Sierra Leone - Economy

Economy

Sierra Leone is slowly emerging from a protracted civil war and is showing signs of a successful transition. Investor and consumer confidence continue to rise, adding impetus to the country’s economic recovery. There is greater freedom of movement and the successful re-habitation and resettlement of residential areas.

Rich in minerals, Sierra Leone has relied on mining, especially diamonds, for its economic base. The country is among the top ten diamond producing nations. Mineral exports remain the main foreign currency earner. Sierra Leone is a major producer of gem-quality diamonds. Though rich in diamonds, it has historically struggled to manage their exploitation and export.

Annual production of Sierra Leone's diamond estimates range between $250–300 million US$. Some of that is smuggled, where it is possibly used for money laundering or financing illicit activities. Formal exports have dramatically improved since the civil war with efforts to improve the management of them having some success. In October 2000, a UN-approved certification system for exporting diamonds from the country was put in place and led to a dramatic increase in legal exports. In 2001, the government created a mining community development fund (DACDF), which returns a portion of diamond export taxes to diamond mining communities. The fund was created to raise local communities' stake in the legal diamond trade.

Sierra Leone is also known for its blood diamonds that were mined and sold to diamond conglomerates during the civil war, in order to buy the weapons that fuelled the atrocities of the civil war. In the 1970s and early 1980s, economic growth rate slowed because of a decline in the mining sector and increasing corruption among government officials.

By the 1990s economic activity was declining and economic infrastructure had become seriously degraded. Over the next decade much of the formal economy was destroyed in the country’s civil war. Since the end of hostilities in January 2002, massive infusions of outside assistance have helped Sierra Leone begin to recover. Much of the recovery will depend on the success of the government's efforts to limit corruption by officials, which many feel was the chief cause for the civil war. A key indicator of success will be the effectiveness of government management of its diamond sector.

Sierra Leone has one of the world's largest deposits of rutile, a titanium ore used as paint pigment and welding rod coatings. Sierra Rutile Limited, owned by a consortium of United States and European investors, began commercial mining operations near the city of Bonthe, in the Southern Province, in early 1979. It was then the largest non-petroleum US investment in West Africa. The export of 88,000 tons realized $75 million in export earnings in 1990. In 1990, the company and the government made a new agreement on the terms of the company's concession in Sierra Leone. Rutile and bauxite mining operations were suspended when rebels invaded the mining sites in 1995, but exports resumed in 2005. The new Mines and Minerals Act was passed by Parliament in November 2009, which aimed to improve concessions management in the Ministry of Mineral Resources. Sierra Leone is an EITI candidate country. In January 2012, the government launched the GoSL Online Repository, which makes public all mining licenses and related payments recorded.

About two-thirds of the population engages in subsistence agriculture, which accounts for 52.5% of national income. The government is trying to increase food and cash crop production and upgrade small farmer skills. The government works with several foreign donors to operate integrated rural development and agricultural projects.

Despite its successes and development, the Sierra Leone economy still faces significant challenges. There is high unemployment, particularly among the youth and ex-combatants. Authorities have been slow to implement reforms in the civil service, and the pace of the privatisation programme is also slacking and donors have urged its advancement.

Sierra Leone’s currency is the Leone. The central bank of the country is the Bank of Sierra Leone which is located in the capital, Freetown. Sierra Leone operates a floating exchange rate system, and foreign currencies can be exchanged at any of the commercial banks, recognised foreign exchange bureaux and most hotels. Credit card use is limited in Sierra Leone, though they may be used at some hotels and restaurants. There are a few internationally linked automated teller machines that accept Visa cards in Freetown operated by ProCredit Bank.