Sierra Leone: Mining Stalled, Economy Strained Further

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Ebola, falling iron prices and a stalling mining industry add burdens to Sierra Leone’s economy; analysts note the need for diversification.

The effects of Ebola have been widespread; as of January 12th 2015 there were 21,206 reported cases and 8,386 deaths, alongside significant economic costs with the three most affected countries, Guinea, Sierra Leone and Liberia losing around 12% of GDP so far in 2015, according to a World Bank report.

The economic affects have spilled over into adjacent countries; regional trade hubs and trade routes, and countries neighbouring those with Ebola such as Côte d’Ivoire and Mali, have experienced noticeable declines in cross-border trade and restrictions on travel.

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(DFID 2015)

The World Bank  explain that since 2014 all three countries have seen ‘negative or flat growth’, particularly Sierra Leone, whose economy the World Bank predicts will shrink by 2% this year, a reduction from projections of 8.9% growth before the onset of Ebola.

Growth rates in Sierra Leone peaked at 21% in 2013; an Institute for Development Studies (IDS) report, ‘Ebola and Extractive Industry’, explains that huge amounts of Foreign Direct Investment (FDI) flooded into Sierra Leone following the end of the 1991-2002 civil war, creating strong growth on the back of an ‘extraction-based’ economy.

However a recent drop in iron ore prices due to lower Chinese demand, has placed further constraints on the economy and resulted in the closure of Sierra Leone’s two flagship mines.

The Tonkolili iron ore project, operated by UK based African Minerals, was closed in December 2014 due to a lack of working capital and a default on loan repayments to partner, Chinese-based Shandong Iron and Steel Group, report Ventures Africa.

The Financial Times notes how another company, London Mining, one of the biggest employers in the region, went into administration 2014; these two companies took on debt in attempts to expand but were caught out by fluctuating mineral prices and the Ebola crisis.

Projects across the Ebola-affected region are at a standstill; Arcelor-Mittal has delayed a US$1.6bn expansion of its iron-ore mine in Liberia; Rio Tinto has halted its operations at a US$20bn iron ore mine in Guinea, reports Business Daily

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Photo: Jbdodane, CC 2013

John Bonoh Sisay, Sierra Leone’s Chairman of the Chamber of Mines, is quoted by the Guardian as saying that Sierra Leone could look to diversification away from a heavy reliance on mineral extraction. Sisay explains; “there are other opportunities especially in agriculture, which, from a stability point of view, really does create a lot of jobs very quickly”.

However the impact of Ebola on Sierra Leone’s agricultural sector, already with issues of food insecurity, is uncertain; the World Bank claim more than three-quarters have not completed the harvest this year. Sisay also identified the growing concerns around corruption following an auditors report of financial aid sent to Sierra Leone that showed a third was unaccountable for.

The mining industry, on which Sierra Leone heavily depends, has faced criticism, resistance and  local disillusionment with promised benefits. Sisay explained that mining companies will need to place a greater emphasis on healthcare and corporate social responsibility; he suggests incorporating the Extractive Industries Transparency Initiative (EITT) as a global accountability mechanism.

Research by IDS identifies that the ‘resource boom’, while contributing to high rates of economic growth, has failed to provide benefits to local communities and generated a suspicion of government and foreign intervention, that may correlate in some way to local mistrust of the Ebola containment effort.

To quote the report; “While there has been much excitement about the recent mining resource boom and its possible impacts on transforming Africa’s economies, the Ebola crisis has exposed its limits – the resource boom was not having wider transformative impacts for communities, which experienced few of the benefits while bearing the brunt of the impacts. Rethinking the styles, relations and politics of mining developments will be an essential part of rebuilding societies that are not just less vulnerable to outbreaks, but able to respond effectively to them”.

Find out more in the Africa Research Bulletin:

Ebola Crisis: World Bank Report
Economic, Financial & Technical Series
Vol.52, Issue.1, Pp.20699A-20700C

Ebola Crisis: Worsening Economic Impact
Economic, Financial & Technical Series
Vol.51, Issue. 9. Pp.20547A-20549C

West Africa: The Economic Impact of the Ebola Crisis
Economic Financial & Technical Series
Vol.51, Issue.8, Pp. 20516A-20516C

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