Sierra Lone is endowed with diamonds and other minerals, but has these minerals benefited the people of the country or has it been a curse? There is a curious phenomenon that analysts refer to as the resource curse. On the average, rich countries have performed worse than those with smaller endowments, only a few have done the opposite that has been expected. Some 48 years ago Sierra Leone and Japan had a comparable per capita, likewise Indonesia and Nigeria. Today Indonesia and Japan’s per capita income are four times and 60 times to Nigeria and Sierra Leone respectively.
Sierra Leone and Botswana are rich in diamonds, but Botswana has had an average growth rate of 5.2 percent with per capita five times than Sierra Leone between 1974 and 2007. When Botswana was busy implementing the Sierra Leone Selection Trust (SLST) blue print, we were busy fighting and killing each other for the diamonds.
The African continent is richly endowed with mineral resources such as gold, diamond, iron ore, bauxite, tin, rutile, manganese, lead, uranium, copper and zinc. The continent produces 25 percent of the world’s gold in which Sierra Leone is a contributor. Also some of the finest diamonds have come from Sierra Leone, but the benefits of these minerals have instead turned the country into a cursed state, with poverty and sickness dominating the lives of people.
The diamond price has been climbing as investors become increasingly concerned. The numbers of buyers over the years that have been flocking the country to buy diamonds are unprecedented as some get themselves robbed by corrupt businessmen. Diamond production is currently benefiting from the safe haven status and there is expectation that the price will keep rising by karat annually.
The export from diamonds should have or have generated large income and foreign exchange for the country and the companies engaged in the mining have employed many workers. Some of these workers have earned healthy incomes that have improved their lives, others have earned less and their lives are still the same. But what has the country gained over decades from diamond production.
Can we boast of our diamond mines as the people of Botswana and Lesotho? I don’t think so; these two countries and even South Africa can say their countries have improved economically over the years from diamond sales that have benefited all. All we can say we fought 11 years war and before and after the war we ended up with blood diamonds that has benefited rebels, war lords, individuals and government officials.
Indeed, diamond has been a curse to our nation, I once read a story in the internet in 2006 that Sierra Leone exported about $300 million worth of diamonds, I was happy that it will help the country in developing infrastructure and the economy, at the end of the story I read that only three percent of the money belongs to Sierra Leone. I was puzzled why.
During my research in China, I saw that Botswana diamonds is mined by De Beers and the government has a big say in the production and sales. Lesotho too is almost the same with the country having 30 percent of the total sales and presently they are pushing for 40 percent. Why these countries should be benefiting from theirs whilst we have been cursed by ours. Where did we go wrong that the populace should be punished by our leaders?
Mining has developed into a vital industry that underpins the economies of many African countries but not Sierra Leone and to some degree influences the quality of life of many African miners and their families. National Governments, Traditional Leaders and landowners receive royalties and other forms of tax revenues, which can help develop infrastructure and basic needs of communities. Does it apply to us, I doubt.
Despite the enormity of mineral projects in Sierra Leone, have mineral resources enhanced the country’s economic well-being? The country is still characterized by low levels of living per capita and productivity, high population growth rates and high levels of unemployment and underemployment. So what is Sierra Leone doing wrong to warrant suggestions from some quarters that our economies would be better off; would it not be good for us to leave the mineral resources in the ground?
Mineral deposits are in no way unique, basic essentials for national ascendancy. Japan succeeded to attain high growth and prosperity without having any significant mineral deposits within its territory. However, Sierra Leone with known and abundant mineral wealth has failed to prosper. This is because primary export industries in the country tend to function as enclaves with very limited linkages to other sectors of the economy.
In our mining projects, there are normally large number of expatriate staffs and many of the inputs necessary for mining are not local and have to be imported. There seems to be no systematic approach of technological transfer from foreign experts to local professionals. While it is important that we invite foreign experts to help in our mineral resource development, these experts should be obliged to train and hand over their roles to locals by the end of their contracts.
Contracts should be fixed at specific time periods depending on experience and responsibility, and training of Sierra Leoneans should be enforced as part of the contract. Botswana mining company and Ghana’s Ashanti Goldfields have ‘Botswananised and Ghanaianised’ most of its senior management positions. The recent appointment of a Ghanaian as the Managing Director of the company’s Obuasi Mine is a step in the right direction. The mine is currently one of the world leaders in the bio-oxidation technology in gold treatment. These changes have seen productivity improvements in various sections of the mine. It is encouraging to note that most of the changes have been driven by Ghanaian Professionals.
The country’s minerals are exported and not processed, leading to the siphoning of the potential gains away from us. Attempts should be made towards further domestic processing of the resources. Botswana and South Africa have done that. Until resource based industrialization is encouraged, the potential for local consumption of the mineral sector output will remain minimal.
Further processing of resources will also ensure greater fiscal revenues and greater stimulus to forward and backward investment opportunities. While our investment laws have encourage overseas investors, very liberal policies regarding repatriation of profits and expatriate wages, make it difficult to reverse the status quo of unequal distribution of the revenue between foreign firms, domestic entrepreneurs and the overwhelming majority of Sierra Leoneans.
Additionally, many Traditional Chiefs do not use royalties received from minerals for the development of their communities and hence deny the people basic infrastructure such as hospitals, clean water, schools etc.
The mining sector should be viewed as an economic bonus with which to accelerate structural change rather than as the backbone of the economy of the country. There is therefore the need for rapid competitive diversification of the non-mining tradable sector such as agriculture and manufacturing.
Much effort is required in stopping economic mismanagement, corruption and conflicts, and adopts widespread pursuit in both democracy and market friendly economic policies. It is up to our government to ensure that the mineral resources are exploited in a responsible and economically attractive manner.
Resources not extracted today are still around tomorrow, they do not disappear. In fact, it may not make sense to extract natural resources as fast as possible. If we are unable to use the funds well, it may be preferable to leave the resources in the ground, increasing in value as resources become scarcer and prices increase.
Extraction in itself makes the country poorer because resources such as diamonds, gas and gold are not renewable. Once they are out of the ground and sold, they cannot be replaced. It is only the subsequent reinvestment into physical capital or natural that can offset the loss of this natural wealth and make the country richer.
Part of the reason that governments often manage their revenues so poorly relates to the widely used standard accounting frameworks. Governments naturally want to show that they know how to manage their economies well. If they can increase their growth rates, they think they are better off. But gross domestic product (GDP) does not provide a true measure of economic well-being. This was the case of the past government boasting about their GDP growth that was never reflected in the pockets and purses of the ordinary man. As I have noted, if the country extracts more resources, and the funds are not invested well, the country is poorer, not richer. This is the case of Sierra Leone year in year out.
Perhaps the most important set of policies are those entailing increased transparency: more information about how the government interacts with those involved in the extraction of the natural resources; the contracts that are signed; the amounts the government received; the amount of natural resources produced; and the uses to which the funds are put. Such transparency reduces the scope for corruption. After all, it is often cheaper for companies to bribe the government of a producing country than to pay market prices for the right to develop a diamond reserve. Transparency limits the opportunities for corruption. At the very least, questions are raised: why did the government not receive full value for the country’s resources?
There is no simple panacea, no single set of prescriptions that ensures growth and development. But if reforms are adopted by the natural resource, our country and by the international community, there is the prospect that the resource curse can be lifted and made a thing of the past. Natural resources can and should be a blessing for us in Sierra Leone at all cost.
By Austin Thomas