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Sierra Leone Business: Freetown does not offer hospitable environment for firms- World Bank

Creating a hospitable environment for productive firms depends upon good and active public policy, both at the city level to improve connectivity, and at the national level to improve power supply.
This is according to the World Bank Economic Update on the country, stressing that Freetown does not currently generate good connectivity, either through dense development or through transport links. The new government it says provides a window of opportunity to reset policies around a few clear priorities.
Even though it is relatively dense with people, the city is not dense with economic activity. Only 4 percent of land within 5km of Freetown’s central business district is currently under commercial or industrial use, compared to 24 percent in other African cities. Instead of generating central clusters of activity, the city is expanding rapidly through urban sprawl.
As Freetown has grown rapidly, increasing pressure has been put on existing transport systems. Limited, poorly- maintained roads and the uncontrolled expansion of private and informal public transport have resulted in high levels of congestion and high emissions in the city. At peak hours, average traffic speeds in some central areas of the city reach just 3km per hour – lower than a walking pace.
The Update further highlighted the challenges of the external transport links from the city which it says are also poor, creating a bottleneck for investment across the country. Freetown’s transport and trade logistics are a key reason why it is ranked 115 out of 137 countries in terms of transport infrastructure and 162 out of 190 countries in ease of international trade. “Privatizing the operations of Freetown’s port has resulted in significant progress being made towards the goal of making Freetown a trans-shipment hub for the region. However, Lungi airport is still poorly connected to the city, and roads to and from Freetown are a significant barrier to regional connectivity” the report states. “The ECOWAS Trans–West Africa Coastal Highway is 80 per cent completed, and much of the remaining sections are in Sierra Leone connecting to the capital.”
Recent estimates suggest that if Sierra Leone’s road infrastructure could be improved to the levels of Mauritius, the country’s annual growth in GDP per capita could rise by almost a percentage point
The report emphasizes on two primary factors that are responsible for the issues stated above, firstly at the national level, low and unreliable electricity provision limits the productivity of competitive firms across Sierra Leone. In a World Bank survey of Sierra Leone’s businesses, 27 percent of large businesses identified electricity as their largest constraint to growth. This was second only to corruption (34 percent).
These figures considerably understate the problem, because the larger and more productive firms that really need reliable energy supply simply do not set up in Sierra Leone. Sierra Leone’s installed electricity capacity is astonishingly low relative to neighboring countries
Firms lose the equivalent of 11 percent of total sales through electricity outages, more than double the losses elsewhere in Sub-Saharan Africa. Though low and unreliable energy supply affects firms across the country, it is particularly damaging for Freetown, as it impedes the ability of the capital to sustain competitive large-scale production.
Secondly, good connectivity it says is valuable because it enables both scale and specialization and also by bringing large amounts of people and capital together in one area.
It enables specialization by allowing firms to trade their specialized goods together, and by allowing workers to develop specific skills, confident that they will find a firm that requires them.
There are two main ways through which this connectivity can be achieved, both of which are used in good urban planning, which are through dense development that brings firm and workers closer together and through transport links that allow easy movement of people and goods.
The report also looked at the impact of poor connectivity and power on productivity, the result it says is that there are too few firms in the city, and that those firms that manage to survive in the city lack sufficient scale and specialization, which means that the jobs they provide are not very productive.
Businesses in the city are predominantly small in size and offer low-value local services, such as informal retail and repairs. Only one firm out of 50 gets more than a tenth of its revenues from exporting, compared to one firm in 12 in the other major cities of Sub-Saharan Africa. As Freetown has grown, Sierra Leone has actually deindustrialized, with manufacturing now at only 2 percent of national GDP, down from 10 percent in 1994.
By Zainab Iyamide Joaque
Monday September 03, 2018.

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