# **I. Introduction and Background**

Sierra Leone is one of the poorest countries in Africa with 7.6 million people and a GDP per capita of US$439 (World Bank, 2018). The country shares a northeast border with Guinea, a southeast border with Liberia and is open to the Atlantic on the west and southwest. Sierra Leone has a highly advantageous geography and significant renewable natural resource endowments in land, forest and fisheries. Almost 75 percent of the total land area of about 72,300 km<sup>2</sup> is arable. Abundant rainfall (3,000 -5,000 mm per year on the coast and 2,000 – 2,500 mm inland), naturally fertile soils, sunlight and river basins make the country suitable for a wide variety of food and cash crops (World Bank, 2018). The country is also wellendowed with mineral resources. Extensive alluvial and kimberlitic diamond deposits as well as bauxite, rutile, and gold have been discovered in the east and south of the country and gold, iron ore and more recently bauxite are being mined in the north. Despite its substantial natural resources, more than half of Sierra Leone’s population is poor and more than three-quarters of the poor live in rural areas and most are engaged in agriculture.

Rice is a staple in Sierra Leone with an annual per capita consumption of 104kg<sup>2</sup> —among the highest in the Sub-Saharan Africa region. Per capita consumption was even higher in the 1970s reaching 127kg. However, domestic yields are low (averaging less than 2 metric tons per hectare per year) and overall production, averaging 620,000 tons per year in the last 10 years is inadequate to meet consumption estimated at about 1,000,000 tons of milled rice and an annual average of 300,000 metric tons of rice are imported. Most of the imported rice is consumed in Freetown, the capital city and the provincial towns, but a small proportion is consumed in the rural areas, mainly in July and August when the stock of locally produced rice is at the lowest.

Sierra Leone has a natural comparative advantage in the production of rice and up until the mid-1950s it had been a net exporter of rice (Kargbo, 1979). Sierra Leone has imported more than US$100 million worth of rice per year since 2012, an amount equivalent to one-fifth of its international foreign reserves. According to Fornah, Spencer, and Wilson (2014) about 187,000Mt of paddy rice are marketable surplus, representing 10-15 percent of domestic production. A substantial proportion of this surplus goes through the traditional value chain, which accounts for 85-90 percent of the marketable surplus. The traditional rice value chain involves mostly smallholders who supply relatively poor-quality rice (with over 35 percent broken grains) to both rural and urban consumers, but only a small proportion reaches Freetown. The modern rice value chain involves a mix of both smallholder and large-scale producers who market rice through institutional buyers. The quality of the rice in the modern value chain is of similar quality to imported rice.

Increasing the share of the modern value chain could create more and better jobs, especially for youth and women in rural areas. Further development of the modern value chain (and to some extent, the traditional value chain) is constrained by low yields and competition from subsidized rice imports. Currently, the tariff (15 percent) on imported rice is waived. Further, in some instances, the overvalued exchange rate has held to keep the imported rice price low. For example, in 2017 the IMF estimated that the currency was overvalued by 15-17 percent.<sup>3</sup>

> 2 Spencer, Deen and Wilson, 2009. The economics of rice production in Sierra Leone.

> 3 IMF Country Report No. 17/154, June 2017.

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