INFRASTRUCTURE

Water, Roads, Rail, Ports, Airports, Telecommunications and Tourism

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.

 

SECTORS IN PERSPECTIVE


 

The A4P sets out the GoSL’s commitment to rehabilitating and developing Sierra Leone’s infrastructure, which was badly damaged during the country’s decade-long civil war. Significant progress has been made through continued investment in the creation of a national road network and the development of the Freetown Port.

With the goal of presenting bankable projects to potential investors, the GoSL has established a Project Preparation Fund to finance competitively-sourced, independent feasibility studies for major priority infrastructure.

The GoSL does not have sufficient resources to bridge the financing gap between project cost and private finance share for large-scale infrastructure projects. Inevitably, the question of GoSL final guarantees is predominant. The GoSL is looking to encourage private sector participation, particularly in water, transport, health and telecoms 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 incentives for infrastructure projects with development costs exceeding US$20 million, which are exempt from income taxes for 15 years from start-up.

In order to meet the A4P’s objectives for private sector-led growth, the GoSL enacted the PPP Act which 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.

Water

The GoSL’s objectives for the water sector are contained the NWSP and the A4P. The national target under the A4P is to achieve access to reliable potable water supply services for 74 per cent. of the population by 2017. Both the A4P and the NWSP express the need for private sector involvement together with effective indigenous participation in order to achieve this goal. The GoSL’s Post-Ebola Recovery Strategy identifies access to WASH as one of the priorities in its second phase, running from April 2016 to June 2017.

There is currently no unified legal framework governing the management of Sierra Leone’s water resources. The nature and extent of water rights depend on their source (such as private land ownership, community trust or statutory title) and different laws apply in Freetown and outside in the provinces. Similarly, there is no clear legal framework for allocating water rights. The out-dated – and soon to be replaced – Water (Control and Supply) Act 1963 contains the requirement for licences to be obtained but this has rarely been implemented.

The objectives set out in the NWSP establish the need to: (i) regulate the use of water and ensure that it is managed to meet the needs of socio-economic development and the needs of the environment in a sustainable manner; (ii) review existing laws on the grant of water rights, pollution control, catchment management, and conflict resolution; and (iii) establish a Water Resources Council to regulate and manage the utilisation of the water resources for socioeconomic development and sustainability of the environment at national, river basin, district, community, and international levels.

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 SLWC, 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 although implementation has been slow to date.

These improvements to water sector governance will be bolstered by a new US$44 million partnership between the U.S. Government’s Millennium Challenge Corporation (MCC) and the GoSL, announced in November 2015. The purpose of the partnership is to implement policy reforms, build institutional capacity, and improve governance in the water and electricity sectors in Sierra Leone, with a focus on Freetown. In the water sector, the grant will fund projects to operationalise and build institutional capacity at the EWRC (the newly formed electricity and water regulator) and at the GVWC. These targeted policy and institutional reforms are intended to assist the GoSL to become eligible for future, larger grants from the MCC.

Roads, Port and Airport Infrastructure

The A4P sets out the GoSL’s priority to rebuild and expand the country’s roads and port infrastructure.

The GoSL’s Integrated Transport Policy, Strategy & Investment Plan 2013 establishes the following objectives: maintaining international connectivity, supporting regional integration, ensuring national continuity and supporting key economic sectors.

The strategy focuses on improving transport service delivery by strengthening public infrastructure providers such as the SLRA and RMFA, encouraging private sector contracting, developing user charging and improving sector governance.

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 (see the NATURAL RESOURCES section). The Act was amended in 2014 in part to remove the SLNSC’s right to add a 10 per cent. surcharge to prevailing market rates in determining the rates for its services. The impact of the SLNC Act on the use of private port facilities remains to be seen.

Telecommunications

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 five companies currently holding licences are Orange Group, Africell Mobile Company, Smart Mobile, SierraTel and GreenNet. These companies are using the GSM-900 frequency band with 3G capabilities.

Companies seeking to operate in the telecommunications sector are required to apply directly to NATCOM for a licence. Licences are granted in-line with NATCOM’s prescribed requirements rather than an auction process.

The Telecommunications Act 2006 provided that all telecommunications operators must be licensed by telecoms regulatory authority, NATCOM before commencing operations. It 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 awarded the contract to manage the IGMS to Ghanaian company Subah Infosolutions, who will manage the quality of international voice and data traffic originating or terminating in Sierra Leone.

The GoSL is developing an Electronic Transaction Policy and legal framework to cover e-learning, e-health, e-agriculture and facilitate effective service delivery within MDAs. A Technical Working Group comprising key stakeholders within the GoSL are drafting the relevant policy with the aim of increasing efficiency and transparency and reducing bureaucracy.”

INVESTOR HIGHLIGHTS


Water

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 was 19 million gallons per day against an estimated demand of 35 million gallons per day.

According to SLIEPA, 60 per cent. of Sierra Leone’s population has access to safe drinking water. Recent efforts to meet the A4P’s national target of 74 per cent. access have been slowed by the Ebola epidemic. To reach the national target in the post-Ebola period, the GoSL is expanding rehabilitation works on current infrastructure (including the water supply systems in Freetown, Bo, Kenema and Makeni) and will 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 will include piloting of a PPP model for the operation and management of public standpipes currently operated by the GVWC.

In rural communities, the GoSL is developing community-supported WASH infrastructure projects to underpin agribusiness investment opportunities.

Roads

Many road infrastructure projects were interrupted during the Ebola epidemic, due to an absence of international contractors and restrictions on movements. The GoSL’s Post-Ebola Recovery Strategy outlines plans to restart stalled projects.

Two major road construction projects have been 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 is being undertaken as a PPP between the GoSL and the Chinese Railway Seventh Group under a 25 year build, own, operate and transfer (BOOT) agreement. Toll gates will be located at three points along the road.

Elsewhere GoSL development partners including the Islamic Development Bank, the EU and OPEC have set aside Le267.5 billion for construction and rehabilitation of trunk roads including the Kambia-Kamakwe road, the Pendembu-Kailahun road and the on-going Yiye-Sefadu road.

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. The Post-Ebola Recovery Strategy details a plan to use the RMFA for the provision of equipment to district councils for periodic feeder road repair. There are numerous opportunities for private sector participation in road maintenance.

Ports

Freetown boasts the largest deepwater natural harbour in Africa.

The existing QE2 Freetown container port is currently managed by Bolloré Africa Logistics under a 20-year concession agreement awarded by the SLPA in 2010. The agreement includes plans to renovate the port’s bulk handling terminal and expand its capacity. GoSL is also considering developing a “dry port” to ease congestion at QE2 and facilitate the transportation of containers destined for rural areas.

Further efforts to involve private partners in the ports system have seen the SLPA (through the NCP) award a 20-year concession for the Marine Slipway and Ship Repair facilities to Holland Shipyard.

To support the needs of the mining sector, the GoSL plans to develop a new deepwater port and associated rail infrastructure with the capacity to export between 30-50million tonnes of ore and other minerals each year. A pre-feasibility study to review options for the new deepwater port was commissioned by the GoSL in 2014. The World Bank is carrying out the study as part of a project to develop a “ports master plan” assessing the need for the expansion of the Freetown Port and the feasibility of the proposed deepwater port. It is hoped that the study will also consider the potential for shared use at the Tonkolili and Pepel ports.

Airport

Transport options from Lungi International Airport to Freetown (across Tagrin Bay) are currently limited to GoSL-operated ferries and a private boat service. A pre-feasibility study has been commissioned to establish the need for sustainable, integrated transport solutions across the estuary and for potential water taxi services along the Freetown coast.

A concession was awarded in 2012 to China International Railway Group for the development of a new airport at Mamamah. The GoSL continues to consult on this project, which is considered a flagship scheme for the current administration. In addition, the GoSL plans to reconstruct small airstrips and helipads in key commercial centres and mining areas, to enable light aircraft transport for certain sectors. The old, disused Hastings Airfield (19km southeast of Freetown) could cater for domestic and regional flights using light aircraft, for instance.

Telecommunications

As mentioned in the Introduction, the Africa Coast to Europe submarine cable, which extends from France to South Africa, finally linked to the Sierra Leone network in February 2013. The connection was initially managed by a 100 per cent. GoSL owned special purpose vehicle, Sierra Leone Cable Ltd. The GoSL now plans to sell a majority stake in this vehicle to the private sector.

This offshore fibre-optic “super highway” has the potential to meet the rising demand for voice and data services and could hugely improve the ease of doing business and the provision of education and health services in the country.

The country is now 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 international 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.

NATCOM has the mandate to put in place an International Gateway Monitoring System (IGMS) to oversee the country’s international gateways going forward.

Tourism

The development of physical and digital infrastructure will help to crystallise the potential for Sierra Leone to secure a healthy share of sub-Saharan Africa’s US$66 billion tourism market. Sierra Leone is home to diverse and rare wildlife, leafy highlands and beautiful sandy beaches along 360km of coastline. There are significant opportunities for eco-tourism. The opening of the five-star Radisson Blu in 2014 was expected to boost the sector, however the Ebola crisis significantly delayed growth in this area. Tourism is expected to recover in the medium term and IDEA (UK)’s Hilton Freetown Cape Sierra Hotel, due for completion in December 2017, is expected to assist with this recovery.

The 2016 GoSL budget includes significant funding for local and international rebranding activities, aimed at tourists and the business community, with a view to restoring Sierra Leone’s reputation in the post-Ebola era. The GoSL is also encouraging foreign governments to exert leverage on airlines to resume international flights as part of the tourism recovery plan set out in the Post-Ebola Recovery Strategy.

The GoSL has identified the tourism sector as a top priority in the A4P. The Ministry of Tourism and Cultural Affairs is formulating a National Tourism Policy for the country and terms of reference have been developed for a review of the outdated Tourism Act 1990. The GoSL is also formulating a National Eco-Tourism Policy and is carrying out a “training needs assessment” in the sector.

Incentives in the sector include an exemption from income tax for 5 years from the commencement of operations (for expenditure up to 150 per cent. 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 per cent. deduction on tourism promotion expenses.

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.

SOLON CAPITAL PARTNERS CASE STUDY

Solon Capital Partners (SCP) owns a portfolio of companies that operate across a range of sectors in West Africa, including transportation, real estate and construction, logistics, and affordable education.

READ MORE >>

SOLON CAPITAL PARTNERS CASE STUDY

Solon Capital Partners (SCP) owns a portfolio of companies that operate across a range of sectors in West Africa, including transportation, real estate and construction, logistics, and affordable education.

READ MORE >>

KEY CHALLENGES


 

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 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 port and airport. Transportation to Freetown from Lungi International Airport is limited to sea boats and ferries which meet incoming flights. 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 has been a priority of the current government to upgrade the road system in the Western Area. 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 GoSL is looking to develop a more transparent and competitive bid process within the PPP Unit and across key MDAs, such as the Ministry of Energy. These plans will be critical to removing political influence from the tender process, which has in the past resulted in substandard rehabilitation and project development works.