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Building on progress: in late November, the government of Sierra Leone met with its development partners for two days of talks discussing its poverty reduction strategy. The outcome was the promise of unprecedented new aid mechanisms and commitments. Stephen Williams reports.

Thirty of Sierra Leone's principal development partners met in London with a high-ranking ministerial delegation led by President Ahmad Kabbah to discuss the country's poverty reduction strategy and agree on developing and implementing better donor co-operation. The talks, held on 29-30 November, were co-chaired by the government of Sierra Leone, the UK's Department for International Development (DfID), the UN and the World Bank.

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This was the fourth in a series of consultative group meetings to review the Sierra Leonean government's progress at re-establishing security since the ending of the country's civil war.

The war had taken a heavy toll of the economy, which slumped by an average of minus 4.5% each year between 1990 and 2000. Per capita GDP nearly halved to $142 in 2000 and over 80% of the population was living beneath the poverty line of $1 a day. Since 1996 the country has been ranked as among the least developed in the UNDP Human Development Index.

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Following the conclusion of a successful disarmament and demobilisation programme in February 2002, a National Recovery Strategy (NRS) was implemented in October 2002. The NRS, along with an interim poverty reduction strategy, was discussed at length at the third consultative group meeting held in Paris in November 2002.

Three years later, at the fourth consultative group meeting in London last November, it was generally agreed that the NRS had achieved its objectives. The results are a sustained recovery of the economy--real GDP rising by 6.3% in 2002, 6.5% in 2003 and 7.4% in 2004. Mirroring the progress of the economy, political devolution has also advanced. The first local government elections in 32 years were successfully held in May 2004 and 19 local councils were established.

Other improvements, highlighted by the UK's International Development Secretary Hilary Benn, include the doubling of enrolment rates in primary schools since the abolition of fees in 2002, the steady decline in child mortality rates, and child immunisation climbing from just 28% in 1997 to 50% in 2004.

The London meeting's participants recognised that Sierra Leone is at a critical juncture in its history and that additional resources are vital to ensure gains from peace are consolidated and to reduce the risk of a return to civil strife. As an expression of confidence in Sierra Leone's plans for poverty reduction, the development partners committed $800m in aid for disbursement between 2005 and 2007. These plans are part of a new three-year poverty reduction strategy programme (PRSP) prepared by the ministerial committee chaired by Vice-President Solomon Berewa. When asked if $800m was sufficient for Sierra Leone's needs, Berewa said that he was more than satisfied and that prior to the London meeting his PRSP ministerial committee had only expected around half this sum being pledged.

New funding mechanisms

Agreement was also reached at the London consultative group meeting that Sierra Leone would benefit from two radically new funding mechanisms. The first was a multi-donor budget support (MDBS) programme, initiated by the European Commission, DfID and the World Bank. The MDBS will focus on strengthening public financial management.

The second was a proposal for a Trust Fund (PRS Trust Fund) to support critical aspects of the poverty reduction strategy that are not being financed through existing bilateral programmes and technical assistance.

The UK has pledged $5m to kick-start the PRS Trust Fund initiative. Secretary of State Benn stated that as the economy improved, more work was needed to tackle corruption. Responding to these comments, Kabbah said: "I am fully aware that the biggest concern for many of our development partners is our level of commitment to fighting corruption."

Vice-President Berewa implored anyone who had evidence of corrupt practices in Sierra Leone to report to this body.

While it was generally acknowledged that many donors, both bilateral and multilateral, may have announced aid budgets but not yet established country-specific aid levels for future years, indications from the major donors at the London meeting were that the $800m support being promised for the 2005-07 period is a solid commitment.

Importantly, this $800m does not include expected debt relief from the HIPC and multilateral debt relief initiatives that have already been factored into the Sierra Leone government's annual budget and medium term expenditure framework. Sierra Leone's external debt burden, including arrears, amounts to some $1.6bn, or more than 200% of GDP. It would also appear that the $800m is fresh resources and does not include previously pledged sums.

However, as Victor Angelo, the UN's resident coordinator in Sierra Leone commented, it will be vital that this new tranche of resources be made promptly available when required. Angelo also emphasised that improving employment prospects for Sierra Leone's youth remains a priority if they are not to be tempted by the blandishments of warlords. Nevertheless, he was upbeat about the results of the London meeting, saying: "The many countries and multilateral organisations present have recognised the tremendous progress achieved by the government and peoples of Sierra Leone in the short period since the ending of the civil war--and given a significant vote of confidence in the government's PRSP."

World Bank country director for Sierra Leone, Matts Karlsson, said: "We have made substantial progress here and demonstrated a real commitment to turning a fragile success into a robust one."

RELATED ARTICLE: INVESTMENT

Mozambique's FDI bonanza

Last year, Mozambique's trade and industry minister, Antonio Fernando, said that no fewer than 11,000 company licences had been issued at the 14 one-stop investment promotion offices (CPI) established throughout the country. These projects cover a wide variety of sectors.

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Since the lifting of visa requirements for South African citizens, tourism is one industry that has posted particularly strong growth. The UAE-based Rani International group, for example, plans to invest over $120m in the sector within three years. Rani's chairman, Adel Ajuan, says the group wants to enlarge the existing Medjumbe Island Resort and the five-star Pemba Beach Hotel; to construct a honeymoon resort on Quissanga Island, more chalets on Matemo Island, further develop the Matemo Island Resort and build a new hotel on the Quirimbas archipelago.

However the main driver of Mozambique's economic growth has been the extractive industry sector. Principal projects include the Corridor Sands project in Gaza province, the mineral sands project in Nampula province, the Moatize coal mine project in Zambezi province, and the South African energy company Sasol's gas pipeline.

BHP Billiton (BHPB), the world's largest resource company, is already responsible for manufacturing Mozambique's most important export commodity, aluminium, at its Mozal smelter plant outside Maputo. But the company has recently become an even bigger player in Mozambique's economy. When it took over Western Mining Corporation (WMC) last June in a $7.2bn deal, it added another massive industrial project in Mozambique to its portfolio.

WMC, a giant Australian mining company, had led the development of the Corridor Sands project which BHPB now owns. This project is based on 10 identified deposits of titaniferous mineral sands. The world's largest known deposit of this mineral, it is located near Chibuto in the Gaza province of southern Mozambique, some 180km to the north of Maputo and about 40km inland from the coast.

Titanium dioxide pigment possesses a unique combination of characteristics: brilliant whiteness, dense opacity and non-toxicity that together make it a major component of modern pigments.

Chibuto will also produce high purity pig iron, rutile and zircon as by-products that, along with the titanium, will be transported by rail to the port at Matola for export to customers worldwide.

As well as providing direct employment opportunities, Corridor Sands will use a multitude of local SME suppliers providing services as diverse as catering to cleaning and transport to technical support.

The same is true of another mineral sands project underway in Nampula province in the north of the country. Lead investor, the Irish company Kenmare, is in a 50/50 joint venture with two Australian-based companies, Multiplex and Bateman, who together have sunk $200m into the venture. It is expected to produce 625,000t of ilmenite, 12,500t of rutile and 23,800t of zircon each year.

Operations are expected to get underway next September and, like the Corridor Sands project's output, most of the ilmenite will be going to pigment manufacturers. Kenmare expects to triple Nampula's economy as soon as operations are up and running.

Just over a year ago, the right to develop the Moatize coal deposits in central Mozambique was awarded to the Brazilian company Companhia Vale do Rio Doce (CVRD) who beat off competing bids from the BHPB/Mitsubishi consortium as well as bids from AngloAmerican, Rio Tinto and others.

This is another giant project that is expected to help transform Mozambique's economy in future years in much the same way as the Mozal smelter has. The Moatize deposit holds 2.4bn tons of metallurgical and thermal coal. It is believed that CVRD, the world's largest producer of iron ore and second largest producer of manganese and ferroalloys, paid an upfront fee in excess of $120m for exploration rights. It plans to extract some 21m tons of coal each year.

Stephen Williams
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Title Annotation:International Development
Author:Williams, Stephen
Publication:African Business
Geographic Code:6MOZA
Date:Jan 1, 2006
Words:1521
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