Parastatals in Sierra Leone: The downfall after Independence

15 August 2009 at 22:44 | 2463 views

By Christian Foday Sesay Jr. PV Correspondent, Texas.

Public enterprises at the time of their creation were expected to play a fundamental role in the socio-economic developments of Sierra Leone. However, Many of them failed to live up to their expectations due to gross mismanagement and undue political interference – ultimately, paving the way for a free fall from grace to grass.

The problems of parastatals in Sierra Leone dated as far back as the colonial era - although the few parastatals that existed were not as badly managed as most of the ones that are currently in operation. When the colonial government decided that it was time to end colonialism in the early sixties, parastatals like the Sierra Leone Produce Marketing Board (SLPMB) and the Sierra Leone Selection Trust (SLST) later renamed National Diamond Mining Company (NDMC), were in a healthy financial state at least for a while until problems started surfacing towards the end of the Albert Margai era.

This does not in anyway suggest that colonialism did not contribute to the problems that are identifiable today in the management of parastatals. For instance, the problem of inadequately trained administrative and technical personnel began from the colonial era. The type of education acquired during this period did not prepare Sierra Leoneans enough to face the challenges of the current global technological demands.

Also, the creation of certain parastatals was to partly service the home country of the imperialists. Sierra Leone Produce Marketing Board (SLPMB) was to mainly export agricultural products to the home of the colonial masters, Britain, which were used as raw materials for their industries. Raw materials were processed and manufactured and sent back to Sierra Leone as finished products and sold at higher prices.

In the case of the Sierra Leone Railway, it was constructed as a way to ease the problem of transportation by linking the provinces to the city. That was why the railway services were made available to the cocoa and coffee producing regions, products of which were in high demands by British industries. The implication of this is that most development ventures undertaken during colonial era were in the interest of the colonial government.

Outside the problems inherited from the colonial masters, the blames for the bulk of the other problems could be placed squarely on past regimes.

With an estimated population of about four million populations then, and an area covering approximately seventy-two square kilometers, Sierra Leone is amongst the smallest states in the West coast of Africa, one that is blessed with rich mineral deposits, as well as abundant amount of offshore fishing and very fertile lands. At independence, there was much hope that Sierra Leone, having inherited an efficient civil service and productive public sectors, would become a model of economic power and prosperity in Africa.

During the transformational period from colonialism to independence, it became obvious that the nationalistic government under the nation’s first Prime Minister, Sir Milton Margai, had in mind a clear role for Public enterprise as a symbol for the promotion of national development. As father of a new nation and leader of the Sierra Leone’s People Party, Sir Milton Margai wanted to maintain and in some other cases expand on these forms of governmental administrative organization.

With the death of Sir Milton Margai in 1964, came into power his half brother, Albert Michael Margai. Unfortunately, he was not able to pursue the nationalistic vision his late brother had for public enterprises. Subsequently, the role of this highly regarded sector began to diminish slowly.

In 1967, the rule of the tantrum prone Prime Minister, Albert Margai was narrowly defeated by Siaka Steven’s All People’s Congress due to allegations of excessive corruptions of government officials and political interference of government parastatals. Up until the 1967 elections, Sierra Leone had been an exemplary democratic, post-colonial state. However, the campaign strategies pursued by Albert Margai would forever alter this trend. He was against any candidates from the opposition running against candidates from his own party. This sounds familiar! Margai refused to dignify accusation of corruption with a response. Riots broke out across Sierra Leone and the actual handing over of power was briefly interrupted by a military intervention that led to the declaration of a state of emergency.

The swearing-in of Siaka Stevens as the third Prime Minister of Sierra Leone did little to salvage the pride of government parastatals either. In fact, if anything, it exacerbated its free fall. Thus, the vicious cycle of orchestrating the demise of the public sector continued unabated.

In the late colonial and early independence era (1950-1972), it will be recalled that Sierra Leone experienced an average annual growth rate of 7%, which was one of the highest amongst the economies of the West African sub-region. This growth was accompanied by rising incomes in agriculture, mining, and the manufacturing sectors. Mining and agriculture remained the twin pillars of economic growth particularly in the export sector.

Under the watchful eyes of Siaka Stevens in the 70’s, the country’s economic performance became poor on most macro economic indices. By this period, the growth rate had slumped to around 3% a year from its 7% and by the second half of the decade, Gross Domestic Product (GDP) had sunk to under 2% a year.

But Some of these problems were not without the influence of what was going on in the world at that time. The OPEC oil price fiasco in the 70’s and the ensuing inflationary pressure inflicted on the economy had a huge impact on the direction public enterprises in Sierra Leone were going.

The terms of Trade of Sierra Leone’s export became worsened and the depletion of the rich iron ore deposits to the Sierra Leone Developmen Company (DELCO) ceasing production of iron ore in Marampa in 1975 were all catastrophic for the economy. The policy of under-valuing peasants prices of products sold to SLPMB encouraged farmers to smuggle their products to neighboring Guinea and Liberia with the aim of receiving better prices and in some cases paid in “hard” currency.

After 1980, with the public sector badly plaqued by economic mismanagement and corruption, the economy experienced a steep decline. The mining, agricultural and manufacturing parastatals came to a near halt. One consequence of the down turn in economic activities was a fall in government revenues leading to the crises of recurrent revenue. The net result of this budget crises was to increase the money supply thuis unleashing hyper-inflation. By the late 1980’s. inflation was running at 171%.

By 1986, the baton of leadership skipped S.I. Koroma and was passed on to a young and seemingly vibrant soldier in the name of Major-General Joseph Saidu Momoh. Thanks in part to the thick and thin sense of loyalty demonstrated to Siaka Stevens all through his reign. With the battered state of the economy in his mind, he went on to label his own regime the “New Order” in a bid to disassociate himself from the old gang. As optimistic as the people of Sierra Leone are, J.S. Momoh got the nation’s blessing. This meant that Sierra Leone should turn to a new page – a page with hope for a prosperous nation.

In view of this “New Order” tag that the Momoh administration became known for, the International Monetray Fund (IMF) was quick to dish out a loan to the tune of $40.5 Million. But as it is always expected, the loan came along with conditions, consequently, the introduction of the Structural Adjustment Programme(SAP) in Sierra Leone.

Structural Adjustment Policies are economic policies which countries must follow in order to qualify for new World Bank and International Monetary Fund (IMF) loans and help them make debt repayments on the older debts owed to commercial banks, governments and the World Bank.

As part of their conditions, the Momoh government agreed to devalue the Leone against the dollar; lift import and export restrictions; balance their budgets; keep a cap on spending; and remove price controls and state subsidies.

The effects of the agreement that President Momoh and his bandwagon of ill economic advisers had, was the straw that broke the camel’s back. What the devaluation of the Leone did was to allow cheaper prices for Sierra Leone’s product and practically made foreign imports more expensive. In principle it made Sierra Leone wary of buying expensive foreign equipment. In practice, however, the IMF actually disrupts this by rewarding the country with a large foreign currency loan that encourages it to purchase imports.

They were also required to balance the national budget and this can be done by one of two ways: Raising taxes, which the IMF discourages a government from doing, or by cutting government spending, which it definitely recommends. The Momoh administration really had no choice here but to go for the latter and cut down on expenditure.

The result of this move saw deeper financial cuts made in education, health and social care. This single act sets in the motion for the abysmal decline in education and health in Sierra Leone today. Also, the removal of subsidies designed to control the price of basics such as food and milk was embarked on. So the government’s action, through its weak grasps on basic economic principles, was enough to hurt the poor most because they depend heavily on these services and subsidies.

By the end of 1987, owing to J.S. Momoh’s failure to accelerate the devaluation of the Leone, and his government inability to honor its debt leading to the accumulation of arrears, the International Monetary Fund (IMF) suspended the agreement after using about one-quarter of the loan ($11.5 million).

By devaluing the Leone and floating it and simultaneously removing price controls, Sierra Leone witnessed an insane hike in prices of up to three times or more in some cases, increasing poverty, worsen the social and economic infrastructure and intensify scarcity of essential commodities like petrol, rice, flour, oil sugar to such an extent that it became intolerable for the masses. Foday Sankoh and his RUF thugs used the failure of J.S. Momoh and the collapse of Sierra Leone’s economy as a war platform upon which he will attempt to brutally settle an old political score.

It is against this background that the National Provisional Ruling Council under Captain Valentine Strasser overthrew the Momoh regime (29th April, 1992). In a desperate bid to combat the prevailing economic stagnation and usher in economic growth, the military government eye-marked privatization as the only viable means towards achieving their goals.

The concept of privatization of government enterprises as a way out of the economic malaise was a new phenomenon in Sierra Leone for its run contrary to much of the country’s tradition and history. As a result of this novelty, the Public Enterprise Reform and Divestiture Commission (PERDIC) was created by the NPRC regime to set the framework for privatization in 1993.

Between 1961 and 1992, the number of government parastatals has increased from six to forty-six. Initially, this surge presented a new problem for the NPRC government. The rapid increase in the number of public enterprise is itself an evidence of the general expansion in the scope of government. The overall result of increasing government intervention is declining productivity and inefficient utilization of resources.

The puzzling irony of the NPRC regime with regards to privatization was that, whilst privatization efforts were carried out by PERDIC, the Junta’s irrational and, at times perverse behavior of policy makers, leave much to be desired. As political creatures, these policy makers were subject to military influences. Where logical reasoning says, “stop”, military influence orders the system to “proceed at full speed”. Conversely, where the entrepreneurial minds in the corporations suggest speedy decisions, the overwhelming military mind of the policy makers in the regime most frequently weave a network of obstruction to allow for consultations with vested interest. What the people of Sierra Leone witnessed here was “double standards” at its best. The insincerity and hooliganism of the NPRC regime prevented it from making use of the golden opportunity to revitalize the public sector.

Through the 90’s, the rebel war in Sierra Leone did not create the kinds of economic environment that could have bolstered the commission’s effort towards privatization. Coupled with poor market conditions, inaccessibility to some of the parastatals and weaknesses in capacity and implementation, PERDIC was short lived, thus, paving the way for a transfer of its mandate to the Public enterprise Unit at the Ministry of Finance. By then, a total of about twenty-four smaller parastatals had been divested living the bigger corporations like SLPMB and SLRTC to continue as liabilities to the government.

In 2001, after the ten-year civil war, the Tejan-kabbah SLPP government restarted the divestiture process by approving the Strategic Plan for the Divestiture of State Enterprises and re-inventing the wheels when it established the National Commission For Privatization (NCP) to implement its policy. The NCP acts as the shareholder of state enterprises with a mandate not that different from PERDIC–to privatize them.

Today, almost forty years after the alarm bells sounded on weak parastatals in Sierra Leone, the nation is still polarized between keeping public enterprises and privatization. The problems of parastatals are not new. The nation did not wake up one morning to find much of its public sector in disarray. It began as a systemic process of government political interference from the era of Albert Margai.

What we have today in Sierra Leone is a situation whereby practically everybody wants to exercise authority over public enterprises, but will shy away from accepting responsibilities for failures. Political functionaries in and outside government circles, the various departments of civil service, and the competing interests within each enterprise, from independence to date – all of these make different demands on public enterprises.

The issue of corruption, political interference, autonomy and control became the central problem confronting too many of these public enterprises. But as the goose laying the golden egg, they were not destined to survive. The attitude of profound governmental and political interference completely wrecked the morale and productivity of public enterprises consequently hampering the economy of the country as a whole.