By Dr Alfred Mbeteh PhD
8th August 2019••••••••••••••••••••••••••••••••••••••••••••The current state of SL's economy is in a mare’s nest. The US dollar and UK pound sterling are increasing at an increasing rate against the Leone, thus; having a negative multiplier effect on the purchasing power of the ordinary local citizen: both in the cities and villages.SL's Gross Domestic Product (GDP) by the end of Quarter 3 (Q3) is estimated to be about 4.5 billion US dollars, which accounts for 0.01 percent of the world’s economy (World Bank, 2018).
According to the 2018 UNDP report on SL, 70% of SL's youthful population (aged between 15-35) are either unemployed or underemployed, with about 800,000 youths actively seeking employment (UNDP, 2018).
Worse still, approximately 60 percent of Sierra Leoneans currently live below $1.25 a day. SL is ranked among the lowest in terms of Human Development Index (HDI).
Interestingly, SL's economy, like many other developing countries, have been facing similar challenges for the past 50 years on. Thus, this phenomenon is not purely a SLPP or APC issue, though critics on both side of the aisle will tend to squarely blame each other for the country's status quo.
However, clobbering both political parties who have alternatively steered our economy since independence is not the intention of this piece. Rather, this specific piece is centred on the author’s viewpoint on what can be done to improve the economic status for not only the current generation but for generation yet unborn.
The author believes that complains, especially those that do not offer concrete solutions to what is being complained about is nothing but a waste of time. It is, therefore, the aim of this piece to proffer possible and pragmatic solutions that may be useful to help our current policy makers to fast track our country’s human and economic development.
The rest of the piece will present a brief comparative analysis of Sierra Leone and Singapore and lay down possible solutions to help kickstart and sustain our economic growth.
You may ask: Why do a comparative analysis between Sierra Leone and Singapore, who are miles apart and located in different continents of the world?
It will interest you to know that both countries were once ruled by the same colonial masters, thus by default adopting the same economic, legal, educational and political policies.
Both countries secured independence about the same time; Sierra Leone in 1961 and Singapore in 1965. Also, as at the time of independence, both countries had about the same Gross Domestic Product (GDP), Per Capita Income and about the same unemployment and economic challenges.
Further, both countries had about the same population; Sierra Leone had 2.2 million and Singapore 1.6 million and their major trading partner was their colonial master - the United Kingdom.
Fast forward, 50 plus years on, Singapore is currently ranked among the world’s developed and competitive economies whilst Sierra Leone is still facing the challenges that have been hitherto explained. The per capita income (average income per person) in Singapore is approximately US$54,530 whilst Sierra Leone is about US$480; a whopping difference of USD$54,050 or 114 times multiples.
In the current World Bank Human Capital Index, Singapore is ranked among the best countries in the world.
This implies that a Singaporean born today will be 88% as productive when he or she grows up (World Bank, 2019).
Singapore is the world's 4th largest financial hub and the only country in Asia to be given a AAA credit rating from Standard and Poor's, Moody's and Fitch Rating. With a population of about 5.5 million people, Singapore reportedly has the highest number of US$ millionaires per capita in the Asia region.
You should ask:
1. How did Singapore with much lesser resources than Sierra Leone catapult itself to the list of developed countries?
2. What did Singapore do and is still doing that SL can learn from and adapt within our context?
The answer lies in the secret force that the leader of Singapore, Lee Kuan Yew found: the powerful force of ENTREPRENEURSHIP.
For centuries, countries have been searching for answers on how to create the wealth of nations. In other words, political leaders as well as economists have been constantly searching for what key ingredients lead to the creation of a nation’s wealth.
The physiocrats who were a group of French economists hugely believed that the wealth of every nation can be created by primarily developing its lands and/or value of its agricultural products. On the other hand, the classical and neoclassical economic theorists led by proponents such as David Ricardo, Adam Smith, Alfred Marshall et al. believed that the productive capacity of any nation is hugely dependent on the combination of three (3) key factors: land, labour and capital.
In this context, land refers to the minerals (diamonds, gold, bauxite etc.), soil and the climate used in the production of products whereas labour refers to all human efforts (skilled and unskilled) used to produce goods and services.
Capital on the other hand, refers to the goods produced by labour (human effort) that are in turn used to produce other goods and services e.g. machinery, buildings etc. The neoclassical theorists’ further divide capital into three broad categories: fixed (machinery, equipment, building, technology etc), working (inventories), and financial (money).
Meanwhile, neo-classical theorists like J. B Clark et al. added a fourth factor of production: ENTREPRENEURSHIP.
Entrepreneurs are responsible for taking the risk to effectively co-ordinate the other factors of production (land, labour and capital). Every car or ship needs someone to steer it to its designed destination. The entrepreneur is that person who takes that responsibility to do so with all the associated risks that goes with it. He or she decides how the other three factors of production are apportioned towards the full production capacity of a nation.
The government of Singapore understanding the powerful effect of entrepreneurship on other factors of production helped to provide one of the world’s most business-friendly regulatory environment for their indigenous entrepreneurs and ultimately foreign investors.
The ease of doing business in Singapore including registering a business, paying taxes, getting loans, obtaining a construction permit, trading across borders is easier and more formalised than in Sierra Leone. This sort of ease and formalise structure of doing business has attracted not only indigenous entrepreneurs to start Small Medium Enterprises (SMEs) but has also been a major factor for attracting Foreign Direct Investment (FDI) into the country.
The Solution: Operation One Million Local Entrepreneurs
••••••••••••••••••••••••••••••••••••••••••••The author strongly believes that for Sierra Leone to grow and sustain its economy as well compete with others, it will need to do the following captured in the author’s STAR (SMEs, Teams, Action and Result) framework:
1. Establish/Develop one Million Viable SMEs (S)
The government needs to proactively identify and develop 1 million Local Entrepreneurs with innovative ideas across the country within 5 years; an estimate of 200,000 entrepreneurs per year. This can be done through a dedicated department whose sole responsibility is to oversee the personal and business growth of these entrepreneurs. The approximate cost of producing each entrepreneur (including training, seed capital etc) is US$5000 over five years. This amount is expected to be covered by key players like the banks and other financial institutions (in the form of loans to each start-up), government (in the form of subsidies and the creation of shared office spaces), Non-governmental agencies (in the form of expert trainings and access to technology) etc.
The creation of one million entrepreneurs will automatically lead to the creation of one million jobs and if those entrepreneurs go on to employ one person each, the unemployment figure would have been reduced by 2 million. The collective productive capacity of these young entrepreneurs coupled with the right ecosystem will help our local entrepreneurs to effectively produce goods and services which can be exported to neighbouring countries within the Mano River Union, thereby increasing the value of our currency and Gross Domestic Product. The OECD (2019) estimates that “in emerging economies, SMEs contribute up to 45% of total employment and 33% of GDP”. Thus, it is estimated that the total contribution from the 1 million start-ups will range between 10 to 30% over the first five years and rising up to 50% in subsequent years.
Also, the constant economic activities that will be undertaken by these entrepreneurs through their ventures will help attract foreign investors who will invest in some of the fast-growing ones.
It is important to note that entrepreneurs especially those who run Small Medium Enterprises are the backbone of every major economy. In the Organisation for Economic Co-operation and Development (OECD) countries for instance “SMEs are the predominant form of enterprise, accounting for approximately 99% of all firms. They provide the main source of employment, accounting for about 70% of jobs on average, and are major contributors to value creation, generating between 50% and 60% of value added on average” (OECD, 2019) and as stated earlier, in emerging economies, SMEs contribute up to 45% of total employment and 33% of GDP.
2. Creation of Teams (T)
There is a need to mobilise the selected entrepreneurs into core teams/clusters. This can be done by regions or towns and by using the Industry Classification Benchmark (ICB) which helps to segregate the macroeconomy into industrial clusters i.e. education, agriculture, health, fashion, food and beverage etc.
In a nutshell, the Regional Teams or clusters should have a strong flavour of Specialisation like in the US: Silicon Valley (Tech); Las Vegas (Entertainment); Dallas, Beverly Hills; Hollywood etc.
Similarly, we could have Bo (Agriculture), Freetown (Technology and Tourism), Kono (natural resources), Makeni (Farming), Bonthe (Fisheries)etc. This kind of structuring will not only help those regions to specialise in key economic activities but could also help to decentralise our already currently centralised economic system.
The essence of teamwork is to enable the effective sharing of information and experiences. In addition, the dedicated department can work alongside the universities and private institutions to develop incubator hubs across the country where these young entrepreneurs can constantly learn from one another as well as from practitioners and experts (both foreign and local) on how to both develop and market their ideas locally and across borders.
Universities should align their trainings to feed into each relevant sector/team/cluster; to contribute ideas and innovation efficiently. Such trainings should primarily focus on changing the attitudes and mindsets of the selected entrepreneurs towards risking taking, constant innovative practices, proactiveness, opportunity spotting, networking, resilience, self-confidence etc. The universities can liaise with the key actors in the informal sector for instance to help impact these core entrepreneurial traits.
In the informal business sector, the Lebanese, Fulas and Nigerians remain the key dominant players. The government can use tax incentives and a Honour’s List to get them to work with the selected universities to help mentor these young entrepreneurs.
3. Action (A)
The government needs to take series of actionable steps around the creation of a viable entrepreneurial ecosystem which makes it easier for anyone anywhere with little or no resources to start and effectively run their own business. The government can specifically take the following actions: levy a lower tax rate or give tax holidays to start-ups, create an online platform that makes it easier to pay for and register a business within 24 hours, negotiate business partnership deals with neighbouring countries to make it easier for our businesses to trade and promote the concept of entrepreneurship as a primary not secondary source of our development.
4. Result (R)
On a regularly basis, each team/hub/region will be required to develop and present a performance-based report, carefully highlighting the key gains and challenges which will inform the next government action (s). This report should be made readily available to investors and the public at large via a dedicated government website or intranet.
In summary, the government of any nation including Sierra Leone cannot feasibly create all jobs it needs. In fact the Government should not be in the business of creating jobs but should rather focus on facilitating the smooth running of businesses by creating a thriving ecosystem that includes a higher HDI, less crime, easy access to seed capital, good technological infrastructure, lower taxes and other specific policies that will help to promote businesses especially SMEs.
It is important to note that the major creators of jobs in any economy are entrepreneurs especially those that run SMEs. We, therefore, need to redirect our efforts towards creating the right environment for our local entrepreneurs to thrive and compete with their counterparts around the world; only then can we grow and sustain the SL’s Economy.
Dr Alfred Mbeteh is a Researcher, Entrepreneur, Author and Lecturer (REAL). He currently resides in the UK, lectures at Roehampton University, University of West London and Nelson College London. He is also the founder and CEO of De VICTORS; a UK based success company which helps to Discover, Develop and Deploy (3D) the talents of our youths. He has worked with the UK National Citizen Service (NCS) as a Youth Programme Leader facilitating the personal development of the youths in the UK.