January 15, 2020
Sierra Leone has abundant natural resources, but as yet not been able to deliver more and better jobs for its fast-growing population. For the last decade, the economy has expanded at an average annual rate of five percent, but the distribution of value-added and employment in the economy is heavily skewed to traditional sectors. Sierra Leone needs to stabilize its economy to limit growth volatility and vulnerability to external shocks and provide a better and more predictable environment for economic activities to flourish, says a new World Bank report — Sierra Leone Economic Diversification Study.
“There has been little structural transformation in Sierra Leone’s economy. Therefore, promoting economic diversification to reallocate resources (capital and labor) from low- to high-productivity sectors can boost growth in GDP per capita and reduce poverty,” said Youssouf Kiendrebeogo, World Bank Senior Economist and one of the authors of the report.
The report describes the structure of the country’s economy and identifies the historical growth by sectors. It also analyzes the main constraints to productivity growth in the country both within and between sectors and proposes pathways to economic diversification. Sierra Leone’s labor productivity in manufacturing tends to be lower than in other African countries. Between 2009 and 2017, labor productivity in the country’s manufacturing sector fell but productivity also varies considerably by firms.
“Raising productivity of private firms especially those in the manufacturing sector is a major path to long-term sustainable growth and poverty reduction and could bring about a positive turnaround of the economy,” said Gayle Martin, World Bank Country Manager for Sierra Leone.
The report suggests that Sierra Leone could harness capabilities in a number of sectors, especially commodity- and agro-industries. Given the country’s vast expanses of accessible arable land, abundant rainfall and large resources of fresh water, and with half of the population employed in agriculture, the report emphasizes that expanding agricultural productivity offers a direct path to job creation, sustained inclusive growth, and poverty reduction. Other sectors where Sierra Leone could build complexity and diversify its economy over the medium-term include extractives and processed natural resources, chemicals, plastics and rubber, textiles, wood products, manufacturing, and machinery and transportation equipment.
The report recommends a mix of policy approaches that Sierra Leone could employ to diversify its economy by accelerating productivity-driven growth. This will require, inter alia, expanding agricultural productivity and supporting agribusinesses; value addition to promote manufacturing; investing in physical and human capital through health, education, and social protection measures; improving firm competitiveness and the regulation of business and strengthening governance and institutions to support private sector-led growth.
The report concludes that Sierra Leone needs to stabilize its economy to limit growth volatility and vulnerability to external shocks and also provide a better and more predictable environment for economic activities to flourish, focusing on easier business and property registration, increased access to credit, access to reliable electricity, streamlined tax payment processes, and simplified processes for licenses and permits.