SIERRA LEONE STRUGGLES WITH RISING PRICES

UNCLAS FREETOWN 000044 SIPDIS SIPDIS E.O. 12958: N/A TAGS: EAGR ETRD ECON SL SUBJECT: SIERRA LEONE STRUGGLES WITH RISING PRICES ¶1. SUMMARY: Although news reports generally exaggerate the situation, tensions between bakers, millers, and flour and rice importers are coming to a head due to steadily rising prices. In the eye of the storm is Seaboard West Africa Ltd., a U.S.-owned company that imports wheat, bakes bread, and runs the only domestic mill. END SUMMARY. ¶2. FLOUR AND RICE PRICES: According to one news report, flour prices in January are nearly double what they were in August 2007. The Ministry of Trade, without providing prior warning to importers and producers, announced on Saturday, January 26 a reduction in flour prices to 115,000 Le (38.92 USD) per 50 kg of locally manufactured flour and 100,000 Le (33.84 USD) per 50 kg of imported flour. Announced rice prices ranged from 66,000 Le (22.34 USD) per bag to 82,000 Le (27.74 USD) per bag, depending on the origin and type of rice. The Minister stated that although GoSL is committed to international trade liberalization, current circumstances dictate the need for these price ceilings. ¶3. BUSINESS COMMUNITY RESPONSE: Despite several false reports in the newspapers of a bakers' strike on January 21 and the suspension of baking operations on January 28, producers have stated their intention to continue providing these needed staples to the public for the time being. Continuing full-scale production in light of the price ceilings, however, will likely become financially unfeasible in a short period of time. Seaboard, for example, is continuing to sell its flour at 130,000 Le (44 USD) per bag, which it claims is below cost. ¶4. SEABOARD: Seaboard West Africa runs Sierra Leone's only flour mill, which it built in 1968. Seaboard's operations also include grain imports and a bakery. The company is 51% owned by the Seaboard Corporation (U.S.) and 49% by Global Trading Corporation (Belgium). It is managed in Sierra Leone by Houssein Bazzy of Ibrahim Bazzy & Sons, owners of approximately 70% of Global Trading Corporation. Despite being a major market player, Seaboard has experienced some challenges. While some companies resort to bribery to avoid taxes and expedite the lengthy import process [NOTE: A variety of sources state that it can take upwards of 3 weeks for goods to clear customs. END NOTE], Seaboard attempts to conduct business by the book. A further challenge includes media allegations that Seaboard is a provocateur in the political scene, with some reports suggesting that their prices are kept deliberately high in an effort to undermine the fledgling APC government. Seaboard maintains, however, that this is untrue. ¶5. COMMENT: The sharp increases in commodity prices have serious impacts on the Sierra Leonean economy for producers and consumers alike. While the government response to place limits on these increases is laudable, it creates further difficulties for companies like Seaboard, which are selling below cost without government subsidies. How long such companies will choose to continue providing their goods to the public under these circumstances is unknown. Further information on this issue and the larger economic context will be provided septel. END COMMENT.