Sierra Leone’s economic performance in the three years preceding the Ebola outbreak was impressive. The decline in iron ore prices occurred at the same time and wreaked further havoc to the economy. Paradoxically, some of the consequences were off-set by the Ebola dividend—budget support, limited debt relief, and more aid from donors including the IMF, World Bank, and ADB. Now that the end of Ebola is in sight, Government is confronted by some policy dilemmas, springing from the lessons of the epidemic; how to ascertain, and how to apply them, taking into account the concurrent suffered by the economy. This note examines some of these dilemmas and describes the underlying forces at play.
Once again Sierra Leone is at the cross roads, similar in many respects to the position after the last conflict of the 90s. However this time around there is greater freedom to choose, and the lessons of the immediate past to help. Understanding the full repercussions of policy choices made is essential to avoid errors of the past.
This presentation outlines some policy options describing them as dilemmas. I firmly believe that open debate on them would facilitate the selection process and improve the prospects for successful implementation.
First some background.
Turning to Sierra Leone’s economy, there is a consensus that it was doing very well until Ebola. The figures appear to support this view; number of roads built, amount of investment received, averaging double digit growth rates from 2010 to 2012 etc. However, at the end of 2013 the price of iron ore – the primary source of all this – commenced its dive, and is now only about one third of its high levels of 2009 – 2012 (from $190 per ton at its height to an average of $60 now) The effects were and still are devastating. The shut-down of the mines left 5000 jobs at risk; projection for iron ore revenue was that it would surpass $180 million by 2014 compared to less than $50m, actually received. Even more difficult to calculate, are the deceleration effects of losses by investors who had sunk investments to meet the expected demands of the industry.
Discounting the contribution of iron ore, the growth rate during the earlier boom period was estimated at about 6% – good progress even if not spectacular given our low base.
Paradoxically, had there been no Ebola, the consequences of this slump would have been even more severe. The raging destruction of Ebola encouraged a sympathetic hearing for budget support, limited debt relief, and more aid from the IMF, World Bank, and ADB; and above all created a temporary Ebola boom economy from the hundreds of millions of dollars in aid for Ebola—the Ebola Dividend is real even after discounting for reverse flows, alleged corruption and inefficiencies.
Another equally important factor hardly mentioned is what was happening to the oil sector just before Ebola and whose cumulative effects had become more pronounced by Ebola. From 2010 – 2012 West Africa was being universally described in the world press as the next frontier for petroleum and for its iron ore discoveries.
The prospects of oil discovery, attracted all types of investors who set themselves up to rake in the spillover gains from petrol extraction. Many of them were in Freetown setting up companies courting local establishments, and all in all reinforcing the atmosphere of impending boom. Then the oil price plummeted and the speculators who had won oil blocks could no longer find resources to prospect for oil. Would-be investors in related fields also melted away, with the epidemic providing a useful excuse, and left the economy empty.
While all of this was happening, the price of gold fell below US$1,200/ounce, and the two gold mining companies that were preparing to commence Sierra Leone’s first large scale gold extraction were forced to go slow.
Thus the fragile economy was being battered by the iron ore price slump, the dramatic fall in oil prices as well as the near collapse of the gold price; all coinciding with the spread of Ebola.
Paradoxically, had there been no Ebola, the consequences of this slump would have been even more severe. The raging destruction of Ebola encouraged a sympathetic hearing for budget support, limited debt relief, and more aid from the IMF, World Bank, and ADB; and above all created a temporary Ebola boom economy from the hundreds of millions of dollars in aid for Ebola—the Ebola Dividend is real even after discounting for reverse flows, alleged corruption and inefficiencies.
Thus the fragility and vulnerability of the economy would have been brought into sharp focus in 2014 had there not been Ebola to take up attention and at the same time to provide some palliatives.
Where is the dilemma? All eyes are now turning to Post-Ebola Recovery, but should more attention go to recalibrating our economy after the collapse of the minerals and oil industry? To do so would entail a longer time to recover and short-term hardship. If this is not done there will be return relatively quickly to pre-Ebola days but this would miss the opportunity to fix an economy that is and will remain fragile and still vulnerable. Such a recalibration would involve formulating a firm strategy for the minerals sector and aggressive diversification.
Dilemma #1: Implementation of the Ebola Recovery Strategy—Go rapid or Go slow
Rapid return to Pre-Ebola period, versus delayed return but that would allow reorientation of development strategy. The first will yield “quick wins” while the latter will ensure a more resilient economy.
Should the country now aim for quick wins such as restoration of the operations of clinics, provision of free agricultural supplies etc OR should each sector be requested to revisit their major programmes and associated policies with a view to enhance performance as the first step to resumption of “normalcy”?
The first option would focus on repairing the damage caused by the epidemic and restoring economic activities that were on-going prior to the onset of the epidemic. This can be done by rushing in additional capacity – funded from external sources for a short period of time.
Examples from the health sector illustrate the dilemma.
Decontaminate and resupply clinics plus recruit health workers lost to the epidemic. This is clearly a quick win. However the environment within which these clinics functioned, the administrative structure and conditions of service that allowed poor delivery of services and that eroded the trust of citizens, all of which prevailed at the time the Epidemic struck, would not have changed by the end of the quick win period, and the country would be back to square one.
There is a general outcry for more public funds to be spent on the health sector. Currently Government expenditure in 2013 as a percentage of GDP is 10% for Liberia, 6% for Cote d’Ivoire, 5% for Guinea and Ghana, 11 % for Rwanda and 12% for Sierra Leone. Curiously the social indicators that are the best reflection of the state of the health sector are better in all these countries than in Sierra Leone. A plausible explanation is that there are huge leakages and or inappropriate expenditures. This suggests that spending more money on the current health system may not produce significantly different outcomes.
During the epidemic, this system revealed weaknesses, in public health policy and practice eg Free Health Care has not been free in many instances, conflicting operational rules, capacity shortcomings etc. Hence, to go for quick wins would require either using or bypassing the current health system . However unless the shortcomings of the system are fixed, these resources will eventually go the same route as in the past, and be largely wasted. On the other hand fixing the system requires time and cannot be completed in 6 – 9 months. In some cases basic institutions and systems have to be reset; for example we need trained trainers to produce new nurses who in turn must have a minimum basic education to perform their work – yet the current education system is not delivering that consistently. Or water wells can be constructed in all schools, but this should be accompanied by adequate sanitation facilities, and practices or it could be counter productive.
A key question is decentralization. Programme planning at council level is different from the planning undertaken at MoHS level. Similarly the District Health Management Teams (DHMTs) are directly linked to the MOHS in Freetown, yet operate at the council level where local power dynamics are different. The result is, confusion, delays and even conflict.
Another example outside the health sector is donor funded projects. These often come from the centre using local councils more as passengers than drivers and yet Ebola has taught the importance of community ownership.
Turning to our industrial sector outside mining and natural resources, this could not take up the slack because not much had been happening. Resilience implies a capacity to absorb shocks. A virtually non-existent manufacturing sector would have left the economy to wind down slowly leaving the subsistence farming, informal trading and diaspora remittances to keep it going.
Here then is the dilemma: whether to pour more on the current structures and hope to get quick wins, or first revisit policies such as decentralisation, focus on diversification, but then not expect a “quick win”. Recognising that success requires population participation, and this takes time.
Dilemma #2: Regional collaboration—Implement the Ebola Recovery Strategy collectively or individually
The difficulties in controlling the spread of the disease across the borders of the three countries and the epidemic’s impact on trade, markets and livelihoods of residents in border zones and others engaged in formal and informal cross-border commerce, highlighted the interdependence and interconnectedness of the countries in the Mano River Union (MRU)_basin. The three Presidents recently announced that a single programme for the recovery would be prepared covering the three countries. This was a landmark political decision for which they deserve praise. The challenge is how to carry it out and who will take the lead. Does the MRU have the capacity to chaperone the three countries to make this a reality? If not, then a feasible option is for MRU to play a facilitation role and let the countries draw on their own experts for designing and implementing a truly sub regional programme. Fortunately the MRU uses this method for the formulation of most of its programmes so the approach is not new. Problem is that if it sees its role solely for the regional component, a major opportunity would be lost for advancing collaboration. and would be a disservice to the Heads of States who have announced to the world that a single programme would be produced. And they have argued strongly and correctly for a Marshall plan type support.
Two factors further illustrate this need. The relatively tiny markets of each country hardly allow economies of scale and low production costs for their products to be globally competitive. The Presidents statement is an implicit recognition that only a major economic reconstruction strategy will enable these three countries (Guinea, Liberia and Sierra Leone) to break out of the low-income trap, and create a competitive and more resilient sub region.
The dilemma is whether to take the hard road towards launching a truly sub regional programme or go the easy way and develop three individual programmes to which will be added a sub regional component.
Dilemma #3: Undertake a post-mortem to determine with greater precision the flaws exposed, or move on. i.e. avoid the blame game or fix the problem?
The Ebola outbreaks had occurred in other parts of Africa but were contained in the remote locality where they occurred, and never reached epidemic proportions.. A careful examination of Sierra Leone’s case was different will ensure the corrective measure are adopted to address the root causes rather than the obvious symptoms of the epidemic.
It is now evident that inability to contain the spread was due to complete system collapse – a complex combination of several failures on many fronts; from institutional weaknesses to corruption, from policy contradictions, to capacity shortcomings, from underlying governance failures to political misdeeds; and just bad management.
However, carefully analyzing all facets of the collapse can very easily degenerate into the “blame game” and become highly politically charged. The cover-up machinery would go into overdrive leading to unproductive accusations and counter accusations.
The alternative is to let sleeping dogs lie and return to pre-Ebola days with the hope that in future the system will not collapse. This would avoid potential dislocation and disruption to the status-quo, but leave the country vulnerable to other catastrophes.
The dilemma is therefore; a) avoid the blame game and not investigate the causes; or
b) investigate and risk pointing out culprits.
Dilemma #4: Public Service Delivery—fix the systemic problems as you implement, or implement under the current regime.
Ebola exposed the shortcomings of the public sector delivery systems. The system is full of leakages, capacity weaknesses, overlapping policies and contradictory regulations. In order to return quickly to Pre-Ebola days the choice is to use the existing system or bypass it to create parallel ones. The first will not address the issue of trust between Government and citizens, nor will it guarantee sustainability.
Every year the Auditor General’s report reveals a pattern of negligence, impropriety, poor discipline and lack of accountability that prevails in the public service. Admittedly there are isolated reports of progress but not enough to create a momentum of change. Only when staff begin to be held accountable for failure to deliver, and rewarded for exceptional delivery will expected changes be seen.
The dilemma is therefore whether to leave the public sector delivery system in its current state, and construct a parallel machinery, or be bold and attack the fundamentals before entrusting it with new roles.
To conclude, these are some of the dilemmas facing the government. The country’s future depends on the alternative selected. An open and public discussion that will engage the rest of the population, promote inclusion and guarantee the incorporation of local ideas. Currently there is some debate on radio and TV but they are not structured or coherent and no clear system for conclusions to influence policies selected.
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