Sierra Leone: The potential pitfalls of foreign investment via Globe and Mail

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Iron ore washing (c) CDE Images ob Flickr

There is a general consensus from Sierra Leone’s donor partners the IMF and the World Bank that the nation’s economy is poised for remarkable growth over the next 3-5 years. But a recent article in Canada’s Globe and Mail suggests that what is good for the country on a macro level may be hurting local communities closest to the country’s biggest investment projects.

At Addax Bioenegy villagers at Lungi Acre say that the company has taken up its water supply ending their means of cultivating rice. But  in another village salaries earned by workers at Addax are being used to build new homes and bring ‘development’. When Addax is at full capacity the company is expected to hire some 2000 people. Communities that have for centuries lived as subsistence farmers are now dependent on the company to provide them with a monthly ration of rice.

I went to many of these communities while working as a media consultant for Addax over a year ago and many of them are very ‘poor’. You can see the changes that land lease rents were already bringing into the communities. Many of the active young people in those villages who had long abandoned them to the women, children, and elderly have now returned and have been employed but Addax. The company is making an effort to mitigate problems being caused by the project but there are certain changes to the environment and way of life that are irriversible.

Sierra Leone is at a crossroads. The 35 percent projected GDP growth that is expected to come from foreign investors as the article argues may go way wrong if the government does not learn to manage its revenues or draft legal policy. Unlike Ghana and Botswana that have been able to use investment revenue to build middle-income economies the trend in Sierra Leone’s foreign investment suggests that we are incapable of negotiating ‘good’ deals.

Sierra Leone’s foreign investors generally enjoy favourable tax rates and other incentives from the government, but most profits are exported to their overseas owners, and the local benefits are poorly distributed.

For example, mining accounts for almost 60 per cent of Sierra Leone’s exports, but provides only 8 per cent of government revenue, according to a recent report by DanWatch, a corporate-ethics watchdog.

The government has consistently circumvented the Mining Act to give unprecedented tax breaks both to African Minerals, and London Mining even after civil society groups raised alarms on both deals.  The Network Movement for Justice and Development released a very concise report on AML front man Frank Timis and the disparity between what they claim to have done by way of community development and whats actually on the ground.

There is a lot of money coming into Sierra Leone right now but the government seems to be so desperate for investment that it is willing to bend over backwards and in the long-term this might have devastating ramifications. Why are our development advisors allowing us to sign these kinds of deals knowing full well that the country is getting the shorter end of the stick?

How can we bring in investment while ensuring that opportunities are created for the masses? One thing this article doesn’t mention that is an equally crucial part of the problem with foreign investment right now, is that these multinationals are being allowed to bring in foreign contractors for ‘small’ things. I once heard complaints that African Minerals was bringing in carpenters. I don’t know how true this claim was but clearly the Ministry of Labour and Immigration process work permits for all these companies. Would they raise a red flag if they saw something like that?

There is a lack of capacity at the high level but the government needs to step in to regulate the division of these contracts so that local companies owned by Sierra Leoneans can also benefit. In addition, we need to make it more difficult for expatriates to come in to Sierra Leone and set up logistics and transport companies to support this mining boom. Because to me that is also eating into the types of services that locals can provide.

A Canadian man comes to Sierra Leone and sets up a car hire company charging $200 a day to the mining companies and the Economist heralds it as business innovation. Sure they are providing employment but what they don’t tell you is that the owners of the company once used to work for the Tony Blair Office. It means that they automatically have connects at the British High Commission. Both  African Minerals and London Mining are headquartered in the UK and run by British nationals. Can you see the full picture?

These kinds of connections and deals are happening daily at Sierra Leone’s biggest foreign-owned company. Money is coming in yes but between the government officials, local elites, and the expatriates none of that is getting down to the masses. And sadly I don’t believe that those in cabinet or parliament who are charged with our national welfare really care.

Perhaps we can only learn from making mistakes but this far in the game and with a 10 year civil war behind us, can Sierra Leone really afford to get economic development wrong?