Sierra Leone, with a population of more than seven million people, is located on the coast of West Africa between the Republic of Guinea in the north and north-east, the Republic of Liberia in the south and south-east and the Atlantic Ocean on the west. With English as the official language, generally favorable views of the United States, extraordinary religious tolerance, and political stability since the end of the civil war in 2002, Sierra Leone presents significant opportunities for investment and engagement. The success of the recent democratic transition in the presidency, subsequent to March 2018 national elections and a presidential runoff that enjoyed 81.11 percent registered voter participation, bodes well for the political environment.
Sierra Leone’s economy remains heavily dependent on mineral resources, including significant deposits of iron ore, rutile, bauxite, and diamonds. Real gross domestic product (GDP) growth hit 20.1 percent in 2013, but the economy came to an abrupt halt in 2014, with the largest Ebola outbreak in history coinciding with a slump in global commodities prices, and the economy contracted by 21.1 percent in 2015. The end of the Ebola outbreak allowed modest recovery in 2016 (6.3 percent) with slowing in 2017 (3.5 percent), and the country continues to require significant budget support from foreign donors. Sierra Leone elected a new president, Julius Maada Bio, in March 2018 replacing the outgoing President Ernest Bai Koroma who could not seek re-election due to term limits. President Bio briefly ruled as head of a military junta in 1996 and now steps in as the democratically elected president. His new direction doctrine focuses on revamping the economy with prudent macroeconomic policies, vowing to fight poverty, indiscipline, corruption and underdevelopment, among other urgent needs.
The investment climate in Sierra Leone presents certain challenges. The World Bank ranked Sierra Leone 160 among 190 countries in 2018 for the ease of doing business, identifying particular challenges in constructions permits, access to electricity, registering property, securing loans and small-business credit, trading across borders, and resolving insolvency. Firms have significant difficulty accessing credit and must pay high interest rates; foreign investors generally bring capital from abroad. Corruption is endemic throughout the economy. Investments outside of Freetown require special attention to local dynamics and community needs, particularly due to the influence and significant authority of traditional leaders, the Paramount Chiefs. In the recent past, Mission Freetown received multiple reports of companies that experienced challenges in asserting their investment interests, including in requests for regulatory approvals and in the execution of contracts with the government. While these issues do not necessarily reflect any discriminatory treatment of U.S. interests, they do underscore the challenges of all foreign businesses operating in Sierra Leone.
In spite of the aforementioned issues, Sierra Leone offers great opportunities for investments. Foreign investors are engaged in the energy sector (including renewables), infrastructure, agriculture, fisheries, tourism, and natural resources. In 2017, the government concluded its 24-month National Ebola Recovery Strategy, which sought to rebuild the health sector, strengthen social protection, and restore economic growth. Largely successful in achieving most objectives, the GoSL continues to focus on improving the business environment to attract new foreign direct investments. Sierra Leone benefits from duty-free access to large markets for certain goods through the United States’ African Growth and Opportunity Act (AGOA) and the EU’s Everything But Arms Initiative. Sustained economic growth will depend on Sierra Leone’s ability to diversify its economy, tap into underutilized sectors like agriculture, tourism, and fisheries, and ensure that the country’s considerable natural resources are leveraged to improve the lives of all citizens. The URL for investment information is accessible at: http://investinginsierraleone.com/introduction/
|TI Corruption Perceptions Index||2017||130 of 180||www.transparency.org/country/SLE|
|World Bank’s Doing Business Report “Ease of Doing Business”||2018||160 of 190||www.doingbusiness.org/rankings
|Global Innovation Index||2018||Not rated||https://www.global
|U.S. FDI in partner country (M USD, stock positions)||2015||Inward – 0
Note- D = data suppressed to avoid
|World Bank GNI per capita||2016||USD 491||https://data.worldbank.org/indicator/
1. Openness To, and Restrictions Upon, Foreign Investment
Policies toward Foreign Direct Investment
The Government of Sierra Leone has a favorable attitude toward foreign direct investment (FDI), which it sees as critical to revitalizing the country’s economic growth. The Agenda for Prosperity, the country’s strategy paper on poverty reduction, is a five-year roadmap meant to place Sierra Leone on the path to achieving middle-income status by 2035. The strategy recognizes that private sector led growth will be pursued vigorously by attracting foreign direct investment, accessing funds from international capital markets and by forging partnership with the private sector on especially large scale projects. The 2014 -15 Ebola epidemic placed enormous strains on the government’s resources and capacities, essentially depriving the country of funds needed for infrastructural investment. The situation further worsened with the collapse of commodity prices in the global market and the unsuccessful oil exploration ventures undertaken by various foreign investments within the same period. As the economy is gradually picking up after the twin disaster, the country has embarked on attracting investments through public private partnerships (PPPs) to undertake major infrastructural projects, particularly in power, water, roads, ports, and telecommunications, etc. Emphatically, Sierra Leone perceives FDI as a catalyst to recovery from the economic downturn of the twin shocks of Ebola and depressed commodities prices, embarking along an ambitious path to become a middle-income economy.
The Ministry of Trade and Industry oversees trade policies and programs, and supervises the Sierra Leone Investment and Export Promotion Agency (SLIEPA), the government’s lead agency in implementing initiatives to stimulate exports and investments, improve the investment climate, and promote the development of small- and medium-sized enterprises (SMEs).
The government has a variety of initiatives to remove constraints on trade and improve the investment climate. In recent years, Sierra Leone has constructed major roads leading to district headquarter towns and rehabilitated a network of trunk and feeder roads, linking agricultural suppliers with urban markets in mainly district headquarter towns. The government has also prioritized improvements to the country’s trade facilitation infrastructure, including simplifying clearance procedures at the ports and land borders, and extending the major seaport to accommodate more vessels.
While the government’s message is that the country is open to foreign investment, investors see key obstacles. Corruption is widely seen as endemic, affecting procurements, land rights, customs, law enforcement, judicial proceedings, and many governance and economic sectors. The legal system generally treats foreign investors in a non-discriminatory fashion, although investors comment that judicial application of the laws is often subject to financial and political influences. The legal framework is largely in place, but consistent enforcement is a challenge.
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activities. Foreigners are free to establish, acquire, and dispose of interests in business enterprises. However, foreign investors cannot invest in arms and ammunition, cement block manufacturing, granite and sand stone excavation, manufacturing of certain consumer durable goods, and military, police, and prison guards’ apparel and accoutrements. Furthermore, there are limits to land ownership by foreign entities and individuals, and the limitations vary depending on location of the land being used, and are discussed below in the “Real Property” section.
Sierra Leone has made significant progress in recent years in simplifying its business registration process. The Corporate Affairs Commission (CAC) now manages registration, which provides a “one stop shop” including an online business registration system. The entire process involves five steps and takes on average of ten days. Additional information is available from the CAC’s website at http://www.cac.gov.sl/ . SLIEPA also provides useful guidance on starting a business, sector-specific business licenses, mining licensing and certification fees, marine resources and fisheries, etc. at http://sliepa.org/starting-a-business/ . Impartial treatment is legally accorded to women, the under-privileged, and disadvantaged.
Sierra Leone has no program to promote outward investment, but also places no restrictions on such activity.
2. Bilateral Investment Agreements and Taxation Treaties
Sierra Leone has bilateral investment treaties with Germany (in force since 1966) and the United Kingdom (revised in 2001). It signed a treaty with China in 2001, but the agreement has not yet entered into force. As a member of the Economic Community of West African States (ECOWAS), Sierra Leone also benefits from the Trade and Investment Framework Agreement signed in 2014 by ECOWAS and the United States.
Sierra Leone does not have a bilateral taxation treaty with the United States.
3. Legal Regime
Transparency of the Regulatory System
Sierra Leone’s regulatory system is not robust, as legal, regulatory, and accounting systems lack transparency and are not fully consistent with international norms. This has been a realm of significant capacity building projects by international donors in recent years.
The Government of Sierra Leone develops laws and regulations at the national level, but the public and business community at large have few opportunities to provide input into proposed laws and regulations. The Constitution requires publication of proposed laws and regulations in a government journal, the Gazette, for a period of 21 days. However, stakeholders assert that they often do not receive notice of relevant regulatory changes, and a proposed regulation may automatically take effect unless overturned by Parliament. The Sierra Leone Chamber of Commerce, Industry and Agriculture represents the business community, but the private sector and civil society still have a too-limited role in pushing for regulatory change.
In recent years, Sierra Leone has taken various steps to promote and improve regulatory transparency. The Right to Access Information Act passed 2013 should make government records and information available to the public. However, the implementation of this Act has been incomplete since the establishment of the Right to Access Information Commission in 2014, though it prompted attention for the public to access vital information as a way to effectively monitor corruption and encourage quality service delivery. Sierra Leone joined the Open Government Partnership (OGP) in 2014 to make governments more transparent and effective, and encourage greater civic participation for citizens. Over the last five years, the Office of the Auditor General produced comprehensive and credible annual audits, including supplementary reports which focused on the expenditure of the Ebola response funds and budgetary subventions to ministries, departments and agencies (MDAs). While the audits identified numerous serious deficiencies and challenges, most of the Auditor General’s recommendations have not been implemented by the responsible MDAs. Sierra Leone joined the Extractive Industries Transparency Initiative (EITI) in 2008, and after a brief suspension for insufficient disclosures, the country has been EITI compliant since 2014. As discussed above, the government has simplified and streamlined the business registration process into a one-stop shop. The enactment of the Public Financial Management Act in 2016 reformed the budget process and improved transparency in the expenditure of public funds, and the Fiscal Management and Control Act of 2017 directed government MDAs to transfer revenues and all other monies they receive into the Consolidated Revenue Fund. One of the first executive orders of newly elected President Maada Bio in April 2018 was to order all MDAs to transfer immediately their residual funds into the Treasury Single Account (TSA), a key conditionality of the International Monetary Fund (IMF) to improve governmental budgetary oversight and controls.
International Regulatory Considerations
Sierra Leone joined the World Trade Organization (WTO) in July 1995 and the General Agreement of Tariff and Trade (GATT) in May 1961. Sierra Leone has never been a party to a dispute case before the WTO, and it has not notified the WTO of any measures that are inconsistent with the WTO’s Trade Related Investment Measures (TRIMs) obligations. As a member of the World Customs Organization (WCO) since November 1975, Sierra Leone acceded to the International Convention on the Simplification and Harmonization of Customs Procedures in June 2015. Otherwise referred to the Revised Kyoto Convention, Sierra Leone successfully completed the WCO Time Release Study in support of the country’s commitments to the WTO Agreement on Trade Facilitation in 2016, and finally notified the WTO of acceptance of the WTO amendment of the Agreement on Trade facilitation in May 2017.
Legal System and Judicial Independence
The Sierra Leone legal system is derived from the English common law system, but outside of the capital, Freetown, local courts apply customary law to many disputes. The courts provide a venue to enforce property and contract rights. The country does not have a consolidated written commercial or contractual law, but numerous, disparate pieces of legislation, leading to uneven treatment of commercial disputes.
The Superior Court of Judicature consists of the Supreme Court, the Court of Appeal, and the High Court. Commercial disputes brought before the High Court are generally heard by the Commercial and Admiralty Division. In 2010, Sierra Leone created a Fast Track Commercial Court, in the hope of reducing the duration of a typical commercial case from 2-3 years to 6 months. To date, the court has had minimal effectiveness due to resource limitations. In 2017, Sierra Leone hosted a commercial law summit to address gaps in the justice system, and came up with concrete recommendations in key areas, including arbitration, anti-corruption and bribery, public-private partnerships, and reform of the court process. There is now a draft Arbitration Bill which when passed into law will bring arbitration proceedings in Sierra Leone up to international standards.
Inasmuch as the judicial system is presumed to be independent, it is generally believed that it occasionally comes under the direct influence of the executive, which has adversely impacted the competence, fairness and reliability of the judicial system. Although foreign investors have equal access to the judicial system, in practice the system is slow and often subject to financial and political influences.
Laws and Regulations on Foreign Direct Investment
Sierra Leonean law generally ensures that foreign investors may compete on the same terms as domestic firms. The Investment Promotion Act 2004 protects foreign entities from discriminatory treatment. The law creates incentives and customs exemptions, provides that investors may freely repatriate proceeds and remittances, and protects against expropriation without prompt and adequate compensation. The law establishes a dispute settlement framework that allows investors to submit disputes to arbitration in accordance with the rules of procedure of the UN Commission on International Trade Laws (UNCITRAL). Export licenses are required only for certain goods and materials. While the export of gold and diamonds must comply with internationally-accepted standards such as Kimberley Process certification, the permits required to export goods such as cocoa and coffee are issued automatically, and legally at no cost.
Foreign companies may own or invest in Sierra Leonean entities, with limited exceptions. Small mining investments require a minority partnership with a Sierra Leonean company. The Sierra Leone National Carrier Ratification Agreement of 2012 provides preferential treatment in shipping to the Sierra Leone National Shipping Company. The Petroleum Exploration and Production Act 2001 restricts licenses for petroleum exploration and production to companies registered or incorporated in Sierra Leone. The government of Sierra Leone has also identified certain restrictions on foreign investment in its Schedule of Specific Commitments to the General Agreement on Trade in Services, from August 1995, which established limited restrictions on business services, financial services, and the maritime and airport sectors. Businesses providing such services must establish local partnerships or joint ventures.
The Local Content Policy, adopted in 2012, promotes the utilization of locally produced goods and locally provided services, and the employment of Sierra Leonean nationals. While failure to follow the policy previously resulted only in a denial of investment incentives, the Sierra Leone Local Content Agency Act 2016 requires compliance. More information is available below in the “Performance and Data Localization Requirements” section.
Sierra Leonean authorities do not screen, review, or approve foreign direct investments. Companies must register to do business in Sierra Leone, but the Embassy is not aware of any complaints that the registration process has been used to block particular investments or discriminate against particular investors. In the case of investment guarantees (e.g. by the U.S. Overseas Private Investment Corporation-OPIC), the GoSL established certain procedures with the U.S. government in agreements signed on December 28, 1962 and November 13, 1963, whereby GoSL authorities grant approval for external investment guarantees in Sierra Leone.
Additional information about the laws and regulations applicable to foreign investments is available on the website of SLIEPA at http://sliepa.org/ .
Competition and Anti-Trust Laws
Sierra Leone does not have a competition law. The European Union (EU) and the United Nations Conference on Trade and Development (UNCTAD) have supported the Ministry of Trade and Industry’s attempts to develop a competition policy, but the parliament has not yet adopted the relevant legislation.
Expropriation and Compensation
There is no history of expropriation in Sierra Leone. The Constitution authorizes the government to expropriate property only when it is necessary in the interests of national defense, public safety, order, morality, town and country planning, or the public benefit or welfare. In such cases, the Constitution guarantees the prompt payment of adequate compensation, with a right of access to a court or another independent authority to consider legality, determine the amount of compensation, and ensure prompt payment.
ICSID and New York Convention
Sierra Leone has been a party to the International Convention on the Settlement of Investment Dispute (ICSID) since 1966, but not a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). Section 13 of the Arbitration Act 1960 allows foreign arbitral awards to be registered in Sierra Leonean courts and enforced in the same manner as a domestic judgment or court order. However, registration of foreign arbitral awards is not automatic but instead left to the discretion of the presiding judge.
Investor-State Dispute Settlement
Investment disputes in Sierra Leone can take a long time to resolve, given heavily centralized decision-making, the slow pace of government actions, and substantial court backlogs.
In 2016, the Embassy received multiple reports of cases where U.S. companies experienced challenges in asserting their investment interests. One company reported that the government denied regulatory approval for the firm’s acquisition of a Sierra Leonean entity in part because preference should be given to Sierra Leonean buyers. Two other companies reported challenges in collecting payments owed by the government in services contracts; mounting arrears in GoSL payment of invoices is an issue the new GoSL administration has stated requires urgent attention. As of April 2018, these three matters remain unresolved.
International Commercial Arbitration and Foreign Courts
The Arbitration Act 1960 allows investors to arbitrate disputes, but the procedures set forth in the law are outdated and not in compliance with international standards. The country does not have a central arbitral institution, and instead arbitration is conducted on an ad hoc basis, including through pretrial settlement conferences and alternative dispute resolution mechanisms before the Commercial and Admiralty Division of the High Court. The Investment Promotion Act 2004 allows investment disputes to be referred to arbitration in accordance with UNCITRAL procedures or the framework of any applicable bilateral or multilateral investment agreement.
Judgments of foreign courts can be enforced under the Foreign Judgments (Reciprocal Enforcement) Act 1960, provided the country has a bilateral or reciprocal enforcement treaty with Sierra Leone.
The Bankruptcy Act 2009 establishes a process of bankruptcy for individuals and companies. Bankruptcy is a civil matter, but it may disqualify an individual from holding certain elected and public offices and from practicing certain professions. The Bankruptcy Act 2009 also encourages and facilitates reorganization as an alternative to liquidation. The World Bank ranked Sierra Leone 159 in the ease of resolving insolvency in 2018. While the country’s regulatory framework for bankruptcy is relatively strong, on average secured creditors receive only 11 cents on the dollar (compared to 20 cents average throughout sub-Saharan Africa) and the proceedings cost approximately 42 percent of the estate’s value.
Following the passing of a Credit Reference Act in 2011, Sierra Leone established a Credit Reference Bureau within the Bank of Sierra Leone mandating all financial institutions to pass all information regarding loan applications for credit history checks. The credit history checks will detail all outstanding loans, when and where a loan was taken, and the repayment history guiding financial institutions in their loan decision.
4. Industrial Policies
The Investment Promotion Act 2004 creates various incentives for foreign and domestic investors, and the Sierra Leone Investment and Export Promotion Agency (SLIEPA) compiles information about the benefits and incentives available in various sectors. In particular, these are investment and employment, research and development, value-added manufacturing and training expenses incentives; incentives provided for businesses engaged in agriculture, airlines, fish farming, infrastructure, liquefied petroleum gas and cookers, mineral and petroleum, petroleum refinery, pharmaceuticals, photovoltaic systems, poultry, tourism; and income tax deductions for disabled persons, women and youth employments and skills development, and social services like schools and hospitals etc. SLIEPA provides details of these investment incentives at http:sliepa.org/wp-content/uploads/Investment-Incentive-Handbook-02-02-2017.pdf .
Foreign Trade Zones/Free Ports/Trade Facilitation
In conjunction with First Step, a subsidiary of U.S.-based development organization World Hope International, the Government of Sierra Leone established a Special Economic Zone (SEZ) in 2011 on 50 acres near Freetown. According to the Sierra Leone SEZ policy of 2013, businesses operating in this zone shall enjoy tax holidays for ten years in the first instance, and renewable for another five years at the discretion of the Sierra Leone SEZ Authority. The GoSL further provides these businesses with import duty exemptions and expedited government services including customs, immigration, and registration.
Performance and Data Localization Requirements
The Sierra Leone Local Content Agency Act 2016 promotes foreign investors’ utilization of the domestic private sector. The act applies in the mining, petroleum, manufacturing, agriculture, transportation, maritime, aviation, tourism, public works, fisheries, health and energy sectors.
The local content policy targets several issues:
- Employment of nationals: Sierra Leoneans should be given “first consideration” for employment and training. The policy establishes a minimum of 50 percent staffing for Sierra Leonean nationals among an enterprise’s managerial and intermediate employees, and limits the employment of expatriates as junior employees.
- Use of local goods and services: Firms should give preference to Sierra Leonean goods when they are of equal or comparable value. Companies must use certain amounts of local materials in key sectors (including 10 percent of domestically produced units in manufacturing, 10 percent of domestically available granite in cement, and specific percentages of locally produced fabric and furniture in tourism). In the event there is inadequate local capacity to meet the law’s target, the Ministry of Trade and Industry may issue a waiver.
- National preferences in contracts: The policy gives first consideration to Sierra Leonean companies for mining and petroleum awards and licenses, as well as public works contracts. The policy also gives domestic firms a preferential margin in government and private procurements.
The local content policy will be enforced by the Local Content Agency. Companies will be required to submit local content plans to demonstrate compliance, and violations are subject to fines, the loss of investment incentives, and civil forfeiture.
The Embassy is unaware of any Government of Sierra Leone requirement for companies to turn over source code, provide access to surveillance information, or maintain data storage within the country.
5. Protection of Property Rights
There are two systems of land tenure in Sierra Leone. The Western Area, the former British colony of Sierra Leone, which includes Freetown, operate under a freehold system. Outside the Western Area, in the provincial areas, land is governed under a leasehold system where local communities retain ultimate control. Foreigners cannot own land under either system, but they can lease land for terms of up to 99 years. In leasehold areas, local Paramount Chiefs control the land, and may enter into joint ventures with investors to develop or use the land in ways that serve the interests of the indigenous and local communities.
The Constitution protects property rights, but the rule of law is fragile and uneven across the country. In the absence of an effectively functioning legal framework, property rights and contracts are not adequately secure. Mortgages and liens are possible but rare, and generally involve high interest rates and short loan periods. There is no land titling system, and traditional tribal justice systems still serve as a supplement to the national government’s judiciary, especially in rural areas. In 2018, the World Bank Doing Business Report ranks Sierra Leone 165th in the world for the ease of registering property, as the process takes approximately 56 days and costs more than 11 percent of the property’s value.
The Government of Sierra Leone’s Agenda for Prosperity recognizes that reforming the manner in which land ownership rights and obligations are determined is necessary in order to attract foreign investment. The World Bank has provided assistance in this area, and proposed reforms include a comprehensive land use policy that modernizes the land registry, revises urban planning policies, and ensures that women have equal access. The cabinet in 2017 approved a comprehensive national land policy meant to improve upon and strengthen land laws and administration within the differentiated land tenure systems in the Western Area and the provinces. The policy, which awaits parliamentary action, is intended to enhance the abilities of institutions to be able to acquire land for responsible investment and promote sustainable socio-economic development.
Intellectual Property Rights
Sierra Leone has been a member of the World Intellectual Property Organization (WIPO) since 1986 and a member of the African Regional Intellectual Property Organization (ARIPO), the common intellectual property body for English-speaking African countries, since 1980. As a member of the WTO, Sierra Leone is also bound by the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Sierra Leone has not ratified the WIPO Copyright Treaty or the Berne Convention for the Protection of Literary and Artistic Rights.
Despite its recognition of international standards, Sierra Leone’s protection of intellectual property is limited. Laws dating back to the colonial era mean that patents and trademarks registered in the United Kingdom can be extended to Sierra Leone. Efforts to update the country’s legal framework have thus far included the Copyright Act 2011, the Patents and Industrial Design Act 2012, and the Trademark Act 2014. Nonetheless, legal protections remain outdated and incomplete, and government enforcement is minimal due to resource and capacity limitations. Customs screening for counterfeit goods is weak, and the government publishes no known statistics about seizures of counterfeit goods.
For companies who may wish to seek advice from local attorneys who are experts in Sierra Leonean law, go to http://photos.state.gov/libraries/adana/5/Consular/Lawyer_sList-2016.pdf for a list of local lawyers.
Sierra Leone is not listed on the USTR’s 2017 Out-Of-Cycle Review of Notorious Markets, or in the 2018 Special 301 Report. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .
6. Financial Sector
Capital Markets and Portfolio Investment
Limited capital market and portfolio investment opportunities exist in Sierra Leone. The country established a stock exchange in 2009, but the exchange initially listed only one stock, a state-controlled bank. In early 2017, the exchange added two new listings, while three other institutions expressed willingness to trade their shares at the exchange.
Sierra Leone acceded to the IMF Article VIII in January 1996, which removed all restrictions on payments and transfers for current international transactions. The regulatory system does not interfere with the free flow of financial resources. Nonetheless, foreign and domestic businesses alike have difficulty obtaining commercial credit. Foreign interests may access credit under the same market conditions as Sierra Leoneans, but banks loan small amounts at high interest rates. Foreign investors typically bring capital in from outside the country.
Money and Banking System
Sierra Leone’s banking sector consists of 14 commercial banks, 56 foreign exchange bureau, 17 community banks, 15 credit-only microfinance, three deposit-taking microfinance, two discount houses, a mortgage finance company, a leasing company, 59 financial service associations, an Apex bank, three mobile financial services providers, and a stock exchange. Nearly 100 bank branches exist throughout the country, with activity concentrated in Freetown. Though three correspondent banking relationships were lost in the past three years, the banking system currently has seven correspondent banks with no relationship in jeopardy. However, the commercial banking sector is characterized by poor performance and has significant financial vulnerability. While the country’s banks are profitable, two state-owned banks are plagued with non-performing loans making the bulk of their investments, and restructuring by the new GoSL administration is inevitable.
Foreign individuals and companies are permitted to establish bank accounts. The usage of mobile money is taking a central place in money transfers and popularity. Other electronic payments and ATM usage are limited in urban areas and non-existent in rural settings, but the Bank of Sierra Leone is much closer to rolling out a “national payment switch” to facilitate connectivity among different banks’ electronic systems. A major telecommunications network upgrade launching in 2018 specifically targets mobile money services and eCommerce.
Inadequate supervisory oversight of financial institutions, weak regulations, and corruption have made Sierra Leone vulnerable to money laundering. While the country’s anti-money laundering (AML) controls remain underdeveloped and underfunded, the Financial Intelligence Unit (FIU) completed a national risk assessment in 2017 and is currently working with the Economic Crime Team of the Office of Technical Assistance, U.S. Department of the Treasury to enhance its capacity with four technical visits already scheduled in 2018 with FIU.
There is no history of hostile takeovers in Sierra Leone.
Foreign Exchange and Remittances
The Investment Promotion Act 2004 guarantees foreign investors and expatriate employees the right to repatriate earnings and the proceeds of the sale of assets. There are no restrictions placed on converting or transferring funds associated with investments, including remittances, earnings, loan repayments, or lease payments for as long as these transactions are done through the banking system. Investors can withdraw any amount from commercial banks and transfer the funds into any freely convertible currency at market rates. Availability of foreign currencies is often limited in practice, however, and foreign-controlled businesses outside of Freetown have reported challenges in dealing with local banks. The more rural the area, the greater the difficulty accessing banking services. The exchange rate is market determined, as the national currency fluctuates based on the forces of demand and supply in the market. Nonetheless, the Bank of Sierra Leone conducts weekly foreign exchange auctions of U.S. dollars. Only commercial banks registered in Sierra Leone may participate, and each bank is limited to purchasing USD100,000 at each auction. The local currency, the Leone, has been increasing against some regional currencies, and is not experiencing any major exchange rate fluctuations at this time. Sierra Leone is a party to the West African Monetary Zone (with the Gambia, Ghana, Guinea, Liberia, and Nigeria), and efforts to introduce a common currency, the ECO, have repeatedly been delayed.
The law provides that investors may freely repatriate proceeds and remittances. The Embassy is not aware of any recent complaints from investors regarding the remittance of investment returns, or of any planned policy changes on this issue.
Sovereign Wealth Funds
Sierra Leone does not maintain a sovereign wealth fund.
7. State-Owned Enterprises
Sierra Leone has more than 20 state-owned enterprises (SOEs). These entities are active in the utilities, transport and financial sectors. There is no official or comprehensive government-maintained list of SOEs, but notable examples include the Guma Valley Water Company, the Sierra Leone Telecommunication Company (Sierratel), the Electricity Distribution and Supply Authority (EDSA), the Electricity Generation and Transmission Company (EGTC), the Sierra Leone Broadcasting Corporation, Rokel Commercial Bank, the Sierra Leone Commercial Bank, and the Sierra Leone Housing Corporation, and the Sierra Leone Produce marketing Company, among others.
Sierra Leone is not a party to the Government Procurement Agreement within the WTO Framework. SOEs may engage in commerce with the private sector, but they do not compete on the same terms as private enterprises, and they often have access to government subsidies and other benefits. SOEs in Sierra Leone do not play a significant role in funding or sponsoring research and development.
The National Commission for Privatization was established in 2002 to facilitate the privatization of various state owned enterprises (SOEs). With support from the World Bank, the commission has focused on privatization of the country’s port operations, and currently seeks investments in public private partnerships (PPPs) for port security, telecommunications, and other infrastructure projects. Privatization processes are open to foreign investors, and could be integrated into plans for better capitalizing the stock exchange in Freetown via new equity listings.
8. Responsible Business Conduct
The government encourages companies to engage in responsible business conduct, and the Sierra Leone Investment and Export Agency (SLIEPA) seeks investors who will undertake corporate social responsibility (CSR) projects. Sierra Leone does not have a set of standards or policies for CSR, but the law provides various incentives. For example, the Finance Act 2011 created a tax deduction for expenditures on social services that are outside the scope of the investment, such as the construction of schools and hospitals for community use. Businesses operating in areas outside of Freetown and the Western Area, where local Paramount Chiefs control the land, are often expected by community leaders to engage in projects to support the communities’ social and economic well-being, human capital development, and physical infrastructure. Throughout the country, there is limited awareness of the impacts that corporate activities might have on human rights and environmental protection. Sierra Leone is a member of the Extractive Industries Transparency Initiative, and has been certified as compliant since 2014.
Foreign investors and the public alike see corruption as a key challenge in Sierra Leone, despite some improvements in recent years. Sierra Leone ranked 130th out of 180 countries on Transparency International’s 2018 Corruption Perceptions Index, scoring an average of 30 percent within the last five years. Nonetheless, measures to combat corruption have been largely ineffective. For businesses, corruption exists in government procurement, the award of licenses and concessions, regulatory enforcement, customs clearance, and dispute resolution.
Sierra Leone signed the UN Convention against Corruption in 2003 and ratified it in 2004. The country is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The Anti-Corruption Act of 2008 does, however, make it a criminal offense to offer, solicit, or receive a bribe. The law applies to all appointed and elected officials, close family members, and all companies whether foreign or domestic, but it does not extend to political parties. Public officials must recuse themselves from matters in which they have financial interests, and must submit annual disclosures of their assets and liabilities. The Anti-Corruption Commission, established in 2000, has the authority to investigate and prosecute acts of corruption by individuals and companies. To date, the commission has had limited impact, though there are no suggestions that it has used its authority to discriminate against foreign businesses. The “Pay No Bribe” campaign, launched in 2016, encourages citizens to report corruption in the public sector. To date, ACC seems to most actively pursue primarily minor corruption cases, rather than higher-level government officials.
Sierra Leone joined the Extractive Industries Transparency Initiative (EITI) in 2008 and, after a brief suspension due to incomplete disclosures, the country has been EITI-compliant since 2014. Corruption has frustrated Sierra Leone’s hopes of partnering with the Millennium Challenge Corporation (MCC) on a compact program, since it began its USD44 million MCC threshold program participation in November 2015. The country has failed the “Control of Corruption” indicator on MCC’s annual scorecards from FY2014 to 2018, with the exception of 2017 when Sierra Leone passed the corruption indicator. Though the country made progress on numerous MCC indicators in 2017 and 2018–and had already commenced the implementation of a MCC four-year threshold program in 2016–eligibility for a larger compact program will depend on the country making additional progress in the battle against corruption.
Resources to Report Corruption
Ady Macauley, Commissioner
3 Gloucester Street, Freetown
+232 76 394 111, +232 77 985 985
Transparency International Sierra Leone
20 Dundas Street, Freetown
+232 79 060 985, +232 76 618 348
email@example.com & firstname.lastname@example.org
10. Political and Security Environment
Sierra Leone has experienced peace and stability since the end of the civil war in 2002. The country held multi-party elections in 2007, 2012, and 2018. The UN Integrated Peacebuilding Office in Sierra Leone (UNIPSIL) ended its operations in 2014. Sierra Leone’s relations with the neighboring countries of Guinea and Liberia are peaceful. There have been isolated incidents of politically motivated violence during and after the national and local elections in March 2018. Some recent incidents post-election, however, appear to have less connection to the elections and tend to be other local “score settling” or simple criminal activities. There are no reports, however, involving targeting of foreign-held property or installations.
11. Labor Policies and Practices
Sierra Leone’s labor force is informal, unregulated, and lacking in specialized skills. Approximately 90 percent of laborers work in the informal sector, predominantly in subsistence or other small-scale agriculture. Sierra Leone’s labor force was devastated by the country’s civil war of 1991-2002, and the formal employment sector has yet to recover to pre-war levels. The war led to significant migration out of the country, and destroyed the nation’s education system. In a country where educational institutions once earned the moniker “the Athens of Africa,” adult literacy is estimated at 48.1 percent (2015 Est.), and businesses identify significant shortfalls in skilled professionals due to limited vocational training. While the government is developing Technical and Vocational Education and Training (TVET) programs, foreign investors find it difficult to recruit and train sufficient numbers of laborers. Youth unemployment is persistently high, and will continue to grow due to changing demographics.
The national minimum wage is 500,000 Leones (approximately USD65) per month, and applies to all workers, including in the informal sector. The law requires paid leave and overtime wages, but enforcement is ineffective and there is no prohibition on excessive compulsory overtime. Workers can be dismissed with limited notice and severance. Foreign employees must obtain work permits from the Ministry of Labor and Social Security, and most countries’ nationals must also have visas. Additional information is available from the Embassy of Sierra Leone in the United States and at http://travel.state.gov. Government policies regarding the hiring of Sierra Leonean nationals are described above in the “Performance and Data Localization Requirements” section.
The law allows workers to join independent unions of their choice without prior authorization, to conduct legal strikes, and to bargain collectively. The Ministry of Labor and Social Security estimates that approximately 35-40 percent of workers in the formal economy are unionized, including mainly agricultural workers, mineworkers and health workers. The law allows unions to conduct their activities without interference, and the government generally respects this right. However, in some private industries employers have reportedly intimidated workers to prevent them from joining a union, and there is no legal protection against employers’ discriminating against union members. Unions have the right to strike, although the government can require 21-day prior notice. Collective bargaining is widespread in the formal sector and most enterprises are covered by collective bargaining agreements on wages and working conditions. In 2015, workers at the Shandong Iron & Steel Group’s iron ore mine and at the Sierra Leone Bottling Company declared strikes over salary disparities and severance packages. In both cases, the workers and management were able to resolve the disputes.
Labor issues are governed by the Employers and Employees Act 1960, the Regulation of Wages and Industrial Relations Act 1971, and regulations adopted by the Ministry of Labor and the Ministry of Health and Sanitation. Legal requirements are outdated and poorly enforced. In particular, child labor remains a widespread problem. The law limits child labor, allowing light work at age 13, full-time nonhazardous work at age 15, and all work at age 18. The law against child labor is not effectively enforced. Nearly half of the children who reside in rural areas are engaged in child labor, compared with 36 percent in urban areas. The Ministry of Labor and Social Security attributes the ineffective enforcement to a lack of funding and the inherent difficulties of monitoring child labor in the informal sector. In addition, the International Labor Organization has identified discrepancies between provisions in the Child Rights Act 2007 and provisions of the Employers and Employer Act 1960, including with regard to the minimum wage.
Additional information is available in the Department of State’s Human Rights Report, http://www.state.gov/j/drl/rls/hrrpt, and the Department of Labor’s international child labor and forced labor reports, http://www.dol.gov/ilab/reports/child-labor .
12. OPIC and Other Investment Insurance Programs
The Overseas Private Investment Corporation (OPIC) operates in Sierra Leone pursuant to a bilateral agreement from 1961. OPIC provided a loan guarantee in 2011 to an investment fund with agricultural projects in Sierra Leone, and is now considering other potential projects in the country including a major expansion in the telecommunications sector.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
|Host Country Statistical Source||USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|Host Country Gross Domestic Product (GDP) (M USD)||N/A||N/A||2016||3,700||https://data.worldbank.org/
|Foreign Direct Investment||Host Country Statistical Source||USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|U.S. FDI in partner country (M USD, stock positions)||N/A||N/A||2016||Data suppressed||http://bea.gov/international/
|Host country’s FDI in the United States (M USD, stock positions)||N/A||N/A||2016||0||http://bea.gov/international/
|Total inbound stock of FDI as % host GDP||N/A||N/A||2016||13.8%||https://www.theglobaleconomy.com/
Table 3: Sources and Destination of FDI
IMF Coordinated Portfolio Investment Survey data are not available for Sierra Leone.
Table 4: Sources of Portfolio Investment
IMF Coordinated Portfolio Investment Survey data are not available for Sierra Leone.
14. Contact for More Information
Economic and Commercial Section
U.S. Mission Sierra Leone
Southridge, Hill Station
Freetown, Sierra Leone
+232 99 105 000