Sierra Leone Jamal Zayid / Moses Sichei /

Transcription

1 2016 Jamal Zayid / j.zayid@afdb.org Moses Sichei / moses.sichei@undp.org Milton Korseh-Hindowa / milton.korseh-hindowa@undp.org

2 Sierra Leone Sierra Leone is currently grappling with the after-effects of the Ebola crisis and the sustained decline in iron ore prices. Accordingly, GDP for 2015 is estimated to have contracted by more than one-fifth. Remedial actions and policies are needed to improve the indicators that may have been reversed by the Ebola Virus Disease (EVD) crisis, following positive strides in improved economic and political governance. Sierra Leone, with approximately 40% urban population is experiencing its urbanisation without industrialisation (manufacturing), which does not promote appropriate structural linkages and sustained transformation of the economy. Overview Sierra Leone is on the path to recovery following the effects of an 18-month Ebola outbreak and the sustained decline of iron ore prices. The Ebola outbreak affected the socio-economic livelihoods of the country, disrupting normal health care and education services, agricultural production and trade. The iron ore price decline affected macro-financial stability and reversed the country s remarkable positive growth trajectory as economic growth declined from a buoyant 20.1% in 2013 to 4.6% in 2014 and thereafter contracted by 21.5% in 2015 according to the latest estimates. GDP in 2016 is expected to remain relatively unchanged and to rise moderately in Inflation, which was moderate in the first quarter of 2015, is now estimated at 9.9% for 2015 and is expected to hover around 10% in 2016 and The Bank of Sierra Leone (BSL) needs to be vigilant as regards second-round inflationary pressures resulting from the depreciation of the Leone and the bottoming out of crude oil prices. Fiscal space in Sierra Leone is very limited due to the historically low revenue to GDP ratio and higher government expenditure. There have been significant gains in the Human Development Index (HDI) from in 2005 to in 2014 (an improvement of more than 20%), and this will most likely be reversed due to the impact of the EVD on health (i.e. life expectancy at birth), education (years of schooling) and standard of living (gross national income per capita). Having failed to achieve most Millennium Development Goals (MDGs) by 2015, government authorities and development partners on the ground are now aware of the pertinence and inseparability of the 17 Sustainable Development Goals (SDGs) which essentially means that development work should be across all sectors. Government needs to do more on poverty reduction using the new poverty-related data and information which will be generated by the population and housing census conducted in December Sierra Leone has a population of about 6.3 million with approximately 39.1% living in urban areas (Freetown, Bo, Kenema, Makeni and other urban areas) in 2015 and the urbanisation rate is projected to reach 43.8% in Manufacturing is the missing link in Sierra Leone s structural transformation as labour migrates from low productivity agricultural activities in the rural areas directly to low productivity services (informal jobs in the urban areas) without a transformative industrial sector. 2 African Economic Outlook AfDB, OECD, UNDP 2016

3 % AfDB, OECD, UNDP Figure 1. Real GDP growth Real GDP growth (%) West Africa (%) Africa (%) (e) 2016(p) 2017(p) Source: AfDB, Statistics Department AEO. Estimates (e); projections (p). Table 1. Macroeconomic development (e) 2016(p) 2017(p) Real GDP growth Real GDP per capita growth CPI inflation Budget balance % GDP Current account % GDP Source: Data from domestic authorities; estimates (e) and projections (p) based on authors' calculations. Recent developments and prospects Sierra Leone is now battling the adverse impact of two severe exogenous shocks: the aftereffects of the Ebola epidemic and the collapse of iron ore prices in 2014 that culminated in the cessation of its production and exports in April Iron ore production is expected to resume in late 2016 despite the acquisition of London Mining (LM) by Timis and African Minerals Limited (AML) by Shandong, a Chinese Steel group which was previously a minority shareholder in AML. Real GDP (inclusive of iron ore) is estimated to have contracted by 21.5% in 2015, following 4.6% growth in Inflation moderated in the first quarter of 2015, is now estimated at 9.9% for 2015 and expected to hover around 10% in 2016 and Revenue shortfalls, including loss of revenue from iron ore mining, and higher than budgeted spending related to the Ebola epidemic, contributed to deterioration in the fiscal balance, with the budget deficit estimated to be 3.7% of GDP in 2015 and projected to increase to 6.0% in 2016 and remain more or less the same for Both the current account balance and foreign reserve accumulation benefited from increased inflows related to Ebola transfers, with the current account deficit narrowing to 11.3% of GDP in 2015 from 16.4% in 2014, despite the loss of iron ore export receipts. GDP for 2016 is expected to remain relatively unchanged but it is projected to rise moderately in The devastating output effects of the two shocks attest to the fact that drivers of fragility in the country are well entrenched in the economy, and should not be obscured by any transient impressive growth. There are other challenges, including systemic capacity constraints and weak systems of African Economic Outlook 3Sierra Leone

4 governance, which exacerbate the adverse impact and effects of the prevailing exogenous shocks in Sierra Leone. Table 2 shows composition of GDP by sector. Table 2. GDP by sector (percentage of GDP at current prices) Agriculture, forestry, fishing and hunting of which fishing Mining and quarrying of which oil Manufacturing Electricity, gas and water Construction Wholesale and retail trade; Repair of vehicles household goods; Restaurants and hotels of which hotels and restaurants Transport, storage and communication Finance, real estate and business services Public administration and defence Other services Gross domestic product at basic prices / factor cost Source: Data from domestic authorities. While agriculture, including forestry, fishing and hunting, continued to account for more than half of GDP in 2014, its relative weight has been declining (50.5% down from 56.0 in 2010) indicating a structural shift towards mining and quarrying (20.2% in 2014 up from 4.2% in 2010). Manufacturing accounted for a mere 1.6% of GDP in 2014, declining from 2.3% in This finding supports the argument in the Overview and the Thematic Section of this report that Sierra Leone has had its urbanisation without industrialisation (manufacturing), with all the attendant structural transformation implications which will be discussed later. Macroeconomic policy Fiscal policy The fiscal position weakened significantly in 2014 relative to Revenue was roughly 5% below the projected level, with shortfalls in personal income tax (PIT), excise duty and mining revenue from iron ore, mostly driven by the economic impact of the Ebola epidemic and lower revenue collection from the iron ore sector. Total expenditures were lower than anticipated because of the significant scaling back of externally financed investment, as many projects were stopped due to either Ebola-related restrictions or reprogramming of financial resources to support government in the Ebola response. However, there were overruns in current spending, reflecting Ebola-related outlays, and higher than budgeted spending on wages and salaries, mostly due to public sector recruitments that were higher than planned in the budget both in goods and services and in domestically financed public investment. The poor revenue performance and delays in the receipt of budget support led to the accumulation of unpaid bills amounting to 200 billion leone (SLL) at end-june These were cleared in the second half of the year through expenditure reallocation and additional external financing. The measures introduced by government were expected to increase revenue collection base in 2015 (other things remaining equal). But as is well-known, tax revenue is a function of GDP, which is projected to contract by over 20% in 2015 and to remain relatively unchanged in African Economic Outlook AfDB, OECD, UNDP 2016

5 AfDB, OECD, UNDP 2016 The measures put in place are sound and effective and, in the absence of exogenous shocks, can raise the historically low revenue to GDP ratio in Sierra Leone. The AfDB is helping government undertake a study of Domestic Resource Mobilisation which is now at the procurement stage for consultancy services. This study will hopefully result in recommendations on how to increase the revenue to GDP ratio effort in Sierra Leone. External budget support (loans and grants) totaled SLL 656 billion, significantly higher than budgeted, reflecting increased support from Sierra Leone s development partners to help address the impact of Ebola on the government budget. Table 3 shows that grants peaked in 2015 at 6.5% of GDP which is roughly half the size of tax revenue. This is mainly due to Ebola and post-ebola related transfers. Plans to establish a Treasury Single Account (TSA) are at an advanced stage. The unified bank accounts via TSA will provide a consolidated view of the government cash position and thus facilitate better fiscal co-ordination and reconciliation of fiscal information. Table 3. Public finances (percentage of GDP at current prices) (e) 2016(p) 2017(p) Total revenue and grants Tax revenue Grants Total expenditure and net lending (a) Current expenditure Excluding interest Wages and salaries Interest Capital expenditure Primary balance Overall balance Note : a. Only major items are reported. Source: Data from domestic authorities; estimates (e) and projections (p) based on authors' calculations. Monetary policy Monetary sector developments in 2014 and 2015 were also heavily influenced by the economic impact of the Ebola epidemic. Currency in circulation increased significantly, particularly in the second half of 2014, reflecting disruptions and uncertainties engendered by the spread of the disease before it was contained. Ebola-related capital inflows contributed to a sharp increase in net foreign assets. Meanwhile, credit to the private sector rose by only 5.4% in 2014, slowing further to 4.2% annual rate in the first half of 2015, consistent with the economic slowdown. Reserve money grew by 30% in 2014, well above the rate targeted by government, before slowing to 23% as of end-june The monetary policy rate was kept at 10% in 2014, but was reduced to 9.5% in March 2015, in order to support the post-ebola recovery. Being a net oil importer, inflationary pressures have remained exceptionally subdued due to the continued decline of international crude oil prices. However, the Bank of Sierra Leone (BSL) needs to be vigilant as regards secondround inflationary pressures resulting from the depreciation of the Leone and bottoming out of crude oil prices and may have to tighten monetary policy. Another issue which BSL needs to tackle promptly is the high ratio of non-performing loans (NPL), which reached 39.6% of gross loans in June Economic co-operation, regional integration and trade Total goods exports declined from USD million in 2013 (31.3% of GDP), to USD million in 2014 (26.3% of GDP). This was largely caused by the decline in international prices for Sierra Leone s key mineral products (accounting for almost 77% of exports), in particular prices for iron ore. With the halt in iron ore production, 2015 exports are projected to decline sharply to African Economic Outlook 5Sierra Leone

6 USD 586 million with the decline persisting through Total imports rose moderately from 31.9% of GDP in 2013 to 33.2% of GDP in 2014, reflecting mainly Ebola-related goods and services that more than compensated for the decline in imports of fuel products, food and machinery. As a result, the trade deficit in goods increased from 0.6% of GDP in 2013, to 6.9% of GDP in For 2015, the collapse in iron ore exports was partially offset by a more than 15% decline in goods imports, as Ebola-related and oil-related imports declined. Nonetheless, the 2016 trade deficit is projected to be 4.0% of GDP, higher than the previous year, and reach 6.2% of GDP in Regarding regional integration, there are still challenges in the free movement of people and capital across the Economic Community of West African States (ECOWAS) countries but the situation had been improving in recent years until the advent of the EVD with its emergency restrictions. Now, the situation is back to normal following the declaration that the three worst affected countries are free of Ebola. The Mano River Union (MRU) Initiative remains on track with the power interconnection project that connects Sierra Leone, Guinea, Liberia and Cote d Ivoire already approved and currently under implementation. The MRU regional transport project is under implementation as well. Table 4. Current account (percentage of GDP at current prices) (e) 2016(p) 2017(p) Trade balance Exports of goods (f.o.b.) Imports of goods (f.o.b.) Services Factor income Current transfers Current account balance Source: Data from domestic authorities; estimates (e) and projections (p) based on authors' calculations. Debt policy Public debt levels (domestic and external) remain low and sustainable, with all debt indicators below their thresholds. However, stress tests point to vulnerability to adverse shocks affecting key macroeconomic variables, particularly exports, in view of Sierra Leone s narrow export base. According to the latest Debt Sustainability Analysis (DSA) update, external debt was estimated at 21.3% of GDP for 2013 and should stabilise around 23% of GDP for Domestic debt is expected to reach around 10% for The main challenge for the debt sustainability framework is the fiscal situation. As domestic revenue declines, fiscal sustainability leaves the DSA framework susceptible to shocks. The policy implication is that domestic revenue mobilisation (especially from the booming mineral sector) needs to recover quickly. The African Development Bank (AfDB) continues to support government in its on-going Diagnostic Domestic Revenue Mobilisation Study. It is somewhat reassuring to note that according to the IMF/WB DSA in March 2015, Sierra Leone was classified to be at a moderate risk of debt distress. The risk for debt distress is expected to increase in 2016/17 before moving back to the 2015 level. 6 African Economic Outlook AfDB, OECD, UNDP 2016

7 % AfDB, OECD, UNDP Figure 2. Stock of total external debt (percentage of GDP) and debt service (percentage of exports of goods and services) Source : IMF (WEO & Article IV). Outstanding debt (public and private) /GDP Economic and political governance Private sector Debt service/exports The Government of Sierra Leone continues to promote private sector activity through the establishment of a one stop shop for investors, the Sierra Leone Investment and Export Promotion Agency (SLIEPA), the implementation of key trade-promotion activities under the Integrated Framework, and the modernisation of the legal and regulatory framework. The success of these reforms has improved Sierra Leone s ranking by 9 places between 2011 and 2014 according to the World Bank report, Doing Business The country moved from the 150th place in 2011 to 141st in 2012 but dropped back to 147th in 2015, out of 189 countries. The number of procedures, time and cost required for licensing a business have all improved since For 2015, the country was ranked 91st in starting a business but 172nd in getting electricity which testifies to the infrastructure bottlenecks within the country. It should be noted that the deterioration of the ranking of Sierra Leone in 2015 does not necessarily mean that it has regressed in absolute terms. Rather, there is progress but Sierra Leone did not perform as well as other countries. Ranked on the Global Competitiveness Index (GCI) as 138th out of 144 economies in the Global Competitiveness Report , it is understood that infrastructure deficiencies in Sierra Leone (transport, power, water supply and sanitation) pose a serious threat to effecting sustainable growth and development and hence poverty reduction. Sierra Leone had an average Africa Infrastructure Development Index (AIDI) of 7.41 for , which is less than half the AIDI average for Africa of for the same period. Weak (soft and hard) infrastructure was one of the many impediments that have frustrated efforts to fight the Ebola epidemic. Financial sector Financial sector developments have been broadly in line with the country s Financial Sector Development Plan 2009 (FSDP), which aims to enhance financial stability by widening and deepening the financial sector, amongst other measures. At end-2014 most banks complied with African Economic Outlook 7Sierra Leone

8 prudential norms. However, compared with 2013, the number of banks that were non-compliant with the minimum liquidity, capital adequacy, and NPL ratios increased. Loan concentration remains high with international trade, construction, and services accounting for about three quarters of total loans. NPLs have grown significantly, reaching 39.6% of gross loans at end-june 2015, a problem that the BSL is currently addressing. BSL supervisory policy in 2015 continued to focus more on strengthening financial stability in the banking and financial sector. This is done through appropriate supervisory actions, including on-site and off-site surveillance. The banking sector performance continued to improve and remained satisfactory in the first half of As at end-june 2015, the banking sector was adequately capitalised with the capital adequacy ratios at 33.63%, which was well above the minimum requirements of 15%. In spite of the EVD, the sector continued to post strong earnings. As regards the high NPL ratio, which is partially due to keeping old loans on the books, BSL is aggressively pursuing a comprehensive plan for debt write-off to reduce the NPL ratio. Additionally, BSL is moving into a risk-based supervisory framework, while at the same time strengthening the capacity of staff to undertake stress testing of the banking sector. There are currently 13 commercial banks in the country with several branches. The number of bank accounts in the country has been growing over time to its current level of over accounts which represents approximately 10% of the population. Additionally, the prevalence and growing importance of mobile banking has increased the banking penetration ratio. Mobile banking was first introduced by Airtel mobile company in 2010 and has been growing ever since especially through Microfinance Institutions (MFIs). The mobile money transfer system is a supply-side medium set up to meet the specific cash transfer needs of many unbanked Sierra Leoneans. The system allows people to send and receive money via their cell phones through major mobile network providers such as Airtel and Africell. Furthermore, BSL is pushing for a number of bills to be enacted by parliament that will further enhance the sector s stability. These include the Borrowers and Lenders Bill, and the Collective Investment bill. Public sector management, institutions and reform In recognition of the growing concern among public sector workers about low wages, government has worked on the implementation of a multi-year pay reform plan ( ) aimed at bringing the wages of public servants to more competitive levels. The reform were supported with assistance from development partners and shall be further informed by a comprehensive civil service reform study, which was recently commissioned. Notable achievements in fighting corruption have been sustained in recent years. The increased efforts by the Anti-Corruption Commission (ACC) and the implementation of the National Anti-Corruption Strategy (NACS) that was launched in 2008 have helped Sierra Leone to improve its ranking in the corruption perception index (CPI). The country s ranking as reported by Transparency International was 158th out of 180 countries in In 2010, the country s ranking was upgraded to 146 then to 134 in 2011 and finally to 123 (out of 176) in There was further improvement in 2013 as it was ranked 119 out of 175 countries with a CPI score of 30. Sierra Leone kept the rank of 119 (out of 167) in 2015 but with a lower CPI of 29. The 2015 Mo Ibrahim s Index for African Governance (IIAG) places Sierra Leone 5th in the sub-region and 25th in the continent. Natural resource management and environment Matters have not changed since Since its establishment in 2008, the Sierra Leone Environmental Protection Agency (EPA) has taken many steps to inform the public about illegal logging, farming and mining in protected forest areas in order to stem deforestation and maintain biodiversity. The agency s robust monitoring and evaluation mechanism staffed by 8 African Economic Outlook AfDB, OECD, UNDP 2016

9 AfDB, OECD, UNDP 2016 well-motivated and committed personnel grounded to a halt due to the travel restrictions arising from the Ebola outbreak. Efforts to support the environment were further undermined by the quarantine imposed in 12 out of the 13 districts in the provinces as the crisis increased the danger of poaching in animal reserves, illegal logging, farming and mining. This impacted negatively on the advances made in protecting water catchment areas, forest and animal reserves, thus reversing efforts made previously towards attaining the Millennium Development Goal (MDG) related to environmental protection. Political context The country continues to make good progress in the development of legitimate political systems and separation of powers. General elections were last held on 17 November 2012 and described by observers as free and fair. The result was a victory for the incumbent President Ernest Bai Koroma of the All People s Congress (APC), who received 58.7% of the vote. A Constitutional Review Committee (CRC), which was established in July 2013 to undertake a comprehensive review of the 1991 Constitution, is expected to submit a draft constitution to the president by March Thereafter CRC will be wound up and preparations for a referendum commenced. Other critical activities for the next elections, which were disrupted by the EVD, must be fasttracked and include updating of the voters and population census data (for delimiting of electoral boundaries). Consequently, the National Electoral Commission (NEC) has proposed multi-tiered elections (presidential, parliamentary and local council in early 2018). The proposed electoral calendar comprises boundary delimitations by the end of 2016 and updating of the voters register and a referendum by the end of In this context, Sierra Leone conducted a housing and population census in December As a democracy, the laws affecting economic activity are predictable and impartial, to a reasonable extent. The judiciary is constantly improving albeit from a low base and this enhances the enforcement of new laws. According to the 2015 Global Peace Index (GPI), Sierra Leone is ranked the 59th most peaceful country out of 162. The media has substantial freedom notwithstanding the existence of the Libel Law and Public Order Act, which are opposed by most media practitioners. Social context and human resources development Building human resources About 77.5% of the country s population remains trapped in multi-dimensional (non-income) poverty with overlapping deprivations in education, health and other living standards, while 14.6% are at risk of falling back into poverty. These groups often fail to achieve improvements in their standard of living because they have limited political participation, livelihood options and access to basic social services. Even when they escape poverty, their situation may reverse rapidly when crises hit. Sierra Leone has a youthful population, with 63% of the population below the age of 25 years. Due to the civil war, a large proportion of this population has limited education or vocational skill levels, thereby adding further challenges to their absorption into the small formal labour market. Sierra Leone is one of three countries in the MRU that experienced the most prolonged and devastating outbreak of EVD. As of 20 October 2015, an estimated probable and confirmed cases and over deaths have been recorded in Sierra Leone. The country was declared Ebola free on 7 November 2015 but a new case was discovered in January 2016, prompting the quarantine of over 100 people based on contact tracing. There have been significant gains in Human Development Index (HDI) from in 2005 to in 2014, which will most likely be reversed due to the impact of EVD on health (i.e. life expectancy at birth), education (years of schooling) and standard of living (gross national income per capita). The government had made efforts to reach the MDGs that relate to education, by African Economic Outlook 9Sierra Leone

10 providing quality education at all levels. Over the period , progress in attaining MDG 2 (universal primary education) was made with primary school participation (gross enrollment ratio) at 129.4% for boys and 120.1% for girls. The net attendance rate was less impressive at 74% and survival rate to complete primary level was 92.5%. Pre-primary and secondary enrollment ratios are much lower, however. The pre-primary enrollment ratio was just 6.7% for male children and 7% for females while for secondary schools, the net attendance ratio was 39.9% for boys and 33.2% for girls in The adult literacy rate stands at 43.3% due primarily to lost school years during the conflict but amongst youth (15-24 years) the literacy rate is higher at 70.5% for males and 52.1% for females. Having failed to achieve most MDGs by 2015, government authorities and development partners on the ground are now aware of the pertinence and inseparability of the 17 Sustainable Development Goals (SDGs) which essentially means that development work should be across all sectors. Poverty reduction, social protection and labour Sierra Leone remains a poor country. Overall, the headcount poverty incidence was 52.9% in 2011, a decline from 66.4% in The measurement of the standard of living and poverty is consumption based in the poverty profile done by the World Bank and Statistics Sierra Leone (SSL). The lowest levels of poverty were found in the capital city of Freetown. Outside of the capital, poverty was relatively consistent across the country. Eleven of the 13 remaining districts had a poverty headcount ranging between 50% and 62%, with the lowest being in Bo district with 50.7% and the highest in Kenema with 61.6%. The two exceptions, which showed higher poverty levels, were Moyamba and Tonkolili districts with 70.8%. Given the regional dimensions, poverty also has a gender dimension. The most recent poverty-related figures are for 2011 when SSL, assisted by the World Bank, prepared a poverty profile for the country based on a national survey that used consumption as a proxy for income. Before 2011 there were the figures from the 2004 census. The government conducted a census in December 2015 and is planning to conduct a new Sierra Leone Integrated Household Budget Survey that will, among other things, update the poverty-related data currently available. The absence of comprehensive empirical data on social protection in Sierra Leone poses significant difficulties in making international comparisons or benchmarking. The available data suggest that Sierra Leone spends 0.5% of its GDP on social insurance (pensions) and 3.5% of GDP on social assistance. Social assistance expenditure comprises all assistance programmes but excludes fuel subsidies. The data suggest that total spending on social assistance and insurance in Sierra Leone is 4.0% of GDP, which is below but close to the average for African countries (4.5%). Social Protection is one of the four priorities in the government s Post-Ebola Recovery Strategy. Prior to the EVD outbreak, the Government of Sierra Leone, with support from the World Bank, had established a Social Safety Net (SSN) under the National Commission for Social Action (NACSA). In February 2015, the government introduced the Rapid Ebola-Social Safety Net (RE- SSN) targeting Ebola-affected households in districts beyond those covered by the regular SSN. Sierra Leone is a signatory to a number of international conventions on labour including freedom of association, elimination of compulsory labour, and elimination of discrimination. Although the authorities have signed the Convention of the Rights of the Child, a great deal more needs to be done to combat child labour. This remains a real problem in Sierra Leone, with almost half of children aged years involved in some form of child labour (27% in urban areas and 57% in rural areas). Light work at age of 13 years, full-time work at the age of 15, and hazardous work at the age 18 are all permitted under the legal framework. Children under the age of 13 are not permitted to work at all. 10 African Economic Outlook AfDB, OECD, UNDP 2016

11 Gender equality The 2014 female HDI value for Sierra Leone is in contrast with for men, resulting in a Gender Development Index (GDI) value of The Gender Inequality Index (GII) reflects gender-based inequalities in three dimensions: reproductive health, empowerment and economic activity. Reproductive health is measured by the maternal mortality rate and adolescent fertility rate; empowerment is measured by the share of parliamentary seats held by women and attainment in secondary and higher education; and economic activity is measured by the labour market participation rate. In 2014 Sierra Leone had a GII value of placing the country at 145th out of 155 countries worldwide. The Ebola epidemic killed more women than men, with women and girls (54% of all deaths) compared to men and boys (46%). As a result, there are more widows, widowers and orphans. Additionally, the closure of markets reduced employment and livelihood opportunities for women. Sierra Leone In Sierra Leone, men earn far more than women, even though there are more women in both the working-age population and the economically active labour force. In the formal sector, female employment has made significant strides, more than doubling the proportion of female employees from 5.7% in 2007 to 13.3% in However, while the largest employer is the public administration, accounting for over 75% of jobs, women made up just 8.7% of its workforce in 2012 (up from 3.6% in 2007). The health, trade, communications, hotels and restaurants, insurance and manufacturing sectors, on the other hand, have all surpassed the minimum 30% female employment target. The Convention on the Elimination of All Forms of Discrimination against Women (CEDAW) has not yet been ratified. Women are especially discriminated against in the area of land tenure on the basis of traditional law even though they are protected under the common law. Government is now pushing for a unified land tenure system so that rural/urban disparities are eliminated. The government s efforts to close the gender gaps have led to some progress but considerable disparities still exist. The Agenda for Prosperity (A4P) , under its Pillar 8 Gender Equality and Women s Empowerment tries to correct the gender disparities. The government recognises that gender equality and women s empowerment contribute significantly to national development and cohesion, and it is committed to ensure that gender analysis is embedded in all national development programmes. That is perhaps why it created a dedicated pillar for Gender in its Poverty Reduction Strategy Paper (PRSP), otherwise known as the A4P. Thematic analysis: Sustainable cities and structural transformation Sierra Leone has a population of about 6.3 million (World Bank, 2014) with approximately 39.1% living in urban areas (Freetown, Bo, Kenema, Makeni and other urban areas) in The rate of urbanisation, currently at 3%, exceeds the average population growth rate (2.3%), which clearly indicates that the country is experiencing a period of rapid urbanisation. By 2030 total population is projected to be 8.6 million with 43.82% living in urban areas. This trend is particularly alarming, as until now, efforts by the government of Sierra Leone at creating more sustainable urban settings remain inadequate. The country is at stage two of the demographic transition, characterised by a high birth rate, a declining death rate and a rapidly expanding population. Urbanisation was 34.2% in 1990 reaching 39.1 in 2015 and is projected to reach 43.8 in The rapid urbanisation will promote structural transformation if the shift from rural (agricultural) to urban employment drives growth in productivity. However, Sierra Leone is experiencing its urbanisation without industrialisation (manufacturing), which does not promote appropriate structural transformation. Specifically, while the contribution of agriculture, hunting, forestry and fishing (low productivity sectors) has been declining (as expected), unfortunately the contribution of the services sector (ideally high productivity sector) is also declining, while the AfDB, OECD, UNDP 2016 African Economic Outlook 11

12 industrial sector is growing, mainly driven by mining, which is by its nature, capital intensive and has limited forward and backward linkages with the rest of the economy. The contribution of the manufacturing sector, which offers greater opportunities for transformative change through the forward and backward linkages, has declined over the years (See Table 4). Thus, manufacturing is the missing link in Sierra Leone s structural transformation as labour migrates from low productivity agricultural activities in the rural areas directly to low productivity services (informal jobs in the urban areas) without a transformative industrial sector. Unplanned urbanisation magnifies challenges such as environmental degradation, deteriorating living conditions and increasing insecurity. Additional challenges have also arisen in the 21st century such as unprecedented levels of demographic pressure and vulnerability to environmental hazards, including air pollution and/or climate change. Regardless of buoyant economic activities, spurred by countrywide reconstruction and rehabilitation work and an expected broad recovery in agriculture, mining, manufacturing and services sectors, the Freetown area is still struggling to meet the needs of its inhabitants. Basic urban infrastructure relating to water, sanitation, and public transport, remain inadequate and outdated, with leaking sewage systems, etc. Power-generation capacity falls far short of meeting demand: just 7% of the population has access to mains electricity and the current capacity of 13 MW per million people is one of the lowest in the world. There have been reduced internal rates of return on urban investment, diseconomies and negative externalities, and urban growth taking place without proper planning layouts. Additionally, many slum dwellers live in low elevation coastal zones that are vulnerable to the risk of rising sea levels and frequent floods as happened in The primary cities in Sierra Leone are Freetown, Bo, Kenema, Makeni and Koidu town. The other secondary cities are Magburaka, Kabala, Port Loko, Moyamba, Kailahun, Bonthe, Waterloo and Kambia. As in other sub-saharan African countries, the capital city, Freetown, is more than four times the size of the second biggest city, Bo. Consequently, much of urban growth is attributed to the growth in Freetown and it also experiences much of the pressure from ruralurban migration and currently accounts for almost 40% of the urban population in the country. For instance, the incidence of poverty in Freetown increased from 13.6% in 2003 to 20.7% in 2011 compared to a reduction in other urban centres (like Bo and Kenema) from 70.9% in 2003 to 39.5% in This is mainly attributed to the large number of economic migrants moving from rural areas to the western region (mainly Freetown) seeking employment opportunities. It also means Freetown is a stronger and more attractive pull centre compared to other urban areas according to the 2011 Poverty Profile on which this information is based. Financing of urban development in Sierra Leone comes from a number of sources. Much of the development of urban cities is through central government resources, transfers from central government to local and city councils, local revenues, external donors and remittances from the diaspora. However, this financing architecture is inadequate and there is need to explore alternative models such as borrowing from financial institutions and local government bonds. One of the main challenges the government has been grappling with over recent years is to create a productive, inclusive, and resilient set of cities. The goal is to promote the urban economic transformation, enhance productive, and create healthy, peaceful and resilient cities, well-adapted to larger populations, create jobs, and environmental changes. To support its cities and municipalities, the government has to develop national goals and strategies that focus on the following: adequate transport facilities (e.g. modernisation and expansion of port facilities, second airport, upgrading major trunk and feeder roads); continuous and affordable power supply (e.g. developing water resources, improving the power generating and distribution capacity); 12 African Economic Outlook AfDB, OECD, UNDP 2016

13 appropriate information communication technology (e.g. linking all major cities and towns to the national fibre optic network); and improved financial services infrastructure that can enhance access to finance while reducing its cost at the same time noting that limited access and high cost of credit constitute a major obstacle to private sector development. Sierra Leone AfDB, OECD, UNDP 2016 African Economic Outlook 13