President Koroma opens Minerals Sector Reform Workshop

Hon Ministers, members of the diplomatic corps,
Distinguished guests, and participants:

It is with great pleasure that I welcome you here today to discuss the reform of our country’s minerals sector. You will recall that at my inauguration, after the successful and peaceful transition from one government to another, I declared that a new dawn had been ushered in with the opportunity to lift our people from poverty and make significant improvement in their lives.

Shortly after that, I consulted with my Ministers, other Government officials and several personalities at home and abroad at a Retreat in Bumbuna to put together an agenda for achieving our goals. The result was the “Agenda for Change”. In that Agenda, we identified four sectors as the drivers of economic growth-agriculture, fisheries, tourism and mining.

The current Presidential Workshop on Minerals Sector Reform is part of that same drive to mobilize all the resources needed for achieving our national development goals and for ensuring that the State and people of Sierra Leone derive maximum benefit from the exploitation of their mineral resources.

As a driver of economic growth, the minerals sector should be capable of generating significant multiplier effects on the rest of the economy through the provision of employment opportunities both directly and indirectly as well as stimulate investments in businesses that provide supplies to it, and in turn create new enterprises from its own products. The minerals sector should be able to accomplish all of this in such a way that will preserve the environment for ourselves and for future generations.

Furthermore, as a source of growth, the sector should benefit from Increased private sector investment from credible companies; and provide a fair share of the benefits in the form of public revenue for further investment in, and expenditure on other sectors. It is customary for mining companies to support communities in the localities of the mines so that they as well will realise reasonable benefits from the exploitation of natural resources in the environment.

In sum, I would like to stress that as a growth sector the exploitation of minerals should not merely be viewed in terms of its revenue and export earnings potential, but equally in terms of the other spill-over effects such as technology transfer, local infrastructure development, employment, and linkages to the rest of the economy.

Ladies and gentlemen, in the current era of rising commodity prices especially for fuel and rice, restructuring our minerals sector is urgent as we look to it and other growth sectors to help us combat the pressures of poverty. This is why today’s workshop is so important.

This is not to say that we have not already started work on reforming and restructuring the minerals sector. We have recently initiated the process of reviewing all mineral rights in Sierra Leone. The intention is to secure optimal gains from current mining activities; particularly, in large-scale mining, The review is being conducted with support and advice from external partners knowledgeable in the field. We hope it will provide pointers on how to improve on the legal and other frameworks governing existing licenses and contracts in the light of current global conditions.

This is no doubt an important activity, but alone it will not deliver all the results we expect. The review must therefore be combined with an examination of the institutional changes required to facilitate investment from responsible, reputable companies and to ensure that government is equipped to better regulate the sector.

As we announce that “Sierra Leone is open for business” we must be cognizant about the competitive nature of the global economy and that Sierra Leone is in competition with other countries in attracting investment from mining companies. The cost of doing business in one country may therefore determine when and where a mining company decides to invest. This workshop should therefore examine the factors, such as the current regulatory system, that influence such transactions costs.

I am also challenging you to approach the task from all angles including the perspective of the mining companies. I am pleased that a number of participants here today are from mining companies who will later present their views on what it is like to do business in Sierra Leone.

From the perspective of the government, how can our role of creating an enabling environment for the responsible investors we want to do business here be enhanced? How do we best create and enforce the “rules of the game”-policies, laws and regulations-that shape business activity? How do we ensure they are applied consistently, transparently and predictably to give responsible investors the certainty they need to invest in our country?

How do we as government get more from the minerals sector? At present none of the mining companies operating in Sierra Leone is reporting a profit, hence our revenue from corporate tax is zero. Government must therefore act as an enabling state within which mining companies can operate productively and profitably. Our role is to ensure they meet the obligations of their licences, to adhere to regulations and to pay their taxes. We must also ensure that holders of other licences, such as exporters and traders, also meet the obligations of their license and pay their dues to government.

While the objective is for the minerals sector to act as a driver of economic growth, we must guard against economic growth “at all cost”. We must guard against exacerbating and multiplying the problems that currently exist. We must encourage investment from responsible and reputable businesses whose activities do not cause irreparable environmental damage or social unrest. We must therefore not be afraid to say “No” to investors whose business practices are not in the best interests of Sierra Leone or who are unlikely to advance into mining beyond prospecting and exploration. Of the 130 total non-artisanal licences in Sierra Leone, only 10 companies actually mine.

We must also be more consultative in our actions and increase transparency in the decision-making processes. I recently read that Venezuela paid the penalty for overlooking the strength of the voice of NGOs, as they were forced to withdraw from the Kimberley Process and will not export rough diamonds for two years. This must not be allowed to happen in Sierra Leone and I am pleased that at today’s workshop civil society organisations are well-represented.

It is critical that in developing the minerals sector we ensure that benefits and gains are realised by all communities in Sierra Leone but especially those in mining areas themselves. The Jenkins-Johnston report presented the delicate relationship that exists between government, mining companies and the community. While growth of the sector will create direct and indirect employment opportunities, we must ensure that a proportion of government revenues, through mechanisms such as the Diamond Area Community Development Fund (DACDF), are utilised for community development initiatives. We must also encourage mining companies to make their own investments in the areas in which they operate, through infrastructure, health clinics and schools for example.

To translate our vision of the mining sector as an engine of growth will require a change in institutional arrangements as well as a change in mindset in our management of the sector. The manner in which we have managed the minerals sector in the past has focused on administration and not on economic policy. The Ministry of Mineral Resources in particular needs to take the lead in developing and implementing policies that manage a key economic sector, and not just an organisation that administers processes.

Underpinning a change in mindset, we need efficient and effective government institutions that are staffed with professional public servants with the capacity to regulate the sector. This will require skilled managers, engineers and geologists in the public sector - difficult to achieve when the private sector is able to offer higher salaries than government. We must therefore consider various options, including new institutional arrangements that many of our African neighbours have adopted to better manage their countries’ minerals sector.

In conclusion, once again I welcome all the participants, especially those coming from abroad, at today’s workshop on minerals sector reform. It is time for our country to move beyond talking about our huge potential, to delivering results for the people of Sierra Leone. Doing so will require government, the private sector and civil society to embrace a common goal and vision for the future of the sector, to identify our priorities, to formulate a strategy and to allocate responsibility for implementation.

I expect from this workshop:

1. Identification of the underlying causes-not the symptoms-of the constraints to the development of the minerals sector;

2. Presentation of reforms necessary to shift the bottlenecks that prevent the sector from profitable development;

3. Agreement of strategic priorities

4. Allocation of responsibility for finalising and implementing the strategy

I will end by reaffirming my government’s commitment to implementing reform in the minerals sector that facilitates economic growth and poverty reduction. This workshop is an important step in our Agenda. We intend to adopt the same approach for the other growth sectors. I am therefore anxious to get the results of your deliberations as I am confident they will help to shape what we do in the others.

I wish you all a successful meeting.

Source: State House, Freetown.