BUSINESS START-UP REFORMS IN SIERRA LEONE

March 30

2009MARIAMA SERAY KALLAY

ADMINISTRATOR AND REGISTRAR-GENERALEXPERIENCE SHARING

OFFICE OF THE AMINISTRATOR AND REGISTRAR GENERAL OF SIERRA LEONE

BACKGROUND

Sierra Leone is a small country lying on the West Coast of Africa covering an area of 71,740 sq. km with a population of about six million. Sierra Leone is rich in natural resources such as minerals, agriculture, land and marine resources. Our formal economy and economic infrastructure were devastated by the eleven years civil war that ended in January, 2002.

The Government of Sierra Leone with the assistance of international donor governments and agencies, is pursuing a policy objective of rapid and sustained private sector development to diversify the economy, As a result, it is succeeding in re-establishing economic and political stability. Economic policies include development plans that will focus on deeper structural and institutional, and legal reforms that are needed to support diversification of an economy that is characterized by low productivity and a weak industry base. Economic growth is forecast to remain at 6.5%, with an expected increase for year 2010.

Due to the quality of leadership Sierra Leone is currently blessed with, and the successful implementation of reform programmes, there is much optimism and international confidence in the continuity of the political stability that now reigns in the country. Sierra Leone qualified for debt relief under the Highly Indebted Poor Country Initiative, consisting of approximately US$6m in debt relief.

The Office of the Administrator and Registrar General (OARG) is a Corporation Sole, situated in Freetown the capital city of Sierra Leone, and has as its supervisory ministry, the Office of the Attorney General and Ministry of Justice. The OARG is responsible for the registration and administration of every activity required to be registered by law excepting that of births and deaths, and generates revenue for the government.

BUSINESS REGISTRATION

The legal regime that governs the registration and operations of all types of businesses such as companies, sole proprietorship, partnership, companies, cooperatives and friendly societies are the Companies Act, CAP 249 of the Laws of Sierra Leone, and the Business Registration Act, 2007. They both provide for compulsory registration and the ambit within which companies are to operate, including cessation of their operations.

STARTING A BUSINESS IN SIERRA LEONE

The exercise of Starting a business in Sierra Leone before now was cumbersome, costly, and time consuming. It involved a nine step procedure that took the applicant to at least three government institutions, and undue delays at each of the institutions. The average time frame was an average of six weeks, costing an average of $1,194.5% per capital. Also, businesses had to be renewed annually on the standard payment for the registration of new businesses. An illustration of registering a Sierra Leone company limited by share was thus:

A new applicant would firstly apply in writing and pay for the assignment of use of the intended company name which normally took at least one week. On the assignment of a unique name, the applicant would then apply to the Bank of Sierra Leone for an exchange control permit to incorporate the company as was required by the Exchange Control Act. Such application would be in writing, and it would have again taken weeks to get a response depending on the workload of the section in the Bank dealing with that aspect. After obtaining the clearance to use the name, the applicant then goes back to the OARG and gets the Memorandum and Articles of Association which was mandated to be backed by a lawyer, together with the statutory notices incorporated, after the payment of the requisite fee based on the share capital of the proposed company. The next step was for the applicant to go to the National Revenue Authority to pay an advance tax on the new business which was assessed based on the estimated turnover of the company. A tax clearance certificate was issued after the payment of the advance tax. It took days and in most cases, weeks because the applicant had to be interviewed, and sometimes personnel would deliberately delay the process for want of a bribe, or perhaps because the applicant could not come up with payment of assessed tax. The next step was to go back to the OARG and have the company registered to do business on the payment of a registration fee.

The experience therefore of registering a limited liability company was very frustrating, and acted as a barrier to both local and international proposed investors in doing business in Sierra Leone.

In order to create a business friendly environment to effect investment growth in line with its economic policy, the Government enacted a number of legal reforms in 2007, among which were the General Law (Business Start-Up), 2007 and the Business Registration Act, 2007 both of which came into operation in July 2007. The General Law (Business Start-Up) Act 2007 introduced reforms that streamlined the registration process, resulting in the following:

Elimination of the requirement for exchange control permit from the Bank of Sierra Leone;

Payment of an advance tax before registration of a new business;

Elimination of the requirement of having the Memorandum and Articles;

Elimination of the annual renewal of business registration.

The process now involves a seven step procedure, it takes between one to two days to register a new business, and it costs much less because applicants have the option of not using the services of a lawyer, and are no longer required to pay advance tax which use to be assessed based on the expected turnover of the business that was based on the initial capital of the business. The result of the implementation of these reforms is also reflected in the World Bank Doing Business Report 2009, Sierra Leone’s overall ranking for ease of doing business moved from 168 in 2008, to 156 in 2009. In starting up business, Sierra Leone moved in overall ranking for sub-Saharan Africa, from 89 in 2008 to 53 and topped the list for starting a business. In West Africa.

These reforms make it easy and convenient to do businesses in Sierra Leone by drastically reducing the time frame, and costs, thus providing a convenient atmosphere for investor. The process now involves a seven step procedure that includes all payments to be made to the revenue authority housed in the OARG. There is now no need for the requirement of a lawyer in the preparation of the Memorandum and Articles of Association. As a consequence, of the simplification of the process, most registrations are completed in a day, and costs have reduced tremendously. Last year, we had a significant increase in the registration

of companies. 781 companies were registered as opposed to 441 the previous year, and an increase of 120% in revenue generation from that of last year despite the elimination of annual renewals of registration for which

the same amount of fees as that for new registration was paid. The experience of the Business Registration Center is expected to be used as a point of reference to indicate the activities challenges and In year 2008, 781 new companies were registered, as opposed to 421 for the previous year. Consequently, Sierra Leone moved from 168 to 156 in the overall ranking on the regulatory ease of the World Bank Doing Business Report 2009, from 89 to 53 in the category of starting a business in the sub-Saharan region, and first in the West African region in tat same category.

Our office has also been restructured into a Business Registration Center One Stop Shop - one interface for all procedures to start a business. In addition, standard Memorandum and Articles of Association and literatures on registering a business are now available to the public.

I look forward to benefiting from networking and sharing experiences to better enhancement OF the delivery of our services to the public, to encourage investment growth leading sustainable development of our nation.

I thank you all for your attention.