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Political Economy of Extractives Governance in Sierra Leone

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Political Economy of Extractives Governance in Sierra Leone POLITICAL ECONOMY OF EXTRACTIVES GOVERNANCE IN SIERRA LEONE Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Richard Fanthorpe and Christopher Gabelle JULY 2013 Public Disclosure Authorized The World Bank © 2013 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202 473 1000 Internet: www.worldbank.org Email: [email protected] All Rights Reserved The findings, interpretations, and conclusions expressed herein are those of the author(s), and do not necessarily reflect the views of the International Bank for Reconstruction and Development / The World Bank and its affiliated organizations, or those of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, telephone 978-750-8400, fax 978-750-4470, www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail [email protected]. CONTENTS ACKNOWLEDGMENTS ........................................................................................................................ 2 EXECUTIVE SUMMARY ....................................................................................................................... 3 ACRONYMS ........................................................................................................................................ 4 1. INTRODUCTION ......................................................................................................................... 8 2. Mineral Resources and Development in Sierra Leone .................................................................. 10 2.1 Political Economy Background: The Rural-Urban Divide ....................................................... 10 2.2 Developmental Impacts of Mining: Sierra Leone’s Historical Experience ............................. 18 2.3 The Role of the Governing Elite in Extractives-led Development .......................................... 24 Chapter 3. ANALYSIS OF THE EXTRACTIVE INDUSTRIES VALUE CHAIN ...................................... 28 3.1 Award of Contracts and Licences .......................................................................................... 28 3.2 Regulation and Monitoring of Operations ............................................................................ 33 3.3 Collection of Taxes and Royalties .......................................................................................... 37 3.4. Revenue Distribution and Management ............................................................................... 39 3.5. Sustainable Development Projects ........................................................................................ 41 3.6 The Political Economy of the Extractives Value Chain ........................................................... 42 CHAPTER 4. KEY STAKEHOLDERS IN EXTRACTIVE GOVERNANCE................................................. 46 4.1 Central Government .............................................................................................................. 46 4.2 Local Government ................................................................................................................ 50 4.3 Development Partners .......................................................................................................... 51 4.4 Mining Companies ................................................................................................................ 52 4.5 Trade Unions ........................................................................................................................ 52 4.6 Civil Society and NGOs.......................................................................................................... 52 4.7 Media .................................................................................................................................... 54 4.8 Communities ........................................................................................................................ 54 CHAPTER 5. A NEW PARADIGM FOR EXTRACTIVES GOVERNANCE ENGAGEMENT ..................... 56 5.1 Introduction ........................................................................................................................... 56 5.2 Lessons from the Past Guide the Future ................................................................................ 57 5.3 Key Areas for Engagement for Managing The Extractives Boom ........................................ 59 5.4 Governance, Institutional Reform and Capacity Building. .................................................... 63 5.5 Public Financial Management. .............................................................................................. 69 5.6 Protecting Economic and Social Rights (especially those of mining affected communities). 72 5.7 Local Economic Development, Local Content, Decentralization and Growth Poles .............. 74 6 CONCLUSIONS ......................................................................................................................... 76 BIBLIOGRAPHY ................................................................................................................................. 78 ACKNOWLEDGMENTS We are extremely indebted to a number of individuals and organizations for providing us with their time, assistance and inputs during both the fieldwork and writing phases of this report. We are grateful for the valuable insights and clarifications provided by key officials in the Government of Sierra Leone (past and present), particularly the Ministry of Finance and Economic Development, Ministry of Mines and Mineral Resources, the National Minerals Agency and the Environmental Protection Agency. Development Partners engaged in the sector, particularly DFID and GIZ, provided documentation, clarification and technical feedback on earlier drafts of the report. Thanks are also due to representatives of communities directly affected by mining operations for their frank and honest discussions about the challenges they are facing. We are indebted to civil society agencies for facilitating these discussions. We acknowledge that many of these individuals and other interlocutors engaged with us on condition of anonymity and confidentiality and we have done our utmost to respect that. We also like to acknowledge the generosity of London Mining PLC and African Minerals Ltd in facilitating site visits to their operations, which enabled us to arrive at a better understanding of their organizations, on-going and future plans and current and potential challenges. The transparency of these discussions allowed the report to accurately reflect all sides of the extractives debate, and in particular to highlight the importance of accountability in the management of Sierra Leone’s natural resource endowment for the benefit of its people. Professor James Kandeh joined the team during the planning stage and carried out interviews and field visits highlighting the problems currently faced by mining-affected communities. However, due to other work commitments he was not involved in the production of the final report. Significant technical comments and guidance were provided and co-ordinated by Roberto Panzardi, Jens Kromann-Kristensen, Cyrus Talati, Yusuf Bob Foday, Lorena Viñuela, Michael Jarvis, Nicolas Menzies, Yongmei Zhou, Radhika Srinivasan, Valya Nikolova, Hardwick Tchale and Katherine Bain. The report was prepared and the overall program of analytical work conducted under the encouragement of Mark Thomas (AFTP3 Sector Manager) and Francis Ato Brown (Sierra Leone Country Manager). Richard Fanthorpe and Christopher Gabelle July 2013 2 EXECUTIVE SUMMARY The conversion of resource rents into both sustainable development and a demonstrated improvement in the standard of living for the majority of Sierra Leone’s population is the immediate challenge facing the Government of Sierra Leone today. Set against these rising expectations and aspirations, is the historical manner in which extractives governance has been conducted in the country, the continued role and influence of the traditional authority and power mechanisms in the communities and areas of the country where mining takes place and the requirement for consistent improvements in the legal, financial and institutional structures and processes of Government. Where institutional structures impede progress, when accountability for revenues earned is not demonstrated, and where transformation in
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