Why so much economic hardship in Sierra Leone?

Dr. Dennis Bright – Chairman and Leader, NGC: Sierra Leone Telegraph: 12 December 2019:

Good morning distinguished Ladies and Gentlemen of the Fourth Estate. You are very welcome to our second monthly press briefing (12 December 2019). Last month we focused on a survey we conducted on the current hardship being experienced by the common man in Sierra Leone.

In that briefing we concluded that Government should consider the situation as an economic emergency and invite all the key economic operators (importers, retailers, trade unions, market associations, bankers, tax collectors etc.) to a round table that would provide a holistic view of the problem and recommend practical solutions.

Since we made that call, no such Round Table has been summoned or organized, at least, not to our knowledge. Rather than that, Government embarked on its usual “damage control” stunts by sending its “Strategic communicators” to the media to tell the public about its achievements in correcting all the wrongs of the past Government.

Furthermore, in paragraph 22 of the budget Speech read to Parliament on 8th November 2019, the Minister of Finance viewed Di gron dry as a direct consequence of “high levels of unemployment especially among our youth”. This confirms our suspicion that there is some disconnect between the Government and the people.

The problem of hardship in Sierra Leone has gone way beyond the issue of unemployed youths; hardship is strangulating the entire society, affecting those who have jobs as well as the jobless.

Because it is our job as an opposition party to critically examine the work of Government and bring to their attention those areas where they are getting it wrong, the NGC will continue to represent those who cannot speak and be heard, those who keep telling us that “wi wey dae suffer, na wi borku.”

After our last briefing in which we exposed the dramatic rise in the prices of food items since March 2018, the NGC spent the whole of the month of November collecting information from various members of the private sector, traders, okada rider, small and middle level business people and some large companies to get an insight into their current situation and basically to find out from their own angle why di gron dry.

It came out clearly from our investigation that business in general in Sierra Leone today is bad and that the country is suffering from an economic malaise that is deeper than the struggles of our unemployed youth.

TAXATION AND REVENUE COLLECTION

According to the Ministry of Finance, revenue collected in the first three quarters of 2019 was 278 billion Leones more than the amount they targeted. Since the advent of the current administration the National Revenue Authority (NRA) has been exceeding its targets.

Good performance by NRA means that the ordinary business persons are kept on their toes and have to pay all the various taxes which, for an importer, would include customs duty, income tax, Goods and Services Tax (GST), municipal taxes (where applicable), ECOWAS tax and (for employers) NASSIT dues. It is a fact that Sierra Leone is a high tax country and people doing business say that the prices of their goods merely reflect their costs including the various taxes they have to pay.

One common thread in our interviews with the business people is that the NRA is not business friendly; they do not encourage businesses to thrive and then comply, they simply threaten to shut them down.

Even those businesses that are suffering today because they have not been paid by Government are being chased by the NRA for back payments. Taxation is a heavy burden on businesses in Sierra Leone. Besides, there are additional hidden taxes that come in all forms.

Importers or exporters will tell you of the nightmare they face having to go through multiple stops to clear their goods: Africa Link, Standards Bureau, Port Health, Clearing Agency, Customs Bollorie, Port Owners, Port and Dock workers, Shipping Line, Phyto-sanitory, Indigenous Transport owners, Security checkpoints, Trade Ministry and PMB.

This is an invitation to graft. The frustration of going through all these stops is so deep that people are obliged to resort to what is called “fast tracking”, which simply means bribing to limit the pain.

Having paid all the taxes and greased all the palms the trader or businessman has no other alternative than to pass all these costs onto the consumer /buyer. This leads to relatively high prices of goods.

Sierra Leone is a high tax country. People have been wondering why good fish is so scarce and expensive here. Under the last administration the license fee for a category 5 boat (also known as Ghana boat) carrying up to 10 crew members was Le 150,000.

The current Government increased it to Le 1,500,000 but later reduced it to Le 1,000,000 after a public outcry from the fishing community. This fee is still considered too high by artisanal fishermen and women so they use lower category boats that have crews of four to five members instead.

These boats do not venture far and their catch is basically limited to herrings and such fishes. Ideally, trawlers operating under Sierra Leone license could have helped but Government is charging a sort of registration fee of US$ 50,000 per trawler which is quite separate from the fees on operations.

We are informed that a foreign company having a fleet of 12 to 15 trawlers had to pack up and leave for another country due to the extremely high registration and operational fees. They would have paid US$ 600,000 to US$ 750,000 even before starting operations; operating a trawler costs approximately US$100,000 to US$ 150,000 per boat per month.

Interestingly, after leaving Sierra Leone, the same company discovered that whereas in Sierra Leone they were asked to pay US$ 50,000 per boat, registration in the Gambia and in Guinea Bissau cost absolutely nothing! One can imagine the number of jobs and opportunities that the operation of 15 trawlers would have generated for our young men and women in the fishing supply chain.

FOREIGN EXCHANGE: CURRENCY VALUE AND AVAILABILITY

The foreign exchange rate also accounts for the high prices of goods. Since most goods are currently imported into the country, importers have to buy the goods abroad in hard currency. We have already shown in our last review how the value of the Leone has fallen especially vis a vis the US dollar.

This means that importers need much more Leones now to buy goods at the current dollar price. To make matters worse, the dollar is becoming increasingly hard to get. Mining exports which used to fetch us the bulk of our foreign exchange have dwindled due largely to the indiscriminate shutdown of mines and cancellation of licences.

Initiatives taken by the Central Bank and the Ministry of Finance to address the problem do not seem to have had much effect, a fact that prompted Parliament to invite them to explain. So importers have to resort to the black market to purchase hard currency. This is also a factor responsible for the high prices of goods today.

One would have expected that due to the current shortage of hard currency Government would be making drastic efforts to encourage exporters. However, the exporters are complaining of very frustrating procedures and excessive taxes including a recently imposed charge of 2.5% on the total value of exports per container.

WHOLESALE PRICES AND TRICKLE DOWN EFFECT

Logically, when the wholesale prices go up, retailers have to adjust their prices accordingly. The ordinary man is at the mercy of the market and its prices. We have noticed that with some essential commodities such as rice the increase in retail price is much higher than the increase in wholesale price.

The explanation given by some market women interviewed is that they have many commitments that are also costly: rents are increasing, they are paying more for drinking water, water for cooking and laundry, transport, electricity, food items, medical services and pharmaceuticals. They also have to pay taxes to the city council. All these tend to dictate the prices they fix on the goods they sell.

POWER AND WATER SUPPLY

For those businesses that are heavily dependent on electricity and water supply, the situation may be worse. Infrastructure costs for water and power provision are among the highest in Africa. Apart from the increase in the cost of electricity and huge EDSA bills there are some areas even in Freetown where supply is not regular.

In other cities especially Bo and Kenema the shortage in power supply has even caused embarrassment for the SLPP Government whose Energy minister has been in the media lately, explaining the problem.

Meanwhile, businesses and consumers still have to use standby options with the added costs that this implies. Some business people claim that their freezers, fridges or musical equipment have been crippled due to the surge of power and the frequent outages. These are factors that make business difficult and can also explain why prices rise.

PROCESSING AND PRESERVATION

For commodities such as fish that require processing (smoking) or refrigeration (cold room), business people such as fishmongers are having to pay much more rent for these services than before. Electricity costs more, mangrove wood costs more, charcoal costs more so the price of fish goes up.

TRANSPORTATION

The price of goods could also be affected by the increase in the cost of transporting them around the country. When fuel prices increased from Le 7,000 to Le 8,500, taxis and poda podas creatively cut their journeys into segments forcing commuters to pay multiple times for a single journey.

So the market woman buying plassas at Dove Cot market may have to use the services of an omolanke and trek it all the way to Regent road before catching a vehicle that will bring her to Lumley. Travelling from Waterloo to Lumley could mean paying up to three times depending on which type of transport one is using, taxi, kekeh or poda poda.

For goods being transported from the provinces to Freetown or from Freetown to other parts of the country the costs can also be high because in addition to fuel, there is the toll gate factor. A heavy truck doing a return trip may have to pay a total of just over a million Leones at the toll gates. So, the cost of transportation is certainly another factor responsible for high prices of goods.

ACCESS TO CAPITAL AND START UPS

People who intend to engage in small businesses are quite often discouraged by the interest loans in the banks 19% to 22%. This rate is not much different from the rates in other African countries and speaks to the difficulties for small businesses to start and grow in our continent.

But the situation in a country like Sierra Leone is obviously more critical considering the depressed state of our economy. NGOs have stepped in in recent times with micro-credit schemes offering start-up capital intended to support small businesses. For many women and men these micro credit loans have turned out to be booby traps. The situation of the market in Sierra Leone, especially the low purchasing power of consumers, has caused beneficiaries to default.

As a result, a considerable number of women have faced prosecution and are today either languishing in prison or have run away from their homes to live as fugitives.

LOW PURCHASING POWER

It is no secret that the purchasing power of the ordinary Sierra Leonean today is at an all-time low. Times are hard even for those who are employed. People now have to make hard choices. It has now become too expensive to prepare meals at home and some families have decided either to reduce the number of times they eat home cooked food or to resort to cookery entirely.

It is indeed a disgrace that some of our countrymen should be eating stuff like bread and kanya, raw cassava and salt, bread and peanuts as their day’s meal. Look around you and you will clearly see hunger printed on the faces of people as they move around in their daily struggle for survival.

Government has announced an increase of 30% for teachers’ salary and an increase of the minimum wage to Le 600,000. So the teacher currently earning one million Leones will soon be having one million and three hundred. Obviously, any single Leone added is better than none at all. However, we have shown in our previous press briefing that a family of four may need at least Le 42,000 a day or Le 1,260,000 a month to prepare home cooked meal or will be spending Le 20,000 a day (for one meal) or Le 600,000 a month if they depend on cookery.

This means that the minimum wage worker who has a wife and two children (no in-laws or extended family members included) will be spending all his wages on one meal a day cookery for the family. And the teacher can feed him or herself, the spouse and two children (no in-laws or extended family members included) on cookery for the month and will be left with only about Le 650,000 for rent, transportation, lunch for the kids, clothing, electricity, water etc. This is not a joke. People are suffering, struggling just to keep alive.

For the business people this means that sales are down; and they suffer too because they have mouths to feed. Take a walk along ECOWAS street and you will see that businesses are closing down. The Cold Storage bottling company has moved most of its operations to Guinea causing scores of employees to lose their jobs; suppliers and contractors who are owed trillions of Leones by Government are virtually in a state of limbo, waiting for Godot.

When Government honours its commitment to local contractors there is more employment, money goes around and small businesses thrive. Today, this is not the case. Due to the heavy domestic debt accumulated by Government since the APC regime, contractors have to wait almost unbearably for payments to trickle down.

Government owes local private companies over $340 million but has budgeted and can pay only $30 million this year. Some of them claim that only those who are well connected to the current regime are given priority consideration. This depressive state of business is another reason why di gron dry.

RENT

Talking about rent, there are many landlords whose sole source of income is the rent that they collect from their tenants. They too are subjected to the same rough weather conditions of the Sierra Leone economy. They buy from the same markets and at the same prices as their tenants.

Previously they used to dodge paying city rates or taxes on their rent but as the City or Local Councils and NRA become more and more efficient in their job of collecting taxes, landlords are becoming more and more ruthless in dealing with their tenants.

A young house help earning Le 3,600,000 per annum told a painful story of how her landlord flung her belongings out in the rain and kicked her out of the house when she could not pay the annual rent that he had increased from Le 1,200,000 to Le2,500,000. These realities are what people are talking about when they say that di gron dry.

BRIBERY, CORRUPTION

In these circumstances people find ways and means to survive, making use of and bending the system as best as they can. This is where the issue of bribery and corruption becomes complex and difficult to handle. Take the example of a police constable taking home Le700,000/900,000 a month.

He relies on the complimentary bag of rice given monthly to all officers for his family to survive. Life at the barracks tends to attract extended family. The average cop’s family includes not only wife and children but also in-laws, siblings, cousins etc.

One police officer told our investigators that the supply of rice is sometimes delayed by five to six months. That is when the small police officer gets desperate and faces a serious crisis. Bribes from transport operators like the okadas, kekeh, poda podas and taxis become an extra source of income. While we deplore any form of bribery or corruption it is sometimes useful to know the context in which these evils flourish.

Of course the drivers complain about the “bookings” that they are obliged to do on a daily basis to earn the freedom of plying the routes without disruption by the police and traffic wardens; and at the Water Quay there is the “fast tracking” fee that one pays to simplify the most exhausting and frustrating process of clearing goods from the port.

Everywhere people are finding illegal means of coping with the hard times. And of course in an environment where bribery and corruption become commonplace, big serious investors hesitate to come and do business.

BIG BUSINESSES AND INVESTORS

Our Government has been travelling and making a lot of moves to attract big investors to this country. The country is still waiting to see how much significant investment would come out of these efforts. Besides, the Finance Minister in his last budget speech informed the public of some “Investment-friendly policies” such as reducing import duty on “raw materials, semi-processed products…” from 20% to 5%, Corporate Income tax from 30% to 25% and removal of the GST on aviation related charges.

This is great; but there are other factors that big investors consider before deciding to operate in a country: one of them is the size of the market. With a population of seven million people, except for industries that extract our resources, Sierra Leone is not a very attractive market.

We have already talked about our low purchasing power; it will be interesting to find out how many people in Sierra Leone have NEVER entered a supermarket or have no intention or chance of ever doing so. Besides, poverty has affected the mindset of our people so much that Sierra Leone has become a dumping ground for second or third hand goods including used clothing (suits, dresses, bras and panties!), used television sets, used coffee tables, used hair, used mattresses and all such unwanted stuff rejected by other countries. People prefer used stuff because original good quality products are deemed too expensive.

Another factor considered by investors is the political environment. In the past 12 months there has evolved a pattern of violence that has unfortunately defined a series of bye elections held in this country. Some of them have ended in the loss of life, others have involved top State authorities but interestingly nobody has been prosecuted not even in the case of the 14 year old boy who died in Tonko Limba or the Constituency 110 bye election where perpetrators were caught on video smashing ballot boxes and causing mayhem.

In the most recent unnecessary bye election fracas in Samu chiefdom, Ward 210, the Parliamentary leader of the NGC was attacked and was shown on social media being treated for injuries; not a single colleague in Government has called to commiserate or at least enquire from him about his experience.

In this digital age, images of these incidents are circulated almost instantly and help to give the impression of an unstable and politically tense country. Investors also consider security of tenure and whether the Government keeps to the law and its policies.

A Government that cancels investment agreements signed on behalf of the country by their predecessors, even if such agreements are truly and clearly against the interests of the country, may be sending bad signals to potential investors. Furthermore, Investors will consider it too risky to go to places where they think their investments can be simply cancelled whenever the regime changes. We are of the view that the Government handled the S.L. Mining issue poorly. It could have been sorted out by keeping the company running and aggressively re-negotiating. Shutting down and not respecting arbitration rulings affects investments in all sectors.

CONCLUSION

As businesses continue to shrink, the Sierra Leone Government has become the Super-Employer, creating new jobs and more jobs, for instance, by opening new Ministries, expanding existing agencies and institutions, creating Commissions and engaging youths in Government projects. In fact government has just announced that next year the Wage Bill will be increased by Le 586.6 billion.

In modern economies, it is the private sector that generates jobs and Government accounts for only a minimal portion of the workforce; but in Sierra Leone today it is the opposite that is true. What is more interesting is that Government jobs are not only multiplying but they are looking more and more attractive.

The impoverished public is observing the dramatic change in lifestyle of people who were errand boys and “dregman” only twenty months ago suddenly becoming Ambassadors or Board members or Advisers driving posh cars without license plates, heralded by sirens and police escorts and living fairy tale lives along the beach and up the hills.

So for the young people, instead of starting up a business the option that appears most enticing today is to get appointed to a Government position. Meanwhile for the unemployed youths, market women, okada riders, kekeh, poda poda and taxi drivers, junior office workers, life is getting harder and harder. Even contractors, suppliers, importers, exporters, landlords, policemen and other civil servants are complaining that for them the gron dry.

It is our belief that the situation has become so complex and urgent that Government needs to sit down with all economic operators and interest groups to work out emergency measures that will begin to alleviate the suffering of the people.

We therefore repeat our call for Government to convene working group meetings on the current hardship that would at least restore hope and reassure the public that Government is taking them seriously. Wan finger nor de pick los.

For our part, we in the NGC will continue to play our role as an opposition, legitimate partners in governance. We will defend the cause of the poor and suffering masses by speaking up for them. The NGC is here to stay and no amount of harassment or violence at bye elections will stop us from doing our job.

The people of this country deserve better than what they are having now. The Government needs to be reminded that instead of trying to wipe out opposition through bye elections and court cases, it is much better off working in partnership with a responsible opposition that sees it from outside; an opposition that recognizes and respects the Government but puts the country first and fears only God. At the end of the day real power comes only from God.

In this season of peace, on behalf of the entire membership of the National Grand Coalition at home and abroad I wish to extend to all Sierra Leoneans our very best wishes for love and peace. In spite of the gron dry, let me wish you all the best you can have at Christmas and in the New Year. See you next month.