Diamonds Don’t Run an Economy Forever
Having been based with PDT on the Afghanistan marketplace project for over a year, and a fully fledged supporter of the results based work PDT does, I was keen to head to Freetown, Sierra Leone, to take a look at the local fiscal impact of donor spending on the economy along with the broader qualitative effects as part of the Economics of Peace and Humanitarian Operations (EPHO) project.
Arriving just in time for the rainy season (which as a Brit I was prepared for), with my waterproof jacket and a pile of business cards I set about meeting with the international donors, UN agencies and a selection of private sector businesses. There are some catchy names for businesses out there- my favorite having to be in rank of preference:
- Plan B- a nightclub
- Ice Ice Baby- ice production
- Big Daddy’s Cars- car sales
But, despite the catchy names the business community is struggling. Here are some of the challenges it faces:
- Lack of local manufacturing. This leads to a reliance on importation or, the purchase on the local market of imported goods, which are expensive and often of low quality.
- Access to capital. Interest is 27-30% making it almost impossible to gain access to the finances needed to open or expand a business.
- Lack of stable electricity. This leads to reliance on generators for any business that needs to keep produce cold. This means high fuel costs. Two supermarkets we spoke to told us fuel needs take up roughly $10,000 USD a month!
- Lack of infrastructure. This means that even though there is fertile land to work the product can’t be brought to market.
- High customs duty which incentives smuggling from across the border where the tax is lower.
There is a clear need for visible development projects – roads, stable electricity and water supply- to inspire confidence in the business community and enable businesses to operate without high costs for basic services. There is also a need to encourage light manufacturing industry and the development of SME financing institutions that can enable businesses to overcome the necessity of imports and to start up home grown supply. Finally, this supply needs to be supported wherever possible by local procurement. If only a Peace Dividend Marketplace project had been operating there…
Whilst Sierra Leone has been post conflict for almost a decade, other post conflict economies should take note that the international community represents a vital source of spending power that should be harnessed to support the local business community to regenerate and stabilize the country in the interests of both the international community. One gets goods faster, potentially cheaper and supports private sector development and job creation; the other helps rebuild industries valuable to the economy.