Direct Expatriate Nationals Investment (DENI)

The DENI-Sierra Leone Concept Paper (Updated version)

Sierra Leonean Context:

The Direct Expatriate Nationals Investment (DENI) proposal was originally designed as a Debt Relief and Poverty Reduction program but has since morphed into Enhanced DENI as an External Resource Mobilization and Poverty Reduction Program for countries that have received massive debt cancellation from the HIPC Program, mostly in Africa (including Sierra Leone). With the changing international politics (thanks to the G8 Summit 2005 in the UK), debt can be cancelled with the stroke of the pen, but poverty cannot be cancelled with the stroke of the pen. Hence, the enduring need for DENI as a poverty reduction program.

We, the Sierra Leonean Diaspora, constitute the greatest Sierra Leone’s offshore asset and the most indispensable catalyst in the accelerated development of our motherland because we have a permanent vested interest in the welfare of our people. The ever-growing Sierra Leonean Diaspora is poised for this unprecedented role by virtue of our remittances, which are already a significant and growing portion of the GNP of our country. The sheer magnitude of remittances to Sierra Leone is staggering yet Sierra Leoneans have nothing visible and collectively owned to show for it. This phenomenon is apparent in virtually all African countries – a lot of money pouring in from the Diaspora but nothing monumental to show for it. The aggregate volume of remittances to Sierra Leone now exceeds all forms of foreign aid combined. And there is more where that comes from. Thus, we as Sierra Leoneans both at home and abroad are only limited by our creativity in terms of how best to exploit this external “gold-mine” of private funds for the common good at home. DENI - SL is one such example of creativity that Sierra Leoneans in the Diaspora have embraced wholeheartedly.

What is DENI all about?

The millions of expatriate Sierra Leoneans living and working abroad today are Sierra Leone’s most precious and under-utilized resource. These individuals are not only earning money abroad and sending some of it back home to their families, but much more importantly they also represent an incredible pool of human resources in expertise, knowledge, education, experience, entrepreneurship and enthusiasm that can be deployed creatively on a host of development fronts at home. Sierra Leoneans in the Diaspora have done two things, namely: we have sent money home primarily for consumption (to reduce the symptoms of poverty) and we (those of us who are financially able) have also sent extra money home to micro-finance SMEs for our relatives as well as contribute to all kinds of non-profit community development projects in our villages, towns and cities. We are now looking to go to the next logical step for remittances - investing in large-scale enterprises starting with privatization of our country’s state-owned enterprises (SOEs). DENI is all about creating millions of new owners of income-generating assets as opposed to a handful of millionaires in the country. This is good for the country because widespread ownership of assets creates a robust economy that is good for everybody - job seekers as well as investors. That is the thrust of DENI with its most outstanding attribute as a people-driven initiative, which is immensely empowering. This is truly visionary. DENI is a Sierra Leonean people’s solution for poverty reduction.

The ingenuity of DENI

In a nutshell, the ingenuity of DENI is to mobilize expatriate (living and working in the West) and home-based Sierra Leoneans to pool their resources one-by-one to purchase outright (or buy into), at the very least, one or more of state-owned enterprises (SOEs) in the country that are slated for privatization, resulting in widespread ownership of these assets by the our own nationals and the reinvestment of their dividend earnings ploughed back into the economy, leading to massive economic stimulation, accelerated growth and poverty reduction. The DENI proposal has great merit in its universality and simplicity. The goal of the DENI, in the first round, is to raise as much as $150 million dollars for the government that is not a loan and is not a grant, but a purchase price from the country’s citizens. And if both sides – the government and the people – are happy with the success of the first round, we will arrange to do it again and again. In this initiative, there will be no strings attached, no humiliating conditionalities and no donor interference. The program will be totally owned by the Sierra Leonean government and their very own nationals at home and abroad. All this in exchange for the ownership of asset shares in privatized state-owned enterprises (SOEs) - thus keeping the family jewels in the family, instead of selling them to foreigners - exactly the way the Government and people of Sierra Leone want it, to avoid foreign dominance of our impoverished economy. That is the ingenuity of DENI.

DENI is based on 5 premises

The ultimate aim of DENI is to stimulate the Sierra Leonean economy and create a Culture of Ownership to replace a culture of dependency on foreign aid. The appeal of the DENI model is based on 5 premises – all of them valid and ever so true.

First: that Sierra Leoneans in the Diaspora have tremendous faith in the remittance lifeline because of our extended family structure. We have sent money home when the international community abandoned our country to its own devices; we have sent money home in the middle of a raging civil war, we have sent money home when there is no functioning bank, we have sent money home even when there was no functioning government. Such is the audacity of the Sierra Leonean Diaspora in their determination to help their loved ones at home.

Second: that we, in the Diaspora have done two things, namely: we have sent money home primarily for consumption (to reduce poverty) and we (those of us who are financially able) have also sent extra money home to micro-finance SMEs for our relatives. We are now looking to go to the next logical step for remittances - investing in large-scale enterprises starting with privatization of our country’s State-Owned Enterprises (SOEs).

Third: that remittances from the Diaspora stimulate our economy by increasing currency flow and consumer purchasing power. These are literally life saving injections, but we can’t help everybody individually in the whole country. If we could, we would, but that is not possible. Instead, when we help our country economically through an ingenious program such as DENI - SL and the economy improves, the positive effects spill over to EVERYBODY IN THE COUNTRY. The poverty reduction implications are obvious.

Fourth: that DENI - SL represents a major frontline (but as yet untapped) source of self-help development finance. This is to replace the culture of dependency on foreign aid with a Culture of Ownership in home-grown publicly traded companies (our NATIONAL assets). This is not about the discredited African Socialism of the 60s or some communist ideology. Ownership has always been there in our culture long before Western civilization came to our shores. We are simply re-asserting what is familiar to us. Our ancestors owned property so re-creating a culture of ownership to replace a culture of dependency on aid hand-outs is not foreign to Sierra Leone.

Fifth: that Government officials who frequently travel abroad and interact with Sierra Leoneans living and working in foreign lands have noted that most Sierra Leoneans in the Diaspora have a longing to be part of some larger “cause” to relate to on equal terms of engagement for the good of their home country. DENI - SL provides us with that larger “cause” to belong to on an equal footing with no eligibility restrictions except being a Sierra Leonean national. DENI - SL operates above ethnic lines - it is all-inclusive. This is perfectly consistent with the stated public policy of our government to bring people from different backgrounds and walks of life together to live in peace and harmony with one another and enhance the welfare of each other.

The Design of DENI:

From inception, DENI was designed to be managed by African nationals themselves, meaning, Sierra Leoneans for the DENI Program for Sierra Leone, Liberians for the DENI Program for Liberia, Malians for the DENI Program for Mali, Ghanaians for the DENI Program for Ghana, and so on down the line country-by-country until we get to Zimbabweans for the DENI Program for Zimbabwe. The model can and will be replicated across the continent. For each cooperating country, capable nationals will be identified and hired as Consultants to manage their country’s DENI Program. There is a compelling reason why DENI was designed this way. When Sierra Leonean nationals are allowed to work on their country’s projects, that hands-on experience builds their capacity and expertise for future projects. This is the capacity building dimension of DENI - SL.

The first order of business, then, begins with sending a DENI Mission of at least 4 to 8 competent Consultants selected from Sierra Leone’s own nationals in Diaspora to go to Freetown to execute generic Terms of Reference (TOR) culminating into the country-specific Project Implementation Program. This mission will be at no cost to the government. Several international development agencies are ready to fund such a mission if the government takes ownership of the project and submits a formal request. Another design feature of Enhanced DENI is the full participation of the Sierra Leoneans at home. But why allow Sierra Leoneans at home to participate in DENI - SL, which is primarily a Diaspora-driven initiative? It is because, we in the Diaspora, don’t want to be perceived as self-serving. To avoid unnecessary criticism from the media and local politicians (MPs at home), we will allow Sierra Leoneans at home who want to and are financially able to participate in DENI - SL, to do so on exactly the same terms as Sierra Leoneans in the Diaspora. We are in this together. After all, what we are addressing here is poverty reduction in the whole country. And poverty is not just among the extended families of the Sierra Leoneans in the Diaspora; poverty is also among the families who have no one in the Diaspora to send them remittances.

Which way- DENI way or IPO way?

DENI was designed to create a culture of mass ownership of Sierra Leone’s national resources leading to mass poverty reduction. Millions of Sierra Leoneans have the potential to benefit from DENI in terms of personal prosperity and economic freedom. The effect of doing it the DENI way is that we end up with a whole new entrepreneurial class of ordinary folks entering that elite group of people known as “stock-owners.” What this does is that it helps expand the circle of opportunity and creates a culture of ownership to replace a culture of dependency on foreign aid. Doing it the traditional way, that is, divesting government ownership in a SOEs by way of an Initial Public Offering (IPO) to the Sierra Leonean marketplace, you end up with the usual suspects (institutional investors, mutual funds, equity funds, insurance companies, pension funds, venture capitalists, banks, etc.) buying up all the assets in massive quantities in a hurry for purely speculative purposes – buying low now and selling high later. Or worse, selling whole enterprises to foreigners like the Chinese, South Africans, Koreans, Malaysians and the like… That does absolutely nothing for poverty reduction in the country! The same circle of people end up getting richer and richer while everybody else is either stagnating or getting poorer. Yet, from the revenue standpoint, the government ends up getting the same amount of money, no less, whether it takes the DENI way or the IPO way.

So, the government of Sierra Leone has a critical choice to make in privatizing its SOEs: getting the same amount of money with a massive impact on poverty reduction (the DENI way) or getting the same amount of money with no impact at all on poverty reduction (the IPO way). When the rich get richer, poverty is not impacted. But when new people get richer, the “middle class” expands and poverty contracts. It should be a matter of public policy to share opportunities such as these and spread wealth around for a healthy economy. People will understand that an opportunity offered and not taken is better than an opportunity denied. If at the end of the day, Sierra Leone is as beautiful as God meant it to be but its endowed wealth has slipped from the hands of Sierra Leoneans into the hands of foreigners, our country will have a lot explaining to do to posterity. How come, what was given to us by the Almighty’s providence, we gave it away to somebody else? The next generation will ask: how come we live on our ancestral land but we own nothing and foreigners own everything? Who will answer? We are at a tipping point. If (we) the current generation fails Sierra Leone by the way we mishandle Sierra Leone’s vast resources by auctioning them to the highest bidder in this destabilizing era of globalization, we might be doomed forever. We cannot afford to fail our posterity the way our dawn-of-independence generation has failed us. We are determined to succeed where others have failed.

Creation of Wealth:

By promoting a Culture of Ownership – whereby ordinary Sierra Leoneans own stocks and shares traded on the Sierra Leone Stock Exchange (SL-SE) - immense wealth can be created. Some astute Sierra Leoneans have become wealthy playing the stock market operated in foreign lands. But this is not unique. Ordinary citizens in the West have created tremendous wealth for themselves through this process. The second richest man in the world (an American, Warren Buffet) never founded or owned a company – only shares in various companies publicly traded on the US stock exchanges. The richest man is, of course, Bill Gates who founded Microsoft Corporation. As of today, 60% of American households own shares on Stock Exchanges as compared to 0% of Sierra Leonean households. The DENI - SL investor’s existing asset market exit strategy is going to be the SL-SE. Every African country ought to have one. The DEN- SL I project will do several things at once (to name just two): Firstly: The DENI program will sensitize Sierra Leoneans about the value of owning stocks and shares in home-grown publicly owned companies because very few of our people at home and (even) abroad understand them as a source of creating wealth. Secondly: DENI will encourage Sierra Leoneans to invest in stocks and shares for themselves and also for their relatives at home as gifts to them. In most African countries (including Sierra Leone) the potential return on investment averages 20-30% a year. There is nowhere else in the world where this can happen, not even in booming China. Sierra Leone is clearly poised for tremendous growth if we can agree to do the right thing for the common good.

Courtesy of Frederick W. Kwoba of DENI -Africa

Photo: Amadu Massally, Global Coordinator, DENI-Sierra Leone.