Identifier
Created
Classification
Origin
09FREETOWN466
2009-12-01 17:31:00
CONFIDENTIAL
Embassy Freetown
Cable title:  

SIERRA LEONE STABILITY, PART II: ECONOMY

Tags:  ECON EAID PGOV PREL SL 
pdf how-to read a cable
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RR RUEHPA
DE RUEHFN #0466/01 3351731
ZNY CCCCC ZZH
R 011731Z DEC 09
FM AMEMBASSY FREETOWN
TO RUEHC/SECSTATE WASHDC 3010
INFO RUEHZK/ECOWAS COLLECTIVE
C O N F I D E N T I A L SECTION 01 OF 02 FREETOWN 000466 

SIPDIS

DEPARTMENT FOR AF/W

E.O. 12958: DECL: 12/01/2019
TAGS: ECON EAID PGOV PREL SL
SUBJECT: SIERRA LEONE STABILITY, PART II: ECONOMY

REF: A. FREETOWN 465

B. FREETOWN 135

C. FREETOWN 262

D. FREETOWN 322

E. STATE 109266

Classified By: Political/Economic Officer Amy LeMar for reasons 1.4 (b/
d)

C O N F I D E N T I A L SECTION 01 OF 02 FREETOWN 000466

SIPDIS

DEPARTMENT FOR AF/W

E.O. 12958: DECL: 12/01/2019
TAGS: ECON EAID PGOV PREL SL
SUBJECT: SIERRA LEONE STABILITY, PART II: ECONOMY

REF: A. FREETOWN 465

B. FREETOWN 135

C. FREETOWN 262

D. FREETOWN 322

E. STATE 109266

Classified By: Political/Economic Officer Amy LeMar for reasons 1.4 (b/
d)


1. (C) Summary: This is the second in a series of four cables
that highlights risks to Sierra Leone's security (reftel A).
The national economy continues to be in a state of woe, built
on the precarious foundation of a weakening currency,
decreasing imports and exports, reduced food security, and
minimal foreign investment. With over-reliance on external
markets and an underdeveloped financial sector, Sierra Leone
is poorly equipped to absorb any shocks, and is finally
seeming to bear the full brunt of the world's economic
slowdown. Though citizens have demonstrated remarkable
endurance and patience, a continued slide that diminishes the
already-meager food on their plates will likely be met with
anger and protest. Some wonder how much more impoverished
this country can become, but it ultimately will bottom-out:
when it does, peace and stability will falter. End Summary.

--------------
NO END IN SIGHT?
--------------


2. (U) While arguably Sierra Leone's greatest wealth lies in
its territorial waters and mineral resources, the inability
to harness and monitor those potential riches themselves
means citizens benefit only marginally from them - and the
global downturn in demand for diamonds and other minerals as
well as increased smuggling means that even those minimal
profits have been lost. President Koroma has placed his focus
on agricultural production in the hopes of shoring up food
security and with a long-term vision to become a net-exporter
of key cash crops like cocoa, coffee, and rice. Though Sierra
Leone has received equipment and technical assistance from a
variety of donors, it is too soon to tell if it will have the
desired effect: food scarcity during the dry season will
indicate if his strategy has thus far been unsuccessful.
Contacts also note that the push to move unemployed youth out
of Freetown and back to their villages to work the land has

been ineffective, and warn that farmers continue to move away
from subsistence farming and into cannabis production (reftel
B).


3. (U) Without increased food production, Sierra Leoneans
must rely heavily on imports. However, the currency
fluctuations (reftels C and D) are hurting merchants, who
have raised prices but are losing profits. The Leone recently
topped out at 4,350 to one U.S. dollar, and importers have
begun hoarding key items, such as fuel and rice, in the hopes
that the situation will improve during the holiday season
(Note: On November 25, the Leone was trading at 3,750:1, and
even 3,500: 1 in local stores. This is likely due to
increased liquidity and foreign exchange in the market, as a
result of diaspora members returning to Sierra Leone for the
holiday season. This is an artificial improvement, however,
and post expects the Leone to fall again by mid-January. End
Note.),or because they can no longer afford to sell at a
loss. Though visiting relatives always bring cash, contacts
told Poloff that overall remittances are drying up.

--------------
"HARD TIMES DONE COME"
--------------


4. (SBU) In speaking with staff and others about the
country's mood, Poloff was told that "hard times done come,"
and that there is more grumbling now than ever before about
inflation and lack of growth. While Koroma's recent
conference in the UK for investors and donors was viewed
positively by many, they also noted that such an event will
not have an immediate, tangible impact: it may help change
the country's image and encourage new interest, but that
won't translate into the major and expedient investment
needed to increase production, employment, and put cash in
people's pockets. Sierra Leoneans are used to having little,
and faced previous food shortages peacefully and stoically.
They are able to "make do" without food imports as long as
fruit, vegetables and locally-produced rice are plentiful,
but the dry season will be challenging. Most Sierra Leoneans
live on the margins of economic destitution and nutritional
deficiency, but increased food prices coupled with the
routine challenge of finding work could push more and more
people into even greater levels of suffering and hardship.


5. (C) According to government contacts, the already-delayed

FREETOWN 00000466 002 OF 002


Goods and Services Tax is unlikely to be implemented on
January 1, as planned. The government is appearing to
compensate for this loss of income by finding other means: a
new "development levy" is being placed on fuel, which will
increase its cost by the equiavlent of 40 cents per gallon.
Post recently received a letter from one fuel vendor, stating
that the levy will be passed on directly to the consumer,
which will be a hardship for consumers at all levels, and
could incite significant outcry from transportation
companies. The taxi drivers, many of whom are ex-combatants,
are quick to strike when unhappy, which will bring cities and
travel between them to a standstill.


6. (C) Reftel E poses the question of when economic hardship
could trigger unrest: this is a challenging question to
answer, because Sierra Leoneans seem to have a greater
ability to withstand poverty than their neighbors. That said,
one critical tripwire is increased criticism directed at the
President from both the general public and members of his own
government and party. A key Presidential advisor said that
the party's statements are a barometer for public opinion -
if the party protects Koroma by citing external market
pressures and Sierra Leone's limited policy tools to address
them, they are reflecting their view that the people will be
comforted by knowing that much of what is happening is out of
their leader's hands. If the party starts to question
Koroma's inability to change the economic landscape (despite
being cognizant that he is relatively powerless to do so),
they have become aware that the mood of the public has
shifted and requires a scapegoat. Shortages on the shelves or
complaints about hunger cannot be seen as tripwires,
according to contact, because these are common occurrences
here and are generally accepted. But continual media
reporting about the President's ineffectiveness, coupled with
statements from APC members that cast doubt and blame upon
him, could signify that the tide will quickly turn.

--------------
COMMENT
--------------


7. (C) There is no way of knowing when the economy will
completely bottom-out, but true food scarcity and a further
decline in purchasing power will likely result in anger as
well as hunger. If the currency resumes its fall again in
January, bringing with it limited imports and fuel hoarding,
post expects that patience to endure the situation silently
will run out. The government needs to quickly revamp its
strategies to increase large-scale works projects that will
employ the huge numbers of unemployed street dwellers,
eliminate the fuel development levy, and approach donors
quickly for food subsidies and foreign exchange. One decent
meal a day satisfies Sierra Leoneans: if the government can
provide that, while at the same time increasing the Leone's
value by increasing its reserves, this potential trigger for
instability can be at least temporarily neutralized. End
Comment.
FEDZER