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Welcoming the new deal in Sierra Leone

By Tanu Jalloh

At the turn of the year and in the final issue of Politico for 2014, I had argued that if the government didn’t streamline its policies to address pressing needs that were beingengendered by the flagging state of affairs, it may not be able to pacify the public when the post Ebola economic recovery slows down in the years to come. And it will certainly be difficult for the government alone to surmount the challenges. It needs help. And badly too.

As if my worry coincided with a recent response by the British government to help Sierra Leone tackle the problems head-on, there is a new deal that will hopefully cushion the expected glitches.

While it is obvious that small businesses are likely to suffer the most because of a seeming contraction in public financing(governmental effects on efficient allocation of resources;distribution of income, and macroeconomic stabilisation), redirecting funds hitherto set aside to deal with the health emergency, a surge of monumental impact on the region’s socioeconomic infrastructure, will be as important as it is critical a political judgment. The ramifications will,to some extent, determine governance – elections and politics in 2017.

The new deal will provide promising, medium-sized businesses with the finance they need to expand – helping to create more jobs and kick-start growth in the country.Under the deal, Standard Chartered Bank and CDC – the UK’s Development Finance Institution – will make up to $50 million (£33 million) of short-term loans or overdrafts available to businesses that are struggling to get the finance they need to grow.

According to the UK government “CDC will share 50% of the risk of new short-term loans and overdrafts provided by Standard Chartered to help facilitate the deal”.Founded in 1948, CDC is the UK’s Development Finance Institution (DFI) wholly owned by the UK government. It is the world’s oldest such institution with a history of making successful investments in businesses which have become industry leaders thereby having enormous impact on the private sector in their country and region as well as improving the lives of many in dividuals. It aims to invest in countries where the private sector is weak and jobs are scarce and in sectors where growth leads to jobs – directly and indirectly – such as manufacturing, agribusiness, infrastructure, financial institutions, construction, health and education.

Such an investment as espoused by that gesture of the British will provide an opportunity to look beyond the extractive sector. A survey report released by Ernst & Young on 6 May, 2013 in Johannesburg, South Africa called on natural resource-rich countries in Africa to go beyond that wealth. Hence, the timeliness of the British to help small businesses grow. Like in Sierra Leone, the idea of natural resources has come to be limited to such wealth as diamond, gold, iron ore, bauxite, oil and gas. I have always said that other sectors of the economy have come to be neglected, something that bodes well for the unnecessary hype around natural resources and their supposed magic wand to turn around the current state of affairs on the continent.

Meanwhile, UK’s International Development Secretary, Justine Greening, said that they had been at the forefront of the international effort to combat Ebola. “As we start to get on top of the disease we must also help rebuild the country’s economy,” she said.

Business and private enterprise have been very crucial to helping the country recover the rapid growth rates it was experiencing only a year ago. Greening therefore noted that the new agreement would ensure businesses got the finance they needed to grow and create more jobs.

The idea for the intervention was that Sierra Leone could be one of the emerging markets of tomorrow and the UK should be interested in helping it get back to the path of prosperity.

As it is, the British Department for International Development has found out that economic growth in Sierra Leone is slowing as a result of the Ebola crisis. “Gross Domestic Product (GDP) was expected to be 11.3% in 2014. It has since been revised down to 4%.Furthermore, shortages of food caused by farmers leaving their fields, disruption to supply chains due to travel restrictions and reduced production in the agriculture and mining sectors has meant that many businesses do not have the working capital they need to carry out day-to-day operations, including paying their employees on time”.

I am sure the position taken by the British speaks to the common position, or what should be, of the entirety of the international community insofar as the need to align the country back on track to economy growth is concerned. It is my view that the government of Sierra Leone was probably the hardest hit in terms of the impact visited on the country by the Ebola crisis. As a people we were all faced with a catastrophic emergency whose enormity was indescribable. The economy was possibly the biggest casualty.

Against that backdrop, the government had to go out of its way to divert funds initially meant for sustainable social service delivery and sound economic development to dealing with a single medical condition at the expense of competing killer diseases. Going forward, I suggest that the government redefines its role in the current economic trajectory. It has to assess, again, its sources of revenue and check its expenditure around all public authorities by adjusting their needs in terms of priorities in order to achieve some desirable effects.

Like every Sierra Leonean, the deal is welcoming. The new support is likely to assist Sierra Leonean businesses provide key supplies such as rice, flour, cooking oil, sugar, building materials, hygiene and petroleum products – many of which are critical to Ebola relief efforts.

Chief Executive of CDC, Diana Noble, said:“The exceptional circumstances presented by the Ebola crisis require a unique response from the international community – both in terms of humanitarian efforts and economic support. Standard Chartered is a trusted partner with an excellent network and understanding of the market in Sierra Leone. By working together in a risk-sharing deal we can support the working capital needs of businesses whose survival and growth is vital to the country’s economic health”.

Standard Chartered’s Diana Layfield agreed that mid-sized companies were essential engines of economic growth, so supporting them was key to limiting the economic impact of the Ebola crisis in Sierra Leone.

“By joining with an experienced and broad-reaching organisation such as CDC to address their short-term financing needs, we hope to help these businesses to continue to operate, and power Sierra Leone’s economy through these challenging times”.

Earlier this week, Greening called on the private sector to help Sierra Leone combat Ebola and regain the stellar growth rates it experienced prior to the outbreak. She highlighted a number of important actions and activities that the private sector could undertake to help the country and other countries hit by Ebola recover.

“Providing better access to finance for entrepreneurs: the new deal with Standard Chartered and CDC is a pioneering example of how the private sector can support wealth creators across the country. Investment opportunities: Sierra Leone has significant long term investment opportunities, especially in the minerals and agri-business sector. However the Ebola crisis has deterred investors and even countries like Kenya which have not been affected by Ebola have had their growth estimates revised downwards.

She also argued that investing in development and major infrastructure would help speed up recovery by creating jobs and make the region more resilient in the long-term, helping end dependency on aid and better prepared for humanitarian crises.

© Politico 11/02/15