By John Mannah, USA
The National Investment Board (NIB) developed by an Act of Parliament is a Breath of Fresh Air for Business Investments in Sierra Leone.
The creation and development of the National Investment Board (NIB) by an Act of Parliament to promote, nurture and sustain investments in Sierra Leone especially foreign direct investments (FDIs) is an innovative idea in opening the investment space in Sierra Leone but a groundbreaking and transformational one.
Dr Maada Mustapha the Executive Director of NIB talked to the African Young Voices (AYV) this morning about the strategies his organization has developed to encourage and incentivize investors especially FDIs to invest in Sierra Leone.
Among the strategies the NIB has put in place is the One-Stop-Shop where investors will have one place or building to enable them to register their businesses within a short time, preferably one day to register and start businesses instead of going to five or ten buildings which often prolongs business registration in Sierra Leone. .
This strategy will eliminate the bureaucracy and delay in business registration.
That’s a very good start for the NIB. What the managers at NIB should however realize is that FDI flows is not slow or being reduced into coming to Sierra Leone because of the bureaucratic bottlenecks such as corruption and high transactions costs but due to other factors such as weak macroeconomic fundamentals in the country.
One important macroeconomic factor responsible for the lack of sustenance of FDI flows in Sierra Leone is the poor economic growth and expansion.
When an economy grows, it leads to productivity and job creation which concomitantly leads to improvement in is the welfare of citizens. This lack of citizens participation in the economy that will lead to improved economic growth and improvement in their welfare is the greatest impediment to the poor sustainability of FDIs in Sierra Leone.
What economists know about this problem is that because of the poor productivity in all sectors of the economy, the income of Sierra Leoneans are very low thereby leading to lack of disposable income to use to purchase goods and services produced by investors be they foreign or local.
A typical example to clarify this point is the incidence that happened with the Radisson Blue hotel which threatened to leave Sierra Leone if the government of Sierra Leone went ahead
d with curtailing meetings and engagements with the hotel in 2018.
This incidence happened because newly elected President Dr. Maada Bio with his enthusiasm to reduce government spending and waste decreed that all government agencies should stop organizing meetings and other government engagements in hotels and motels but should use government meeting rooms and offices to cut down on government spending.
The hotel knowing that a huge part of their revenue came from government spending threatened to leave the country if the President followed through and enacted this law. The government backed down and relented on executing this law and therefore continued doing business with the hotel continued doing business in Sierra Leone.
What this anecdote tells us is that the hotel knew that the average Sierra Leonean citizen does not have the disposable income to patronize or do business with the hotel by renting rooms, eating in their restaurants, and buying merchandize for them to continue being profitable in the hospitality industry.
Arguably, having stated the reasons for the poor state of investments in the country, the question then becomes what should the government do to improve investments in Sierra Leone especially FDIs?
The simple answer to the above question is continuation and deepening of endogenous economic growth – through human capital development which is the flagship program of the SLPP government. Endogenous growth theory of Romer (1996) is transformational because the Solow (1956) growth model has a feature in it called constant returns to scale (CRS) which led to what economists call ‘steady-state-equilibrium.
It is a state where saving and investments will depreciate at an equal rate, and at some point, economic growth will stop.
The conundrum of the Solow growth model is what Sierra Leone was caught up in, until the introduction of the endogenous growth model through the free quality education (FQE) program by President Bio in 2018.
The FRQ or endogenous technical change introduced a shock into the Solow growth model. It is like an exogenous shock or force that changed the growth process in Sierra Leone and the country has never looked back or been the same.
Furthermore, the big 5 game changers spelt out in the SLPP manifesto for the 2023 Presidential and Parliamentary Elections namely, Feed Salone, Human Capital Development, Youth Employment Scheme, Revamping the Public Sector Architecture, development of Technology and Infrastructure will deepen and reinforce the drive to improve economic growth, create more private sector jobs because the cost of labor will be low, and investors will be encouraged to invest in Sierra Leone.
Moreover, creating the environment for private sector participation in the economy will lead to the creation of well-paid private sector jobs thereby offering average Sierra Leones the opportunity to earn adequate incomes.
This improvement in earnings will avail Sierra Leonean workers the disposal income for better participation in the economy to purchase the goods and services produced by investors especially FDIs which will not only provide revenue for the profitability and sustainability of FDIs in the long run in the country.
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