Investment Incentives

The Investment Promotion Act 2004 creates various incentives for foreign and domestic investors, and 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 employment and skills development, and social services like schools and hospitals, etc. SLIEPA provides details of these investment incentives at http://sliepa.org/investment/why-sierra-leone/investment-incentives/. In May 2019, the National Revenue Authority provided details on tax incentives at https://www.nra.gov.sl/sites/default/files/Final%20Magazine%20MRP%2029-5-19.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 established a Special Economic Zone (SEZ) in 2011 on 50 acres near Freetown. The SEZ policy accords businesses operating in the zone tax holidays 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 is meant to boost the economy by leveraging the power of local industries and citizens through their participation in the economy. It targets several issues including:

• Employment of nationals: All foreign businesses must employ Sierra Leoneans, at least 20 percent of the managerial and 50 percent of intermediate positions, and this ratio must increase over time to stand at 60 percent for managerial and 80 percent for intermediate positions after 5 years.
• Preferential Treatment: Preference will be granted to a foreign business that partners with Sierra Leonean businesses over foreign businesses with no equity share own by Sierra Leonean entities.
• First Consideration: Foreign businesses must give Sierra Leoneans first consideration for employment and training.
• 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 but if 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 is enforced by the Local Content Agency. Companies are required to submit local content plans to demonstrate compliance, and violations are subject to fines, the loss of investment incentives, and civil forfeiture.

Capital Markets and Portfolio Investment

Limited capital market and portfolio investment opportunities exist in Sierra Leone. The country established stock exchange in 2009 to provide a place for enterprise formation and a market for the trading of stocks and bonds. The exchange initially listed only one stock, a state-controlled bank but in early 2017, it had three listings that 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, supervised by the central bank of Sierra Leone, consists of 13 commercial banks, 69 foreign exchange bureau, 17 community banks, 32 credit-only microfinance, 5 deposit-taking microfinance including Apex Bank, 2 discount houses, a home mortgage finance company, a leasing company, three mobile financial services providers, and a stock exchange. More than 100 bank branches exist throughout the country, with activity concentrated in Freetown. The banking system currently has seven correspondent banks. While the commercial banking sector is characterized by poor performance with significant financial vulnerability, the central bank of Sierra Leone in 2018 approved the take over a commercial bank acquired in 2016 by a foreign investor.

Foreign individuals and companies are permitted to establish bank accounts. The use of mobile money is taking a central place in money transfers. Other electronic payments and ATM usage are available in urban areas but limited in rural settings, while the Bank of Sierra Leone is set to roll out a “national payment switch” to facilitate connectivity among different banks’ electronic systems. Telecommunications companies are upgrading to specifically enhance mobile money services and e-commerce.

As part of structural reforms in the banking sector under the Extended Credit Facility of the International Monetary Fund, the Bank of Sierra Leone pledged to establish a special resolution framework for troubled financial institutions, establish a deposit insurance system, strengthen its capacity to supervise, oversee the non-bank financial institution sector, and facilitate the adoption of International Financial Reporting Standards (IFRS) both internally and across the financial sector.

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 a series of technical visits in 2018 and 2019, and others scheduled for 2020 with the FIU. The GIABA (a French acronym for Groupe Intergouvernemental d’Action Contre la Blanchiment d’Argent en Afrique de l’Ouest, which in English is, ‘The Inter-Government Action against Money Laundering in West Africa’) and the EU also funded a workshop on designated non-financial business and professions on Anti-Money Laundering and Combating Financing Terrorism (AML/CFT) preventive measures.

Foreign Exchange and Remittances

Sierra Leone has a floating exchange rate regime and the currency, the Leone, has depreciated slowly over the years mainly due to the increasing demand to finance current consumption and a decreasing inflow of foreign currency resulting from decreased exports and remittances.

Foreign Exchange

In August 2019, the government-mandated the exclusive use of the Leones for all contracts and payments, prohibited individuals and other entities from holding more than USD 10,000 or its equivalent in any foreign currency, and travelers must declare foreign currencies of more than USD 10,000 or its equivalent. Contravention of these directives is punishable by law as stipulated in the 2019 Bank of Sierra Leone Act. In late 2020 however, an acute shortage of domestic currency hit the market, compelling the central bank to order sufficient domestic currency to meet the market demand and lifted the restriction on foreign currency holdings to mitigate the effects of the scarcity.

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.

With the approval of the Bank of Sierra Leone, investors can withdraw any amount from commercial banks and transfer the funds into any freely convertible currency at market rates. The exchange rate is market-determined, and the Bank of Sierra Leone sometimes conducts weekly foreign exchange auctions of U.S. dollars, but only commercial banks registered in Sierra Leone may participate. Sierra Leone is a party to the ECOWAS Common Currency, the ECO, and efforts to introduce this common currency are being given serious consideration, though it has repeatedly been delayed.

Remittance Policies

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 any planned policy changes on this issue.

Sovereign Wealth Funds

Sierra Leone has not established a sovereign wealth fund which was legislated under the 2018 Extractive Industries Revenue Act and the 2016 Public Financial Management Act. The implementation has been delayed because of the collapse of the international iron ore prices as well as other minerals in 2014-16, which also coincided with the Ebola outbreak, both of which deteriorated the fundamentals of the economy, especially in the extractive sector.

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. However, notable examples include the Guma Valley Water Company, the Sierra Leone Telecommunication Company, the Electricity Distribution and Supply Authority, the Electricity Generation and Transmission Company, the Sierra Leone Broadcasting Corporation, the Rokel Commercial Bank, the Sierra Leone Commercial Bank, the Sierra Leone Produce Marketing Company, to name but a few.

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.

Privatization Program

The National Commission for Privatization was established in 2002 to facilitate the privatization of various SOEs. With support from the World Bank, the commission has focused on the 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.

Corruption poses a major challenge in Sierra Leone and is particularly endemic 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 Commission (ACC), established in 2000, has the authority to investigate and prosecute acts of corruption by individuals and companies. The Anti-Corruption Act of 2008 makes it criminal to offer, solicit, or receive a bribe, and this law applies to all appointed and elected officials, close family members, and all companies whether foreign or domestic. The Commission launched a “Pay No Bribe” campaign in 2016, which encouraged citizens to report corruption in the public sector.

In its efforts at tackling corruption, the country progressed 10 places up in its Transparency International Corruption ranking from 129/180 in 2018 to 119/180 in 2019, and further up 2 places (117/180) in 2020. Sierra Leone passed the Millennium Challenge Corporation’s indicator on the control of corruption scoring 71 percent in 2019, 79 percent in 2020, and 81 percent in 2021, though it failed in 2018 (49 percent). Sierra Leone ranked third out of 35 African countries surveyed on government’s effectiveness in the fight against corruption. Corruption declined from 70 percent in 2015 to 40 percent in 2020 according to the Afro Barometer report, and 92 percent of respondents say the fight is on the right course according to a national perception survey conducted by the Center for Accountability and Rule of Law in 2020.

In April 2018, President Bio established a 12-member Governance Transition Team to conduct a stocktaking of the government of former President Ernest Koroma. The report documented a high level of fiscal indiscipline and alleged corruption and recommended a commission of inquiry of all MDAs, and for the supreme audit authority to carry out forensic audits of specific sectors. These sectors included agencies relating to energy, telecommunications, the National Social Security and Insurance Trust, and roads. A white paper to implement the recommendations of the reports of the Commission of Inquiry is currently being implemented by the Ministry of Justice. It is hoped that the outcome of the implementation will make corrupt practices very unattractive for would-be perpetrators.

In 2019, the GoSL passed an Anti-Corruption Amendment Act which increased the powers of the ACC in the fight against graft. It protects witnesses and whistleblowers, provides sanctions for failing to submit asset declaration on time or with falsified, inaccurate, or misleading information. It empowers the Commissioner to prevent contracts that are not of national interest and increased penalties for offenses under the Act. Since then, the ACC has steadily pursued arrests, repayments, and convictions in both the private and public sectors. As of April 2020, the ACC had recovered millions of dollars in misappropriated funds, and prosecuted corruption cases leading to convictions of present and former public officials and private citizens. The Chief Justice established a Special Court to adjudicate corruption cases while the ACC has signed several information-sharing agreements with key government institutions, including the Audit Service Sierra Leone and the FIU.

Resources to Report Corruption:

Francis Ben Kelfala, Commissioner
Anti-Corruption Commission
Cathedral House
3 Gloucester Street, Freetown
+232 78 321 321
info@anticorruption.gov.sl
http://anticorruption.gov.sl/ 

Lavina Banduah (lbanduah@tisierraleone.org)
Executive Director
Transparency International Sierra Leone
20 Dundas Street, Freetown
+232 79 060 985 & +232 76 618 348
http://www.tisierraleone.org/  

Sierra Leone is a constitutional republic with a directly elected president and a unicameral legislature. In March 2018, the opposition Sierra Leone People’s Party (SLPP) presidential candidate, Julius Maada Bio, won the fourth cycle of presidential elections since the civil war ended in 2002 and it was deemed “free and fair” by international observers. The Sierra Leone Police (SLP), supervised by the Ministry of Internal Affairs, is responsible for law enforcement and maintaining security within the country, but it is poorly equipped and lacked sufficient investigative and forensic capabilities. The Republic of Sierra Leone Armed Forces (RSLAF) is responsible for external security but also has some domestic security responsibilities to assist police upon request in extraordinary circumstances. The RSLAF reports to the Ministry of Defense and the Office of National Security. Civilian authorities maintained effective control over the security forces.

There is tension between social, political, and cultural institutions over power and resources. Policies and positions are sometimes sought for control over public finances. The government launched three Commissions of Inquiry (COI) to probe into the governance activities of the immediate past administration which created further tensions. The COI was concluded in March 2020 and the government came up with a White Paper in September 2020 assuring citizens of the full implementation of the recommendations, which included recovery of all monies and confiscation of all assets as detailed in the COI reports. At the outbreak of Covid-19, the government implement nationwide restrictions and curtailed movement to reduce the risk of the infection. Enforcement provoked sporadic violent clashes around the country, leaving some people dead, many hospitalized, and property destroyed. Though the President blamed it on the opposition as trying to make the country ungovernable, concerns about peace and national cohesion were raised as reverting to the dark days of the war will only make things very difficult for Sierra Leoneans.

Sierra Leone’s relations with the neighboring countries of Guinea and Liberia are peaceful. However, Guinea laid claim over the border village of Yenga, in the Kailahun District of Sierra Leone despite the several meetings between the Presidents of the two countries. There have been isolated incidents of politically motivated violence during and after the 2018 national and local elections.

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 was estimated at 43 percent in 2018 (data.worldbank.org) 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 enough workers. Youth unemployment is persistently high and will continue to grow due to high birth rates and changing demography.

The national minimum wage was reviewed upward by the Minister of Finance in November 2019 from Le500,000 to Le600,000 Leones (approximately USD 60) per month and applies to all workers, including those 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. Employers can dismiss workers with limited notice and severance. Foreign employees must obtain work permits from the Ministry of Labor and Social Security, and most countries’ nationals must 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 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 requires 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.

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 while 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. Child labor is more prevalent in agriculture, artisanal gold and diamond mining, granite quarrying, sand mining and construction, domestic service, street hawking, and begging, charcoal burning, and fishing, and the laws against child labor are not effectively enforced. 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. Also, the International Labor Organization has identified discrepancies between provisions in the Child Rights Act 2007 and provisions of the Employers and Employer Act 1960.

Table 3: Sources and Destination of FDI
Data not available.
Table 4: Sources of Portfolio Investment
Data not available.