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Sierra Leone2012

Sierra LeoneGDP growth accelerated in 2011 and the outlook is positive for 2012 and 2013. Growth is mainly driven bymining sector activities and the new discoveries of iron ore mines aided by policy that will boost theeconomy.

Governance has improved in recent years following the implementation of the National Anti-CorruptionStrategy (NACS).

Although there have been some improvements, the country’s social indicators are amongst the lowest inthe world and further efforts are needed to meet the Millennium Development Goals (MDGs).

Overview

Real gross domestic product (GDP) growth increased from 5% (excluding iron ore) in 2010 to 5.7% in 2011 andis projected to rise gradually to 6.2% in 2012 and 2013 driven by recovery in the mining sector. According toInternational Monetary Fund (IMF) projections, new iron ore exploration planned for 2012 should result in aone-time expansion of real GDP growth (including iron ore) of 51.4% this year. Growth is expected to stabilisearound 10.2% in 2013.

Despite this growth performance, inflation rose to 18.1% in 2011 in response to high international oil andagricultural prices on the one hand and the depreciating Leone (SLL) on the other. The rate is expected to fallto 11.7% in 2012 and to 9.4% in 2013, as a result of improvements in domestic agricultural production, theintroduction of the new goods and services tax (GST) and the slower rate of currency depreciation.Nevertheless, pressures on prices will remain a challenge because of the removal of fuel subsidies which, alongwith the rise in royalties on diamond production, have led to an improvement in the overall fiscal balance(including grants) from -6.4% of GDP in 2010 to -5.3% in 2011. Corrective actions that have been taken in 2011to strengthen fiscal discipline will help to reduce the fiscal deficit to 4.5% and 3.6% in 2012 and 2013. However,the current account deficit has grown from 18.3% of GDP in 2010 to 55.7% in 2011, owing to a rise in importsof machinery for the mining sector. The current account deficit is projected to stabilise at around 9.9% in 2012and 9.6% in 2013 because of a substantial increase in exports of minerals and cash crops.

The tightening of fiscal and monetary policy will also help Sierra Leone to manage its debt sustainability better.Furthermore, strong reforms aimed at reducing corruption, providing free health care and improving thedecrepit transport, power and public health infrastructures top the list of the government’s priorities. As aresult, the country is ranked as one of the world’s top reformers by the 2012 World Bank’s Doing Businessindex.

Youth unemployment is a challenging social problem in Sierra Leone. The country’s youth unemployment rateof 60% is amongst the highest in the West African sub-region. In the context of the second Poverty ReductionStrategy Paper (PRSP II) for 2008-2012, the government has implemented new legislation for youth-friendlyinitiatives that aim to provide an environment conducive to youth development, employment andempowerment.

African Economic Outlook 2012 2 | © AfDB, OECD, UNDP, UNECA

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Figure 1: Real GDP growth (Western)

Figures for 2010 are estimates; for 2011 and later are projections.

Table 1: Macroeconomic Indicators

2010 2011 2012 2013

Real GDP growth 5 5.7 6.2 6.2

Real GDP per capita growth 2.8 3.5 4.1 4.1

CPI inflation 17.8 18.1 11.7 9.4

Budget balance % GDP -6.4 -5.3 -4.5 -3.6

Current account % GDP -18.3 -55.7 -9.9 -9.6


Real GDP growth (%) Western Africa - Real GDP growth (%) Africa - Real GDP growth (%)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130%

2%

4%

6%

8%

10%

Real

GDP

Gro

wth

(%)


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Recent Developments & Prospects

Table 2: GDP by Sector (percentage of GDP)

2006 2010

Agriculture, forestry, fishing & hunting 54.2 61.5

Agriculture, livestock, forestry and fisheries - -

of which agriculture - -

Mining and quarrying 4.1 1.8

of which oil - -

Manufacturing 2.3 2

Electricity, gas and water 0.3 0.3

Electricity, water and sewerage - -

Construction 1.9 1.5

Wholesale and retail trade, hotels and restaurants 10.1 8.5

of which hotels and restaurants - -

Transport, storage and communication 7.5 7

Transport and storage, information and communication - -

Finance, real estate and business services 4.5 3

Financial intermediation, real estate services, business and other service activities - -

General government services 4.9 3.5

Public administration & defence; social security, education, health & social work - -

Public administration, education, health - -

Public administration, education, health & other social & personal services - -

Other community, social & personal service activities - -

Other services 10 10.8

Gross domestic product at basic prices / factor cost 100 100

Wholesale and retail trade, hotels and restaurants - -


Real GDP growth rose from 5% in 2010 to 5.7% in 2011 and is expected to rise to 6.2% in 2012 and 2013,driven by the extractive industries. GDP growth (including iron ore) is expected to reach 51.4% in 2012 tostabilise around a more sustainable rate of 10.2% in 2013. The robust economic activity in 2011 was enhancedby continued expansion in agriculture and mining. Domestic output has been supported by bank credit to theprivate sector, which in turn, along with foreign direct investment (FDI) inflows, enhanced investment in themining sector. Public spending on infrastructure and the improved electricity supply from the Bumbuna hydro-electric plant, launched in November 2009, helped to ease power shortage problems and enhanced output. Highprices for diamonds and aluminium, Sierra Leone’s major exports, and the commencement of an iron oremegaproject in 2012 are expected to boost substantially GDP and exports.


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Agriculture was the largest contributor to GDP in 2010 with 61.5% of total output (Table 2). However, thesector is mainly subsistence farming and is limited by the small scale of commercial projects. The government’sfocus on self-sufficiency in rice production, and a major bioethanol programme are expected to improvefarmers’ conditions. Several projects in the agriculture sector are being supported by international donors. InApril 2011, the African Development Bank (AfDB) approved a loan of EUR 25 million to finance the AddaxBioenergy Sierra Leone (ABSL) project, which includes the development of a greenfield sugar cane plantation ofapproximately 10,000 hectares, the construction of an integrated bio-energy facility including a sugar-canecrushing facility and ethanol distillery, as well as a 32-megawatt biomass co-generation power plant. In May2011, the World Bank agreed to provide grants totalling USD 42 million in support of two other projects in theagriculture sector (the West Africa Agricultural Productivity Program [WAPP] worth USD 22 million, and anadditional financing of the Rural Private Sector Development Project [RPSDP] worth USD 20 million). The twoprojects seek to boost agricultural production and the sales of agricultural produce. Given the very low riceyield levels in Sierra Leone, the WAPP is expected to help increase domestic rice production in a short period oftime. The RPSDP which is seeking to rehabilitate around 1,500 kilometres of feeder roads is expected toincrease household incomes and create local jobs by increasing yields, production and exports.

The industry and mining sectors will be the main drivers of GDP growth going forward. Real GDP growth,including iron ore, is projected to reach 51.4% in 2012 and exports will quadruple in 2012. At present, iron oreproduction is minimal, but, following the discovery of 10.5 billion tons of high-grade iron ore deposits at theTonkolili mine, the sector is expected to boom, reaching around USD 55 million tonnes per annum (MnTPA) by2015. This will make Sierra Leone one of Africa's largest iron ore producers in the next five years, as two otherlarge mining projects (Marampa and Bembeye) are also planned. The completion of phase I of the Tonkililiproject in 2012, with a total investment of USD 1.4 billion (63% of 2011 GDP) provided by a private foreignmining company (African Mineral Limited) through equity and issuance of debt, will have a significant impact oneconomic activity. It will help to diversify the country's mining sector, which has been based mainly ondiamonds, and will significantly enhance its contribution to exports and GDP. Mining sector development will besupported by the construction of the Bumbuna hydro-electric dam in close proximity to the Tonkolili project,helping to overcome the permanent power shortages in Sierra Leone (currently, total generating capacity isonly 50 MW). However, road and railway infrastructure from the mines to the deep water port is poor andinsufficient to handle current transport demand, which explains why the project includes plans to upgrade thesefacilities.

The service sector was the second dominant sector, contributing to over 30% of GDP. While tourism andtelecommunications appear set to continue on their trajectory in the medium term, manufacturing is theweakest sector, beset by supply-side constraints and competition from low-cost imports. Indeed, tourism is oneof the four pillars of the country’s first national export strategy launched in mid-2010 and, with 5,000employees sustaining up to 35,000 household members, is more likely to create jobs than the mining sector.According to the National Tourism Board (NTB) of Sierra Leone, tourism revenues were about USD 9 million inthe first half of 2011, up from USD 10 million over the same period in 2010.


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Macroeconomic Policy

Fiscal PolicyThe overall fiscal balance (including grants) is estimated to have improved from -6.4% of GDP in 2010 to -5.3%in 2011 and will reach -4.5% and -3.6% in 2012 and 2013 respectively, thanks to the government’s efforts toreduce expenditure and lending (Table 3). Indeed, fiscal policy was restrictive in 2011 and corrective actionswere taken by the government to reduce the fiscal deficit by strengthening fiscal discipline, containing domesticfinancing and reducing central bank direct credit to government. As a result, the fiscal contraction reduceddomestic bank and non-bank financing to 1.2% of GDP in 2011. The relatively rigid fiscal policy will bemaintained in 2012 and 2013. The main fiscal challenge for the government is to close the infrastructure gapand expand social services while maintaining macroeconomic stability. The authorities are to raise royalties ondiamond production and eliminate subsidies on fuel prices. This will expand the fiscal space that can be used onpriority social and development spending.

Domestic revenue decreased slightly from 11.6% of GDP in 2010 to 11.2% in 2011 because of the revenuelosses from continued low fuel-excise revenues. External grants increased from 7.2% of GDP in 2010 to 8.4% in2011 but are expected to revert in 2012 to 7.2% and to 6.3% in 2013, as a result of slow global economicgrowth. In early 2010, to improve tax collection and strengthen domestic tax legislation, the governmentintroduced a goods and services tax (GST), supported the collection of income taxes (including one-timepayments from the mining sector) and introduced a simplified tax regime for small and medium enterprises(SMEs).

Total government spending and net lending in 2011 (26.6% of GDP) are expected to decrease slightly from thelevel of 2010 (26.8% of GDP) as a consequence of the restrictive fiscal policy. Government expenditure isprojected to decline to 23.8% of GDP in 2012 and to 21.7% in 2013. In contrast, interest on capital expenditureis expected to grow from 2.1% of GDP in 2010 to 2.6% in 2011 but is projected to decline to 2.4% in 2012 and1.6% in 2013 and will be limited to projects on track.

Table 3: Public Finances (percentage of GDP)

2003 2006 2007 2008 2009 2010 2011 2012 2013

Total revenue and grants 20.1 32 42.8 16.1 20 20.4 21.3 19.4 18.1

Tax revenue 12.2 11.3 10.3 10.9 11.4 11.6 11.2 10.5 10.2

Oil revenue - - - - - - - - -

Grants 7.7 20.3 32 4.6 8 7.2 8.4 7.2 6.3

Total expenditure and net lending (a) 25.7 22.7 17.6 21.3 22.6 26.8 26.6 23.8 21.7

Current expenditure 20.8 17.6 14 15 15.4 16.5 15.9 14.2 12.2

Excluding interest 17.2 13.8 11.8 12.9 13.7 14.4 13.3 11.7 10.6

Wages and salaries 6.5 6.4 6 5.8 6.4 7.1 6.2 5.4 4.9

Interest 3.6 3.8 2.3 2.1 1.7 2.1 2.6 2.4 1.6

Primary balance - 13.2 27.5 - -1 -4.3 -2.7 -2 -1.9

Overall balance -2 9.3 25.2 -3.1 - - - - -


Monetary PolicyMonetary policy was expansionary in the second half of 2010 and early 2011. However, the Bank of SierraLeone (BSL) now plans to tighten monetary policy and maintain exchange-rate stability. To that end, Treasurybill interest rates fell in 2011. A responsible monetary policy stance was maintained with the objective of


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controlling the inflationary pressures that resulted from high world food and energy prices. Growth of reservemoney was set at 4% for 2011, then reverting to trend growth of 15% in 2012. This is generally consistent withthe 22–25% annual growth in private-sector credit during 2010 and 2011. The BSL has, in addition, agreed touse its repo instruments more actively to achieve liquidity targets. Finally, the legal requirement limiting centralbank credit to government to 5% of the previous year’s revenue will boost the independence of the BSL, helpachieve the monetary policy target and maintain the downward trend in inflation.

In a bid to strengthen its monetary operations, the BSL introduced the Monetary Policy Rate (MPR) early in2011. Conducted within the framework of a monetary targeting regime, this will be used as the maininstrument to carry out monetary operations in the secondary market while simultaneously signalling to themarket the bank’s monetary policy stance. In addition, a Lombard facility, which is a borrowing facility forexceptional financing with an administered interest rate, was introduced, and set at a penal rate of 5% abovethe MPR; this is the rate at which the bank will supply liquidity as the lender of last resort. A more forward-looking liquidity framework has been introduced to strengthen open-market operations.

The exchange-rate regime is flexible and in 2011, the Leone (SLL) depreciated by about 7% against the USdollar. The BSL’s Monetary Policy Committee noted in October 2011 that the continuous decrease in theinflation rate in the third quarter of 2011 was sustained by the relative stability in the exchange rate.Interventions in the foreign exchange market will have to balance the need to absorb foreign-financed budgetspending with the objective of reducing short-term market volatility. The authorities sought to tap into foreign-exchange reserves to finance spending on infrastructure; however, this approach carries its own risks, sincereserves are quite low and cover only three months of imports.

Economic Cooperation, Regional Integration & TradeIn 2011, Sierra Leone’s trade deficit widened to 40.9% of GDP, a significantly higher percentage than the 7.4%recorded in 2010 (Table 4). This was due to a surge in imports of machinery and transport equipment, whichwere largely destined for new large-scale mining activities and road-construction projects. Consequently, thecurrent account is projected to record a historically high deficit equal to 55.7% of GDP in 2011. Looking ahead,the external balance is expected to improve substantially in 2012 and 2013 when the trade balance should be insurplus at 15.9% of GDP in 2012 and 12% in 2013 owing to the recovery in mineral exports. This will translateinto an improvement in the current account deficit whose share in GDP is expected to fall to 9.9% and 9.6% in2012 and 2013, respectively.

At the bilateral level, Sierra Leone’s major trade and investment partners are China, the United States andRussia. In its reconstruction plan, Sierra Leone has embraced trade and regional economic integration as a majorconcern. The government is in the process of reforming its trade regime in line with its partners in theEconomic Community of West African States (ECOWAS). However, the volume of trade with ECOWAS is stilllimited (less than 1% of the total trade of the Community) and is mainly with Senegal, followed by Nigeria andMali. Sierra Leone has now aligned about 1,000 of its tariffs with those prevailing under the ECOWAS CommonExternal Tariff (CET) while requesting temporary exemptions from the CET for strategic products. Themomentum towards participating fully in the ECOWAS plan for a customs union and single currency isundeniable.

The government is participating in the West African ECOTRADE project that brings together ECOWAS membercountries that are not members of the CFA (Communauté financière africaine) monetary union. Thegovernment has received funding from several foreign donors, including the US Agency for InternationalDevelopment (USAID), to help in the financing of the reform programme.


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Table 4: Current Account (percentage of GDP)

2003 2006 2007 2008 2009 2010 2011 2012 2013

Trade balance -14.8 -6.6 -5.7 -10.2 -10.1 -7.4 -40.9 15.9 12

Exports of goods (f.o.b.) 16.5 19.3 17 14.2 14.7 18.8 18.1 45.1 43.3

Imports of goods (f.o.b.) 31.3 25.9 22.6 24.4 24.8 26.2 59 29.2 31.3

Services -2.8 -1.1 -1.4 -3.3 -3.4 -13.4 -17.7 -11.9 -9.2

Factor income -3.3 -4.1 -2.1 -3.9 -1.9 -3.3 -3.1 -17.5 -15.7

Current transfers 16.1 8.2 5.7 5.8 7 5.7 6 3.6 3.3

Current account balance -4.8 -3.5 -3.4 -11.6 -8.4 -18.3 -55.7 -9.9 -9.6


Debt PolicySierra Leone, for the most part, has been current with its external-debt-servicing obligations in the last severalyears. The government, however, still faces the challenge of servicing its domestic debt (18.8% in 2011),including Treasury bills, Treasury Bearer Bonds and arrears to domestic suppliers as well as to utility companies.

The country has received debt relief under the Heavily Indebted Poor Countries (HIPC) and Multilateral DebtRelief Initiatives (MDRI), and from several donors including the IMF, the World Bank’s InternationalDevelopment Association (IDA), the AfDB, the European Investment Bank, the International Fund for AgriculturalDevelopment (IFAD), the Arab Bank for Economic Development in Africa (BADEA), the Islamic DevelopmentBank (IDB), and the Organization of the Petroleum Exporting Countries (OPEC) Fund. Bilateral agreements havebeen signed with all Paris Club creditors. Barring large, unexpected shocks, external debt indicators will remainbelow the HIPC thresholds. Full delivery of HIPC and MDRI has significantly reduced Sierra Leone’s externalpublic debt. Indeed, the external (including public and private sector) debt to GDP ratio decreased from 40.4%in 2010 to 29.6% in 2011. It is projected to remain stable in 2012 and 2013 following the implementation of thedebt reduction programme for external commercial creditors by 2012.

Debt sustainability is a priority for the Sierra Leonean government. A comprehensive national debt law andprocedures manual was adopted in 2010. Efforts are underway to link the Commonwealth Secretariat DebtRecording and Management System (CS-DRMS) electronically to the Integrated Financial ManagementInformation System (IFMIS). In order to improve debt management further, the government has requestedassistance from the World Bank and IMF in the elaboration of a comprehensive medium-term debt-managementstrategy. The treatment of external commercial debt poses serious challenges to debt sustainability. In order toeliminate the debt that should be paid to external commercial creditors in 2011, the government hasapproached the World Bank to utilise the IDA-Debt Reduction Facility to implement a commercial debt buy-backoperation. Once implemented, this will result in a considerable decline (over 90%) in Sierra Leone’s externalcommercial debt. Sierra Leone is eligible to access financing of its IDA and AfDB allocation on the basis of 50%grants and 50% highly concessional loans, with a grant element of over 70%.


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Figure 2: Stock of total external debt (percentage of GDP) and debt service (percentage of exports ofgoods and services)


Debt/GDP Debt service/Exports

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130%

25%

50%

75%

100%

125%

150%

175%

Perc

enta

ge


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Economic & Political Governance

Private SectorLimited access to financial services is the main constraint to private-sector development in Sierra Leone. As aconsequence of the expansionary monetary policy, which limited opportunities for private-sector credit in 2011,credit to the private sector amounts to less than 10% of GDP. In addition, the poor quality and inadequacy ofinfrastructure, as a result of over a decade of civil conflict, did not help the development of the private sector.The total cost of addressing specific infrastructure gaps and capacity-building requirements in transport, tradeand irrigated agriculture is estimated at USD 2.4 billion, for which a financing gap of USD 1.38 billion currentlyexists. To reduce this gap, the government encourages Public-Private Partnership (PPP) investment ininfrastructure and intends to attract the private-sector involvement in the tri-partite investment programme(TIP) through PPPs.

According to the World Bank’s Doing Business 2012, Sierra Leone moved up 2 places in its overall worldranking, from 143rd to 141st, in ease of doing business between 2011 and 2012. The “starting a business” and“access to credit” rankings nonetheless slipped by 13 and 10 places, respectively, in 2012, relative to 2011.Rankings of dealing with “construction permits” and “protecting investors” have also slipped, by 3 and 10places, respectively. These results may discourage FDI in the future.

In 2011, to encourage private-sector activity and facilitate access to credit, Sierra Leone improved its creditinformation system by enacting a new law that provided for the creation of a public credit registry. However,the ranking of the “access to credit” indicator did not improve. It is important to note that the vast majority ofthe Sierra Leoneans are poorly connected to banking services. This is especially true for those living in ruralareas, as the rural bank network was destroyed by the war. In addition, the recent widening of commercialbanks branch networks did not help or contribute directly to microfinance projects.

Financial SectorSierra Leone’s financial sector continues to face a number of challenges: banks are small (assets average aboutUSD 45 million); efficiency is low (non-interest expenses average about 10% of total assets and interest ratespreads are around 11 percentage points); there is high banking concentration where the three largest banks(out of the thirteen operating commercial banks) hold about 54% of total bank assets; the skill and experiencelevel of bankers are deemed to be low; and the financial-sector associations, including the bankers association,do not function well. The payment system is under-developed, with no interoperability across the ATM system;domestic payment transactions are dominated by cash with limited use of cheques or internet banking, and, ofcourse, no electronic large-value payment system. In addition, the normal financial markets (short-term credit,medium and long-term credit, foreign exchange, etc.) are rudimentary and do not function well. The new stockexchange has yet to obtain a significant number of listings. Efforts to develop the payment system in line withinternational standards are thus underway. The AfDB is financing the automation of the payment system, whichincludes: (i) real-time gross settlement; (ii) automated cheque processing and an automated clearing house; (iii)a scriptless securities settlement system; and (iv) core banking applications.

On a more positive note, the capital-asset ratio of the banks, for example, is a healthy 17%, though non-performing loans are still high at 14.96% of GDP in 2011, down from 15.61% in 2010. Nevertheless, bankingsupervision is underdeveloped as the liquidity ratio of net loans to total deposits, which is still as high as 40.1%.Thus, there is an urgent need to examine the soundness and management of financial firms against risks and riskmanagement, and to emphasise the importance of a clear understanding of financial risks and optimalassignment of the responsibility for managing different types of risk (namely: liquidity, credit, interest-rate,market, foreign exchange, operational, sovereign, legal and fraud risk). There is an urgent need to develop aregulatory strategy that is focused, coherent, and in line with international best practice.

Public Sector Management, Institutions & ReformThe government of Sierra Leone has adopted a number of measures to improve governance and fightcorruption. These include implementation of the service charters, the African Peer Review Mechanism ( APRM)in 2011, the Extractive Industries Transparency Initiative , and anti-corruption efforts based on the number ofallegations, investigation, prosecution and conviction rate, and amounts recovered as settlement fromcorruption cases (including some high-profile corruption cases). In 2009, the country’s ranking, as reported byTransparency International, was 158 th out of 180 countries. In 2010, following the implementation of theNational Anti-Corruption Strategy (NACS) that was launched in 2008, the country’s ranking improved to 146.This is a notable achievement that needs to be sustained through increased efforts by the Anti-CorruptionCommission (ACC).


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In May 2011, the AfDB approved a budget support operation for Sierra Leone (Economic Governance ReformProgram II [EGRP II] 2011-2012). The objective of this reform programme is to promote inclusive economicgrowth and poverty reduction through public financial management (PFM) reforms. The expected outcomes ofthe programme are: improved fiscal discipline and efficiency/effectiveness of public expenditures; and improvedrevenue transparency and accountability in the energy and extractive sectors. Thus, EGRP II is expected tocontribute to an improved PFM system and a robust fiduciary arrangement that will promote transparency andaccountability in the use of public resources. While the direct beneficiaries are Sierra Leone’s key PFMinstitutions, the indirect beneficiaries are the people of Sierra Leone who will benefit from enhanced fiscal spaceneeded for the delivery of social services.

Natural Resource Management & EnvironmentDuring the last decade, the government of Sierra Leone embarked on a major environmental protection andmanagement programme designed to promote sound environmental management and biodiversityconservation. It thus introduced a number of initiatives, legislation and regulations specific to areas dealing withenvironmental and natural resource management, protected area system management and biodiversityconservation. These include the Sierra Leone Maritime Administration Act 2002; the Forestry Policy 2003; theNational Land Policy and Land Commission Act 2004; the Bumbuna Watershed Management Authority and theBumbuna Conservation Area Act 2008; Ozone Depleting Subsistence Regulations 2008; and the EnvironmentalImpact Assessment (EIA) Procedures and Guidelines 2010.

Sierra Leone is actively engaged in a number of regional/sub-regional initiatives that are designed to promoteefficient resource management. It has started a dialogue with The West Africa Resource Watch (WARW), anNGO that, inter alia, trains civil-society actors in monitoring revenue flows in the natural resource extractionindustries, and advocates improved transparency and accountability in the management of these revenues.Progress to date has been limited. This calls for a more integrated and co-ordinated approach to support futuremining development and stimulate broader economic impact from mining activities.

The Kimberley Process Certification Scheme is a process designed to prevent illicit diamonds from entering thelegitimate diamond trade. Although the scheme has so far failed to bring to an end the flow of “blooddiamonds,” it has nonetheless managed to reduce that flow and thereby increased the revenues of government.

Political ContextSierra Leone had its first democratically elected government in 1996 and has made considerable progress inimproving its democratic institutions since the end of the civil war in 2002, including a reasonable level ofseparation of powers. The National Electoral Commission (NEC) has announced that the next presidential,parliamentary and local elections will be held on November 17th 2012. Prior to elections, the NEC planned athree-month voter registration period from January 2012. In the meantime, the UN Security Council hasextended the mandate of the UN Integrated Peace building Office in Sierra Leone (UNIPSIL) to September2012; this is expected to be extended again to cover the November elections.

To avoid the risk of political violence similar to that recently experienced in Côte d’Ivoire and Liberia during andafter the elections, the government has taken steps to ensure a more peaceful climate. To this end, PresidentErnest Bai Koroma, has suggested that the International Criminal Court (ICC) investigates the existence of anytrouble. This would dissuade the opposition from provoking violence and disrupting the election process.


Social Context & Human Development

Building Human ResourcesPromoting human development is essential to reducing poverty. Poverty is strongly related to low levels ofeducation, poor health status and low access to clean water and sanitation. Despite some improvement, thecountry’s social indicators are amongst the lowest in the world. The infant mortality rate is above the averageof West and Central Africa and has been estimated at 114 deaths per 1,000 live births in 2010. Sierra Leone alsohas one of the worst maternal mortality rates worldwide with 970 deaths per 100,000 live births. Some 41% ofthe population suffers from malnutrition. Moreover, there is minimal access throughout the country to safewater supplies.

Over the last few years, the government focused on the expansion of access to and improvement in the qualityof basic education through several reforms, including: streamlining and re-organising the educational institutionnetwork at all levels; implementing teacher-training programmes; and reviewing school programmes. As aresult of government action to support free tuition, payment of examination fees, increases in the number ofschools and increasing awareness of the importance of education, the primary net enrolment rate was 101% bythe end of 2007, in excess of the 67% target. However, the continued practice of early marriage for girls andcommercial activities such as street trading and mining inhibits enrolment past basic education; the juniorsecondary school net enrolment ratio stood at 21%, reflecting a shortfall of the targeted level by 8%. Theprimary and secondary pupil-teacher ratios are high and the targets for textbook-to-pupil ratios have also notbeen achieved. Results on progress related to MDG 2 on Universal Primary Education are inconclusive becauseof the lack of data to track progress. According to the government, MDG 4 and MDG 5, related to ChildMortality and Maternal Health, respectively, are achievable by 2015, thanks to the government’s efforts, on theone hand, and the introduction of the Free Health Care Initiative (FHCI) for pregnant and lactating women andchildren under five years old, on the other. Sierra Leone is likely to achieve only the HIV/AIDS component ofMDG 6 as the HIV prevalence rate has stabilised at 1.5%.

Poverty Reduction, Social Protection & LabourPoverty is widespread in Sierra Leone and the situation was aggravated by the civil war which left the countryin disarray and suffering from gross under-development. Some 70% of the population live below the povertyline. Rural areas accounted for the largest proportion of the poor (73% in rural areas, versus 61% in urbandistricts). The second Poverty Reduction Strategy Paper (PRSP II) is the overarching development strategy ofthe government for 2008–2012. Over the course of the previous PRSP, significant progress was made in certainareas; however extreme poverty is still pervasive. PRSP II moved away from the recovery agenda of the firstPRSP to a development strategy focused on broad-based economic growth. In preparing PRSP II, thegovernment undertook a growth diagnostic study in order to determine the potential drivers of growth. Thisrevealed that a sustained focus on infrastructure, productive sectors and natural resources, combined with pro-growth policies, would be the most effective route to unlocking the economic potential of Sierra Leone. Theoutcome of the study, as well as the results of nationwide consultations became the Agenda for Changed. It ledthe government to set the following strategic priorities to be the central theme of the second poverty reductionstrategy paper: improving infrastructure with a focus on energy and transport development; developing theproductive sectors that would generate private-sector-led growth from the key resource-based industry ofagriculture; and improving human development through investment in public services such as health andeducation. The “Agenda for Prosperity” (2013-2017) will succeed the Agenda for Change and will provide adevelopment strategy for the coming years.

The government has extended the life span of the National Commission for Social Action (NACSA) and expandedits mandate to include social protection of disadvantaged individuals and households; repatriation of war victims;the implementation of community-driven development projects for rural communities; and support for capacitybuilding in district and chiefdom councils. In addition to these initiatives, the government has intervened tosupport the extremely poor and vulnerable sections of the population.

Basic labour standards do exist in Sierra Leone, but are not well implemented. The country is a signatory to anumber of international conventions on labour including freedom of association, elimination of compulsorylabour and elimination of discrimination. The country is signatory to the Convention of the Rights of the Child,but much more needs to be done to eradicate child labour, especially in the diamond mines. In addition, anumber of labour-market regulations that seek to balance job creation with social protection exist but are notenforced well due to the lack of capacity. Such regulations include those governing the minimum wage, holidaysand paid leave. Several social safety-net programmes in Sierra Leone now rely on community-drivendevelopment initiatives, such as the Social Action and Poverty Alleviation Programme and the NationalCommission for Social Action (NACSA) project funded by the World Bank and the AfDB.


Gender EqualityWomen in Sierra Leone were and continue to be, in some regions of the country, oppressed and marginalisedby customary, constitutional and religious laws. With regard to political participation, women are under-represented in elective and nominated positions. Women’s participation at the preliminary elections decreasedfrom 14.5% in 2002 to 13.5% in 2009.

In general, women in Sierra Leone are more susceptible to poverty because of their prevalence in the informalsector with poor working conditions, low salaries and no social protection, which limit their economicopportunities. Despite improvements in health and achieving a near gender balance in primary education inwhich the gender enrolment gap has narrowed substantially, girls still lag behind boys in enrolment, retentionand completion rates in secondary education because of high female dropout rates. To eliminate genderdisparities and to improve the retention rate of girls at the secondary level, the Sierra Leonean government hasadopted two national policies: the Gender Mainstreaming Policy and the National Policy on the Advancement ofWomen, these are in addition to the National Gender Strategic Plan (2009-2012) and the Sierra Leone NationalAction Plan (SILNAP), based on United Nation Security Council Resolution (UNSCR) 1325 on Women, Peace andSecurity and UNSCR 1820 on sexual violence launched in 2010. However, despite these efforts, MDG 3 onGender Equality and Women’s Empowerment will not be met by 2015.


Thematic analysis: Promoting Youth Employment

Youth unemployment continues to be a social problem in Sierra Leone. The youth unemployment level in thecountry is amongst the highest in the West African sub-region, standing at 45.8% of the total unemploymentfigure in 2008 (Ministry of Labour and Social Security, 2008). This high unemployment figure for youth revealsonly part of the challenge as youth in the sub-region face high rates of inactivity, underemployment and poorworking conditions with long working hours and low pay; the vast majority have little chance of finding a securejob.

Indeed, Sierra Leone is a post-conflict country and during the time of war, major economic activities (such asprivate investment, food production, transport, communication and training) came to a halt, while valuableassets (such as buildings, infrastructure, factories and institutions) were destroyed or damaged. Human liveswere lost and education and training were disrupted, which, in turn, limited employment opportunities. Besidesthese factors related to the fragility of the country, the limited capacity of the private sector and a generallydifficult economic environment, exacerbated by the global economic crisis and its repercussions on the country’seconomy and labour market, have worsened the situation.

Sierra Leone has a very young population with 60% of its people between the ages of 15 and 34, of whom 65%are of working age. This further creates a shortage of secure jobs and has numerous socio-economic andsecurity implications for the country. Youth unemployment is a potential trigger for social instability,underdevelopment and economic stagnation. According to the post-war Truth and Reconciliation Report, theproblem of youth unemployment was a leading factor in the prolongation of the brutal ten-year conflict. In theearly 1990s, young people with few job prospects and little hope of future progress joined rebel groups andengaged in criminal activities and armed conflict. Employment and job creation for young people in fragile andpost conflict countries like Sierra Leone is therefore a key component of the peace-building process.

According to the World Bank’s Youth and Unemployment in Africa: The Potential, The Problem, The Promisereport, released in December 2008, “creating long-term jobs for youth is a key factor for Africa’s povertyeradication, sustainable development, and peace, and in countries emerging from conflict, access toemployment for youth is integral to peace-building processes”. These findings are in line with the current youthemployment situation in Sierra Leone: in recent developments youths looking for jobs in the government’soverseas-employment programme have been recruited to serve in the Iraq war. This clearly reveals theprecarious nature of the Sierra Leonean labour market.

The government’s pro-youth initiative, under the Second Poverty Reduction Strategy (PRSP II) for 2008-2012,includes the development of youth structures to promote representation as part of a strategy to support youthemployment and empowerment. It continues support to youths who have specific professional skills (ICT forexample), or who are engaged in agricultural production. The objective of this initiative is to help young peopleacquire access to appropriate vocational training, apprenticeship and ICT skills; to encourage buildinginfrastructure projects with labour-intensive public works and high social benefits; and to promote outsourcingto youth enterprises in solid waste collection, disposal and recycling. After short-term training, the youths willbe able to set up micro, small and medium enterprises (MSMEs) and to access financial resources from the SierraLeone Enterprise and Skills Development and Training Fund (SLETFUND) which aims to promote equity andgender equality in access to financial resources by prioritising women, youths and vulnerable persons.


sierra leone - african economic outlook sierra leone (absl) project, which includes the development...

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