Blog 10
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Business & Economy: The Liquidity Crisis: Away From Poli
By Tanu Jalloh
14-03-12
www.politicosl.com
As it is right now, commercial banks cannot pay their numerous customers. Most of them small accounts holders whose numbers are likely to increase if the government’s current ‘financial policy of inclusion’ was to materialise any time soon. Large account holders, like the big investors around, are not likely to complain because the risk of losing them is in itself inhibitory. Bad for the banks!
But for obvious reasons, among them news values, newspapers have come to limit their description of the liquidity crisis to banks’ inability to service regular income earners, their clients. Most of these accountholders have opened accounts with banks as a condition they must meet to operate in the formal sector of the economy. They are in the majority, but are most likely to suffer when competition for the limited cash in the banks gets keenest. It is prudent income management by the banks but the lot to explain this has fallen on the politicians; it affects the lives of ordinary people.
When the situation deepened lately, the Bank Governor Dr Sheku Sambadeen Sesay admitted to a crisis in the financial sector. No details on the cause and the cost. A room for doubt has set in. In its wake politicians have confused the occasion either to make some political gains or to beat the ensuing propaganda off the scruff. Both efforts could not sufficiently appeal to the situation of Sierra Leoneans. In a community so polarised by politics and in a year so burdened by elections, it can never get better. While we may not be too sure of where we are headed in all of this, it behoves the media to do justice to the liquidity crisis management – or the lack of it – away from politics.
Thus, I feel compelled to widen the explanation by incorporating some basic facts; certainly not too technical. According to businessdictionary.com, liquidity crisis is a period of short term or technical insolvency (indebtedness, bankruptcy or collapse) during which persons or organisations cannot pay the due bills and meet other demands or obligations. When, generally, there is a negative financial situation characterised by a lack of cash flow, it becomes a liquidity crisis. By those definitions, we see that liquidity crisis runs through businesses and manifests itself when those firms cannot pay their workers because they simply cannot afford cash to do so. But the media in Freetown seems to have confined liquidity crisis to the banks for two reasons: firstly because it affects people’s daily lives and as a corollary, secondly, it makes for an effective tool to score or prove a point with a view to maximising some political capitals. Against that backdrop, I have attempted, here, to spin around the faltering banks as I put to perspective what liquidity crisis should mean to the country’s current circumstance.
A better context has been provided by Investopedia, an online portal, in its explanation of 'liquidity crisis': “For the economy as a whole, a liquidity crisis means that the two main sources of liquidity in the economy, banks and the commercial paper market, severely reduce the number of loans they make or stop making loans altogether. Because so many companies rely on these loans to meet their short-term obligations, this lack of lending has a ripple effect throughout the economy, causing liquidity crises at a plethora of individual companies, which in turn affects individuals.”
In mid-July last year the Bank of Sierra Leone (BSL) was pressed by the Bretton Woods Institutions to cause a critical assessment of the banking system, with focus on risks and vulnerabilities. The findings were grim. Since then, apparently, the BSL has heeded some prudential fiscal advice to include maintaining control over the supply of reserves and hence achieving its stated policy objective by developing a liquidity forecasting framework. Despite its attendant immediate effects, that action may well be the beginning to addressing the problem of liquidity crisis. The problem is, they don’t have time to explain these basics to the public.
Let me make reference to Simon T Gray’s attempt at explaining liquidity crisis and his eventual success at creating the level of understanding his country required to rationalise and appreciate the basic concept as cushion not a neglect. In a lecture series titled: Central Bank Management of Surplus Liquidity (August 2006, Centre for Central Banking Studies, Bank of England), the economist agreed there would be “disruption in the payment system: either banks would not be able to purchase enough banknotes to satisfy customer demand, or they would not be able to settle all payments due across the central bank’s balance sheet.” He did not in any way concede that liquidity crisis was the worst that could happen to any economy. In fact even where there could be enough cash in the banks, managing it properly could cause fear that there was serious problem. He therefore assured that: “At the margin, banks might have sufficient funds to make due payments, but would be left with smaller working balances than desired.”
According to WAMA the ECOWAS countries have had to face important inflationary pressures between 2008 and 2009. The large dependence of these countries on imported foodstuffs as against local production has exacerbated the situation. At the end of 2008, all these countries except Senegal recorded high inflation rates. To me fighting inflation has been the problem, and one such way could be that banks might have sufficient funds to make due payments, but would be left with smaller working balances than desired. A case of proposing necessary wrong at the spur of the moment to achieving that right long term financial policy goal.
Let me close this peroration by bringing a portion of my last article: ‘Mitigating macroeconomic risks in 2012’, published in the Wednesday March 7-13, 2012 edition of Politico. In a 2011 development policy note extended to assure the African Development Bank, the country’s Finance Minister Dr Samura Kamara stated inter alia that there were good signs the country’s economic policies were tenable. For example monetary policies have been set aside to achieve the goal of single-digit inflation in the medium-term while the Bank of Sierra Leone (BSL) continues to pursue its open market operations through a repurchase agreement or repos and reverse repos TO CONTAIN THE GROWTH IN EXCESS LIQUIDITY and hence INFLATIONARY PRESSURES.
According to the minister one such way to attain this feat would be to strengthen monetary policy operations and allow the BSL to strategically review such policy framework in a bid to introducing a benchmark interest rate - the monetary policy rate - which is used to signal the stance of monetary policy to the market.
The ordinary man on the streets might find these details very difficult to understand, but to achieve the objective of single digit inflation in a country still trying to balance imports with exports power (dis)parity, RESERVE MONEY IS JUSTIFIABLY PROGRAMMED TO SLOW DOWN. -
Business & Economy: Mitigating Macroeconomic Risks in 20
By Tanu Jalloh
07-03-12
www.politicosl.com
If we were to discuss the economy of Sierra Leone today without attempting to create an impression around its credibility, whether for the good or the bad reasons, we would be remising in our vow to analysing the facts. While hopes abound, they certainly are often accompanied by fear of macroeconomic risks.
In a July 2011 appraisal report on the Economic Governance Reform Programme II for Sierra Leone, the African Development Bank Group established at the outset that, “the fiduciary risk assessment (FRA) conducted by the Bank in May 2011 rated the risk as “substantial” with a positive trajectory of change since 2007.” The FRA provides guidance on mitigating any significant risks to the proper use of funds and outlining a suitable process for monitoring performance. In short, fudiciary risk talks about transparency or the lack of it as a risk factor.
Similarly, in a 2012 statement on the investment climate in Sierra Leone, US Embassy observed that after the war the country was “being forced to move beyond the moniker of a post-war nation to one of nascent self-sufficiency;” and therefore warned that business market entry strategies should carefully assess the specific risks presented by such fiduciary risks - poor governance and corruption - including immature infrastructure, the lack of training, extreme poverty, and illiteracy in the labor force.
However, the same communication agreed that there have been no “discrimination, limits or denial of treatment for foreign investors. There are no known economic or industrial policies or practices that have discriminatory effects on foreign investors.” The country’s Investment Code of 2005 has effectively addressed the treatment of foreign investors, thereby creating the basis for an economic culture that would eventually launch Sierra Leone as one of the most favourable on the World Bank’s Doing Business 2012. The reasons were the macroeconomic policies.
Meanwhile, in a development policy note extended to assure the African Development Bank, the country’s Finance Minister Dr Samura Kamara stated inter alia that there were good signs the policies were tenable. For example monetary policies have been set to achieve the goal of single-digit inflation in the medium-term while the Bank of Sierra Leone (BSL) continues to pursue its open market operations through a repurchase agreement or repos and reverse repos to contain the growth in excess liquidity and hence inflationary pressures.
According to the minister one such way to attain this feat would be to strengthen monetary policy operations and allow the BSL to strategically review such policy framework in a bid to introduce a benchmark interest rate - the monetary policy rate - which is used to signal the stance of monetary policy to the market.
The ordinary man on the streets might find these details very difficult to understand, but to achieve the objective of single digit inflation in a country still trying to balance imports with exports power (dis)parity, reserve money is justifiably programmed to slow down. During this period a restraint is likely to engender what people consider as hardship or constrain the flow of disposable cash. What I just did in the precedent established above is to debunk a complex technical macroeconomic policy in a way that ordinary people would appreciate the extent of government’s effort at mitigating force majeure, in this case a major risk factor.
That is certainly not my own way of downplaying the seriousness of macroeconomic risks the country faces at the moment. As a matter of fact Sierra Leone is vulnerable to external shocks due to its dependence on imported food and fuel as well as on primary exports. Interestingly, the country is on record to have admitted severally to the fact that increasing fuel and food prices were impacting negatively on its economy and effort at alleviating or eradicating poverty. In essence, they speak to the compounding problems of “Sierra Leone’s fragility situation”.
As a corollary, many implementation strategies have been employed to flesh out an extant macroeconomic policy framework that would be supported by IMF - the global financial evaluator and traditional lending partner - to eventually mitigate possible macroeconomic risks. Those of you who are relatively comfortable with basic economics would agree with me that such multilateral development budget support to the country could help create the fiscal space for government to implement pro-poor projects and mitigate the pains of rising fuel and food prices. Added to this, the government has committed itself to increasing financial resources for safety net programs and enlarging the size of the public bus fleet to halt the grimace related to poor transportation or the lack of it.
Another risk has come in the form of government approaches to the 2012 elections. By the look of things, elections related tension could undermine revenue performance. Thus, there is the risk that substantial “spending” in the multi-tier elections in November this year could lead to a large fiscal deficit; apart from that, spending pressure to improve social indictors and fund civil service wage could increase. Against this backdrop, a mitigating measure, on the one hand, should see increased role of civil society organisations in budget monitoring and oversight. On the other hand, the government feels that donors’ budget support disbursement triggers should strengthen fiscal discipline and mitigate the potential risks of fiscal slippages during the elections period.
In what seems like a self-restraint, it has promised to uphold pledges in the public finance management reform and address potential weaknesses in the fiduciary control environment with transparency tools like the Anti-Corruption Commission, the Sierra Leone Extractives Industry Transparency Initiative and the Audit Service Sierra Leone. According to the Finance Minister, government was committed to maintaining a flexible exchange rate to facilitate the adjustment of the economy to external shocks and promote a tax administration that minimises the granting of discretionary tax exemptions.
To conclude, the US Embassy thinks despite all “the considerable challenges” there are encouraging signs in Sierra Leone’s investment climate. “Foremost among them is what seems to be a sincere and determined priority among national leadership to boost the market economy. The Government of Sierra Leone (GoSL) continues to work to improve the integration of the private sector to advance modern technologies into the mining and agricultural development strategies as well as to continue to build the industrial base to create more jobs.” -
Of high-sounding words and the art of writing
By Tanu Jalloh
6-12-2011
© www.politicosl.com
The art of writing could be completely different from what contemporary journalism requires of information gatekeepers, especially newspaper journalists. For example a certified political scientist could be a celebrated columnist but he is often, definitely, not a professional journalist. Forget the experiment and commission him to write a short news story and you would effortlessly strike out the supposed elements of ‘professionalism.’ Yet he would take pleasure in employing high-sounding words to achieve imagery, the most fundamental element in literature.
As it were, I came to think that writing with high-sounding words might be a folly on many writers’ part only when I started my stint as a columnist with Concord Times newspaper. I had sat on my laurels as a young and fine lexicographer; a poet who would chain such words as extempore, flabbergasted, schism, somnambulism et cetera to construct compound complex sentences for expressions that could otherwise be explained in a simply worded statement. Consequently, I caught up with my nemesis when I took up appointment later as a reporter. My first news story was dismissed with scorn. Guess what, the information therein were over-expressly opinionated. I could not write a simple news story?
Meanwhile, many people enjoyed reading my articles. Despite the highfalutin that accompanied them, the readership was ever curious to know the academic that was behind the curtain. I had written some highly researched and critically convincing articles on good governance and politics; the economy and finance; development and society and… and… you name it. While many more had taken issue with the unfamiliar sequence of big words, clichés and jargons in my articles, many people had blessed me in their morning prayers because I had let them learn some new words. Inadvertently, I became particularly attracted to those people.
Caught between journalism and the art of writing, in which case one could employ the biggest of words to express a thought, I took solace in arguments forwarded by contemporary studies of ‘Language and Logic.’
According to language and logic, even single words or short phrases can exhibit the distinction between purely informative and partially expressive uses of language. Thus many of the most common words and phrases of any language have both a literal or descriptive meaning that refers to the way things are and an emotive meaning that expresses some feeling about them. Thus, the choice of which word to use in making a statement can be used in hopes of evoking a particular emotional response. That is a natural function of ordinary language, of course. We often do wish to convey some portion of our feelings along with information, including the use of high-sounding words.
The exception is journalism. This is because there is a good deal of poetry in everyday communication; and poetry without emotive meaning is pretty dull. But when we are primarily interested in establishing the truth—as we are when assessing the logical merits of an argument—the use of words laden with emotive meaning can easily distract us from our purpose. Journalism justified!
The celebrated columnist who is not a journalist believes that the formal patterns of correct reasoning can all be conveyed through ordinary language, but then so can a lot of other things. In fact, he uses language in many different ways, some of which may be irrelevant to any attempt to provide reasons for what others believe. Hence, it would be great to identify at least three distinct uses of language: informative, express and directive uses of language.
The informative use of language involves an effort to communicate some content. If as a journalist I tell a child, “The 27 of April is Independence Day,” or write to you that “Logic is the study of correct reasoning,” I am using language informatively. This kind of use presumes that the content of what is being communicated (news story) is actually true. Again, journalism is justified here. But the celebrated political scientist employs an expressive use of language, on the other hand, and intends only to vent some feeling, or perhaps to evoke some feeling from other people (here the art of writing takes precedence). For instance when he says, “Friday afternoons are dreary,” or yells “Ouch!” he is using language expressively. Although such uses don't convey any information, they do serve an important function in everyday life, since how we feel sometimes matters as much as—or more than—what we hold to be true.
Finally, directive uses of language aim to cause or to prevent some overt action by a human agent. When one says "Shut the door," or writes "Read the textbook," he is using language directively. The point in each of the three cases is to make someone perform (or forswear) a particular action. This is a significant linguistic function, too, but like the expressive use, it doesn't always relate logically to the truth of our beliefs.
So, that was how I came to learn the distinction between the art of writing and journalism proper. However, much as I had marshalled the art of writing I needed to learn how to write simple news stories. Against that backdrop, I settled down for the obvious: I wanted to become a professional journalist. But with no formal training (then), I found it almost incredibly impossible to comprehend the rudiments in newsroom maneuvering. I felt even more foolish after my editor, Osman Benk Sankoh, would have praised me for writing a fantastic piece the previous day.
“You write like one professor,” he had told me. But alone, soliloquizing, I had blamed myself for not been able to use my strong command of the queen’s language to report a simple event that I personally witnessed and covered as a reporter. The reason was simple. I used to be a columnist but I was never, never a journalist.
Eventually, I passed through all the strata, especially those typical of Concord Times Communications, Sierra Leone’s quintessence of modern day journalism, to become the editor. Before that, my editor Sahr Musa Yamba, who saw me hone that skill of journalism, once told me that I could make a good editor if I stopped writing opinion articles for news stories. I had since shaped that skill into making me the features editor, a position to which I owe the stewardship that eventually led to my appointment as editor of Concord Times newspaper on January 4, 2008. The moral lesson here is that not all writers can make professional journalists but most professional journalists can make very good writers.
PS: This piece was first carried by Concord Times Newspaper in July, 2008. -
Business & Economy: Mines, Hopes & Money
By Tanu Jalloh
30-01-2012
© www.politicosl.com
When the diamond mines surfaced in the 1930s the country glittered. The economy boomed. But when they almost diminished after eight decades, they left behind misery, hatred, greed and war. The hopes they had raised were razed. However, resources generated by the mines, then, were the major forces behind the country’s glosses. With the mines, there were hopes, but also was money.
The war was here, and people partly blamed it on the diamond mines. Some observers say output of the country’s diamond export was likely to have peaked in recent times; thus even at its best it accounted for just 34% of total export earnings in 2010. Yet the country was the world’s 10th ranked producer of diamond, by volume, in 2010 and the world’s third ranked producer of Rutile (Gambogi, 2011; Kimberley Process Rough Diamond Statistics, 2011).
Mines
The war is gone, and then comes iron ore. In the words of Dr. Samura Kamara, Sierra Leone’s finance minister, the commencement of iron ore production would boost economic activity this year and beyond.
When the country would have attained full implementation of the two new iron ore mining projects (African Minerals Limited and London Mining Limited), a substantial expansion of domestic output is assured – exports and tax revenues in the coming years would be a testament to the mines, hopes and money.
So hopeful that Dr. Kamara, when reading the Government Budget and Statement of Economic and Financial Policies for the Financial Year 2012 noted thus: “Real GDP is projected to expand by at least 50 percent in 2012, putting Sierra Leone among the fastest growing economies in the world.”
In fact the International Monetary Fund believes Sierra Leone’s economy may grow by 51% y/y in 2012 as a result of iron-ore production. Even the most recent critical assessment by Standard Chartered Bank (SC
global research titled: ‘Sierra Leone – New Opportunities, Old challenges’ (10 January 2012, UK) was optimistic. The report stated that based on their analysis of other post-conflict economies, starting from a low-base, with substantial export growth nonetheless, they expect GDP growth of around 30% in 2012, which would still put Sierra Leone among the fastest-growing African countries.
Sierra Leone’s export profile is set to be transformed this year, as production from the Tonkolili iron-ore mine could lead to a quadrupling of total exports. Iron-ore production ceased in Sierra Leone in the 1970s because of unfavourable iron-ore prices and government mismanagement. When operations and supply resumed in full scale late last year, with production was expected to reach 20 million tonnes in 2012. Expansion projects could increase production to 50 million tonnes in the medium term, according to SCB.
Informed by those estimates, the country’s economy could grow further by 10 percent in 2013 and 2014, hoping that exports increase by fourfold in 2012. In fact hopes are so high that even if you take away iron ore production from the general monetary outlook of Sierra Leone, the economy enjoys a huge chance to grow by 6 percent on average per annum in real terms in the next three years. This fact has been corroborated by findings of the latest African Economic Outlook report. It pointed out that having recorded 4.5% in 2010, growth was projected to rise to 5.1% in 2011 and to gradually recover to 6.0% in 2012.
“Consistent with this high growth performance, Sierra Leone has been identified by the International Monetary Fund (IMF) as one of the countries that will contribute to Sub-Saharan Africa’s strong growth performance in 2012, largely on account of developments taking place in the mining sector,” he stated.
He, however, added that the two-speed economy could pose serious management challenges. In that regard, Sierra Leone could learn from the experiences of other Sub-Saharan African countries, and in doing so, create a dynamic, long-term vision whereby the Dutch Disease, the resource curse and excessive environmental degradation, could be avoided.
And then there was news of oil as if to lubricate the cog on the wheels of fortune for Sierra Leone’s economy.
Oil, first discovered in 2009, could be a game-changer, so says the SCB report. Meanwhile, currently three companies are conducting exploratory operations and the ministry of finance expects oil in commercial quantities to be verified in 2012. If so, this could lead to significant investment in the country, which would necessitate a reassessment of Sierra Leone’s likely long-term growth trajectory. Apart from mines, this is hope. This is money.
Like all laws subject to constant necessary reforms, the Mines and Minerals Act may be inconclusive and vulnerable but the initiative was certainly a critical move towards contemporary reforms. Legal regimes change not necessarily because they are weak or bad, but also because things move fast such that people take decisions that are likely to be overridden the next day by positive change. It is dynamism, and probably the only constant thing in human history.
So, there was an Act of Parliament to consolidate and amend the law on mines and minerals; to promote local and foreign investment in the mining sector by introducing new and improved provisions for exploration, mine development and marketing of minerals and mineral secondary processing for the benefit of the people of Sierra Leone; to ensure that management of the mineral sector is transparent and accountable in accordance with international best practice…( The Mines and Minerals Act, 2009; No 12 of 2009), eighteen years more recent than the one that had existed. This legal reform was in itself a hope for money from the mines.
Hopes
On Friday 20 August 2010 the Government granted, and Parliament ratified, the mining lease for the Tonkolili project and related infrastructure which included two mining licenses for a period of 25 years. In December, SRK Consulting completed a preliminary mineral resource estimate that totaled 12.8 billion metric tons of measured, indicated, and inferred resources for the Kasafoni, the Marampon, the Numbara, and the Simbili deposits combined in the Tonkolili District.
Cape Lambert, which planned to begin production in late 2012 with an expected mine life of 20 years based on preliminary mineral resource estimates and AML have signed an agreement that gave the former right of access to the Marampa railway and Pepel Port. It would have an initial minimum transport capacity of 2 Mt/yr and would hold 33% interest in the Marampa infrastructure. AML and the Government hold the remaining 57% and 10% interests respectively (Cape Lambert Resources Ltd., 2011).
Sierra Rutile Ltd. (SRL) of the British Virgin Islands owned and operated the Sierra Rutile Mine which is located in southwestern Sierra Leone, some 135 km from Freetown, is expected to increase ilmenite and rutile production this year (Sierra Rutile Ltd., 2011).
The Government and Koidu Holdings S.A signed a new agreement for the Koidu kimberlite project mining lease area…which contained provisions for the mining and commercial exploitation of the Koidu kimberlite and development of the surrounding community.
New York-based Dolat Ventures Inc. acquired a 75% stake in Millennium Mining LLC of Sierra Leone which operated alluvial diamond mining in Sewa River, Tinkonko Chiefdom in Bo District. It has announced the installation of the new wash plant to increase its processing capacity to 90 metric tons per hour of gravel (Dolat Ventures, Inc., 2010).
Guernsey-Paragon Diamonds Ltd. through its subsidiary Sierra Leone Hard Rock Ltd. held 100% ownership in the Konoma alluvial diamond project in Kono District and produced 5,400 carats of diamond in 2011(Obtala Resources plc, 2010; Paragon Diamonds Ltd., 2011).
Stellar Diamonds plc, through its subsidiary Sierra Leone Ltd., held 100% ownership in the Tongo kimberlite dyke project initiated a bulk sampling program to collect 1,000 to 2,000 carats for grade and value estimation of the diamond (Stellar Diamonds plc, 2010).
& Money
Let’s say money from all these mines could not be appropriately estimated to represent the aggregate of hopes for the country’s economy, mining revenues in the form of royalties and licenses could still increase substantially in the years coming. For instance, revenues from this sector are expected to rise to Le242.3 billion when compared to the estimated collections of Le185.5 billion in 2011 on account of the projected increase in iron ore exports in 2012. Royalty on iron ore alone is projected at Le178.8 billion in 2012. -
Commentary: A long wish for judicial probity
By Tanu Jalloh
18-11-2011
© www.politicosl.com
The whole of chapter VII of the 1991 Constitution of Sierra Leone talks about the judiciary, one of the three arms of state governance in a democracy. Under that clause, establishing but also detailing the scope and nature of the judiciary, Section 120 talks about the power vested in it with the Chief Justice as the head.
The judiciary holds massive power. It could be so powerful as to warrant an alternatively parallel body, the Anti Corruption Commission (ACC); a reckoned source of probity. The general wish is, longing for judicial probity.
Basically, the judiciary is supposed to be the bastion of equal right and justice, peace and stability. It is the officially permitted instrument for the interpretation of law and ensuring societal order by punishing lawbreakers and enhancing social justice where every citizen is equal before law on the basis of presumption of innocence until found guilty before a competent court of law. In a nutshell, the judiciary preserves respect for the rule of law.
Subsection 3 under that chapter, states that: “In the exercise of its judicial functions, the Judiciary shall be subject to only this Constitution or any other law, and shall not be subject to the control or direction of any other person or authority.”
That paragraph was a deliberate attempt to ensure that sieving justice could constitute an issue of probity or transparency and accountability. The ACC, an institution of probity frowns at such an act as it notes, “giving and receiving of advantage to judges, magistrates and court staff is a key corruption issue.”
Although part V of the constitution of Sierra Leone outlines and explains some of the reasons why the judiciary must not be corrupt or corrupted, I presume the ACC is yet to explore those sections and relay them to the public in simple messages for easy understanding. For instance, the public would want to know inter alia what constitute corruption in the judiciary, who actually can be held culpable for corruption in such an instance, how can corrupt instances in the judiciary be reported, how can corrupt acts be identified in the judiciary, how are members of the judiciary remunerated, is this of public knowledge, etc.
The issue of remuneration in the judiciary is said to be a cause of corruption in that establishment. Apart from those on private practice, members of the judiciary have a secured and assured remuneration from the same source other members of the public service system. Subsection 1 of Section 138 of the Constitution asserts this as thus: “The salaries, allowances, gratuities and pensions of Judges of the Superior Court of Judicature shall be a charge upon the Consolidated Fund...” Let us get the public to know that remuneration for judges is secured and guaranteed, a reason enough to deter them from being compromised.
Subsection 3 states that: “The salary, allowances, privileges, right in respect of leave of absence, gratuity or pension and other conditions of service of a Judge of the Superior Court of Judicature shall not be varied to his disadvantage.” Perhaps section 143, under Fees of Court etcetera, is even clearer on the issue of probity. It states that, “any fees, fines or other moneys taken by the Courts shall form part of the Consolidated Fund.”
Against that backdrop the understanding of how the judiciary works, including its constitutional rights to deal with the citizenry as well as its obligations to the state, leaves enough room for different and often confused interpretations of its relationship with the executive and legislature. I think the ACC must engage the public on why those three arms of government must not interfere in the operations of one another. It could effectively use the interpretation, in simple terms though, of the principle of checks and balances as a powerful preventive internal system for probity check.
The Open Society Justice Initiative once observed that “Sierra Leone’s official legal system is of limited practical relevance for most people in the country...” This is why the ACC believes that actions must be taken, one of which it said would include that the judiciary establishes “a public complaint mechanism to receive and investigate any complaint of corruption involving judicial officers and court staff and to punish them for the same.”
My, and perhaps many people’s, concerns are that civil litigants know little about their rights, putting those who cannot afford representation at an often decisive disadvantage, thus a fertile platform for bribery. Under circumstances in which many Sierra Leoneans can neither assert nor defend their legal rights in criminal or civil matters, either in common law or traditional forums, the constitutional promise of human rights, the rule of law, and equal access to justice (regardless of “economic or other disability”) remain unfulfilled.
Intrinsically, with the civil war over and political stability in view, the time is ripe to address these problems. I am therefore challenging the ACC to go beyond conducting workshops, supposed to be addressing issues of integrity and ethics in the judiciary, to looking at the scope and excesses of the judiciary and all that comes with it in a potentially vulnerable situation similar to what we now have in Sierra Leone. It is that impression of unlimited scope of power and affinity that would continue to constitute a major corruption issue across the board.
The ACC can serve as an effective tool to forestall the downward spiraling of the delivery of social justice in the country, a form of countering entrenched anti social systems in the country. In a national anti-corruption strategy (2008-2013), NACS – a set of integrity pillars put together to complement such external and ever-ready intervening system – the Commission stated that: “When preventive measures fail and all efforts to sensitize people about the evils of corruption and the benefits of a corrupt-free society are not observed, confrontation becomes the only other way to deal with offenders for their wrongdoings.”
However, these issues could be surmounted according to the ACC entity of focus for the Ministry of Justice. First, proper records of all fines must be ensured and receipts issued for all payments made; use the statutory instrument pursuant to section 145 (2) of the 1991 Constitution for Rules of Court for regulating the practice and procedure of all courts in the country; this should include rules relating to the prevention of frivolous and vexatious proceedings; and the office of the Attorney General should monitor sentencing guidelines and prepare quarterly reports to the Minister and Chief Justice.
[nickname]www.politicosl.com[/nickname] -
Commentary: SLBC’s Stillbirth
By Tanu Jalloh
14-12-2011
© www.politicosl.com
It is now clear that previous records of the current management at the Sierra Leone Broadcasting Corporation (SLBC) were not properly accounted for and therefore all financial staff should be investigated by the Anti-Corruption Commission. Isn’t this yet a proof of another case of trial and error?
The idea of an independent public broadcaster was a marvellous novelty, but this was soon to prove ill-conceived. While it was no surprise that the Act that borne the corporation was flawed and weak in terms of probity, it was promulgated without thorough scrutiny by the wider media. Even where such contributions were solicited and elicited at all, those critical suggestions by the country’s media umbrella organisation, SLAJ, were jilted with some subtlety.
By every indication the calculation was wrong. The estimate was not informed. The ministry of information, which advised the government and partnered with the international community on its behalf, made a wild guess. It probably had assumed that by landing the SLBC, a major benchmark of democracy and press freedom would have been met. On the same token it created the impression that government was now free to use a farce-of-an-independent media platform to sell its policies, polities and feats. Hence there was an implied notion that government pays salaries and cushions running cost of the corporation in return for monopoly.
Sadly, all of the above conclusions by the information ministry were premised on a totally faulty reasoning. I think the smooth running of the UN Radio since its inception in 2000, as the country’s only 24-hour national broadcaster, deceived the ministry of information into believing that they too could do it with SLBC once the funds are there. Consequently, the UN genuinely put aside a huge amount of money to conceive and hatch the plan. Interestingly, the ministry had the penchant to score another political point and maximize huge capital thereby causing SLBC’s stillbirth. It was meant to be a smokescreen to assure UN of government’s commitment to good governance. In so doing, they faked the efforts on the ground to promote media plurality and secure an independent public broadcaster. Unfortunately, it blurred the right-thinking.
Because government had to provide the leadership through the ministry of information and the UN had shown some political will in that regard, no thorough self-appraisal was done. Any such effort could have considered a robust inaugural team that was capable enough to surmount the challenges and stabilize possible aftermaths of such experiments.
Ideally, in the absence of Sierra Leone Broadcasting Service, which was government run, the SLBC was created to function as a sober replacement all in the general public interest. For God’s sake the project was meant to contribute to and strengthen the peace, security and democracy through the participation of all for national development. It was a dream to carve a forum where all voices are heard and expectations are professionally managed. Where this could not be realized, the public confidence is betrayed.
It was a stillbirth. We don’t have to be lawyers to see the gray areas in the SLBC Act, created as a result of the folly of politicians who wanted another fort, this time in the media. Promulgated in January of 2010, section 10 (1) of the SLBC Act pointed out that the object of the establishment of the Corporation was to provide information, education, entertainment and reflect all shades of opinion throughout Sierra Leone. This responsibility was shirked or shelved due to gross administrative inadequacies.
President Ernest Bai Koroma is disappointed! Go through Section 13 (1, 2 & 3c) to confirm that the Director-General, Elvis Gbanabom Hallowell, was appointed by the President and sanctioned by the Sierra Leone Parliament to become the Chief Executive Officer of the SLBC with secure office tenure of four years. As if this chain of goodwill was not enough, “the Director-General shall be responsible for the management of the funds of the Corporation.” Thus, in the office of the Director-General alone was an unnecessarily high concentration of political, administrative and financial powers. Too powerful to be careful!
In section 14 the Deputy Director-General is expected to perform the duties of the Director-General and “shall be charged with the performance of any of the functions of the Director- General when the Director-General is absent from Sierra Leone or is otherwise incapacitated from performing his functions under this Act and who shall otherwise assist the Director- General in the performance of his functions and perform such functions as the Director-General may delegate to him.” In essence, both persons must be equally experienced. This was never taken into consideration.
In the above two paragraphs it is expressed or implied (expressed and implied) that both the Director-General and his deputy must be professionally trained and qualified journalists or must have had some background in mass communication. While both of them failed to meet that cardinal condition, they were party stalwarts who had exhausted every possible opportunity to lobby the government directly or indirectly. However, they failed to deliver on the grand plan and have disappointed the President and the nation.
Similarly, sections 16 (2) and 19 (1 & 2) respectively explain that the funds of the Corporation “shall be applied only for the purposes of the approved budget of the Corporation,” and the “Corporation shall, as soon as possible but not later than three months after the end of each financial year, submit to the Minister a report of the activities, operations, undertakings, property and finances of the Corporation for that year, including the Auditor-General’s report and a list of persons granted licences in that year and the Minister shall, within thirty days of the receipt of the…copy before Parliament.”
While that section was in line with the National Anti-Corruption Strategy, it was probably never adhered to in almost one year of the corporation’s existence. This was corroborated in a leaked enquiry report by the panel to investigate SLBC, following proven instances of mismanagement by the present administration. Inter alia, the committee suggested that the positions of the Director General and his deputy should be re-evaluated to discover a suitable candidate with management experience and media expertise. This is a testament to my argument that both executives were not necessarily appointed on merit.
Let me end with the following recommendations contained in the confidential document now before President Koroma for possible actions. The committee “strongly recommend that the process to review and amend the SLBC Act be commenced immediately, in view of its many grey areas and tensions which have arisen during one year of its application e.g., the powers of the board in relations to those of management. In view of the confusion and mismanaged hierarchy of SLBC, we strongly recommend that an integrated corporate structure be adapted as per the agreed upon structure/organogram submitted in 2010 by development partner consultants.”
“We recommend the strict enforcement of discipline to ensure an ideal environment for productive and uninterrupted work, thereby avoiding cases of gross indiscipline, abrupt and unilateral action to remove programmes, quarrels, and intimidation etc, brought to the committee’s attention.”
In the area of recruitment and professionalism, the committee believes that in view of the corrupted recruitment practices recorded, there should be an end to all current contracts and staff positions, including open, transparent, accountable and fair recruitment to positions within SLBC. It also recommended an open, accountable and transparent recruitment process for all positions within the SLBC including the management.
Also, in view of the current staffing of some unprofessional and unqualified staff, the committee recommended a thorough recruitment of qualified staff who would work towards professionalism, ethical news production, national pride and development; new staff should undergo training and orientation.
The committee commended the revisions to the SLBC Act to allow for professional and ethical membership of members and further recommended that the current members of the board be examined for qualifications and professional standards to take up their positions as advisors to the management of SLBC.
Finally, in view of the current state and status of the board, “we strongly recommend that the board chairman be removed from his post immediately and a new chairman be recruited and selected on the basis of impartiality, neutrality, media knowledge/experienced, independence, peace and development.”
In the interim we wait to see the official reaction of the President to the recommendations; the admission of guilt or not by the wanton and beleaguered Hallowell led-administration of SLBC; and above all, I render my prayer to bring back the favour it once enjoyed from the UN peacebuilding fund. -
Opinion: Usu Boie’s gain, is his strain
By Tanu Jalloh
2-12-2011
© www.politicosl.com
“My vision in politics is not only for the presidency but to serve humanity and change the lives of the grassroots,” said Usu Boie Kamara at the Attouga Mini Stadium after the convention.
In Sierra Leone and overseas, very few people knew Usman Boie Kamara (Usu Boie) before he shot to fame in recent years as a politician. He was certainly thorough on his job as a mines engineer and civil servant. But that could not have made him a politician.
If at all he really was, he was not that type of politician who could have braved the murky terrain that characterized the transition from an emergency situation after the war to a relatively stable democracy after the 2002 elections.
The last time I checked with his CV, Usu Boie started as a government mining engineer in Kenema in 1972. His entire working life was spent in the mining sector in Sierra Leone and abroad. Between 1972 and 2009 he worked in various capacities, moving up the ladder through the years to become in 2008, the director of mines, responsible for all mining, supervision and administrative activities in the country. Against this backdrop, he made fortune. He is mooted to have ranked among the richest people in the country.
Thus, naturally, people like him needed somewhere to start in politics. But he was so lucky that he started at the acme of party politics. Invariably, he was expected to launch without perching. Unfortunately, he perched. That was the nadir of his political difficulty. His case was a case study. We must all learn that pulling resources is diametrically opposite to pooling people. Usu Boie had the resources, but how he used them to poll his delegates was probably faulty; a testament to the logicality of my argument. While it is not necessarily a condition for all, Usu Boie needed a political bout at community level before he yearned for the party leadership. This is however not to say he is a novice.
In the meantime, Usu Boie should consider reverting to the passion he had for his party and reconstructing the future he wished for, if he had won the SLPP leadership he vied for. With that, his party’s reputation, with its spirit is rekindled. Arguably, if he had campaigned, contested, won and worked as a member of parliament before, he could have guarded whatever small gains he made despite the strains, constraints. Similarly, if he had campaigned, contested and lost a contest at constituency level, he might as well play the peoples’ way; lest he might lose the confidence of the community. That scenario manifested itself in the leadership competition for the SLPP at their July Convention in Bo. Till date, the reverberating effects are epitomized by the stuck-up actions of Usu Boie. The party needs him, though.
I am not alone under this impression. In a 2011 September issue of Global Times Newspaper, the Manjoroka columnist, Sorie Fofana, explained: “Why Usu Boie Lost Out”. “Naturally, Alhaji Usman Boie Kamara would have been appointed as running mate to Julius Maada Bio given the results of the recent flag bearer election. He came second in the race. Usu Boie bowled himself over when he refused to gravitate towards Julius Maada Bio after he (Usu Boie) lost the flag bearer election to Julius Maada Bio. Many overtures made to Usu Boie were flatly ignored. He refused to cooperate with the man who had emerged as flag bearer of the Party…”
And read what Manjoroka found out about what the SLPP leader, Julius Maada Bio, had to say to people like Usman Boie after the convention.
“Just like for the flag bearer, there is only one slot of the position of running mate. And only one person can be chosen. To all those who have been hopefuls I sincerely implore you to be guided by the same spirit that had inspired our choice of flag bearer; and to accept in good faith the selection I make. Victory in 2012 is almost assured but we must all stay united, committed and focused towards our common and noble aspiration of bouncing back to power in the State House and Parliament in 2012. With that, State House is our next destination next year’.”
Was this a popular call? The Usu Boie camp said it was not.
All Usu Boie would need to enjoy his gain, is in his strain. Some of the gains he made while he worked as a government functionary are intact. But that alone could not be enough to make him a politician, popular with the party’s grassroots. However, when he eventually was brought into mainstream politics, he was quick to create a balance because he had the money resources. The ‘fourah bay’ sense was quick to appeal to; his love for the community; his contributions to the Muslim circuses; his belief in and respect for the ‘magazine culture’, etcetera etcetera. He’s got the Fourah Bay community in the east of Freetown in particular and probably the Western Area in general, but he would definitely need the party’s delegates from elsewhere.
Go to his website and you would find out how much he believed in unity until his defeat. “UBK is a fervent believer in the saying, ‘United we stand, divided we’re conquered.’ Nothing can be gained now from conflict and friction. The SLPP must mend all internal rifts and differences. UBK can help the party find its common ground and present the united front that will guarantee our success.” But the Kadi Sesay appointment as Bio’s running mate seemed to have left him even sourer. The very few, forming the core of his supporters, are the biggest bane to his becoming a real politician. They have always thought Usu Boie and not the party.
Before you go, let us look at how much he’s put into a party whose support base at the time (2007) was as obviously flagging as its executive was polarized and vulnerable. UBK, as his loyalists call him, had helped give a facelift to ruined SLPP offices across the country; set in motion several revenue earning schemes especially for the women; mobilized the youthful population in the Western Area; made a strong representation to the swing district of Kono where he worked and made friends; gave the party hopes because of his financial standing and coaxed the Muslims, his people; paid fees for young collegians. In short he spread the wealth!
By Tanu Jalloh
2-12-2011
© www.politicosl.com -
Business & Economy: Economic hopes where fears aboun
By Tanu Jalloh
14-12-2011
© www.politicosl.com
In spite of the impressive growth rates, with 2008 gross domestic product (GDP) per capita of about only 700 US dollars (purchasing power parity (PPP), current prices), Sierra Leone remains one of the poorest countries in the world, according to 2011 African Economic Outlook (AEO).
But President Koroma is hopeful. In a recent ceremony marking this year’s state opening of parliament he disclosed that: “With the investments in the mining sector, especially in iron ore mining, Sierra Leone will be among the fastest growing economies in the world in the next few years. With iron ore production, real GDP is projected to grow by 51 percent in 2012.” He, however, acknowledged that the task was daunting but assured that the country was gradually getting on her feet.
Like a recuperating old woman in a remote hospital, the country still has scars of the decade-long-war strewn on her back. Therefore, a large amount of foreign assistance was needed to rebuild the battered infrastructure and get her back on her feet.
“Such recovery efforts were unsustainable,” said former bank governor Dr. James D Rogers who suggested that during the reign of the Sierra Leone People’s Party, the government which until 2007 was in power for almost twelve years, things were a bit stable.
“At an average of about 7%, the country recorded impressive real GDP growth rates during 2005-07 which was among the highest not only in West Africa but also on the continent,” he argued.
His argument was in support of claims made in the AEO - an annual report that combines the expertise of the African Development Bank, the organization for economic cooperation and development (OECD) development centre, the United Nations Economic Commission for Africa, the United Nations Development Programme and a network of African think tanks and research centres.
“Economic growth has been fueled by foreign investment inflows into the mining sector, which is the main generator of export receipts,” the report said, adding that although growth is projected to increase to 5% in 2011 (thanks to stronger global recovery and rising exports, returns on infrastructure investments and an improved business climate) it will remain below the pre-crisis rates - growth in real GDP per capita was 0.0 %, according to UNDP’s Macroeconomic Indicators (1961-1990).
Going by that outlook report, the economy was yet to recover from ‘the agony of a nation’. The reason for this, according to Dr. Rogers (an economist with several works to his credit), was that, “unemployment remains staggeringly high. The UN has estimated it is 65% in a country with more than half the population illiterate.”
International Monetary Fund (IMF) is one of Sierra Leone’s biggest lending partners. Even whereas the Fund continues to express hope for the country’s economic recovery, its conditions accompanying such loan facilities have been criticized by some civil society groups.
On March 15, 2011, the Fund commended the country’s progress as part of its intermittent evaluations of the economy. “Real gross domestic product growth picked up from 3.2 percent in 2009 to 5 percent in 2010, reflecting higher activity in manufacturing, mining, and construction.”
However, this impressive growth did not come without costing the government a great deal. As part of its conditions, the IMF supported the commitment [by government] to significantly reduce domestic fuel subsidies and subsequently implement an automatic monthly pricing mechanism. Two months later the government cut out subsidies on fuel in apparent adherence to the Fund’s conditionality. As a result, fuel pump price soared by over 25% and engendered shortage.
Dr. Richard Konteh, minister of trade, justified the cut on domestic fuel subsidies. He told the media that government was spending US$ 200 million on fuel subsidies annually. About this same time government implemented an automatic monthly pricing mechanism by replacing the imperial (gallonage) system with the metric (liter) system, a move that attracted huge public outcry.
In May 2011 the National Democratic Alliance, a budding political party, officially condemned the calibration effort. Also, Al Sankoh Conteh, a youth leader and civil rights activist, said the move had brought untold suffering on commuters. They rallied around other civil society members to threaten the government with a two-million-man petition unless the situation was corrected in twenty-one days. Consequently, the government consulted, succumbed and struck a fair deal with trade unionists.
Away from this industrial check, there was the proliferation of banks. The emerging sector has helped to enliven what Dr. J.D. Rogers would refer to as a flagging economy. The Bank of Sierra Leone noted that services in the banking sector accounted for about 34 per cent of GDP in 2007. Having contracted by 6 per cent in 2007, services rebounded in 2008. Meanwhile, the financial sector continued to expand in 2009, with the number of commercial banks increasing to 14 by end of that year.
Invariably, the president painted a picture of an auspicious future for the country’s burgeoning economy.
Addressing the October 8, 2011 state opening of parliament, President Ernest Bai Koroma suggested his government was hopeful. “With the investments in the mining sector, especially in iron ore mining, Sierra Leone will be among the fastest growing economies in the world in the next few years. With iron ore production, real GDP is projected to grow by 51 percent in 2012,” he said.
“We shall make the mineral resources of this nation benefit the people of this country, and the result of our endeavours visible in hundreds of millions of dollars of investment and the creation of thousands of jobs.
“We have granted a concession to African Minerals Limited for the mining of Iron Ore in Tonkolili district. Reconstruction of the Pepel Port has been completed by African Minerals and also the railway from Ferengbeya to Pepel is nearing completion. The Production of Iron Ore is expected to commence in December 2011.
“To further ensure transparent and effective administration of mineral rights, we have introduced and started implementation of a Mining Cadastre. This system feeds in relevant information to the EITI process. A Data Repository has been established in the Ministry’s website for the purpose of transparency and accountability,” the President said.
With all of these in place, a strong base would have been created to enhance domestic revenue generation and minimize dependence on donors. The former government (SLPP) had the same dream to become self-reliant when it created the National Revenue Authority in 2002 to replace two major revenue collection departments of customs and excise and income tax. In the years that followed revenue was collected on a sustainable basis.
In nine years, the tax collector continues to bolster revenue generation and deposit in the consolidated fund for government’s infrastructural development. The public affairs and tax education unit of the authority told this medium that the target for 2011 is Le 1.174 trillion, far above the targets for the last two years.
“A total of Le 292.2 billion was collected in the first three months of 2011. In 2010, out of a target of Le 930.494 billion, a total of 945.842 billion was collected. In 2009, the revenue collected was Le 700,328 billion away from the target of Le 668,343 billion. In 2008, a total of Le 615,645 billion was collected for government.”
With all the above data President Koroma confidently faced the parliament to announce that, “his government has been very successful in mobilizing internally generated funds to gradually reduce our reliance on donor funds.”
Apparently challenging earlier estimates and projections given by Dr. Rogers and directly allaying fears expressed by the AEO report above, the president disclosed that in recent years, domestic revenue collection has improved considerably, increasing from 10.8 percent of GDP in 2007 to 13.3 percent of GDP in 2010 and is projected at 14.5 percent of GDP in 2011.
NRA might have presented such impressive figures, but some tax experts and importers have expressed dissatisfaction, in particular, at the authority’s biggest reform initiative in recent years: The Goods and Services Tax (GST). They complained that the new tax, introduced in 2009, was a burden on the business community and the consumers. Nonetheless, NRA has insisted that the tax was a mere replacement of seven different taxes that used to exist separately but were not as effective and efficient as they are now under the new system.
Though convincing they might sound, even the IMF was concerned that consumer prices rose by 18.4 percent in 2010 on account of the introduction of the GST.
Jan Mikkelsen, who led the IMF mission to Sierra Leone in March, was worried that “the main challenge facing the authorities is the need to accelerate investment in basic infrastructure and social services while maintaining macroeconomic stability.”
His fears seem to have been justified by the general outlook of the economy which warned that: “For the future the key policy priority is thus to bring the economy quickly back on a high and broad-based growth path, as the current slowdown raises already high unemployment, hampers progress with poverty reduction and heightens risks of resurgence of fragility.” -
Business & Economy: Untamed Economic Expectations
By Tanu Jalloh
21-12-2011
© www.politicosl.com
In a ten-thousand-nine-hundred-and-thirty word 2012 budget summary statement delivered by Sierra Leone’s finance minister to Parliament in late November, there was no mentioning of the word EXPECTATIONS, as if to suggest that there was no need to manage them.
In this piece we attempt to explore high expectations around three key areas: the booming mining industry, the country’s laurel on doing business ranking by World Bank/IFC and the herculean task ahead of the National Revenue Authority to quench government’s thirst for domestic revenues in 2012.
Expectations are already high. It was about time they were managed, lest they might expose politicians to caustic reactions from victims of economic hardship largely perpetrated and perpetuated by politics. As crucial as it has already been, 2012 will be a litmus test for political leaders who must demonstrate prudence and the electorate who are presented yet with another opportunity to judge them by their words.
“Delivering on Commitments,” quoting Dr. Samura Kamara, was in a way meant to raise hopes in front of an isolated bowl of legislators, and witnessed by some sections of civil society and the international community. So it was almost politically correct that he sounded determined and hopeful. However, it is even more proper that as we move into the new year government, through the finance and information ministries, engages and addresses the media in a genuine bid to manage expectations. Expectations management must always inform the aptitudes of politicians as they resolve for 2012.
For instance, politicians should let the public know that budgets are mere proposals and projections for which the country must work hard to raise the required seed money. I think a policy maker of some sort, should attempt to explain how tall an order it is to meet the 2012 appropriation bill, to be specific. Revenues expected from agriculture, mining sector, manufacturing companies and mobile phone service providers have been bandied as absolute panacea to reticent economic problems.
These expectations are wild. In particular we shall attempt to contextualize expectations around revenues from the mining industry as we read along. In a December 7, 2011 press release, following the last visit by the executive board to Sierra Leone, the International Monetary Fund (IMF) expressed hopes but warned against bloated expectations from mining revenues in 2012.
“The medium-term outlook is favorable. Full operation of an iron ore megaproject in 2012 is expected to boost GDP and exports substantially. The fiscal space for infrastructure investment and social spending is, however, constrained in the near term, as government revenue is expected to increase only gradually in the first years of new mining activity,” said Naoyuki Shinohara, Deputy Managing Director and Acting Chair.
He also noted that “despite improved revenue performance in the second half of 2010, an acceleration of infrastructure investment under the government’s Agenda for Change led to a surge in unbudgeted spending and commensurate liquidity expansion. As monetary policy accommodated the fiscal easing, key fiscal and monetary targets for December 2010 were not met,” and warned that continued fiscal restraint would be critical to maintaining macroeconomic stability in the period ahead.
In essence the 2012 budget is still haunted by government activities in 2010 and 2011, hence an increase in the expected money required to make up for infrastructure deficits in particular. That aside, financing the upcoming elections, as well as the government’s decision to reduce excises on fuel, are said to have placed additional burdens on the 2012 budget. Fuel subsidies paid to oil marketers amounted to Le 95.4 billion in 2011.
But Dr. Kamara is positive: “In 2012, we will be celebrating five years of transformative achievements, including of higher standings on the major international country performance rankings. In particular, in the World Bank’s Country Policy and Institutional Assessment (CPIA), our score has improved to 3.3, thereby moving Sierra Leone beyond the threshold of the classification of a fragile state…This performance tells us that we are on the right path and that we are following the right policies. Our goal is to use the fruits of our successes to sow the seeds of our future prosperity.”
The minister, however, noted that in spite of all these achievements, “significant challenges still remain. The need to address the infrastructure deficit continues to require our attention; strategic investments are needed in people; public sector capacity and accountability need further strengthening; and more importantly, better management of our natural resources is compelling to ensure that the benefits are widely and equitably shared. Hence, without prompting the outcomes of the pending National Consultative Conference on the next 50 years, the next “Agenda for Change” should among other priorities, focus on ensuring inclusive growth and poverty reduction, effectively managing natural resources, accelerating progress towards achieving the Millennium Development Goals (MDGs), enhancing the competitiveness of the economy, expanding quality employment opportunities, and strengthening social protection systems.”
Consequently, there are issues posing serious questions for which straight answers are required. We say so because every bit of technicalities has to be explained to the electorate on the eve of elections. Therefore, the ideal situation would expect a thorough perspective on third world economies like Sierra Leone and their vulnerability to turbulent global economic dealings in the last decade. This could be traded for informed public appreciation. No matter what, policy makers must find a way around this capitalist phenomenon while they continue to raise hopes without recourse to tall and unrealistic expectations.
Similarly, for policy makers trying to improve their economy’s regulatory environment for business, a good place to start is to find out how it compares with the regulatory environment in other economies.
Sierra Leone is rated high on the ease of doing business rankings over the years. But whenever they attempt to explain the country’s achievement on the World Bank/IFC Doing Business ratings, politicians are limited to the reduced number of days it takes to register a business. But where does Sierra Leone stand on the rest of the topics? For each economy the ranking is calculated as the simple average of the percentile rankings on each of the 10 topics included in the index in Doing Business 2012: starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and, new this year, getting electricity.
Now, while this ranking tells much about the business environment in an economy, “it does not tell the whole story,” according to Doing Business Sierra Leone 2012. The ranking on the ease of doing business, and the underlying indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business.
Finally, the National Revenue Authority is likely to see immense pressure to exceed targets in the first two quarters of 2012 if activities unbudgeted for were to be successfully incorporated in the new agenda to succeed. Like in 2011, the coming year the government will depend on the tax collector to do wonders. For instance the target for 2011 was Le 1.174 trillion, far above the targets for the previous two years to cushion roads infrastructure spending.
Put in context, a total of Le 292.2 billion was collected in the first three months of 2011. In 2010, out of a target of Le 930.494 billion, a total of 945.842 billion was collected. In 2009, the revenue collected was Le 700,328 billion away from the target of Le 668,343 billion. In 2008, a total of Le 615,645 billion was collected for government. In 2012 the trend must change drastically to accommodate for extra commitments to elections and fuel subsidies.
The revenue authority might be up to the task given its impressive past, but some tax experts and importers are calculating the implications this might have on how the authority’s biggest reform initiative is implemented. Already, fears abound that the Goods and Services Tax (GST), introduced in 2009, will remain a burden to be borne by the business community and end users.
But NRA believes the fears were not necessary at all. The public affairs and tax education unit of the authority has maintained that GST was a mere replacement of seven different taxes that used to exist separately but were not as effective and efficient as they are now under the new system.
Merry Christmas. Happy New Year. All the best in 2012. -
Business & Economy: Banking with 2012
By Tanu Jalloh
12-01-2012
© www.politicosl.com
In mid-July last year the Bank of Sierra Leone (BSL) was pressed by the Bretton Woods Institutions to cause a critical assessment of the banking system, with focus on risks and vulnerabilities. The feedbacks were debasing. Thus, there was need to test the resilience of the industry to credit foreign exchange, liquidity and sovereign risks. By this time the financial muscles of certain banks were contracting. BSL was losing grip of its oversight role. Some banks almost faltered and there was no arbiter; so the situation festered and wreaked havoc on ordinary lives. We hope for change in 2012.
In this piece, looking at the susceptibilities of the banking sector to hazards with particular reference to fears around risk management, control and oversight, strength and preparedness of the central bank to provide adequate supervision in 2012, I am trying to point out the trials of a flagging relationship between the BSL, its authority and the financial system. Should the public bank on the central bank to bank with the banks? Let’s cast our minds ahead, based on current realities, to attempt to answer that question.
In the first place there are reasons for apprehension. And here is why:
In late last year the Stability Analysis Report on Sierra Leone’s financial sector indicated that “the banking system was vulnerable to a certain level in all of the key areas of assessment and, therefore, had weaknesses.” As a consequence, between October and December 2011, this fear became a reality.
Quoting a BBC report aired on 2 January, “2012 has begun the same way 2011 ended. There is an apparent liquidity crisis leading to customers queuing up at banks for their money. Sources in the banking industry say the central bank is short of cash. Bank of Sierra Leone is yet to comment on the situation despite its persistence. They [BSL] are also grappling with the country's currency the Leone which is on clay legs.”
In fact in a July 2011 document titled: ‘Financial Sector Reform and Development in Sierra Leone,’ authored by Omotunde E. G. Johnson for the International Growth Centre (IGC), the pessimism was even justified. “Sierra Leone is at a very low level of financial development. It is a country of about six million people, with a per capita annual income currently around US$315. Sierra Leone currently has thirteen commercial banks, nine community banks…, two savings and loans…, and some forty-two foreign exchange bureaus,” according to the IGC, which is based at the London School of Economics and offers independent advice on economic growth to governments of developing countries.
While there seemed to be no indication of serious efforts to correct a possible liquidity wrong by end of 2011, this year’s fiscal prudence is likely to suffer neglect. This is an election year and reckless spending, like many election years, is not likely to heed any fiscal policy advice that is informed by judicious management. If anything the BSL could be at the mercy of the powerful power.
Meanwhile, a possible way out of this could include, but not limited to, a legal requirement that limits central bank credit to government to 5 percent, especially in an election year. It could enhance the independence of BSL and facilitate achievement of the monetary policy target it sets itself.
In addition the BSL could issue revised prudential guidelines in line with the amended banking act to enhance compliance with the Basel Core Principles (structural benchmark for end-September 2012). The said amendment to the BSL Act, which was submitted to parliament in November 2011, sets a limit on the annual flow of direct credit to government (loans and advances). It requires that such direct credit be repaid within 93 days from the end of the financial year.
But 2012 is here, and the status quo might flourish on inadequacy, abandoned legal regime and outright lack of oversight. The situation might get defiant. No thought is being given to that. Granted that Sierra Leone has a fairly liberalized financial system but interest rates and exchange rates are obviously market-determined. In other words, there are no selective credit controls.
“The soundness of the financial system is in some question, although it is not in any danger of crisis. The capital–asset ratio of the banks, for example, is good (about 17%), but non-performing loans are a problem, tending to hover around 16% in recent years,” the IGC observed. The report also found out that the current state of banking supervision was rudimentary. Again the BSL’s supervisory efforts, capacity and capability are being questioned.
“One certainly does not see any attempt to explicitly organize the approach to assessing the soundness and management of a financial firm in light of risks and risk management. This would emphasize the importance of a clear understanding of financial risks and optimal assignment of the responsibility for managing different types of risk (namely, liquidity, credit, interest rate, market, foreign exchange, operational, sovereign, legal, and fraud risk),” said IGC.
It also added that, all in all, the regulatory strategy is in need of a focused, coherent, modern approach. Banks in Sierra Leone are small with assets averaging about US$45 million, efficiency is low with non-interest expense averaging about 10.1% of total assets and interest rate spreading some 10.8 percentage points. There is also a high concentration in the banking sector despite recent improvement with the three largest banks – Sierra Leone Commercial Bank, Rokel Commercial Bank and Standard Chartered – holding about 54% of total assets. Skill and experience level of bankers are deemed to be low on average.
The payment system is very rudimentary, with no interoperable ATM system, no widespread credit card use in domestic payment transactions, no significant use of cheques or internet banking, and, of course, no electronic large-value payment system.
There is also no credit rating agency. Therefore, although there is no generally available empirical evidence on the matter, it is also very doubtful that the commercial banks have the data or the sophistication to have developed internal processes going beyond so-called traditional approaches to credit risk management.
Meanwhile, as we resolve to bank with and on 2012, the International Monetary Fund has some pieces of advice that could lead to responsible monetary engagements and the health of Sierra Leone’s financial systems, the banking sector. According to the Fund, “Spending must be kept in line with available financing to preserve hard-earned macroeconomic and debt sustainability. Infrastructure investment should be well grounded in medium-term public investment plans. It will be important to contain the wage bill while gradually raising public servant compensation to more competitive levels. This must be done in the context of a multiyear pay reform where corresponding savings are achieved through re-grading and retrenchments. To safeguard budgetary resources in the medium-term, the government should revisit the fuel pricing policy to ensure full pass-through from international to domestic prices while restoring fuel excises. Targeted measures should be adopted to protect the poor from significant fuel price adjustments.”
Perhaps a more appropriate intervention could be to learn how to deal with obvious liquidity crisis such as the one that rocked commercial banks across the country in the last three months. Access to funds was limited and banks could not pay people at a time like Christmas and New Year when they badly needed them to offset mounting social pressures. No obvious BSL reaction to the hardship was in the public domain. The situation is still refusing to go.
However, BSL can only maintain control over the supply of reserves and hence achieve its stated policy objective by developing a liquidity forecasting framework, an effort it first initiated in 2008 but is still grappling with. Meanwhile, in a lecture series titled: Central Bank Management of Surplus Liquidity (August 2006, Centre for Central Banking Studies, Bank of England), Simon T Gray noted that where there was a structural deficit and that the central bank should always lend enough to bring banks back to balance. Is BSL readily strong enough to do so?
“If the central bank judges that demand for liquidity is growing too fast, it will usually increase the cost of supplying liquidity, whether by raising its policy rate, or forcing banks to borrow more at penal standing credit facility rates. But it will always lend a sufficient volume to offset the shortage,” Gray suggested. He said: “The alternative would be disruption in the payment system: either banks would not be able to purchase enough banknotes to satisfy customer demand, or they would not be able to settle all payments due across the central bank’s balance sheet. At the margin, banks might have sufficient funds to make due payments, but would be left with smaller working balances than desired.”
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