Thursday, August 09, 2007

Sierra Leone hopes elections bring prosperity

FREETOWN, Aug 8 (Reuters) - The half-sunken boats rusting in Freetown's harbour and the hawkers peddling everything from charcoal to shoes on its dilapidated streets are reminders that prosperity has lagged peace in Sierra Leone.

In the five years since the end of its 1991-2002 civil war, Sierra Leone's economy has recovered painfully slowly but its people now hope elections on Saturday, the first since U.N. peacekeepers left in 2005, can bring better times.

There are already some signs: billboards for mobile phone companies dot Freetown's streets and new buildings are rising across the city. Mining companies, the main foreign investors, are producing rutile and diamonds in the rugged interior.

But the former British colony's diverse mineral reserves remain largely untapped, its palm-fringed sandy beaches are empty of tourists, and its rich fisheries under-exploited.

"There is a lot of caution: this is still the first election since U.N. peacekeepers left," said Alvin Hilaire, the International Monetary Fund's representative. "Once the election is over, and that doubt disappears, investment should pick up."

The West African country's $1.5 billion economy grew by 7 percent last year and is on track to better that in 2007, but it needs much faster expansion to recuperate from a war that slashed two-thirds off its value.

Officials say fuel imports, a key measure of activity, are less than half their pre-war level.

With unemployment at 60 percent, most Sierra Leoneans earn under $1 a day and can only dream of getting a formal salary.

"There are no jobs. We invented this job for ourselves because there was nothing else," said Amadou Mansaray, an illegal money changer known as "the General".

Like many of the men grasping bundles of the local leone currency on street corners, he was once a fighter in the war.

Their hefty wads of notes are likely to grow larger still, with the IMF predicting inflation could end the year in double digits, defying government attempts to bring it down.

Prospects for next year are brighter, with the completion of the long-delayed Bumbuna hydroelectric dam expected to bring reliable power to the capital, which currently rumbles with thousands of smoky diesel generators.

"This is certainly the single biggest project for boosting the economy ... Without reasonably secure electricity at a reasonable price, you are not going to get foreign investment," said World Bank representative Engilbert Gudmundsson.


Foreign businessmen in Sierra Leone complain about onerous taxes and endemic corruption. Anti-graft watchdog Transparency International ranked it 14th most corrupt in the world in 2006.

John Sisay, head of Corporate Affairs and Investor Relations at Sierra Rutile, which has ploughed $150 million into mining, said there is little attempt to mask corruption.

"They are not shy because it's still part of their culture," said Sisay, one of a number of dynamic Sierra Leonean businessmen returning from overseas. But, with the elections sparking a debate about graft, he hopes for change.

"It's beginning to happen. People are starting to understand that there is a due process and that they could defend their rights within the legal structure."

Until now, the government has obliged companies to estimate profits in advance, forcing some investors to pay several times their actual profit in tax.

"The government is in a Catch 22 situation," said one disgruntled investor who asked not to be identified.

"It doesn't have money, but it doesn't have the capacity to collect revenue from the informal sector, so it goes after the few major investors as revenue providers instead."

The cancellation of $1.6 billion of Sierra Leone's foreign debt late last year gave the government some breathing space, but it still relies on aid for much of its budget.

Businesses, though, may be about to receive relief. In its last days the outgoing parliament passed legislation to simplify company registration and overhaul the corporate tax system.

"We expect that there will be some pretty positive signs coming out of here when these laws start getting put into practice," said the World Bank's Gudmundsson.

Business in Sierra Leone used to be synonymous with the Lebanese, who arrived here in the 19th century and dominated the diamond and trading sectors. But thousands fled during the war and other investors are filling their shoes.

"I would say that 90 percent of commercial enterprises used to be run by the Lebanese. Now it's less than 60 percent," said Central Bank Governor James Rogers.

Many of the general stores and supermarkets in downtown Freetown now have Indian or Chinese names. On the sandy crescent of Lumley Beach, a red pagoda named "Chinatown" boasts a supermarket, boutique, bakery and guest house.

Further along the waterfront, however, Freetown's once bustling port lies idle, as the government and the World Bank seek ways to attract investors to operate it.

"The port is ideal. It is a very good natural, deep-water port," said Gudmundsson. "We are fairly certain that there will be a few port operators who will be interested."

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