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Building a Better Business Environment in Sierra Leone

Areas of Work » Cross-Cutting Themes » Confilict-affected Countries » Building a Better Business Environment in Sierra Leone

@ World Bank Group l RABI report coverSupported by FIAS, the impacts of the Removing Administrative Barriers to Investment (RABI) program in Sierra Leone, which began in 2004, have been significant, encouraging job creation, and laying a foundation for the country's economic growth.

An external evaluation of RABI completed in FY11 estimated that program had resulted in nearly 6000 new businesses and 15000 jobs being created, an increase in the tax base with 330-550 new taxpayer registrations leading to incremental revenue from corporate tax and tax on self-employment at $1.4-2.1 million. This is supported by the Sierra Leone Ministry of Finance report of an increase in tax to GDP ratio of 13 percent.

Sierra Leone has made steady progress, ranking second only behind Burkina Faso among the Economic Community of West African States in improvements recorded by the Doing Business report—a remarkable turnaround only seven years after a civil war all but destroyed the economy.

"Under the RABI program, we have seen great progress on the ease of doing business in this country," says former Minister of Trade and Industry David Carew.

Results

FIAS-funded capacity building to the Sierra Leone Investment Promotion Agency (SLIEPA) resulted in new investment leads rising from four in 2009 to more than 100 as of June 2010. It also boosted a critical sector, tourism, with the redevelopment of the Cape Sierra Hotel which is expected to create 400 new direct jobs, generate $40 million in investment, stimulate a range of indirect jobs and smaller businesses, and have a signaling effect for influencing other potential investors.

The Sierra Leone Business Forum (SLBF) was established as an independent organization, active in promoting issues related to tax modernization, financial sector reform, land rights, and other business-oriented changes. SLBF advocacy efforts have lead to the enactment or amendments of six laws including that related to Business Start-up and Registration of Businesses which has helped cut the time to register a business from a week to 2 days and the cost by almost 50 percent. The number of businesses registered has more than doubled, and the associated revenues have increased from $150,000 in 2007 to 1 $250,000 in 2009.

In an effort to further encourage business creation, the government eliminated the requirement for new businesses to pay a quarter of their estimated taxable income prior to company registration, an exemption scheme allowing compliant taxpayers to avoid advance import taxes. As a result, the total number of active taxpayers increased by 27 percent between 2005 and 2010.

The property registration process has sped up with the lifting of a moratorium on sales of privately owned properties. A public credit registry has been created resulting in 13 banks providing credit information on 9,315 firms and individuals as of May 2011. In the area of construction permits, building approvals has been moved from the Ministry of Lands to the Ministry of Works, leading to a reduction in the time to issue location clearances and building permits, which shortened the time to obtain a building permit by 31 days. To simplify customs procedures introduction of an automated system has cut the clearance time for exports from 26 to 24 days and imports from 31 to 27. The commercial court established in Freetown is expected to reduce the estimated backlog of 1,500 commercial cases in Sierra Leone. This development will also have a positive impact on the time to resolve insolvency.

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