By Rundell, Sarah
African Business , No. 360
Even for the most adventurous frontier investors, Sierra Leone may have been deemed a step too far. The economy has been slow to recover from the brutal civil war that raged between 1991-2002. Yet an invitation to the private sector from the Sierra Leone government showcasing untapped investment opportunities in the fledgling democracy has met with unprecedented interest. "A decade ago a forum like this was just a pipe dream. Sierra Leone was a place for charity and not investment," said President Ernest Bai Koroma to a packed audience gathered in London. "The bullet has given way to the ballot and stagnation has given way to growth."
It is a message resonating with influential and bellwether investors. "Sierra Leone has real, genuine potential to be a leading African economy. The foundations for a prosperous future are there. There are significant opportunities for high future returns on investment," said billionaire investor George Soros, whose economic development fund is making "significant commitments" to the country. So, has the tide finally turned for Sierra Leone?
A handful of mining companies including London AIM-listed African Minerals and Guff Gold, privately owned Koidu Holdings, London Gold and Mano River Resources, are already active in the country. They are tempted by deposits of iron ore-Sierra Leone has the third-largest reserves in the world-diamonds, gold, bauxite and base metals such as copper, lead and zinc amongst others.
But now the government plans a full-on assault on foreign investors and an overhaul of the mining industry to tackle the war's legacy of mismanagement and corruption. The Mines and Mineral Act 2009, passed on the eve of the forum, hikes diamond and gold royalties, gives the government the right to take a stake in big mining projects and requires companies to contribute to local community funds.
The new law tightens reporting requirements for companies and stops investors holding land under licence for too long without developing it. "There has been a long honeymoon," says Minister of Mineral Resources Alhaji Alpha Saahid Bakarr Kanu, "and now we are reviewing fiscal regimes."
The law increases royalty rates to 6.5% on diamonds from 5%, and to 5% on gold and other precious metals from 4%. Companies must now spend 0.1% of annual gross revenues on community initiatives, and new entrants work under a new non-exclusive 'reconnaissance' licence that will replace the 'prospecting' licence and is renewable only once. It also gives clarification to investors. "We have separated land rights from mineral rights. Minerals belong to the government and land to the people." The law addresses new issues like health and safety and environmental protection.
Israeli-owned Koidu Holdings, which mines the country's deepest kimberlite diamond mine and which previously enjoyed a 'special agreement', has already accepted the standards set by the new act.
Officials are now reviewing the country's deal with Sierra Rutile, owned by AIM-listed Titanium Resources Group, which mines the world's third-largest deposit of rutile, used in paint and toothpaste.
Oil companies' interest in Sierra Leone has also peaked since Anadarko, the US oil group, and its partners Woodside of Australia, Rep-sol of Spain and the UK's Tullow Oil recently announced positive drilling results from the Venus well off the coast, 1,100km from Africa's largest deep-water field in Ghana, The hope is oil companies may now believe the basin holds enough oil to make it worth buying into projects or considering takeovers.
But Ian Cooling, executive vice president of global business development at Anadarko, warns the find will not benefit Sierra Leone just yet. "We don't bring employment at this early stage. The employment and rewards come when we reach the developmental phase. …