant progress since the end of the civil war in 2002 to improve its democratic institutions, establish sustainable pluralism and achieve a reasonable level of separation of powers. Indeed, Sierra Leone is one of the true democracies in the region and the media has substantial freedom. Journalists and media have facilitated access to information on public affairs. They have helped expose cases of corruption and have assisted the Anti-Corruption Commission (ACC) to do its work more efficiently, leading to the prosecution of many cases including those involving prominent government officials. 

Social Context & Human Development

Building Human Resources

In 2008, the Government of Sierra Leone adopted a Poverty Reduction Strategy Paper II (PRSP II) 2008-2012, called Agenda for Change, based on the Vision 2025 long-term development agenda and on the Millennium Development Goals (MDGs), with the aim to reduce poverty on a sustainable basis and to improve social conditions. It will be succeeded in 2013 by The Agenda for Prosperity, with the objective to achieve broad-based, sustainable and inclusive economic growth consistent with other macroeconomic fundamentals for job creation and poverty reduction.

Sierra Leone’s social indicators continue to be among the lowest in the world. According to the 2013 Human Development Report, Sierra Leone‘s Human Development Index is 0.336, which ranks the country 180th place out of 187 countries in the world and places it below the regional average of 0.463. Similarly, social indicators are below regional levels, as life expectancy at birth is 47.8 years while under-five mortality is 192 deaths per thousand live births. Sierra Leone also has one of the worst maternal mortality rates worldwide with 970 deaths per one hundred thousand live births. Malnutrition exists although there is no recent data on that. Physicians stand at 1.6 per one hundred thousand in 2011 while the percentage of births attended by skilled health staff was 42.2%. Despite the free health care programme (FHCI) for lactating mothers and children less than five years of age, launched in 2010, the country is still struggling to reach MDG 4 (on child mortality) and MDG 5 (on maternal health), by 2014. Only the HIV/AIDS component of MDG 6 will be achieved by 2014 since the HIV prevalence rate has been stabilised at 1.5 %. The AfDB Health Districts Services Project and other strong efforts have contributed to the prevention and treatment of malaria and tuberculosis. Policies to prevent the spread of AIDS include free screening and counselling on prevention and for people living with AIDS.

Education indicators are poor and the country is unlikely to achieve the MDG 2 (on universal primary education) by 2015. According to the 2013 Human Development Report, adult literacy is at 40.9% of the population aged over 15 years; gross enrolment ratio in primary education stands at 106%, while for secondary school it is 54.5%.

 

Poverty Reduction, Social Protection & Labour

The Second Poverty Reduction Strategy Paper (PRSP II) 2008-12 helped the country to make significant progress in several areas; but extreme poverty is still pervasive and 72.8% of the population lives below the poverty line of USD 1.25 PPP per day. While the MDG 1 (on poverty reduction) target is 40%. Rural areas account for the largest proportion of the poor with 73% in rural areas against 61% in urban districts. Poverty is mainly explained by the low levels of education, poor health conditions and low access to clean water and sanitation, all aggravated by the civil war, which left the country lagging behind in terms of development.

As mentioned earlier, PRSP II is to be succeeded by the Agenda for Prosperity 2013-17. It is based on Vision 2025 and aims at scaling up and broadening drivers of inclusive green growth, employment and value addition productivity in various sectors and accelerating the MDGs. The Agenda for Prosperity proposes seven key pillars: i) Economic Diversification to promote Inclusive Growth; ii) Managing Natural Resources; iii) Accelerating Human Development; iv) International Competitiveness; v) Employment and Labour Strategy; vi) Social Protection; and vii) Governance and Public Sector Reforms.

The government has set the following strategic priorities to be the central theme of this poverty reduction strategy: improving infrastructure with a focus on energy and transport development; developing the productive sectors that would generate private sector-led growth from the key resource-based industry of agriculture; and improving human development through investment in public services such as health and education (with targets of about 1.4% of GDP and 4.3% of GDP, respectively). Access to safe water was achieved for 55% of population in 2011, up from 38% in 1990, while access to sanitation is 13%, up from only 11% in 1990.

Social protection policies and basic labor standards exist but are not well implemented. The mandate of the National Commission for Social Action (NACSA) has been reinvigorated. Many projects financed by development partners have been working with NACSA including the AfDB social action support project (SASP), completed in 2010, which provided tools to enhance employment such as cash for work programs.

According to the employment survey of 2012, employment opportunities increased in Sierra Leone over the last five years. The number of nationals employed rose from 74 693 in 1997 to 107 988 in 2011 and to 124 770 by August 2012. This progress could be due to the improvements in the business environment and the pick-up in iron ore mining activities. Child labor is a real problem in Sierra Leone, although the government has signed the convention on the Rights of the Child. Almost half of children aged 14-15 years are involved in some form of child labor (27% in urban areas and 57% in rural areas). The law allows light work at age 13, full-time work at age 15, and hazardous work at age 18 but prohibits any work for children under 13. However, much remains to be done to enforce this law.

Gender Equality

Some progress has been made in the gender balance in Sierra Leone and the country is on track to meet one of the MDG 3 components with a ratio of 93% of primary school enrolment of female to male pupils in 2010. The other components of MDG 3 (on gender equality and women’s empowerment) will not be achieved by 2015.

Inequalities between men and women do exist and the country is lagging behind with regard to the proportion of seats held by women in the national parliament, which did not exceed 13% in 2010. Women held one of the 20 cabinet positions. There were four female judges out of seven judges on the High Court and the Chief Justice is a woman.

Women face several challenges in Sierra Leone such as economic dependence; poor working conditions; and, because they are mainly working in the agriculture activities and the informal sector, minimal or non-existent social protection. Women’s labor force participation in crop farming and in trade and agriculture stands at 65.8% and 21.9% respectively. They do not have permanent land rights and can be dispossessed through the death of a spouse or divorce. Rape, though punishable by up to 14 years' imprisonment, is common. The law does not specifically prohibit spousal rape.

 

Thematic analysis: Structural transformation and natural resources

Expansion of the extractive sector in Sierra Leone, especially following the recent discoveries of iron-ore mines, has spawned a process of structural transformation of the economy. The country is experiencing today a shift of productivity from the primary sector to the mining and extractive activities. As a result, the mining sector became the main driver of economic growth leading to an unprecedented high growth especially over the last two years. This should in principle be accompanied by structural transformation, defined as the transfer of workers from activities and sectors with low average labor productivity to those with high average labor productivity, thus contributing to an increase in average labor productivity for the overall economy and increasing diversification and sophistication of exports.

Empirical evidence suggests that rapid productivity growth is often accompanied by declining shares of agriculture in GDP and employment reflecting the migration of resources toward high productivity industries and services. For the case of Sierra Leone, natural resources have favoured a type of transformation in which the extractive industry plays a more dominant role than services or manufacturing. While agriculture remains the most important sector of the economy, its contribution to GDP (at constant prices, 2006) has increased from 45.8% in 2001 to 54.5% in 2009 to drop thereafter to 47.02% in 2012. In addition, agriculture’s contribution to the economic growth has declined from 4.5% in 2003 to 2.8% in 2012 and its average productivity growth did not exceed 3% during the period 1995-2010 with an annual percent change in agricultural output share of 1.7%4 during this period. The poor performance of the agriculture sector is mainly explained by poor irrigation, lack of fertilisers and other inputs, shrinking land use, infrastructure constraints and the fact that the government’s "tractorisation" policy, which aims at expanding land under cultivation, has reached its limit. Some kind of backup policy seems needed to enhance productivity and the processing of produce. On the other hand, the contribution of the mining and quarrying sector to GDP (at constant prices, 2006) has risen sharply from 2.9% in 2001 to 13.4% in 2012 and its contribution to economic growth has increased from 2% in 2003 to 12.3% in 2012, making the sector a main driver of economic activity. The development of the extractive sector has led to a construction boom to upgrade infrastructure and build roads connecting the mines to port facilities. As a result, the share of the construction sector rose from 1.6% of GDP in 2001 to 2.2% in 2012 and its contribution to the economic growth, which had decreased from 0.3% in 2003 to 0.1% in 2009, accelerated starting in 2010 and reaching 0.4% in 2012 reflecting the indirect effects of the development in the mining sector on the one hand and the upgrade in infrastructure on the other. However, it is also important to note that the last decade was a post-conflict period in Sierra Leone and the development of the construction sector was a need and was not only driven by productivity issues. Manufacturing did not benefit from these changes and its share in GDP has rather regressed from 3.12% to 2.3% during the period 2001-2012. Likewise, services share has tumbled from 41.2% of GDP in 2001 to 31.1% in 2012 and the sector has been heavily concentrated in low value-added informal sectors such as retail trade. But there is still room for the sector to experience high productivity rates, especially for telecom, transport and financial services.

Despite a capital shift to the mining and construction sectors, labor transfer to these sectors has been low due to the fact that extractive activities and construction are capital intensive, as mentioned earlier. Moreover, the poor quality and coverage of education and training did not help to facilitate the shift of labor into high value-added industries. According to the 2012 Employment Survey, manufacturing accounts for the highest percentages (19.8%) of business establishments canvassed, followed by banking institutions (11.0%) and insurance and construction (9.9%). The mining industry employed around 1% of the total work force during the period 2007-10, but the contribution increased rapidly to 5.4% in 2011 and 6.9% in 2012.

Under its new strategy, the Agenda for Prosperity 2013-17, the government is making efforts to implement reforms to better manage its natural resources and enhance its revenue collection by strengthening the collection process rather than increasing taxes on extractive activities.

It aims at creating a dual economy, in which resource exploitation centres become enclaves with minimal integration with the rest of the economy, guaranteeing minimum returns from exploitation to the national economy and avoiding the effects of Dutch Disease that could eventually lead to social instability.

However, efforts to accelerate the development and structural transformation in Sierra Leone are hindered by substantial obstacles, particularly those related to infrastructure (electricity and roads), governance, human development, finance and trade.

Notes

1. The projects are: Addax Bioenergy Sierra Leone (ABSL) project, Agriculture Sector Rehabilitation Project (ASREP), NERICA Rice Dissemination Project, Rural & Private Sector Development Project, GEF Biodiversity Conservation Project, Regional Agriculture Project, Artisanal Fisheries and Development Project and Regional Fisheries Project.

2. Travel & Tourism Economic Impact 2012

3. From the IMF, IDA, AfDB, EIB, IFAD, BADEA, IDB and OPEC.

4. Regional Economic Outlook: Sub-Saharan Africa. IMF, October 2012.

 

 

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