In the past, Sierra Leone’s mineral wealth in diamonds, iron ore, bauxite and many other materials was more of a curse than a blessing. The civil war that only ended in 2002 was largely financed from mining revenues. Even today, the state still faces enormous challenges related to the efficient management of its mineral resources, their sustainable use, and efforts to combat corruption and achieve better management of state institutions.
Sierra Leone’s economy depends on raw materials. In 2013, government income from this sector amounted to 109 million US dollars. At the same time, the region is characterised by extreme poverty and is highly volatile. The government has set itself ambitious development goals and intends to achieve the level of a middle-income country by 2035. How can income from raw materials be increased and used for sustainable development? What changes must be made to the political, economic and legal frameworks to achieve this goal? On behalf of the German Ministry for Economic Cooperation and Development (BMZ), the German Development agency (GIZ) is advising the responsible stakeholders at ministries, in civil society and the private sector.
Greater transparency - higher state income
Transparency is key to enhancing efficiency and reducing corruption. Sierra Leone now has an electronic management system that efficiently manages over 800 mining licences and makes them publicly accessible in an online repository. This database enables citizens to establish which company has a licence and how much the state earns from it. The new software also makes it much easier for the mining supervisory and tax authorities to manage the licences. For one thing, it enables them to verify whether companies have complied with their financial obligations. It also makes it much more difficult to issue illegal licences by circumventing statutory regulations.
At the same time, potential new investors can get a better idea of the licences that have already been issued.
With support from GIZ, the mining authority selected a system that calls for little local IT infrastructure and for which no long-term licensing fees will be charged. In parallel, staff at the mining and tax authorities are being trained to use the system and to optimise administrative workflows. The use of digital technologies is combined with long-term advisory services to improve the statutory frameworks and to develop standards that improve the living conditions of people in mining regions.
Shortly after the system was introduced, in the 2010/2011 tax year Sierra Leone was able to claim over 5 million US dollars in outstanding licensing fees from the mining sector. Since then, the number of mining companies that have registered for taxation has risen from 40 to 95 percent. The system has also played a key role in enabling Sierra Leone to meet the requirements of the Extractive Industries Transparency Initiative (EITI). This puts the country in a better position to compete for reliable international investors who comply with the relevant international standards.
In the meantime, the neighbouring country of Liberia has adopted the same approach and set up a similar technology-based management system with support from GIZ in order to derive greater benefit from its mineral wealth and use it in the interests of sustainable development.