Cablegate: Sierra Leone Struggles with Rising Prices
RR RUEHMA RUEHPA
DE RUEHFN #0044 0361000
ZNR UUUUU ZZH
R 051000Z FEB 08
FM AMEMBASSY FREETOWN
TO RUEHC/SECSTATE WASHDC 1683
INFO RUEHZK/ECOWAS COLLECTIVE
UNCLAS FREETOWN 000044
E.O. 12958: N/A
TAGS: EAGR ETRD ECON SL
SUBJECT: SIERRA LEONE STRUGGLES WITH RISING PRICES
1. SUMMARY: Although news reports generally exaggerate the
situation, tensions between bakers, millers, and flour and rice
importers are coming to a head due to steadily rising prices. In
the eye of the storm is Seaboard West Africa Ltd., a U.S.-owned
company that imports wheat, bakes bread, and runs the only domestic
mill. END SUMMARY.
2. FLOUR AND RICE PRICES: According to one news report, flour
prices in January are nearly double what they were in August 2007.
The Ministry of Trade, without providing prior warning to importers
and producers, announced on Saturday, January 26 a reduction in
flour prices to 115,000 Le (38.92 USD) per 50 kg of locally
manufactured flour and 100,000 Le (33.84 USD) per 50 kg of imported
flour. Announced rice prices ranged from 66,000 Le (22.34 USD) per
bag to 82,000 Le (27.74 USD) per bag, depending on the origin and
type of rice. The Minister stated that although GoSL is committed
to international trade liberalization, current circumstances dictate
the need for these price ceilings.
3. BUSINESS COMMUNITY RESPONSE: Despite several false reports in
the newspapers of a bakers' strike on January 21 and the suspension
of baking operations on January 28, producers have stated their
intention to continue providing these needed staples to the public
for the time being. Continuing full-scale production in light of the
price ceilings, however, will likely become financially unfeasible
in a short period of time. Seaboard, for example, is continuing to
sell its flour at 130,000 Le (44 USD) per bag, which it claims is
4. SEABOARD: Seaboard West Africa runs Sierra Leone's only flour
mill, which it built in 1968. Seaboard's operations also include
grain imports and a bakery. The company is 51% owned by the Seaboard
Corporation (U.S.) and 49% by Global Trading Corporation (Belgium).
It is managed in Sierra Leone by Houssein Bazzy of Ibrahim Bazzy &
Sons, owners of approximately 70% of Global Trading Corporation.
Despite being a major market player, Seaboard has experienced some
challenges. While some companies resort to bribery to avoid taxes
and expedite the lengthy import process [NOTE: A variety of sources
state that it can take upwards of 3 weeks for goods to clear
customs. END NOTE], Seaboard attempts to conduct business by the
book. A further challenge includes media allegations that Seaboard
is a provocateur in the political scene, with some reports
suggesting that their prices are kept deliberately high in an effort
to undermine the fledgling APC government. Seaboard maintains,
however, that this is untrue.
5. COMMENT: The sharp increases in commodity prices have serious
impacts on the Sierra Leonean economy for producers and consumers
alike. While the government response to place limits on these
increases is laudable, it creates further difficulties for companies
like Seaboard, which are selling below cost without government
subsidies. How long such companies will choose to continue providing
their goods to the public under these circumstances is unknown.
Further information on this issue and the larger economic context
will be provided septel. END COMMENT.