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June – December 2020

Sierra Leone: Does today’s private sector help or hinder?

Sierra Leone: Does today’s private sector help or hinder?

By Prof Brian Ganson and Herbert M’cleod

  • DEC 2020
16 minutes to read

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Was Sierra Leone’s approach to private sector development the answer to its fragility?
When Sierra Leone emerged from its protracted civil war in 2002, a strategy of private sector development, supported by business-enabling reforms, was implemented to entice investors and, arguably, to accelerate human development and reduce fragility. Although Sierra Leone saw an initial improvement in some key indicators (notably GDP) and was hailed by the International Monetary Fund (IMF) in 2016 as being on the path to ‘stronger and more inclusive growth’, it has remained a profoundly fragile state.

For example, since the end of the armed conflict, the country has continued to fare badly, compared to the rest of the continent, in terms of health standards, housing and access to electricity. Despite private sector-led economic growth from 2002 to 2014, there was still widespread under-employment, a failure to diversify the economy away from continued dependence on extractives, and a marked decline in the value of the local currency. There were also compelling evidence of impropriety in the reporting and use of public funds. The Ebola outbreak in 2014 threw into sharp relief the incapacity of the state, which avoided collapse only through foreign entities providing financial and technical assistance. There may be some signals of improvement, such as in anti-corruption efforts; yet these do not seem to be having widespread impact on how citizen’s experience the state.

There is plenty of qualitative evidence of heightened private sector investment and activity exacerbating economic divisions in fragile, conflict-prone states and clearing the way for renewed conflict.

It is common to premise a country’s exit from fragility on robust private sector development; any number of World Bank Group and other global and national schemes are pursued on this basis. Yet, despite all the rhetoric, the private sector remains one of the vectors of persistent poverty, and growing inequality and instability, in Sierra Leone. Sierra Leone’s experience is not unique. There is plenty of qualitative evidence of heightened private sector investment and activity exacerbating economic divisions in fragile, conflict-prone states, laying a foundation for renewed socio-political conflict, often violent.

If private sector development is to play a meaningful role in helping Sierra Leone and other fragile and conflict-prone states transition towards peace, stability and economic well-being, the shortcomings in the current approach to private sector development and state-business relations need to be probed. This study aimed to do just that.

How the study was conducted
The study used four sources of data to inform its analysis:

  • A literature review of research on private sector development in Sierra Leone, focusing on the period 2002 (when the civil war ended) until 2014 (when the Ebola crisis erupted).
  • Semi-structured interviews with government officials and community and private sector actors with direct experience of the impact of private sector development on conflict and fragility, as well as country experts, policymakers and researchers.
  • A working paper, which was specially written to capture preliminary insights from the literature review and the interviews, with commentary thereon and further insights provided in a consultative session in Freetown, Sierra Leone with selected academics, economic actors, civil society representatives and government officials.
  • A study of the accumulated insights obtained through the above data-collection techniques in the light of existing peace-building and state-building frameworks. This informed the development of a model, with both empirical and theoretical foundations, showing the negative interactions between private sector investment and the core manifestations of fragility.

The rationale for this methodology was to investigate if, where and how theory meets practice in order to better understand the impact of private sector development on fragile states.

It is clear that private sector interests provided some of the fuel that stoked Sierra Leone’s lengthy civil war, which has been described as ‘a struggle between two rival groups supported by businessmen intent on gaining control of mineral wealth’.

Key findings from the study

  • Private interests meddling in the affairs of state: It is clear that private sector interests provided some of the fuel that stoked Sierra Leone’s lengthy civil war, which has been described as ‘a struggle between two rival groups supported by businessmen intent on gaining control of mineral wealth’. The conflict between commodity-hungry multinational corporations (including De Beers) that fueled the violence between combatants on the ground, however, was found to be just the culmination of a cycle of corporate malfeasance that had plagued the country since its founding.
  • An economy for the connected few: In Sierra Leone, a “public-private partnership” has generally meant elites across sectors plundering the country’s assets, notably in the minerals sector. In the post-war period as in the past, the minerals sector was highly capital-intensive and provided a spawning ground for rent-seeking, with beneficiaries including government officials managing the sector. In mining and plantation agriculture, the government knowingly disrupted the livelihoods of farming communities, thereby entrenching poverty and inequality. Many of these inefficient mining and farming operations failed spectacularly when commodity prices fell.
  • Policy incoherence: Both before and after the war, the policy landscape in Sierra Leone was characterised by strong patronage networks that favoured the well-connected in government and business. As the government would not follow through on structural reforms needed to overhaul a moribund economy at the expense of parochial interests, most existing businesses failed to grow, and widespread unemployment and poverty persisted. Aid, foreign direct investment and tax revenues were used to reward government officials or were earmarked for government supporters, thus helping to entrench societal divisions and ethnic tensions.
  • Failures in the rule of law: A failure to uphold the rule of law has long characterised day-to-day life in Sierra Leone, both before and after the war. A police force and judiciary in the pockets of the political elite and the politically connected (including influential private sector concerns) stirred up a great deal of mistrust and fear among the generally downtrodden population, whose rights were continuously abused. With the legal system and security structures manipulated to support members of the elite, inclusive growth and development remained compromised.
  • Mounting social frustrations and upheavals: Before the civil war, most of Sierra Leone’s population had not experienced the benefits that had been promised to them in the struggle for independence. Widespread frustrations bubbled over into strikes, riots and election violence. Perversely, in the post war period, a free press and a few institutions (such as the Human Rights Commission and Auditor General) that reported on government abuses exacerbated tensions in the face of a still-unresponsive government. The period 2009‒2014 was a particularly torrid time, with social media helping to fan the flames of discontent across the country, especially on campuses. In an attempt to quell the violence, the state resorted to the use of force against its own citizens.
  • Repeating the mistakes of the past? Taking all of these findings into account, it appears that the emphasis on “post-conflict recovery” and “rebuilding the country” following Sierra Leone’s civil war —without sufficient reflection on exactly what was being rebuilt—led to a repeating the mistakes of the past. For example, the IMF’s and World Bank’s open-market and austerity measures that added to Sierra Leone’s lack of distributive justice and yawning wealth gap before the civil war was largely replicated in the post-war period. Perpetuating the earlier political and economic order allowed patronage and corruption to flourish once again. Today, the suppression of citizen protests against mining and farming company excesses shows few signs of abating, and Sierra Leone is performing abysmally in terms of socio-economic indicators such as child mortality, hunger, educational achievement and poverty. The country also remains highly dependent on commodities as the economy has seen little diversification.

Widespread frustration over the government’s preoccupation with rent-seeking and its neglect of the needs of the general population bubbled over into strikes, riots and elections that were often laced with violence.

Time for a new understanding of private sector impacts to tackle fragility?
The above findings paint a disturbing picture of a country in an apparently interminable state of fragility. This is in strong contrast to assertions made by the Sierra Leone government, donors and international institutions that the country has shed its fragile status and is now on a positive development path. In the researchers’ view, it also highlights flaws in the widely accepted theory surrounding the impact of policy interventions intended to help countries to escape conflict and fragility through private sector development.

The dominant model assumes that policy and aid interventions as well as private sector initiatives shape economic growth opportunities and private sector development in ways that ameliorate key factors of conflict and fragility – as captured by the World Bank focus on private sector contributions to “security, justice and jobs”.

Some authors have suggested that a contributing factor in Sierra Leone’s inability to escape its dire socio-economic circumstances is an apparent paradoxical insistence on repeating the mistakes of the past.

Yet this linear model fails to explain how, in Sierra Leone and many other cases, austerity measures have been used to eliminate political opponents, infrastructure projects have extended the scope for corruption, and an over-reliance on a few strategic export products has marginalised local businesses, increased economic insecurity, and dashed the country’s hopes for inclusive growth and development. These realities, however, do not seem to deter the international community who in many cases continue to portray the policies pursued to promote the kind of private sector development Sierra Leone has experienced as the key to the country’s economic recovery and prosperity.

Drawing on advances in peace- and state-building theory, the researchers propose an alternative model, which contextualises private sector development as part of a complex system in which the outcomes of policy interventions and private sector initiatives are themselves shaped by key factors of conflict and fragility, including most notably inter-group conflict. The authors argue that this dynamic systems model better explains how the private sector may help advance a fragile state towards peaceful and inclusive development, or, as in the case of Sierra Leone, become a key factor in reinforcing the conflict system and impeding positive socio-political change.

The model emphasises that  a significant injection of private sector resources into a fragile state will – unless specifically managed – inevitably deepen existing social and political divisions. If reform efforts and investments tend to further concentrate power and resources with the allies of the government in power; if they attract or enable private sector actors indifferent to issues of social and environmental justice in economic development; or they reinforce experiences of exclusion from the benefits of private sector development and thus grievance among the broader population, the intended recovery project will  predictably fail.

The authors underline, however, that in the model is also a positive message. A more robust set of metrics—whether for research, for policy and institution actors on the international stage, for constructive national actors, or for an individual enterprise attempting not only to “do no harm” but contribute to peaceful development—may not be so difficult to conceptualize. Policies and investments that manage the dominant systems dynamics to create a more open economic order, that prioritize positive impact on the informal sector, and that bring civil society and opposition voices to the table in decision-making roles, for example, are far more likely to move a country away from fragility.

One of the key conclusions from the study is that a significant injection of private sector resources into a fragile state will – unless specifically managed – inevitably deepen existing political and socio-economic divisions, and the intended recovery project will fail.

The model is, thus, a modest step towards an empirically rigorous and theoretically sound description of the policies and practices that might make more real the promises—so far unfulfilled in Sierra Leone and many other places—of private sector development in service of inclusive growth, resilience, and peaceful development in fragile contexts.

  • Find the original article here: Ganson, B. & M’cleod, H. (2019). Private sector development and the persistence of fragility in Sierra Leone. Business and Politics, 21(4), 602‒631. https://www.researchgate.net/publication/337635126_Private_sector_development_and_the_persistence_of_fragility_in_Sierra_Leone
  • Brian Ganson is a Professor at the University of Stellenbosch Business School and Head of its Africa Centre for Dispute Settlement. He works at the intersection of the private sector, conflict, and development in peacebuilding and other fragile contexts. He engages with human rights advocates, peacebuilders, governments, community advocates, companies, and other international actors as a researcher, consultant, educator, evaluator, and mediator.
  • Herbert Mcleod is the Country Director for IGC Sierra Leone and Liberia. He has been an advisor to the government of Sierra Leone in its transition from post-conflict to normal development and at the forefront of efforts to ensure the application of human rights in the operations of the extractive industry. His prior career spans 35 years of development work in fragile countries for the United Nations Development Program.

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