ADDRESS BY HIS EXCELLENCY
THE PRESIDENT ALHAJI DR AHMAD TEJAN KABBAH
AT THE ANNUAL DINNER OF THE
SIERRA LEONE CHAMBER OF
COMMERCE, INDUSTRY AND AGRICULTURE
THURSDAY 16TH DECEMBER 2004

Mr Chairman
President and Members of the Chamber of Commerce
Mr Speaker
Honourable Chief Justice
Ministers of Government
Members of the Diplomatic and Consular Corps
Distinguished Ladies and Gentlemen:

It is always with pleasure that I look forward to attending the annual dinner of the Sierra Leone Chamber of Commerce, Industry and Agriculture. The event gives us each time an opportunity to further strengthen the shared responsibility and commitment we both have in looking for innovative ways to develop and boost the private sector's role in carrying forward our difficult post-conflict development agenda. The onset of peace which we highly welcome has brought with it many and varied challenges ranging from providing humanitarian assistance and social safety nets, to real investment in those dilapidated physical structures that provide great opportunities for more effective private sector engagement. These include investment in roads, water, electricity, schools and hospitals. In doing this, we always try to identify those interlocking issues which should be given priority in our policy agenda. Tonight, I would like to focus on some of the nagging problems we jointly face in empowering the private sector and our respective responsibilities for taking corrective measures, in the full recognition that the Chamber is an important partner of government for promoting economic growth and improving the welfare of our people. We would at the outset need to reorient our engagement so that we can align our efforts better to ensure that they are mutually supportive.

Mr Chairman, Ladies and gentlemen, at the Chamber's dinner last year, I outlined some of the key constraints affecting the private sector in Sierra Leone. A recent analysis of the country's competitiveness using the World Bank Business Environment Groups model shows that Sierra Leone compares less favourably with other neighbouring countries in the sub-region. The 2001 Government Report on Private Sector Development and Competitiveness in Sierra Leone concluded that the environment for investment is weak and generally unattractive compared with other West African countries.

Mr. Chairman, Ladies and gentlemen, we know that we are yet to bring to standard an infrastructure already decrepit after decades of under-investment and devastation. There are few roads and fewer still with all-weather surfaces. Operations of our airports, including the international airport and seaports suffer from extremely limited capacity. The supply of electricity, water and telecommunications is grossly inadequate. Capitalisation of firms in the country needs serious attention, including micro-enterprises and the few medium size enterprises that exist. The capital they need is rarely available from the domestic banks or from private non-bank investors. The laws affecting business and trading have for long been outdated, inconsistent and ineffectively implemented. Private investors especially from overseas continue to perceive Sierra Leone to be highly risky despite the significant improvement in national security and the progressive modernization of our laws.

There are more specific limitations of the private sector as is presently functioning. Let me start by questioning the traditional over-reliance of our private sector on public procurement as well as in the merchandising of imported consumer goods, many of which, I believe, could easily be produced locally and in quantities that would provide for export. Here, I would want to mention rice and onions, in particular, on which the country is spending a substantial amount of our meagre foreign exchange earnings. Of course, as we are all aware, much of public expenditure is also on imported consumption rather than productive goods, a situation we are trying to reverse in the coming years. This in the end boils down to the gross under-utilisation of the country's comparative advantage.

Mr Chairman, Ladies and gentlemen, another notable shortcoming is the absence of Public-private partnerships. It is now evident that the relative performance of Sierra Leone cannot be simply explained by access to physical resources. While the public sector is expected to take a lead in the building and maintenance of economic infrastructure (i.e. roads, water, electricity, telecommunications, transport and financial services), the private sector must spearhead the development of productive activities in most sectors. Given the required huge capital investment and risk exposure, the establishment of a strong business partnership between the government and the private sector in undertaking these and supporting economic infrastructure projects remains a major challenge. Public-private partnerships do hold the promise of increasing the supply of much bigger development endeavours without overburdening public finances. An infusion of private capital and management can also boost efficiency. Our aim is to make your membership to be more innovative and pro-active in this direction. It is recognised that private sector investment initiatives are crucial to the performance of the economy, and far from competing with public investment they form a necessary prerequisite to higher levels of public investment.

Another area of concern is the lack of meaningful value-added in our private sector activity in a manner that should assist Sierra Leone reduce its heavy import demand as well as limited access to international markets, given the lack of value-added export products. In this regard, I would refer to agro-processing and industrial production.

We have also noted that there is a very limited number of corporate partnerships between indigenous businesses and foreign counterparts, even though there are very many opportunities especially in mining and agriculture. This severely limits the capacity of our businessmen and businesswomen to access capital as well as management and entrepreneurial skills and international networking.

Mr Chairman, at this same event last year, I also mentioned several initiatives that my Government was embarking on to address the constraints to private sector activity. These were initiatives that should spur private sector development after the initial years of rebuilding our nation at the end of the war. They were further dilated on in my statement on the Occasion of the State Opening of the Third Session of the Second Parliament of the Second Republic of Sierra Leone in June this year. Indeed, my Government fully recognises that private sector development and the improvement of the investment climate are a vital pillar to support continued growth, which underpins job creation, income generation and poverty reduction.

Since the onset of peace, Government has made greater progress in improving the policy and institutional factors that influence private investment. The adoption of a new investment code, with assistance from our development partners, improvements in public financial management including fiscal decentralisation and the enactment of a Public Procurement Law, the strengthening of national security, governance, transparency, institutional and bureaucratic reforms, and the work of the Anti-Corruption Commission are major steps in improving the investment climate and therefore in attracting private sector investment, while safeguarding the use of public resources.

In my recent address at the opening of the new International Bank Sierra Leone Limited, I admonished the commercial banks that our current development challenges demand a complete transformation of their traditional roles. Such transformation, by venturing into longer term investment financing, is crucial for promoting private sector development in this country. Government will continue the process of liberalising the economy to make it more internationally competitive. Sierra Leone is one of the very few developing countries without any form of arduous capital controls or restrictions on trade and investment. This is a composite measure of variables that determine the degree of openness to private investment. Government is also promoting the deepening of the financial sector by supporting the development of capital and security markets, including the establishment of a stock exchange and a venture capital fund. Government will provide the legislative backing associated with the development of these and other financial market institutions.

Mr. Chairman, my government is aware of the need to modify tariffs in order to encourage private sector investment. In this respect, my government has progressively reduced tariffs in the last few years. Although customs tariffs still constitute a very large proportion of government revenue, my Government will endeavour to rationalise our duty rates in tandem with our development objectives.

Meanwhile, since its inception two years ago, the National Revenue Authority has embarked on a series of processes that would eliminate all inefficiencies and anomalies in the relevant agencies that are disturbing to both the business people and the general public. The Authority is reforming the overall tax system to make it more business friendly. Apart from the modernisation of the tax laws and computerisation of customs operations, most of the indirect tax reforms are driven by the adoption of the ECOWAS common external tariffs (CET). With effect from January 2005, the CET would bring our tariff levels for several traded commodities in line with those in other ECOWAS countries. Consequently, and on average, many tariffs would be revised downwards despite the potential immediate loss of government revenue, estimated at Le4.8 billion in 2005. We are participating in the ECOWAS trade liberalisation scheme (ETLS), the result of which would increase our competitiveness within the sub-region. The NRA is also working closely with the Sierra Leone Ports Authority, Shipping companies and clearing and forwarding agencies in streamlining the processes for the discharge and clearing of goods, thus saving costs and time.

In another positive development, the NRA's sister institution, the National Commission for Privatisation (NCP) is now poised to commence its divestiture programme with a number of activities in 2005, thereby opening the doors for the expansion of the private sector activity base. Government assets, both physical and equity, would be sold in key enterprises that should interest your participation, including the SLPMB, Forest Industries Corporation, Rokel Commercial bank and the Sierra Leone Ports Authority. Management contracts would be encouraged for the National Power Authority and the Sierra Leone Road Transport Corporation.

Furthermore, as part of Government strategy, my Minister of Finance in his recent budget statement for fiscal year 2005, laid before Parliament, clearly articulated the steps that my Government intends to take to continue to build upon the ongoing efforts in the best interest of private sector development and to increase the competitiveness of our economy for foreign direct investment. These include, among others, higher investment in roads, energy, water and sanitation, institutional strengthening and capacity building to lay a solid foundation for achieving higher growth, job creation and poverty reduction. The Minister also announced a reduction in corporate tax.

The electricity situation is being seriously addressed, having secured funding for the completion of the Bumbuna hydroelectric project. We have also received a commitment from the South African Government to improve electricity generation and distribution. We are planning to embark on an extensive rural electrification programme, principally with the support of the German Government. Funding is also being firmed up for the construction of the Hill-Side Bye Pass road and the Lumley-Tokeh Road in 2005. These two roads when completed would ease travel connectivity both within Freetown and between Freetown and the provinces. They would also increase our tourism potential.

I am also happy to report that we have made substantial headway in our export promotion strategy by having achieved preferential treatment under the US initiative, the African Growth and Opportunity Act (AGOA) and the EU concessions under the Everything But Arms (EBA) Project. Experience has however shown that those countries like Lesotho, which have beneficially exploited these facilities, have done so with a strong private foreign intervention. This therefore brings me back to what I said earlier about the need for local enterprises to evolve partnerships with foreign counterparts.

Mr. Chairman, Ladies and Gentlemen, Sierra Leone needs to encourage a competitive private sector for employment generation and wealth creation; develop a strong service sector; reduce the dependency on imports and enhance foreign exchange earnings; encourage addition of value to products and raw materials; and comply with international trade agreements. Government is encouraging the international multilateral institutions to open up their private sector windows to Sierra Leonean businesses. Your reference points for accessing these facilities are the Ministries of Finance, Trade and Industry, and Development and Economic Planning. The ongoing development of an Export Processing Zone by the Ministry of Trade and Industry is encouraging. SLEDIC is also at hand to continue its usual role of guiding and supporting the private sector.

The private sector cannot develop without the right legal and regulatory framework. The Law Reform Commission has so far done considerable work in this area, which has received your commendation. The completion of the Partnership Law and the review of the law on Commercial Use of Land have been very much welcome. The Law Reform Commission is also planning work on having a Company Law and on developing laws on competition and protection of intellectual property.

Mr Chairman, my Government realises that mining and agriculture have been the backbone of the economy in the past and we are willing to do our utmost to resuscitate these sectors. On the mining sector, we are working closely with the international community to improve the investment climate in this area, especially corporate mining. The Rutile and bauxite mines are in the process of starting up, which would further improve investment confidence. On the agricultural front, several initiatives undertaken by Government are yielding good dividends to the extent that achieving our food security objectives is very realistic. Again, our aim is to encourage corporate activity in agricultural production geared towards export and food security.

Mr Chairman, Ladies and gentlemen, overall, we are making such bold interventions because we are aware of the numerous constraints that still exist for the growth and development of the private sector in our country. My Government is committed to give full support to the private sector to become the "engine of growth" and a central pillar for our development and poverty reduction on a sustainable basis. Issues relating to private sector development are thus being appropriately articulated in the full PRSP.

Finally, I thank you for the dinner and wish you well. I particularly wish you all a very Merry Christmas and a happy and successful 2005.

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