Sierra Leone Part II: Post Independence

IMF Pain, a 25 Year old Head of state, Civil War, and Massive Education Investment

Sierra Leonean dancers

In part one, I discussed Sierra Leone’s status as a low income country and the colonial era. It is a country with weak savings rates, leaving a developing financial system. It has low manufacturing, and depends on mining for exports, but substantial amounts of gems are stolen and the gems Sierra Leone does export have volatile prices. Sierra Leone has weak agricultural productivity, low financial reserves, and weak energy production. Yet despite those issues, they have massively increased health outcomes and increased education spending. The question is after independence how did they get there? We answer that now. Below you will see how the country’s average incomes grew/declined under each President, from 1964 to present. As you can see, much of the decline in incomes happened until the 17 year rule of Siaka Stevens. But as we will discuss there are some macro affects that occurred that were beyond his control.

Sir Milton Margai (1961-1964)

In 1961, Britain handed power to Sir Milton Margai and his Sierra Leone People’s Party (SLPP), supported by the Mende from the South and East.

Margai had to deal with an illiterate population, poor healthcare, a chief system that controlled large parts of the economy, and chronic poverty. Many Sierra Leonean farmers were hoping that the most extractive colonialist institutions would be reformed or abolished. He initiated reforms, yet many colonial institutions persisted due to time constraints before his death in his third year.

His plan (which was the same as Botswana’s) was basically to use the partnership with De-Beers to fund infrastructure & healthcare, as diamonds were 80% of Sierra Leone’s export earnings. He enacted reforms, including the National Health Plan, Development Act, the Bank of Sierra Leone, and established more universities. Margai followed the dual economy model laid out by Nobel Prize winning economist from St. Lucian, Sir Arthur Lewis. Rural areas had “traditional” law run by tribal chiefs while the urban areas were more actively managed by the state. However, this only exacerbated the urban-rural gap.

Colonial Institutions that were maintained (and still exist today):

Agriculture: Despite hopes for reform, the marketing board continued post-independence, squeezing farmers' incomes further by taxing them heavily and offering low wages irrespective of commodity price fluctuations. Coffee and cocoa exports were used to supply Sierra Leone with a foreign exchange buffer.

Chief System: Margai maintained the chief system since they were perceived to have good administrative ability. He renamed the “hut tax” to a “poll tax”. Presently there are now 190 chiefs. Much of the land is customary land tenure, which means traditional leaders or chiefs playing a significant role in land allocation and management instead of private property law. The chief, rather than the individual farmer, is the custodian of the land. Though families and clans have user and traditional rights to the land, the chief has the last say on who farms where. The more closer connected farmers are to the chief the more secure their property rights are.

Sir Albert Margai (1964-1967)

Milton’s half brother, Albert Margai, continued many of the policies from the colonial administration like the marketing boards and made limited reforms.

Reforms:
In 1964, Margai removed itself from the British West African pound, and made its currency the Leone.

He made government owned-enterprises like a state owned Hotel, planation, cement factory, and oil refinery, and borrowed from international lenders to make Kim Tom Power Station in 1965 to generate energy.

He was accused of making affirmative action policies for the Mende tribe. He also Africanized the civil servants, replacing civil servants from Britain with Mende people.

Maintained Institutions:
Marketing boards: He maintained the colonial marketing boards. By mid 1960s, the marketing board paid the farmers of palm kernels were paid 56% of world prices, cocoa farmers received 48%, and coffee farmers received 49%.

Paramount Chief System: In addition, Margai kept the Paramount Chief system. But, Land tenure for chiefs was only suspended if iron ore or diamonds were found. Then the land became the monopoly of the European entrepreneurs.

By 1967, the polices weren’t working, population growth and inflation eroded per capita economic growth. The government owned plantations and industries were unprofitable. Agricultural production decreased in the government owned plantations. Sierra Leone turned from a rice exporter to a rice importer. By 1967, six years after independence, Sierra Leone was almost bankrupt, so Sierra Leone took a $6.9M loan from the IMF. The government had to reduce government spending, let their currency float instead of anchoring to the pound sterling (devaluing the currency), end state projects, and increase income taxes and diamond selling to allocate more funds to paying off the IMF loan — austerity. Needless to say, people did not like the austerity measures so people rioted.

Margai tried to suppress political parties and make a one party state because he thought the alternative candidate in the APC (All People’s Congress) - Siaka Stevens - would win and ruin the nation. Margai lost but didn’t want to leave so he executed a coup. Then, a counter coup reinstated Siaka Stevens.

Siaka Stevens (1968-1985)

In 1967, Siaka Stevens was in power and killed & jailed political opponents. He was a socialist populist and drew support mainly from the north — Limba, Temne, and Loko.

Global Macro Issue Beyond his control:
He came to office when oil prices skyrocketed over five fold from when he took office (1973 Oil Crisis & 1979 Iranian revolution). High prices drained foreign currency reserves since crude & fuel needed to be imported. Then, in the 1980s, due to Western economies falling to recession, the commodity buyers weren’t buying commodities as much, reducing demand and prices for commodities starting the African Debt Crisis.

Agriculture:
Siaka paid the farmers 10% of world prices, so 90% of the export revenues went to the government. Stevens used the revenues mainly to enrich himself and his political and communal patrons instead of providing public services, roads, or education. Instead of trying to help farmers expand rice production he just decided to lean on food aid from US and Europe.

Nationalization & Corruption:
He made the government own more enterprises and then used the profits to give money to himself and his political and communal patrons instead of making a good business. He effectively made a shadow state with his “Big Men” who worked to illegally smuggle diamonds to enrich himself.

Kicked out Immigrants:
He was not a fan of migrants, he expelled Fante Fisherman back to Ghana.

Finance:
He borrowed from China to make more sugar cane plantations, borrowed from Soviet Union to get new fishing boats and nets for fishermen, and borrowed from the World Bank for agricultural projects. Siaka borrowed massively to host the Organization of African Unity conference to show off his country. In 1977, Sierra Leone was officially bankrupt. From 1978 to 1985, Sierra Leone borrowed consecutive IMF loans to the tune of $77M. Continuous borrowing from the IMF, the lender of last resort, led him to implementing austere policies which he termed “political suicide”.

Authoritarianism :
Stevens also weakened the army after many coup attempts. Stevens made special paramilitary force to protect himself. First was the Internal Security Unit (ISU) and then the Special Security Division (SSD). The people called ISU “I shoot U” and SSD “Siaka Steven’s Dogs”.

Neglection/Mistakes:
Siaka Stevens deprioritized the economic interests of SLPP voters, the Mende, by failing to maintain crucial railways from Bo (a leading economic center where Mende people live and sell large amounts of cocoa & coffee) to Hastings and Waterloo (coastal cities for export). This led to the collapse of a vital sector of Sierra Leone's economy, affecting diamond, cocoa, and coffee sales.

Nationalization of Diamonds:
He increased taxes on De Beers’ diamond exports (7.5% tax). De Beers didn’t like the tax so the firm illegally sold diamonds to Liberia to avoid the tax. Stevens then nationalized the Sierra Leone Selection Trust from De Beers, making it National Diamond Mining Company Sierra Leone Limited, where the government (or really Stevens) owned 51% of the company in 1970. De Beers left in 1984.

Unfortunately, there was a collapse in recorded diamond exports. From 2M carats in 1970 to 595K in 1980, to 48K by 1988. It wasn’t because diamond production fell, it was because Steve lost the ability to use the state to control diamond exports. Illegal diamond activity was able to avoid state-owned export checks (or the diamond traders bribed to export checkpoint people to avoid taxes). He shifted his focus from trying to end illegal mining and enforcing industrial mining to supporting and controlling small scale smuggle networks and benefit from the smuggling himself.

Tired of the lack of clean water, corruption dependable electricity, decent education, or high quality healthcare, a man named Foday Sankoh tried to execute a coup against Siaka Stevens government. He was jailed, released, and entered a training camp that Libyan dictator Moammar Gaddafi ran for African Revolutionaries in Bengazi. Sankoh met Charles Taylor who was planning to overthrow Liberia.

In 1980, the Governor of the Central Bank, Sam Bangura criticized Siaka Seteve’s policies for being extravagant. Bangura was thrown off the top floor the building and died.

Manufacturing from European firms left in the 1980s. Teachers were not being paid. By 1980s, the African Debt crisis kicked in when world prices for coffee, cocoa, iron and etc. dropped.

Joseph Momoh in (1985-1992)

Stevens was pressured to leave office so he appointed Joseph Momoh. Momoh inherited a nearly bankrupt Sierra Leone: roads fell to pieces, teachers, chiefs, and civil servants were unpaid , and schools disintegrated.

Agriculture: On the positive side, Momoh was better than Siaka for farmers, but was still punitive on farmers: The marketing board paid: 37% of world prices for palm kernals, 19% for cocoa farmers, and 27% for coffee farmers.

On the negative side, in the 1980s, Sierra Leone was also suffering in the African Debt Crisis.

Momoh underwent a structural adjustment program in 1986-1989 and took a 11.5M dollar loan. Momoh had to undergo painful neoliberal economic reforms and dismantle the policies that the IMF thought made the Sierra Leone backwards. In short, the IMF said that Sierra Leone’s government had too many unprofitable government owned firms and borrowed too much money making food and petrol cheap via subsidies for their already poor population.

Momoh sold government owned hotels, mines, and plantations to rich Sierra Leoneans, local successful Syrian-Lebanese Arab families, and foreign firms in Britain, US, & Israel to get foreign currency. He removed subsidies on rice and petrol, balance the budget, float the currency instead of anchoring it, and shrink civil service. The idea was after a few years of pain to fix Sierra Leone’s balance of payments, then Sierra Leone can be on a path to growth. But could the suffering people tolerate these reforms?

The IMF’s treatment of free floating currency was extremely painful as the Leone quickly devaluated as Sierra Leoneans demanded more goods from the globe than the globe demanded from Sierra Leone. AKA, dollar demand was stronger the Leonean demand, thus weakening the Leone.

Basic essentials like rice, milk, kerosene fuel, and medicine where expensive and scarce, there were frequent power cuts, and the black market thrived. The government officially put their currency at 6 Leones to a dollar, but since foreign currency was so scarce at official places, people went to the black market where 25 Leones were a dollar. Rice prices increased 180% and petrol increased 300%. People were suffering.

People couldn’t afford rice or fuel, so people dug more diamonds in the rivers, and Momoh did a counterproductive crackdown on his citizens for illegal diamond mining called “Operation Clean Sheet”. All it did was make more gangs for illegal diamond exports. Illegal export mining exploded to the point that by 1989, there was almost no legal exports of diamonds virtually all of diamond exports were stolen, which means foreign reserves isn’t going to Sierra Leonean central bank. Sierra Leone defaulted on debt again in 1990.

Civil War (1991-2002)

Charles Taylor started civil war in Sierra Leone’s neighbor, Liberia, in 1989. He also helped fund a group of armed men called the Revolutionary United Front, led by Foday Sankoh, to cross the border from Liberia into Sierra Leone to start his war in 1991. Momoh’s government couldn’t even stop the RUF. The military was weakened, the border wasn’t protected, and the civil war commenced.

There was a stream of atrocities: mass rapes, drugging families, amputation of ears, child soldiers, and 70K deaths. The RUF and the official government funded their war by forcing people to find diamonds at gunpoint and then sell diamonds for weapons. This is where the term “blood diamonds” comes from.

Joseph Momoh was ousted by Captain Valentine Strasser, a 25 year old kid, but the country goes through several presidents after a series of coups.

The United Nations passed a resolution in 2000 to ban buying diamonds in Sierra Leone, so the world wouldn’t be funding the civil war. In addition, Economic Community of West Africa States (ECOWAS), mainly Nigeria, and Britain intervened and captured Foday Sankoh.

185K Sierra Leoneans were refugees and aslyum seekers as well. Roads, houses, and buildings were eradicated. Investment was gone, export currency dropped, banks were looted, healthcare was in shambles, and the formal economy was destroyed.

Post Civil War, Ahmad Kabbah (2002-2007)

The UN ban was lifted in 2003 and flushed Sierra Leone with foreign aid, nearly 65% of it budget was donor aid.

British leader Tony Blair was helping Kabbah with a “good governance” strategy which promoted anti-corruption, transparency and good governance. While there were improvements and reforms, economic growth was sluggish. Especially compared to other African countries where 2000-2014, was the fastest growth the African continent has ever seen, fueled, in part, by rising commodity demand by a rising China.

More diamonds were stolen, discovered, and exported thanks to increased investment. Australian firm African Minerals and London Mining flushed back into Sierra Leone after the civil war to mine more iron.

China was investing in the country to build bridges and helping farmers cultivate rice and in return China was getting more rubber, iron, and diamonds.

He also sought IMF debt relief. In 2005, Sierra Leone owed $1.8B in debt. After the West relieved debt, by 2007, Sierra Leone debt was reduced to $550 million.

Ernest Bai Koroma (2007-2018)

Social Policy:
Ministry of Health & Agriculture instituted a free healthcare policy for pregnant and breast-feeding women.

Leasing land:
Koroma tried to lease fertile land to foreign firms to boost agricultural yield. But there has been push back by the public calling it “land grabbing” and there has been land dispute issues as some chiefs claim that the government is selling their people’s land without their consent.

Citizenship
He allowed the Lebanese Arabs to finally obtain citizenship in Sierra Leone.

Foreign Investment:
Diamond mining in Koidu is increasingly mechanized. Sierra Leone has attracted foreign investment from Israeli-diamond firms. Gold, bauxite, and iron exports also rose. This was benefiting Sierra Leone until iron ore crashed in 2013 and didn’t recover in price until 2020.

Mechanized mining in Koidu

In addition, Chinese firms like Shandong Iron & Steel started buying own mines from Australian and British firms in Sierra Leone once these Western firms were having debt issues.

Despite progress, the Ebola outbreak ravages the nation for years killing 11K people.

Julius Maada Bio (2018-Present)

Education: The man dedicated almost a quarter of the government budget on education. The results have been an additional 1M children have been able to attend school. In 2018, less than 2M kids went to school, now it’s 3.1M.

Changing Mining Contracts:
President Bio canceled signed mining contracts with China’s Shangdom Iron & Steel Company and US’s Gerald Group in 2019. The government unilaterally revoked their rights to mine and sell iron ore. Bio did this because he felt the previous government was not collecting enough royalties from the deal. This led to less exports from Sierra Leone leading to a lower value of the Leone to the dollar, causing inflation since most imported goods are priced in dollars.
Bio then tried to settle a new contract with Gerald.
In the new contract, the U.S. firm Gerald Group invested in 90%-10% joint ownership stake with the Sierra Leonean government in the Marampa mine to increase production and exports of iron.

In August 2022, violent riots broke out in Freetown and in the north over a cost of living crisis caused by the war in Ukraine.

Right now as of November 2023, the Sierra Leonean currency is depreciating fast. Since Sierra leone imports food, fuel, manufactured goods, and medicine, all these goods are more expensive, causing rampant inflation.

Overall, over 50% inflation

Land Reform law: Bio is weakening the chieftaincy laws with a new law signed. Women now have the same land rights as men, and now descendants of freed slaves can own land outside Freetown. The chiefs say this would make the country ungovernable, but its not surprising they say that since they benefit from the status quo. In addition, he is taking a grant from the World Bank to complete the land registry database.

Conclusion

Sierra Leone was damaged a few things:
Colonial institutions that need further reform (marketing board & customary land). The customary laws are not good for property rights and family farming investment. There still needs to be a universal land registry which Rwanda has done.

Siaka Stevens was a corrupt leader who made the extractive marketing board worse than the British and nationalized corporations to enrich himself and his patrons. Momoh inherited a horrible state, and the people could not take the IMF reforms and a civil war broke loose. The nation is still dealing with issues in food production, climate change induced heat waves, and daily power cuts.

Will Bio’s education investment boom yield? It takes over a decade to reap the rewards of educated workers. In the mean time, agricultural productivity needs to be boosted(i.e. rice), more solar energy generation needs to be exploited, and artisanal mining needs to be formalized so people can get access to credit to use mechanized tools instead of depending on foreign companies who bribe public officials. Eventually, Sierra Leone will have to make its economy more complex to avoid commodity price shocks.

Does Sierra Leone have the ability to accomplish these goals? Only time will tell the tale.

If you want an example of a more successful diamond African country, check out my post on Botswana below.

.

Source: Where Credit is Due by Greg Smith

Sierra Leone: A Political History

Why Nations Fail: The Origins of Power, Prosperity, and Poverty, Daron Acemoglu and James A. Robinson