Water, Roads, Rail, Ports, Airports, Telecommunications and Tourism
Legal and Regulatory Landscape
Solon Capital Partners Case Study
SECTORS IN PERSPECTIVE
Sierra Leone’s infrastructure was badly damaged during the country’s decadelong civil war and the country continues to suffer from deficits in both the quantity and quality of its infrastructure. Progress has, however, been made through investment in the creation of a national road network and the development of the Freetown Port.
The GoSL’s MTNDP recognises the important role of investment in infrastructure in order to promote economic development and stability in Sierra Leone. The transformation of Sierra Leone into a middle-income country will be heavily dependent on the development of its infrastructure facilities, systems and services. The Office of the Presidential Infrastructure Initiative (OPII) has identified a number of short, medium and long-term priority infrastructure projects.
LEGAL AND REGULATORY LANDSCAPE
Sierra Leone has adopted a number of policies aimed at supporting growth, reducing poverty and closing the infrastructure gap. These include a number of incentives for infrastructure projects with development costs exceeding US$20 million such as: income tax exemptions for 15 years from start-up; duty free imports on plants, equipment and other inputs required to execute the project; and costs incurred in training local staff are tax free.
The PPP Act established a PPP Unit in the Office of the President. The Unit is mandated to provide coordination and transactional support to the GoSL MDAs across a range of potential PPPs.
Investors should note the following provisions under the PPP Act:
- with limited exceptions, PPPs are required to be procured on a competitive basis;
- all PPP Agreements are subject to an agreed review procedure, which is carried out by the PPP Unit and the statutory sector utility regulator every five years on the basis of overall performance, delivery of service level and fulfilment of parties’ obligations; and
- in certain circumstances, MDAs have the right to take over a PPP project to ensure effective and uninterrupted delivery or timely completion.
The GoSL’s overall objectives for the water sector, as set out in its MTNDP, are focused on increasing the population’s access to safe drinking water and improved sanitation. According to current plans, these objectives will be pursued through attempts to address issues within both urban and rural water supplies and sanitation systems. There are also plans to improve the harnessing of the water supply, irrigation and navigation through a number of changes which are targeted at improving water management within the agricultural sector.
A framework for governing the management of Sierra Leone’s water resources was passed in the National Water Resources Management Act 2017. The Act provides for the efficient and sustainable use and management of Sierra Leone’s water resources, by establishing a legal framework within which the regulator, the National Water Resources Management Agency, can promote licensing and carry out enforcement against bodies which breach the terms of their water management licences.
The Ministry of Water Resources, established in 2013, is pursuing a number of reforms to implement these objectives and address the lack of a single legal regime for the sector. This includes enacting legislation to support the two utilities in their core mandate of delivering water supply services: (i) GVWC, which supplies water in Freetown; and (ii) the Sierra Leone Water Company (SALWACO), which supplies water to the rest of the country. In 2004, the Local Government Act brought in measures to decentralise responsibility for the supply of water in rural areas. This was amended in 2017 to provide for the addition of new Districts, however, implementation of the measures in the Act has been slow to date.
The Sierra Leone Water Company Act 2017 was enacted in May 2017 to streamline the national water and sanitation company, SALWACO, as a modern company and to change its organisational structure. These changes are intended to help with capacity and equip the institution in carrying out its work, through enhancing provincial water supply and sustaining it. The Guma Valley Water Company Act was enacted in June 2017. Among the sections that were amended is Section 61, which states that regulations can be made without any consultation with the Minister of Water Resources and that the rules, orders and regulations should remain at the administrative level (rather than at Ministerial level). The GoSL has expressed its intention to improve efficiency and cost recovery through regulatory reforms of the sector as well as strengthening the capacity of GVWC.
In 2018, the Ministry of Water Resources also established the Water, Sanitaion and Hygiene (WASH) programme, the Monitoring and Evaluation plane (M&E), and the National Resources Management Agency in order to monitor and control water resources throughout Sierra Leone. This included launching the 5-year initiative, Freetown Water Supply and Sanitation Master Plan and Investment Studies (FWSSMPIS), in order to closely monitor the water supply in Freetown, and execute the M&E plan which aims to strengthen country-led monitoring of water and sanitation services in households, communities, schools and health facilities.
These improvements to water sector governance were bolstered by a US$44.4 million partnership between the U.S. Government’s Millennium Challenge Corporation (MCC) and the GoSL, which commenced in 2015. The purpose of the partnership was to implement policy reforms, build institutional capacity, and improve governance in the water and electricity sectors in Sierra Leone, with a focus on Freetown. All of the funds have been committed. The program includes electricity and water reform projects and regulatory strengthening project which aims to support the independent regulator – the EWRC. The Water Sector Reform Project also involves physical mapping, conditions assessment and hydraulic modelling of the GVWC transmission network and treatment plant, and construction of water kiosks and pipe rehabilitation.
Roads, Port and Airport Infrastructure
The GoSL’s New Direction manifesto proposed a new network of strategic transport links which would connect the mining belts in the North East and South West of Sierra Leone through Southern Central farmland region. Under these plans, new roads and rail links would be centred on two “Economic Corridors” (linking the Free Trade Zones – see the Key Legislation Affecting Businesses In Sierra Leone section), linking six “Regional Growth Hubs”. The proposals in the New Direction include a new railway line to run across the Northern, Western, Southern & Eastern provinces, linking Koindu to Freetown and Falaba to Bonthe. Under these proposals, a second railway would link the country’s two mining belts. Roads will extend the network to Kono district.
Port activities are controlled by the SLPA and the maritime regulator, the Sierra Leone Maritime Administration. In 2012, the GoSL enacted the SLNC Act, establishing the SLNSC (see the Natural Resources section of this guide). The Act was amended in 2014 in part to remove the SLNSC’s right to add a 10% surcharge to prevailing market rates in determining the rates for its services. New legislation is currently being drafted in order to replace the 1964 Port Act.
The RMFA, established in 2010 by an Act of Parliament, is mandated to support the routine maintenance of trunk and city roads, bridges and ferries and the development of new trunk and feeder roads. This would be supported by the newly established Office of the Presidential Infrastructure Initiative (OPII) which would assist with the selection, design, planning and management of road projects and the mobilisation of resources
The Ministry of Information and Communications has principal responsibility for the ICT/telecom sector. It has under its portfolio a number of specialized agencies/departments to carry out implementation of these policies and strategies, such as the regulatory agency, NATCOM, and the eGovernment Department for implementing eGovernment activities.
The telecommunications sector was a state-owned monopoly until the late 1990s. It has been significantly liberalised since the first mobile phone licences were awarded in 1994.
Since 2002, it has been possible to obtain a “generalised licence” for the provision of telecommunications services, allowing competition to grow rapidly in the industry. The four mobile companies currently operating are Orange Group (which purchased the operations of Bharti Airtel in Sierra Leone and Burkina Faso for c. US$900 million in 2016), Africell Mobile Company, SierraTel and Gambian mobile operator QCell. These companies are using GSM bands with 3G capabilities, with SierraTel and Africell also providing LTE services, with the exception of Orange (SL) Limited who is also providing 4G network capabilities.
The Telecommunications Act 2006 provides the framework for the telecoms sector. This outlines that all telecommunications operators must be licensed by NATCOM before commencing operations. Licences are granted in-line with NATCOM’s prescribed requirements rather than an auction process. The Act was updated by the Telecommunications Act 2009 to give NATCOM increased powers to foster competition in the IT sector. To that end, in 2016 NATCOM reviewed twelve tenders before awarding the contract to manage the IGMS to Ghanaian company Subah Info solutions, who will manage the quality of international voice and data traffic originating or terminating in Sierra Leone.
In order to provide a stable and predictable legal and regulatory framework which aims to build trust online and ensure online transactions are secure, the GoSL have drafted the National Electronic and Transaction Bill which has also been submitted to Parliament for enactment in 2019. This will provide the legal framework for the National Electronic Transaction Policy. The legal framework and policy together cover e-learning, e-health, e-agriculture and facilitate effective service delivery within MDAs.
Although Sierra Leone has substantial water resources, the country faces a number of challenges in this sector due to dilapidated infrastructure, uneven distribution of rainfall across the country, the seasonality of water availability and limited capacity for water storage. Large parts of the system are in need of rehabilitation in order to provide sufficient service levels and there is a significant divide between urban and rural areas and between wealthy and low-income communities in terms of coverage.
Urbanisation in Sierra Leone exceeds the current levels of urban water supply. At the moment, the GVWC average daily output in Freetown is approximately 70,000m³ per day as against a daily estimated demand of 130,000m³ per day. In response, the GoSL is working collaboratively with its donor partners, including DfID, the UNDP and UNICEF to provide a Dry Season Water Supply Backup plan for Freetown, involving the construction and reconstruction of boreholes and repairing and monitoring of the network.
According to SLIEPA, 87.8% of the people in the Western Area have been assessed as having access to safe clean water. However, only 37.1% have access to pipe-borne water on premises. To help reach the national target in the postEbola period, the GoSL has benefited from funding from the OPEC Fund for International Development, the ADB, and the DFID totalling US$64.5 million towards rehabilitation works on current infrastructure (including the water supply systems in Freetown and the Three Towns Water Supply Project focused on Bo, Kenema and Makeni). This funding will be used to construct new infrastructure in order to increase supply, improve transmission and distribution, and develop waste-water treatment facilities.
There are significant opportunities for private sector involvement in these projects. Existing investment opportunities in the water sector include the development of new water dams in several of the major rivers in Sierra Leone to increase water supply and the expansion of the GVWC dam’s capacity. The water sector reform project funded by the MCC grant (mentioned above) includes piloting of a PPP model for the operation and management of public standpipes currently operated by the GVWC. A new reservoir for Freetown has been considered by the GoSL as well as the construction of gravity water supply facilities in the Western Area, and the rehabilitation of existing water distribution networks and water dams. Improvements to water management are also under consideration. These measures include developing in-land valley swamps and waterways to increase productivity, devising a national irrigation and drainage programme and using agricultural water to take advantage of agro-climatic conditions. The GoSL has also allocated additional resources for the construction of one hundred solar powered boreholes which will result in four hundred new water tanks being supplied to thirteen Districts.
The construction and rehabilitation of trunk roads is to be given high priority by the GoSL in the coming years, particularly the Bo-Bandajuma road and the Pendembu-Kailahun road, whilst the GoSL has partnered with the Islamic Development Bank which will fund construction of a Kambia-Kamakwe road. As part of the GoSL’s Office of Presidential Initiative on Infrastructure, in November 2018 President Julius Maada Bio formally opened construction work on the four-lane Lumley-Juba bridge, whose work is now complete, and the reconstruction of Limkokwing-Regent road in Freetown. The Lumley-Juba bridge is now open.
Two major road construction projects were given the green light in 2016: (i) the Bandajuma-Liberia Highway (which will create 100km of paved road, restore 2 bridges and construct a new bridge over the Moa River at an expected cost of €67.7m); and (ii) the widening of the Wellington-Masiaka road, the main road from Freetown to four regions in the country. The Wellington-Masiaka project was undertaken as a PPP between the GoSL and the Chinese Railway Seventh Group under a 25 year build, own, operate and transfer (BOOT) agreement (extended to 27 years later in 2017). The project commenced with the introduction of tolls on the road in 2017. In 2018, the Sierra Leone Road Transport Authority announced a technical and financial audit into the project and the House of Parliament referred the report to the ACC to take action.
There are numerous opportunities for private sector participation in road maintenance. Following the completion of the feasibility study on the Lungi Bridge, the OPII has begun mobilising resources for the next stage of the project. The GoSL has invited potential contractors to review the project documentation and to bid in respect of the project. In addition, the GoSL is close to approving a US$50 million World Bank loan which will be directed towards improving access to quality public transport, addressing issues associated with climate resilience and improving road safety.
Freetown boasts the largest deep-water natural harbour in Africa. In order to take advantage of its geographical location, the GoSL is pursuing development of its three major ports; QE2, Freetown and Bonthe.
The existing QE2 Freetown container port is currently managed by Bolloré Africa Logistics under a 20-year concession agreement awarded in 2011. As part of the agreement, expansion works at the port were launched in late 2016 with the expanded port opening officially in November 2018. The QE2 port can now accommodate vessels carrying up to 6,500 containers, increasing possible traffic by more than 30%. President Maada Bio has indicated that the port is part of a strategy to broaden Sierra Leone’s ability to attract trade and investment and has expressed an intention to build relationships with the EU and African, Caribbean and Pacific states. Other developments include the installation of CCTV cameras to monitor activities around the QE2 port and improve safety.
There have been further efforts to involve private partners in the ports system. Holland Shipyard, which holds a 20-year concession for the Marine Slipway and Ship Repair facilities has announced that it will launch a floating dock at Freetown port in 2019. GoSL is also considering developing a “dry port” to ease congestion at QE2 and facilitate the transportation of containers destined for rural areas.
The GoSL’s New Direction indicated that a new seaport complex near Bonthe would form an important aspect of its infrastructure proposals, in particular mineral and agrishipping. If built, this would provide a new commercial deep-sea port on the Southern Coast with bulk and break-bulk facilities. The Office of the Presidential Infrastructure Initiative is engaging EPC contractors and financiers.
According to the International Civil Aviation Organisation (ICAO), Sierra Leone’s current safety rating is 18.5%; well below the 60% safety threshold set by the Abuja Safety Targets. On account of this, the GoSL has undertaken a number of steps to develop its aviation industry. Working alongside a US$500,000 investment from the ICAO, the GoSL is implementing a new safety oversight system in order to strength its safety capabilities.
This runs in conjunction with Lungi airport taking part in its first ever ACI Airport Excellence (APEX) review in 2019. The Sierra Leone Civil Aviation Authority has also entered into a number of cooperative agreements with aviation safety experts including Banjula Accord Group Aviation Safety Oversight Organisation and the Airport Council International. This aims to provide training in airport operations and airworthiness with the aim of being granted an Air Operation Certificate. This would allow Sierra Leone to resume registration of aircrafts on the national aircraft register.
In 2012, a deal was struck between the then GoSL and the China Railway Group for the development of a new airport called the Mamamah International Airport just outside Freetown, which was intended to replace the current Freetown International Airport located in Lungi. Construction was due to be completed by 2020. However, in October 2018, the GoSL announced that it had cancelled the deal and that it will renovate the existing airport in Lungi instead. The GoSL has also indicated plans for a major expansion at Freetown International Airport. At the time of publication, the GoSL had entered into a Memorandum of Understanding with Summa Group. In relation to the construction of a new terminal, taxi-way and airport hotel. It was reported that the 18 month project would commence after a feasibility study of the topography.
Transport options from Freetown International Airport (located in the small town of Lungi) to Freetown (across Tagrin Bay) include road, ferry and water taxi. Although the three main water taxi operators provide fairly reliable services and can be booked in advance, transport from the airport is, in general, relatively challenging and time-consuming. A new Lungi bridge connecting Lungi and Freetown is planned which, if built, would reportedly involve an infrastructure project well in excess of US$1bn. The GoSL has carried out a feasibility study into the project and is looking for private sector partners to collaborate in its construction.
In an effort to reduce the cost of air fares and promote investment in the aviation industry, the GoSL has additionally reduced all landing fees by 34%, removed passenger handling fees and reduced both passenger service charges and aviation service fees.
The Africa Coast to Europe (ACE) submarine cable, which extends from France to South Africa, was commissioned to link to the Sierra Leone network in February 2013. With the assistance of a US$31 million grant from the World Bank, the fibre-optic cable landed in Sierra Leone in 2016. This offshore fibre-optic “super highway” is aimed at meeting the rising demand for voice and data services and offers vast improvements to the ease of doing business and the provision of education and health services in the country. Its installation has lowered the cost of international connectivity. The connection is managed by a GoSL-owned special purpose vehicle, Sierra Leone Cable Ltd (SALCAB). In November 2018, SALCAB announced a cut in the wholesale cost of the internet bandwidth by almost 50%. Despite this cost reduction, a quarter of the population is still reportedly without telecoms access. SALCAB has also stated it has aspirations to attract capital expenditure investment that will allow it to implement a second submarine cable that will serve as a redundancy to the ACE cable.
The country is now also benefiting from the ECOWAS Regional Backbone and e-Governance Program (ECOWAN) project that was completed in Sierra Leone in December 2015, ahead of schedule. As a result of ECOWAN, most of the major towns and cities now have fibre optic cable terminating or passing through them and a high speed wireless network has been established in Freetown for use by MDAs.
In 2015, the GoSL terminated the gateway monopoly, which had been enjoyed by the Sierra Leone Telecommunications Company for almost ten years. The liberalisation of the gateway in April 2016 has increased competition in the sector, which, it is hoped, will lead to improved service provision and reduced prices. To date there has been an increase in the availability of LTE services and in recent months an additional entrant into the market for mobile phone services (QCell).
A new internet service provider was launched in January 2019 by K3 Telecom Sierra Leone (a subsidiary of Swiss-based K3 Telecom AG). The service provision aims to provide high-speed internet and was launched on K3 Telecom’s own wireless broadband telecommunications network.
The Ministry for Information and Communications in collaboration with NATCOM have begun a review of the Telecommunications Act 2006 (as amended). Recently, in February 2019, Orange Sierra Leone announced it was reducing its internet prices in order to make internet connectivity easier for the people of Sierra Leone. The decision to lower prices comes as a response to the increased pressure to reduce the internet penetration gap.
The GoSL has also developed a National ICT Policy. Once passed, it will enhance admissibility of electronic documents/ evidence in legal proceedings therefore promoting e-Commerce. In addition, the SALCAB will launch a quarterly Tech Start-Up competition in order to drive innovation. This will run alongside other initiatives to provide internet connectivity in 500 schools and universities by 2023 under the School Connectivity Project and rolling out phase 2 of the National Terrestrial Fibre Network.
There are significant opportunities for private sector investors in the telecommunications sector. The Ministry has initiated engagements with relevant stakeholders particularly the PPP unit to start the procurement process for a turnkey for the supply, delivery, installation and commissioning of the Digital Terrestrial Multimedia Broadcast platform solution based on DVB-T2 technology. The technical design of the turnkey project will cover the country with 10 main sites utilising powerful DTTB transmitters. The GoSL is also in the advanced stages of acquiring a loan of US$30 million through Exim Bank of China for work on the National Fibre-Optic Backbone Infrastructure project which aims to identify weaknesses in the network and provide protection to the transmission infrastructure in the country.
The post-Ebola recovery of the tourism industry in Sierra Leone was confirmed by the United Nations World Tourism Organization (UNWTO), which identified the country as one of the world’s fastestgrowing tourist destinations.
In its MTNDP, the GoSL has recognised the importance of the tourism sector and has identified an overall objective of increasing revenue and jobs from tourism and promoting the cultural heritage of the country. Specific policy actions are intended to cover (i) improvements to the policy and legal environment; (ii) developing historic sites; (iii) developing the tourism infrastructure; (iv) promoting marketing and improving international image; (v) skills development; and (vi) diversification of tourism product. The adoption of a stronger policy framework, including the National Tourism Policy and National Ecotourism Policy in 2017, have provided blueprints to guide the development of this sector.
The country is home to diverse and rare wildlife, leafy highlands and beautiful sandy beaches along 360km of coastline, presenting significant opportunities for growth in the eco-tourism sector. IDEA (UK)’s Hilton Freetown Cape Sierra Hotel, projected to open in the fourth quarter of 2018 but subject to a number of delays, will assist in providing a platform for this growth.
Incentives in the sector include an exemption from income tax for 5 years from the commencement of operations (for expenditure up to 150% of the original capital investment), duty free imports for new construction, extension or renovation of existing tourism-related facilities, exemption from payroll taxes for 3 years for up to six non-Sierra Leonean employees with skills not available in the country and a 125% deduction on tourism promotion expenses.
SOLON CAPITAL PARTNERS CASE STUDY
Solon Capital Partners is a West-Africa focused investment manager that is pioneering a new approach to investment, as well as economic development and poverty reduction, in fragile and post-conflict states.
Infrastructure development presents both critical challenges and substantial investment opportunities for investors in Sierra Leone. Without the resources to significantly reduce the infrastructure gap, the GoSL has looked to attract private sector investors through the implementation of policies and legislation to promote PPPs and mitigate the risks inherent in greenfield investments.
In order to attract the right levels of investment in its infrastructure, the GoSL acknowledges that it will need to focus on the development of viable, bankable and sustainable projects that can unlock the potential of promising growth sectors such as those outlined in this Guide.
The most visible challenges and opportunities lie in Sierra Leone’s physical infrastructure. Sierra Leone’s two major international transport hubs, as described in this section, are its ports and airports. As construction of the new airport at Mamamah has been cancelled, it remains to be seen if and when the proposed renovation of Freetown International Airport materialises and whether it will be sufficient to accommodate the potential demand of the coming years. The new Port Loko to Lungi Highway that links to Freetown provides better road access and the GoSL is looking to develop alternative means of transport across the estuary.
The country’s road networks are in need of significant improvement. It is a priority of the government to upgrade the road system. However, journeys beyond the major urban centres, such as Makeni and Bo, remain difficult. Consequently, transport costs can be higher than might be expected in a country as small as Sierra Leone.
The railway network in Sierra Leone is also under-developed. Following the decline in rail transport operations in the 1970’s and subsequent damages to the railway infrastructure during the civil war, there are difficult and expensive obstacles to restoring the lines or building a new railway system. However, there is strong political will and committed leadership to exploring options to transform the transport sector.
NECTAR GROUP CASE STUDY
Nectar Group’s involvement in Sierra Leone can be traced back to the late 1980’s where it pioneered Bulk/Bagging operations at Freetown under the USAID Title II programme. After returning to Sierra Leone in 2006, Nectar’s presence has evolved and developed further.