No Mud, No Lotus: Sierra Leone’s Finance Act 2023 as a Wake-Up Call for the Private Sector

Despite the challenges posed by the Finance Act 2023, Chukwu-Emeka Chikezie urges a constructive approach to finding ways forward that benefit both the public and private sectors in Sierra Leone.

by Sierraeye

Listening to my meditation app this morning, the theme was “no mud, no lotus,” a Zen Buddhist saying. The beautiful lotus flower starts in the mud but emerges on the pond’s surface in all its resplendence. The muddy origins of the Finance Act 2023 that MPs passed into law last week can transform into a lotus of better public-private relations in Sierra Leone.

On 16 March 2023, the Minister of Finance, the Minister of Trade & Industry, and the Acting Bank Governor invited a cross-section of private sector players to a well-attended meeting at the Ministry of Finance. The aim was to calm jittery business nerves because of the ongoing economic challenges Sierra Leone faces, also reverberating globally. These senior government officials stressed the importance of continuing dialogue with the private sector.

Indeed, encouragingly, the Ministry of Finance has created a private sector liaison desk (which they might upgrade to a directorate) to strengthen the all-important ministry’s links with businesses. Other senior government officials have hinted that government could replicate this model across other ministries that interface with the private sector. At the helm of the Ministry of Finance are a minister and deputy with a wealth of relevant international and local experience across international development institutions and the private sector here.

MPs get in on the Act

The parliamentary press release issued after the MPs passed the Bill into law mentioned the consultation process, but did not provide specific details. However, it is important to note that since 2020, the Ministry of Finance and the National Revenue Authority have been actively engaging with the private sector prior to submitting Bills to Parliament. Additionally, they have been conducting annual consultations before the Finance Bill is enacted into law, which happens after the annual Budget Speech.

Business alarm

As business leaders began to make sense of the Act, concerns mounted. As the Easter weekend unfolded, business leaders converged on a WhatsApp group to compare notes. One business owner contacted the Minister of Trade, who granted an emergency meeting for Tuesday, the first day after Easter. As word got around, the WhatsApp forum saw not only business owners but the arrival of heads of business membership organizations active across the economy: from renewable energy to manufacturing to agribusiness to pharmaceuticals to importation to fisheries to foreign direct investors to market women to traders.

And when this group met the Minister of Trade & Industry, his Deputy, the Senior Permanent Secretary, and senior officers, they shared their concerns surrounding the recently passed Finance Act 2023. These concerns included the Minimum Alternate Tax of 3% on turnover, which could force many companies to cut their workforce, close, or conceal earnings by reverting to cash-only transactions, thus paradoxically undermining the government’s domestic revenue mobilization efforts; a 2% tourism levy, just as the hard-hit sector is seeing the green shoots of growth; GST on fee-based financial services that will increase the cost of banking for a largely underbanked population and might undermine financial inclusion; removal of GST exemption for solar products, which could deprive thousands of poor rural dwellers from enjoying access to power in their homes and small businesses and even harm Sierra Leone’s green credentials. One business leader re-assessed his company’s figures from last year by applying the new taxes and concluded his company would have ended the year with a $2m debt. A travel industry actor drew attention to the significantly higher costs per passenger to fly into or out of Sierra Leone.

The Minister of Trade promised to engage counterparts across the government to resolve the sticking points. The race is now on! Will the President sign the Act into law? Will he ask Parliamentarians to revise it? Or will he reject it, sending the designers back to the drawing board? Parliament is set to dissolve on 25 April in preparation for the June elections, so the clock is ticking.

Never waste a crisis…

Someone once said no crisis should go to waste, and this one could still deliver a lotus. Rather than throwing mud and having a political bunfight that generates more heat than light, let’s recognize the complexity of the systemic situation in which we find ourselves and find constructive ways forward.

Thanks to the Finance Act 2023, a broad cross-section of private sector players quickly converged to advance their collective interests. To date, the private sector has been fragmented, creating challenges for policymakers when they do want to engage.

Other countries do a better job of fostering productive public-private interfaces. At the other end of the spectrum from Sierra Leone in terms of ease of doing business and the investment climate is the Indian Ocean Island state of Mauritius. We can learn from Mauritius and adapt to the Sierra Leone context.

Mauritius’s key private sector coordinating body is the Joint Economic Council (JEC). The government of Mauritius will regularly consult with JEC on critical matters of public policy. Formed in 1970, just two years after Mauritius gained independence from Britain, the JEC comprises the Mauritius Chamber of Commerce and Industry (formed in 1865), Mauritius Chamber of Agriculture, Mauritius Employers’ Federation, Mauritius Sugar Producers’ Association, Mauritius Export Processing Zone Association, Mauritius Bankers’ Association, Mauritius Insurers’ Association, Association des Hôteliers et Restaurateurs de l’île Maurice, Association of Mauritian Manufacturers.

“Operation JEC Sierra Leone”?

Sierra Leone’s private sector needs to embark on an “Operation JEC SL” starting with constituent business membership organizations (BMOs) that cut across the Sierra Leonean economy (taking account of the structure of our economy, in which many Sierra Leoneans are engaged in all-important informal or semi-formal trade). Legitimacy for business groups will come from having properly constituted, credible, capable, and well-informed BMOs to speak on their behalf.

Coincidentally, the IMF country representative has requested a meeting with the private sector. This is an opportunity for BMOs to engage with a key international development partner to the government and people of Sierra Leone and establish an independent relationship to ensure future exchanges and interactions will be well-coordinated. Evidence suggests that good state-business relations contribute to both macro- and micro-economic development. The private sector must play its part and cannot afford to leave things entirely to the government. On several occasions, government officials have confessed that engaging the private sector can leave them confused and unsure which policy option to pursue because of the mixed messages they receive. An urgent priority for the private sector is for the Sierra Leone Chamber of Commerce, Industry, and Agriculture to resolve the internal issues that have hampered its effectiveness, as the institution has a critical role to play in the private sector ecosystem.

Public sector must play its part

The government is the other key partner in the public-private relationship. Last year, parliament enacted the National Investment Board (NIB). It mandated it to initiate, organize, and lead all public-private dialogue pertaining to investment. Almost certainly, NIB will need to delegate other bodies to conduct a lot of the dialogue (e.g., private sector liaison desks in different ministries). Still, the overall coordination is a key value-added role the NIB can play to ensure that dialogue doesn’t default to a talk shop with zero follow-ups.

Cabinet can also play a pivotal role in ensuring that all government policy and legislation benefits from a thorough consideration of the likely impact on the private sector before it secures Cabinet approval.

Finally, parliament is the last port of call between decisions by the Executive branch of government and the public. MPs could embed standard procedures to ensure all legislation benefits from adequate consultation with legitimate private sector bodies before they pass it. Of course, this happens now, especially when parliament is aware of private sector concerns or interests. However, some pieces of legislation may fall through the cracks. Making it an established part of parliamentary procedure, with the private sector increasingly playing a proactive rather than a reactive role, will help to reduce this risk to a minimum.

Here comes the lotus…

Let’s not waste time pointing fingers and apportioning blame for how we got here. Instead, let’s ask ourselves how we move forward. One of the business leaders assured the Minister of Trade that the private sector supports the government’s revenue mobilization drive. As long as the burden is shared equitably and the proceeds are used in the public interest for Sierra Leone’s development, the government will find a capable partner in the private sector.

If the private sector can—in the face of what we hope is the near-miss of the Finance Act 2023—overcome its collective action problem and enhance its own coherence and coordination, if the government can follow through with the promising steps it has already taken and ensure they are joined up and coordinated; and if MPs—the peoples’ representatives—can put in place systems and structures to scrutinize Bills to ensure they strengthen prospects for inclusive growth in Sierra Leone, we shall see a beautiful lotus emerge from the mud.

©️ 2023 Chukwu-Emeka Chikezie is writing in his personal capacity

You may also like

Leave a Comment

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More

Privacy & Cookies Policy