Now that the MCC compact is here, we expect to see the promise of an energy transition come to pass and have several positive impacts on the business environment in Sierra Leone.
Sierra Leone, a small West African country rich in natural resources yet facing significant developmental challenges, may have just achieved a major socio-political and economic milestone on 26 June 2024 when it secured the $480 million Millennium Challenge Corporation (MCC) Compact.
The country’s Vice President, Dr Mohamed Juldeh Jalloh, under whose direct supervision the landmark feat was recorded, calls it a tangible step towards transforming the country’s energy sector, ensuring access to reliable and affordable power and accelerating private sector growth and sustainable national economic development.
His optimism is shared by the MCC Board of Directors, which yesterday announced that the compact would aim to address the critical energy demands and foster the growth of local businesses, a move that is expected to have transformative impacts on the country’s economy and overall development.
At the launch of the Sierra Leone Human Capital Development Coordination Framework in May, the country’s Vice President, a former UN chief who is familiar with development indicators, assured that the government was making efforts to transition from utility energy to productive energy.
The MCC Compact Programme
The Millennium Challenge Corporation (MCC) is a U.S. foreign aid agency that provides time-limited grants to countries that meet rigorous standards for good governance, economic freedom, and investing in their citizens. The $480 million compact with Sierra Leone is designed to tackle the country’s acute energy challenges, which have been a major bottleneck to economic growth and development.
Addressing Current Energy Challenges
Sierra Leone’s energy sector has been characterized by inadequate generation capacity, frequent power outages, and high costs of electricity. According to the World Bank, only about 23% of the population has access to electricity, with rural areas being the most underserved. The unreliable power supply hampers the operations of businesses, affects the quality of life, and limits economic opportunities.
Ahead of full implementation in the coming years, we at SL News are hopeful that the MCC compact will focus on several key areas to improve the energy sector through infrastructure development that will address generation capacity by investing in the rehabilitation of existing power plants and the development of new ones. Transmission and distribution will certainly upgrade and expand the transmission and distribution networks to reduce losses and ensure a more reliable supply of electricity.
Another even more sustainable intervention might consider promoting renewable energy projects, particularly solar and hydroelectric power and extensively diversifying the energy mix to reduce dependency on fossil fuels. This would also mean introducing and implementing off-grid and mini-grid solutions to provide electricity to remote and rural areas.
In recent years we have seen an increase in consumer or customer-centric interest in the energy sector administration. We know that electricity services are among the most regulated areas of economic activity, and research has shown that sector performance is linked to the quality of regulatory institutions. Therefore, we see an opportunity for energy sector reforms and a progressive regulatory framework. It is important to strengthen the regulatory framework to be able to attract private investment and ensure sustainable management of the energy sector.
There is a seeming paucity in management, resulting from the possibility of an inadequate or a total lack of capacity of most of the stakeholders in the power generation, sale, distribution and supply chains in the country. It is a perennial problem but capacity building with a training package that promotes business mentality and benchmarks inspiring growth margins among the workforce will improve the operational efficiency of energy utilities.
Growing Local Businesses & Economic Impacts
Reliable and affordable electricity is crucial for the growth of local businesses. At the launch of the Sierra Leone Human Capital Development Coordination Framework in May, the country’s Vice President, a former UN chief who is familiar with development indicators, assured that the government was making efforts to transition from utility energy to productive energy.
Now that the MCC compact is here, we expect to see the promise of an energy transition come to pass and have several positive impacts on the business environment in Sierra Leone. Apart from the fact that a stable power supply will also enhance productivity, businesses can operate more efficiently, reduce operational costs, and increase profit margins. This is particularly important for manufacturing and processing industries that are heavily reliant on electricity.
A reliable energy sector will make Sierra Leone a more attractive destination for both domestic and foreign direct investments and could lead to the establishment of new businesses, expansion of existing ones, and overall economic growth. Job creation or employment is a vexing issue among young people. The expansion of the energy sector and the growth of local businesses will consequently create job opportunities, thereby reducing unemployment and improving livelihoods.
Support for SMEs
We at salone-news.com are a small business and like all other start-ups, we want to grow. Meanwhile, in a June 2022 World Bank publication, Small and Medium-sized Enterprises (SMEs) are referred to as the engine of economic growth and job creation but also serve as the backbone of Sierra Leone’s economy. We are, therefore, excited to learn that the MCC compact includes provisions to support SMEs.
The situation is even more desperate with those small businesses in the energy and power supply industry. Unlike some of us in the service sector, the major challenges they face include access to finance. We hope this windfall of a support will also consider facilitating business training and access to finance for SMEs to invest in energy-efficient technologies and expand their operations.
The $480 million MCC Compact is a significant achievement for Sierra Leone, poised to address the country’s critical energy demands and stimulate the growth of local businesses. By improving the energy infrastructure, promoting renewable energy, and supporting regulatory reforms, the compact aims to create a reliable and sustainable energy sector. This, in turn, will enhance the productivity of businesses, attract investments, and create jobs, ultimately contributing to the socio-economic development of Sierra Leone.
The successful implementation of this compact will be a testament to the collaborative efforts between the government of Sierra Leone and the MCC, paving the way for a brighter and more prosperous future for the country.
