The lamentations of the private sector

Andrew Keili: Sierra Leone Telegraph: 24 January 2019:

Whenever you have a change in government, the new leaders get saddled with the problem of absorbing large masses of people into jobs in the overburdened public sector. Inevitably this involves removing people from positions and replacing them with their own supporters.

It is often the case that this is not done in a rational way and more often than not, due process is thrown out the window. It is also true that those who lose their jobs with government changes – and this includes political figures like Ministers, heads of parastatals and those holding their positions, mainly because of government connections as well as other civil servants and public workers who may retire genuinely find it difficult to fit into the private sector.

In the final analysis, most people are forced to try their hand at surviving in the private sector which serves as the source of employment for over 90 percent of people.

The object lesson from all of this is that politicians and other people in the public sector should do all they can to make the private sector thrive. But do they?

The issue of the survival of the private sector – especially the formal private sector, is espoused year after year by the premier institution representing the sector – the Sierra Leone Chamber of Commerce Industry and Agriculture.

The rapprochement with the government of the day is constant. The Chamber also espouses its views on important issues at the once a year annual Christmas dinner at which His Excellency the President is invited. The President is then given the opportunity to reply to Chamber President’s speech and perhaps come up with policy initiatives to address such concerns.

Last year was no different. His Excellency could not attend because of other commitments but was represented by the Chief Minister. I would like to share with you some of the major views expressed by the Chamber President, Ing. Christopher Forster.

The Chamber has had a good rapport with the New Minister of Finance who appears very enthusiastic about forging a relationship between the government and the private sector. The Chamber President reiterated his support to government for reforms to improve investment climate and business environment and his desire to work with government to promote development and strengthen mutual beneficial economic cooperation with other countries and establish a conducive environment for investors.

Here are a few areas of importance in his speech:

Public-private dialogue

Through the context of public-private dialogue (PPD), the government and private sector should work together to identify needed reforms, decide on prioritization and sequencing, and monitor progress. To this end, government should make adequate provision for a PPD Secretariat that can convene and facilitate meetings, undertake research, support thematic working groups, conduct outreach across Sierra Leone to engage diverse communities and sizes of enterprises, and monitor the performance and progress of PPD. Government should set up a high level Consultative Council on improvement of investment climate and business environment, the membership of which should include representatives from various public offices, local and foreign private sector and development partners.

Single electronic customs clearance window

Government should provide the necessary support and modalities that will ensure a “one-stop-shop” single window for export, import and transit transactions in border posts.

Education

Due to lack of relevant skills, outdated curricula not reflecting the demands of  industries, deficient linkages between training providers and the industries, insufficient infrastructure of learning institutions, high cost of intensive training to fulfil industry skills – to name but a few, the country’s  workforce is mostly not fit for purpose.

Chamber as part of the TVET Coalition with membership drawn from NGO’s, industry, and training providers will push for addressing such issues with government assistance.

Government must pay heed to the establishment of private schools and other supplementary education institutions and encourage such institutions to thrive.

NRA taxation

The Chamber calls for a simpler tax administration system for businesses. This will help increase the number of taxpayers, and as a result the public budget will increase and society will make significant achievements. The Chamber therefore entreated the President not to give assent to some aspects of the 2019 Finance Act dealing with taxation.

Public services regulations

The Chamber frowns upon aspects of the Finance Act 2019, dealing with Clearing and Forwarding Services and Insurance of properties. Government MDAs were required to insure all properties and assets with the National Insurance Company (NIC) and to use the Sierra Leone National Shipping Company Limited for all its clearing and forwarding services.

The Chamber cites especially gross premium figures for insurance in 2016 which shows the listing of the eleven companies operating in the country: NIC has 18% of Motor, 20% of Marine cargo/Hull, 10% of fire, 18% of general accident. In overall premium figures NIC ranks third with a little over 11% of the total.

Mr Forster stated: “In view of the above, the Chamber is of the opinion that the Act will be detrimental to fair competition. Effective operation of the private sector is one of the important signs of competitiveness in the economy.”

The government, to its credit has subsequently reversed course on the insurance issue and expunged it from the Finance Act, 2019.

Access to finance

The Chamber President continued: “There is lack of special and favourable loan products for investment and development of different sectors particularly in the Agribusiness sector, issues with the entrepreneurial ecosystem, harsh requirement for the use of property as collateral and lack of financial leasing banking system continues to hamper the activities of businesses. The Chamber also calls for the set-up of an investment bank and financing to our local banks at an interest rate not more than 12%.”

Data

The Chamber calls on government to increase the use of official statistics, and be more responsive to the needs of the business community.

Investors protection and land legislation

The Chamber is concerned about investor protection and the Chamber President cites more recent events involving private sector players thus:

“Considering all of the above, the recent disturbances faced by investors, such as SOCFIN, Miro Forestry and Sierra Rutile Limited do not paint an attractive image of our country’s investment climate and even scare away potential investors into the country. This current situation does not reflect a country that is in dire need of promoting Foreign Direct Investment.”

There is little doubt that, if as professed by the Finance Minister, dialoguing with the private sector is encouraged actively, this will bode well for the country.

One however has to temper such optimism with caution, as in the past we have seen rhetoric from government that has not been matched with action. To deal with the problems of the private sector goes beyond the Finance Ministry alone into other sectors and involves several players working in sync.

In general, the existence of a vibrant private sector is highly dependent on whether the policy environment obstructs or enables private enterprises to conduct business effectively. A conducive business environment engendered by the government reduces the cost of doing business, unleashes economic potential, and attracts investment.

In Africa the large and dynamic private sector accounts for 70 per cent of production, more than 65 per cent of investment, and 90 per cent of African jobs. The figures for Sierra Leone reflect this. The United Nations Sustainable Development Goal 8 is “to promote inclusive and sustainable economic growth, employment and decent work for all”.

An observation of our private sector however shows very grim statistics. Just think about the masses of students leaving college with all kinds of qualifications but cannot get private sector jobs. How many young people entering the job market are able to get formal jobs? Negligible.

Many young people are either unemployed or inactive, and many others operate in vulnerable and poor working conditions, often in the informal sector.

While unemployment remains a problem, underemployment is a bigger problem. Both adversely affect the level of decent income that can be generated and thus weaken standards of living.

The jobs being created are not matching the growing number of youths entering the jobs market. Many youths are therefore classed as “jobless”.

Despite expanding education and training, the youth lack employable skills.

A world Bank study on Sub-Saharan Africa makes out five distinctive structural deficits of the region’s enterprise structure that command the attention of policymakers: (a) widespread and rising informality; (b) a “missing middle” and lacking upward mobility of enterprises; (c) weak inter-firm linkages; (d) low levels of export competitiveness; and (e) lack of innovation capabilities. Shortage of a skilled workforce also seems to be a big limitation in addition to inappropriate regulations.

I am certain both the government and the Chamber are aware of these. The Chamber does not have all the answers. Neither does the government. It behoves all players to sit down and reflect upon how things can be done better.

There is little doubt that businesses of all types are not having things easy. But there are solutions if the private sector has a productive dialogue with government. There are however admittedly naysayers on both sides.

There may be other MDAs who may not want to look at the bigger picture and are bent on preserving their turf. There may also be some private sector players who only thrive on circumventing whatever system is set up and thrive on corruption. Corruption is a two-way street and is not only the preserve of the public sector.

A business friend told me: “How can I employ young people when my business is not thriving? I am not playing on a level playing field with my competitors and everywhere I go there are “expectations”. The high taxes have considerably reduced my profitability. I have lost business and instead of employing more people I have had to lay off staff.”

This refrain is normal for many in the private sector. There are always politicians or people in the public sector who look at the private sector as a means of empowering only their relatives, friends or political supporters, even if they are undeserving or incompetent. This has always been the case.

There is need to have more people in government and in the Public sector like the Finance Minister, who realise the importance of a vibrant private sector and go to all lengths to make businesses thrive.

The last thing we need at this time is imperious politicians or public sector workers who think they are doing the private sector a big favour by encouraging them. In the long run, they will have to come down to earth and join the 90 percent or so of us who etch our living in this all important sector.

Ponder my thoughts