The beautiful West African coastal country of Sierra Leone is at ease with not just its most valued multilateral development institution partners, the International Monetary Fund (IMF) and the World Bank, but all its sovereign associates and counterpart economic players around the globe. The budding economy has got its bearings right, so says the country’s personable Finance Minister, Sheku Ahmed Fantamadi Bangura.
Over the past five years, under the leadership of President Julius Maada Bio, Sierra Leone has made a virtue of setting straight its economic affairs at home and ensuring that investors and others interested in doing business in the country are comfortable with its economic recovery and business-friendly reforms.
Given the vast array of natural resources the country is blessed with, including iron ore, which Bangura correctly cites as a critical base for industrial development, the country has worked hard to demonstrate commitment to sustainable development and promotion of the interests of investors and partners as it does its own people.
The level of this commitment is what Minister Bangura makes the crux of this revealing interview with the editors of THE AFRICAN ECONOMY. In his easy-flowing style, the emerging economy’s Finance Minister tells the world why this now peaceful country should be on the minds of investors, sovereign and corporate. He assures that all barriers to entry and business registration have been cleared, and the best-practice regulatory framework and generous incentives are firmly in place. Sierra Leone, he says, is today, a must-engage investment destination for all players seeking huge returns in a safe, mutually beneficial economic atmosphere.
The Gross Domestic Product (GDP) has been rebased. What is the impact of this rebasing on the economy in general and on revenue generation in particular?
The rebasing of our GDP (2018 as base year) has seen a structural shift in our economy. Before 2018, the agriculture sector accounted for almost 50 percent of our GDP, but most of the activities in the agriculture sector were done at a subsistence level that did not make a significant impact on our drive to be food self-sufficient. The rebasing of our GDP has shown the service sector is now the largest sector, accounting for about 44 percent of GDP, followed by the agricultural sector at 34 percent and the industrial sector at 22 percent, led by mining and manufacturing.
The rebasing of the GDP also showed that our economy is bigger than we previously estimated. The size of the economy increased by 56 percent in 2018 (the new base year). Overall, the size of the economy has increased from about US$4.0 billion to about US$8.0 billion, with a corresponding increase in the GDP per capita.
The rebased GDP also showed that the growth of the economy was stronger. For example, whereas under the old GDP the economy grew by 5.2 percent in 2019, the rebased GDP showed that the economy grew by 5.9 percent. Similarly, the economy is estimated to have expanded by 5.7 percent in 2023 under the rebased GDP compared to 4.6 percent under the old series.
The rebased GDP also showed that the economy was more resilient than we envisaged. The economy contracted by 1.3 percent in 2020 when the COVID-19 pandemic broke out, compared to the original estimate of a 2.0 percent contraction. Also, in 2022, growth of the economy was estimated to have slowed down to 3.4 percent due to the impact of the Ukraine crisis. The rebased GDP showed that the economy instead grew by 5.7 percent in 2022.
In terms of revenue, our domestic revenue to GDP ratio was about 13.1 percent in 2023 with the old GDP. The rebased GDP has seen this ratio reduced significantly to 7.4 percent, well below the government’s target of 20 percent by 2027 in its Medium Term Revenue Mobilisation Strategy (MTRS). The rebasing also indicates that there is huge untapped revenue potential, especially in the service sector. Over the next few years, the government will focus on the effective implementation of the MTRS to ensure our revenue potential is maximized. The implementation of the government’s development strategy will only be effective if resources are at the disposal of the government. Hence, it is incumbent on the government, in collaboration with the private sector, to ensure the National Revenue Authority (NRA) is supported in collecting the much-needed domestic revenue.
Although agriculture is no longer the largest sector in the economy, is it still relevant in the government’s drive towards food self-sufficiency?
The agriculture sector is central to the government’s effort to diversify our economy. One of the BIG FIVE GAME CHANGERS in the new Medium-Term National Development Plan (2024-2030) is FEED SALONE, which aims to increase agricultural productivity and achieve food self-sufficiency. The government recognised the limited investment opportunities available to the sector, and the huge foreign exchange needed for the importation of foodstuffs is a huge burden, worsening our current account position. The FEED SALONE strategic direction has identified clear pathways to promote self-sustenance in key staples, boost export earnings, create new job opportunities and generate income, alleviate hunger and malnutrition, improve climate resilience techniques in crop production, and boost productivity in livestock and fish for increased commercialization in the agriculture sector.
The critical role of the government is to help address the coordination failures and reduce the risks facing investments in the agriculture sector. The government, in collaboration with other development partners and the private sector, is working on de-risking the sector to open up key ecological zones to attract private investment. The government is focused on reducing the major constraints like roads, energy, and finance to attract private sector participation that will spur commercial production and increase the availability of food crops. At the moment, the importation of rice takes a huge chunk of our foreign exchange. Over the last few years, external factors like the Ukraine/Russia conflict and the outbreak of the COVID-19 pandemic had an adverse impact on the prices of basic commodities. The increase in domestic food production will not only reduce the pressure on the demand for foreign exchange; it will also contribute to a reduction in domestic food prices, which is the largest contribution to inflation.
Fisheries is another area that is yet untapped. There are opportunities once we are able to manage our surveillance capabilities. We are ready to work with investors to increase fish supply for the domestic market and meet the needs of potential fish canning and other value-adding related activities through the development of aquaculture. This will enable us to step up fish exports by focusing on high-value markets globally.
How about the financial sector?
Given the importance of diversifying our nation’s economy, it is crucial to explore viable pathways to transform the financial sector. The financial sector has been an enabler in using technology and innovation to spur economic growth and development. As you know, the financial sector usually channels financial resources from savers to investors—the so-called financial intermediation activities of commercial banks. At the moment, there are 14 commercial banks engaged in the mobilisation of deposits and giving out credit facilities to potential investors, especially in the private sector.
We are aware that commercial banks’ loans are of short tenure and mostly concentrated on trade and commerce, which is not necessarily the most productive sector. In addition, the cost of borrowing is also very high, but this is expected to go down as inflation and government borrowing appetite decline. The government has been discussing with commercial banks the importance of supporting our development agenda by increasing lending and improving their loan terms to the private sector, especially those operating in the agriculture sector.
The Bank of Sierra Leone is working tremendously hard to promote financial inclusion. With US$12 million in support from the World Bank, the Government of Sierra Leone has commenced the implementation of the National Payment Switch. This financial architecture now connects six commercial banks and makes payments interoperable among banks, microfinance institutions, mobile money operators, and financial technology firms. This upgrade in the payments system infrastructure is a great way of advancing the use of innovation in the financial sector. The interconnectivity and interoperability among banks also enhance the uptake of financial services, thereby increasing access to finance and the contribution of the financial sector to growth.
Yes, there are plans to expand the financial space to support economic growth. The government is working on introducing specialised financial institutions such as investment and development banks that can provide medium- to long-term loans to support the productive sectors such as agriculture, manufacturing, mining, and construction that require long-term financing. The government is also encouraging the establishment of Merchant banks.
You mentioned that there are already 14 commercial banks. Is there space for additional participants?
Definitely yes, both domestic and foreign. Sierra Leone is open for investment, and we will welcome investors in the financial sector as long as they meet the requirements of the Banking Act and the Bank of Sierra Leone Act, including the capital requirements for the establishment of any financial institution. Currently, there is only one fully privately owned indigenous commercial bank. It is good to increase the competition in the banking sector, which may bring efficient financial intermediation and bring down the high cost of bank credit.
Apart from the financial sector, there are investment opportunities in other areas of the economy like construction, manufacturing, and services. The government is keen on attracting foreign direct investment into these sectors. The government has invested in improving our business environment through new initiatives, policies, and reforms, which have liberalised the economy and made it entrepreneur-friendly. The National Investment Board is a one-stop shop for investors to ensure the smooth entrance into the private sector space in Sierra Leone.
How are you collaborating with the Bank of Sierra Leone in ensuring macroeconomic stability?
The Bank of Sierra Leone has operational independence in implementing monetary and financial sector policies. This is necessary for it to achieve its mandate of ensuring price and financial system stability. The Ministry of Finance is in discussion with the IMF about putting in place the modalities to recapitalise the Bank of Sierra Leone in order to ensure it has the instruments to pursue its mandate. The Bank of Sierra Leone is, however, accountable to the government through the Ministry of Finance. Both the Ministry of Finance and the Bank of Sierra Leone collaborate to ensure a stable economic environment.
The last Extended Credit Facility (ECF) arrangement with the International Monetary Fund (IMF) ended in November 2023. When is the next programme with the IMF?
The IMF is a very solid partner of our country. The government successfully completed the 8th and final review of the previous ECF arrangement in November 2018. Since then, the Ministry of Finance has been in constant discussion with the International Monetary Fund on the new ECF arrangement. Discussions for a new programme started in April 2024 when prior actions for a new programme were agreed. I am pleased to report we successfully met all the end-June 2024 quantitative targets, and substantial progress has been made towards meeting all the commitments for the new ECF arrangement. Negotiations for the new programme continued in August and September 2024, when a mission was fielded to Freetown. The negotiations went well. We have been implementing prudent macroeconomic policies since 2023, including fiscal consolidation and a tight monetary policy stance. The results have been encouraging—the budget deficit narrowed, inflation decelerated, and the exchange rate of the Leone to the US dollar has remained stable. We hope to have the new ECF programme in early November 2024. This will trigger support from other development partners.
The priorities outlined in our Medium-Term National Development Plan (2024-30) will be costly and will require support from development partners. The new ECF should help galvanise this support and advance reforms conducive to achieving inclusive, green, and sustainable growth for our people.
We are also working with other development partners like the World Bank and the European Union on both programme and project support. The government has been in discussions with the World Bank and the European Union on budget support disbursement in the fourth quarter of this year, and significant progress has been made by the relevant Ministries, Departments and Agencies towards meeting the triggers for disbursements.
What are the economic prospects of Sierra Leone over the short and medium term?
I think the prospects are bright, notwithstanding the international shocks that are happening or even some elements of domestic shocks. I’m very bullish on the economy’s prospects, given the sound policies and programmes we’re implementing. This country has an ample opportunity under the present administration to be transformed within a reasonable period of time, especially in the short to medium term. To be sincere, I can boldly say that in the short term, we’re doing very well in stabilising the economy and ensuring that we have macroeconomic stability through our monetary and fiscal policies. We are also doing so through our international trade practices, especially in terms of how we are tackling issues in the mining, agriculture, and other sectors. In the medium term, I think that through the mining and agricultural sectors, opportunities exist for transformation.
Recently, there was a shift in the economy when we did rebasing of our GDP. As mentioned earlier, the services sector now accounts for 44 percent of the economy, followed by agriculture (30 percent) and industry (22%).
In the industrial area, the mining sector leads. We have seen a phenomenal shift in mining, and we need to start adding value there in an integrated way, creating industries along the value chain. We have seen light manufacturing picking up hugely. In the agricultural space, we have seen a downward shift in agriculture; the shift is going towards industry. In this space, we need to start working on our own on the transformation of all aspects of this shift. In the area of manufacturing and industry, we have to ensure we go into more productive manufacturing, value addition, especially along the mining space, and light manufacturing at scale. Even in the area of agriculture, we need to scale up the whole issues around the agriculture and agro-processing zones. Once we go in that space, we would have actually started building the foundation for serious transformation of the economy. We’ve had a shift, but the shift has to be transformational, and that is where we are headed. The prospects are very bright; I think we can do well while we stay focused on our policy measures to deliver.
Although the country has been hit hard by multiple external shocks in recent years, notably the outbreak of the COVID-19 pandemic, spillovers from the Ukraine/Russia conflict, and recent tensions in the Middle East, we have begun taking steps to reduce the impact of these vulnerabilities on our economy through tightening of macroeconomic policies and persevered on a structural reform agenda.
I have great confidence in this economy. By the end of the year, the government will have a new Extended Credit Facility (ECF) arrangement with the IMF. Growth is expected to reach 4.0 percent in 2024 and 4.6 percent over the medium term, driven primarily by strong activity in agriculture and mining, as well as the expansion in the services sector. The exchange rate will remain stable as exports increase, and speculative behaviour will be minimised as confidence in the economy consolidates. Inflation is already on a downward trend and will continue to decline as monetary policy remains tight, supported by fiscal consolidation as well as the stability in the exchange rate. The projected increase in domestic food production will also contribute to lowering inflationary pressures.
If you are compelled to name one single main development challenge of Sierra Leone, what would it be?
A single challenge? Well, we have many development challenges. The country has a huge infrastructure deficit, but the one that needs urgent attention is the energy situation in the country. Nationwide access to energy is still very low, and this is a significant constraint in attracting private investment. In May, a Sierra Leone delegation led by the Minister of Finance participated in negotiations at the MCC in Washington, DC, to finalise the Compact and Programme implementation Agreements.
The $481 million Compact, excluding GOSL’s contribution, will seek to reduce poverty through economic growth. It includes three projects that seek to increase coverage and reliability of the transmission network with modern, centralised system operations; increase reliable delivery and consumption of electricity in Sierra Leone while reducing barriers to access in selected communities; and improve the financial sustainability of the electricity sector in Sierra Leone that enables the sector to expand and satisfy more demand at lower cost.
The government is also collaborating with other development partners in developing sustainable long-term energy solutions to improve generation, transmission, and distribution. All of these investments are expected to significantly improve access to energy and contribute to reducing poverty, improving quality of life, increasing economic activity, and improving human capital development.
What are the major investment attractions of Sierra Leone?
Sierra Leone is a beautiful country on the West Coast of Africa. Geographically, it is well located to attract international investments. Indeed, our country is really the West Coast of the Atlantic. We are close to Europe and Latin America by sea. It is also easy to access Asia by sea, especially given all the turmoil we are having in the Middle East and the Straits of Gibraltar.
Our country is replete with investment opportunities across various sectors. Mining is one of such areas. The mining sector in Sierra Leone is a key driver of economic growth. The country is rich in minerals, including diamonds, gold, iron ore, and bauxite. The government is committed to promoting the development of the mining sector and attracting foreign investment. When you take into consideration the way the government is making concerted efforts to transform the mining sector and its interest in partnering with investors in the form of joint ventures, you will understand why it is a major investment attraction. We are ready to work in partnership with government entities coming to invest in the sector in an integrated way. However, we prefer investors prepared to add value to these primary resources before exporting them from Sierra Leone. We want to be able to have access to the wider West African market that is still in need of development.
You said the mining sector is key?
Mining has been a significant economic activity of the Sierra Leonean economy since independence, and the country is endowed with a wide range of minerals, including bauxite, diamonds, iron ore, gold, zircom, and rutile. Mineral resource endowment and their associated economic rent, if well harnessed, offer great opportunities for host countries in achieving sustained and broad-based growth and development. The opportunities include government revenue, employment, foreign exchange, improved human capital development, and the development of infrastructure such as roads, telecommunications, and energy. To achieve this, the government is committed to strengthening the governance framework for natural resource management.
How are you hoping to leverage the huge mining potential of the country for the good of the people?
I think what we have right now in the mining sector is public-private participation. We do have good laws, but even in the implementation of those laws, we have not been able to attract investments. We are increasing our mining exploits but not benefiting commensurately. The reason is simple: the state is not effectively participating in the sector. We have the resources underneath the soil, but they are being exploited and carted away; not much value is staying back. That is why we must refocus from raw material exploitation to value addition. And this is not just for Sierra Leone but also most African countries. Without value addition, we will remain at the bottom of the value chain, which would not positively impact our development programmes towards economic growth.
A shift towards value addition would help expand employment opportunities and make a dent in poverty. I will give you an example. We have a lot of iron ore, gold, and critical minerals. Iron ore is a very powerful mineral because it’s the base mineral for producing steel. Steel is a prerequisite in every aspect of development, whether it’s buildings, roads, bridges, making vehicles, aeroplanes, etc. So, we should ensure our extractives are beneficiated to maximise the benefit as host country. Therefore, it is important for the government to invest and participate in all processes along the value chain.
To what extent have you started implementing this in Sierra Leone?
The government has established a new SOE, the Sierra Leone Mines and Mineral Development and Management Corporation (SLMMDMC), with the purpose of carrying out development and management activities in the mining sector through a project company, the Mineral Wealth Fund (MWF). The Fund will hold mining assets mined under joint venture agreements. This is because state-to-state entities will be subjected to heavy scrutiny in terms of adhering to prudential standards for delivering on their investments, sharing resources, and adding value to them. We have seen some countries doing that in Africa. For example, Botswana is doing it, but only for diamonds. We want to do so for a portfolio of assets, including gold, precious minerals, bulk minerals (bauxite, iron ore, rutile), and diamonds. We believe that the Fund would be able to transform the country once it is properly executed, and we have very good partners that are ready to work with us. The administration of His Excellency President Bio is committed to ensuring that the people of Sierra Leone benefit from our mineral resources just as our partners get their rewards. One of the challenges countries have with investors is the issue of profit repatriation.
How has Sierra Leone been able to navigate this?
Sierra Leone has an open economy that allows for repatriation of resources. We know that once you bring your investment, we want you to be able to bring a minimum of about 30% back into the country to support your own operations, build our banking system, and make it easy for us to have access to foreign exchange. For us, we have no problems with foreign investors repatriating their profits. The laws allow that, and there are no restrictions. We are fully in line with what they call Article 8 of the IMF Articles of Association. We fully implement those, and we accede to those very freely. We don’t have restrictions in Sierra Leone. That’s why investors in the mining sector do so without problems. Investors in fishing and other sectors enjoy the same freedom. Sierra Leone is investment-friendly. One thing we promise genuine investors is that they will find the government a willing partner always ready to synergise with them, and they stand to reap abundant returns on their investments. The government has created a conducive business environment for securing investments for win-win outcomes. So, the country is open for business. Thus, Sierra Leone is a viable investment destination.
There appears to be a lot of interest in “N-Soft” technology under the present administration. In what way has this innovation improved and reshaped income mobilisation in Sierra Leone, and to what degree?
It is impossible to run a 21st-century economy without innovative technology systems. That is why we are big on technology. When this government came into office, President Bio introduced the Directorate for Science, Technology and Innovation (DSTN). The Presidency later on transformed that entity into a full-blown ministry—now the Ministry of Communication, Technology and Innovation. This is to allow technology to permeate the way we do business in the country. In fact, the President made technology one of the Big Five Game Changers of our new National Development Plan, which defines the strategic priorities of the country in the next five to seven years.
N-Soft technology is the software that helps the government collect data on telecommunications sector activities, both in terms of the volume of calls and data usage in the country. It allows us to know the turnover of the telecom company. Before now, telecom companies were allowed to do what we called self-assessment of their tax obligations. Today, N-Soft technology enables our National Revenue Authority to see what is truly due the government in terms of taxes from those companies that are operating in the country. It also has the facility for monitoring all types of gambling and taxes from gambling. It actually helps relevant government agencies to effectively determine the volume of e-money transfers—mobile money transfers. Mobile money transfer is a growing aspect of the financial sector. Through N-Soft, we’re able to capture the volume of transactions and determine what is due to the government.
In terms of degree, we’ve seen a phenomenal increase in telecom taxation lately. There has been a huge jump from what was the case before now when they were self-assessing. Now, we know that it’s more than 50% increase in the resources that are coming through telecom usages. I know that once we start using the other levers of the N-Soft technology, we should be able to bring in more resources into the Treasury. The technology sector has emerged as a very strong tool for economic transformation. It’s important that much attention is drawn to this sector. We can’t ignore it, knowing the value of technology and innovation, which have impacted the global economy.
Sierra Leone recently signed a partnership agreement with the European Union to support the Spotlight Initiative, a legacy project of President Maada Bio focused on gender issues. How would you assess the initiative and its success so far?
Spotlight Initiative is an international initiative to combat all forms of violence against women and girls, a problem the government takes seriously considering its inclusivity record. Spotlight Initiative supports programmes aimed at eradicating all types of violence against women and girls, including traditional practices such as FGM (female genital mutilation). It equally entails educating women on how to protect their bodies against health-associated issues.
The partnership relieves the government’s burden and costs of managing women’s health in general. The education and empowerment that will come out of it will help greatly to improve women’s contributions to our society. In fact, we’re receiving funding and support from the European Union (EU) to be able to propagate the initiative. About 15 million euros was direct funding provided by the EU. In my view, the EU-UN Spotlight Initiative is a very well-thought-out idea.
Sierra Leone has been approved as an official member of the Coalition of Finance Ministers Member States. What informed your decision to join the group?
The Coalition of Finance Ministers Member States is an initiative to promote the sharing of ideas and knowledge in the area of climate change and climate-related financing opportunities. The coalition brings together finance ministers from several countries leading the global climate response and securing a just transition towards low-carbon-resilient development. It helps finance ministers to promote climate-informed public expenditure using climate fiscal tools such as carbon taxes and emissions trading systems to cut emissions and prioritise low-carbon growth. The coalition enables finance ministers to share experiences and ideas and build capacity through the experiences of those countries that have been benefiting hugely from climate-related policies and programmes in their various countries. So, the coalition is geared towards ensuring that countries that are vulnerable reposition their policies and programmes in ways that attract climate-related financing.
So, in Sierra Leone’s case, we know that we have forest mangroves and peat lands. How do we package them all? How do we audit them? How do we get those assets effectively validated, verified, and certified? The coalition’s certification is standard. They encourage projects that develop carbon credits, which can be monetised and used to support communities, eke out alternative livelihoods from those resources, and preserve those assets. It is an avenue for ministers to share ideas. It’s a coalition across the world, and not only for developing countries. We have developed countries that are also part of this initiative promoting understanding of climate-related actions globally.
Do you believe the group is capable of addressing the economic effects of climate change and the opportunity presented by climate action, which might lead to the creation of 65 million additional jobs by 2030 and $26 trillion in global investments? Is that feasible, and how will Africa benefit from this?
Africa has to reposition itself properly. We’re vulnerable to climate-related risks; we don’t pollute that much; we have a lot of greenery; we have a lot of forest cover; and we have a lot of mangroves. But I also think there are climate opportunities in terms of technology because there are issues around adaptation and mitigation measures. Depending on the technology, for example, you can develop the technology that will change your way of cooking. Thus, rather than using wood, you use an enhanced stove that is certified for reducing emissions and harmful particles.
But some of these other alternatives are not easily manufactured in Africa?
Well, I think we should try and build those technologies in Africa. I also think that we’re endowed. We have to take advantage of what we have. Our forests, our greenery, our mangroves—those carbon sinks. Like I said, we have to audit and package them and make sure they are certified and their management kept in good systems. There are block chain systems, and they are listed and registered in the international market for carbon sales. Out of that, we will be able to generate funds for these when we participate in some of these mechanisms. So, there are opportunities for African countries to structure themselves to benefit from them. Even in terms of the technology, the kinds of investments we make in the energy space are important. Whether it is solar energy power that you invest in your country, as long as it’s a good mix of energy sources, there are some carbon credits to be generated from them. Even with some of the investments in hydro, you still generate some kind of carbon. Although there are environmental issues around it, it emits less carbon than the energy it produces. There are international funds for climate support. Through these international funds for climate support under this coalition, developing countries can be capacitated. We share experiences on how to package our programmes to be able to get access to those funds to build clean energy development interventions. So, that’s how I think we will be able to get access to the opportunity for jobs associated with climate interventions, especially our climate-resilient-oriented kind of interventions.