I.

Chapter one

1.0 INTRODUCTION

Overview of Retailing

Retailing consists of the sale of goods or merchandise from a

fixed location, such as a department store or kiosk, or by
post, in small or individual lots for direct consumption by the
purchaser. Retail establishments are often called shops or
stores. Retailers are at the end of the supply chain. Retail
comes from the French word retailer which refers to "cutting
off, clip and divide" in terms of tailoring (1365). Retail is one
industry we all have a part in—after all, it is the sale of
products to individual consumers (as opposed to
businesses). Retail goods are traditionally divided into
durable goods, such as furniture and large appliances, which
are expected to last at least 5 years, and nondurable goods,
which include food, clothing, and other categories far too
numerous to mention but which eventually form the bulk of
the stuff you see on makeshift tables at garage sales.
Manufacturing marketers see the process of retailing as a
necessary part of their overall distribution strategy. Online
retailing, also known as e-commerce is the latest form of
non-shop retailing (cf. The pricing technique used by most
retailers is cost-plus pricing. This involves adding a mark-up
amount (or percentage) to the retailers cost.

Retail trade contributes around ----% of Sierra Leone’s GDP

and currently employs a very significant number of the
country’s population. Within this, unorganized retailing
accounts for 98% of the total retail trade. These retailers
also make up a portion of the population under the poverty
line. Traditional forms of low-cost retail trade, from the owner
operated local shops and general stores to the handcart and
pavement vendors together form the bulk of this sector. In
the absence of any significant growth in organized sector
employment in Sierra Leone, that is in the manufacturing or
services sector, a good number of the work force are forced
to seek their livelihood in the informal sector. Most of these
retailers who come up as a result of unemployment do not
last long in the business as they are forced to close down
due to competition or poor management. Retail trade,
which has been a relatively easy business to enter with low
capital and infrastructure needs, has acted as a refuge
source of income for the unemployed.

The retail industry improves the econo,mic standard of not

only those engaged in retail activites but the entire Sierra
Leonean population.

Liberalization is arguably the most strongly advocated policy

for improving economic performance, Trade liberalisation
means reducing the limitations on trade that countries
around the world have erected over a number of years.
Protectionism is a means of attempting to ensure that
domestic industries are protected from competition from
foreign producers and can be carried out through a variety of
means - through tariffs, which raise the price of goods
coming into a country (imports), quotas - a physical limit on
the number of goods that can be brought into a country, and
other non-tariff barriers such as regulations and
legislation that make it very hard for foreign competitors to
sell goods into another country.

The government of Sierra Leone can put legislations in place

to protect these retailers who are coming in and also to
protect the consumers from being exploited.
It is the policy of the State to promote consumer welfare in
attracting, promoting and welcoming productive investments
that will bring down prices for the sierra Leonean consumer,
create more jobs, promote tourism, assist small
manufacturers, stimulate economic growth and enable Sierra
Leone goods and services to become globally competitive
through the liberalization of the retail trade sector.

The retail trade sector is a very important sector in the

economy of any country. In the USA it is the second largest
sector and 97% of this sector is represented by unorganized
retailers , in India this sector accounts for 10% of the
countries GDP in which also 97% of this sector is the
unorganized retail market. This is a sector which every
country should encourage this sector to grow by putting
policies in place to encourage them to grow.

1.1 Background To Trade In Sierra Leone

Sierra Leone covers an area of 71,740 km2 and is bordered

by Guinea to the northeast, Liberia to the south, and the
Atlantic Ocean to the west. In 2002, its population was
approximately 4.8 million, of which 34% (2004) lived in
urban areas; per capita GDP was US$208.8. The rate of
population growth is fairly high with a birth rate of 2.3% per
annum; average life expectancy is estimated at 34.3 years.

The organized trade in Sierra Leone started as early as 1790

with the advent of company administration, which gave way
to British colonial rule in January 1808. Formal British rule in
the hinterland commenced in 1896 when a British
protectorate was declared over that area. The British
colonialists (like their other European counterparts) were not
interested in promoting internal economic development in
their colonies. Their economic policy was guided by two
main factors:
1. The desire to encourage the production and export of raw
materials for their home industries.
2. The need to create in the colonies an ever-expanding
market for British manufactured goods.
It was the demand for materials and markets that dictated
the pace of Sierra Leone’s economic development during the
colonial period.
Freetown’s natural harbor facilitated trade between the
Colony and Britain. The import export trade flourished
throughout the nineteenth century, there by given rise to a
prosperous trading and professional bourgeoisie among the
Krio population. The Krio society thus became satisfied.
Below the bourgeoisie were the petty traders, craftsmen and
artisans. The economic opportunities in the Colony however
were insufficient to meet the demands of most colony
citizens many of whom ventured in to the hinterland in
search of greater economic benefits. They subsequently
developed greater trade relations between the Colony and
the hinterland.
The construction of the railway was done after the then
governor, Cardew toured the hinterland in the 1980’s. During
his tour he noticed that the construction of a railway across
the export produce-bearing regions, the south and the east
would bring huge economic benefit to the British industry.
This railway which covers a distance of 83 miles went across
the country from Freetown to Pendembu in the east. The
European firms and Lebanese traders were quick to seize the
opportunity which the railway system provided. Prior to the
construction of the railway foreign traders bought goods
through African middlemen (mainly Krio) and sold their
manufactured goods through the same media. Now they
moved to control the source of the supply of the produce and
the means of distribution of there imported goods. This
meant that the foreign traders with greater capital source
were soon to edge the Africans out of the retail trade. This
saw many large businesses set up in Bo Blama, Segbwema,
Pendembu and many more area’s. in 1940 the colonial
government set up a trading enterprise, the Sierra Leone
Produce Marketing Board (SLPMB) to take over the buying of
produce. The board aimed to give a guaranteed price to
farmers.
Not much effort was made to encourage the local industries.
In fact, colonial trade regulation set up at that time speed up
their decline by restricting their production and waiving
taxes on those foreign goods that were locally produced. Dr
Abayomi Cole, a sierra Leonean entrepreneur was banned
from producing tobacco, soap and sugar. Cadbury’s of
England flooded the Sierra Leone market with cheap
chocolates to force D.B Curry out of business.
So at independence in 1961 Sierra Leone was still a producer
of primary product and receiver of goods from European
manufactures but the distribution of these goods were
almost exclusively controlled by them. The Sierra Leoneans
were effectively excluded from participating in the trade in
the country and inevitably became victims of economic
exploitation.

1.2 Statement of Problem

For a country’s economy to develop the most important

sectors have to grow, one of these sectors that have to grow
along with others is the retail sector as it accounts for a
significant amount of the country’s GDP and level of
employment. This sector should be monitored and
encouraged to grow by making the environment favorable
for it to grow. In Sierra Leone the constitution does not have
well defined and active policies to control the retail trade in
the country. According to the Ministry Of Trade and
Industries’ trade policy review of 2005 posted on the World
Trade Organization web site dose not have a well written
policy on retail sector, it focuses more on the imports and
exports. After going through the Ministry Of Trade and
Industry, Freetown City Council, the Law School’s library and
a few lawyers, I still could not get any well written and active
policies on the retail trade market. This market is one of the
most important in any country and for the economy to grow
this sector must be regulated, by implementing liberalization
measures and some form of restriction in this market. It is
also widely believed that the private sector with retailing
taking the lead should grow as it has been proven in
countries like India, china, Kenya, etc.
Through past ten years of senseless rebel war in Sierra
Leone the burning down, looting of shop and stores has left a
large number of jobs lot.
Another major problem faced by the retail sector in the
country is that the bulk of the retailers are uneducated and a
large percentage of them lack the basic skills of keeping
proper records of their business activities. This makes it very
difficult to get accurate information on the monetary value of
these businesses, therefore it is not incorporated in to the
Annual National Income, Gross Domestic Product (GDP) of
the country.

Looking at a few legislations that affect the retail sector;

The Restaurant Food Tax Act, this act is concerned more
about a 10% tax on the price of all food and drink consumed
or supplied by the restaurant.
The Sales Tax Act, 1995 is amended in 2007 to also have a
10% tax on the cost of hotel and guest house
accommodation. For the country to develop and reduce the
number of people under the poverty line this sector has to
be monitored. Countries like Kenya, Philippines, India and
many others have dedicated a lot of effort to make sure this
sector succeed and the result is visible, India have
experienced a steady growth in the GDP of which 10% is
from the retail trade sector.
If this sector is not monitored and encouraged to grow we
might see the countries economic growth been restricted
along with the figure below the poverty line increasing.

1.3 Objectives Of The Study

1. To identify and discuss the factors affecting growth of the

retail sector in Sierra Leone.
2. Retail contribution to employment.
3. To identify the potential of the retail market in Sierra
Leone.
4. To identify its contribution to the Gross Domestic Product
(GDP).
5. The importance of foreign retailers.
6. To design a guideline to a Retail Trade Act.

1.3 Significance of the study

From mere perspective one can attest to the fact that Sierra
Leone is dominated by the retail industry.
Formerly as far back as the post- colonial period retailing in
Sierra Leone was done in a very small scale but its important
was recognized as foreign investors also invested in this
sector they tried to control their chain of supply the wanted
to be the ones selling directly to their consumers eliminating
the indigenes middlemen. Its activities continued to grow at
an ever-increasing rate since the late 1980’s and up to
present date, as we can clearly see that the entire Sierra
Leone market is dominated by the retail sector.
In present time the popular view among consumers is that
without retailers in the market trade will be very difficult if
not impossible accelerate development even if there is an
improvement in the other component of the marketing
channel. The critical importance of adequate retailing for a
country‘s development has been stressed in many
publications and in economic development literature. This
can be done effectively by creating more ease of entry
cutting down the number of monopolies and other restrictive
barriers. Developing the retail sector means an improvement
in the private sector. For a Country’s economy to flourish and
match up with international standards, private sector
development is seen as a leading icon in achieving such
success. Thus efficient plans must be put in place in all
segment of economic development by stimulating
investment. An improvement in the investment in the Sierra
Leone retail sector can help in the economic recovery of the
country.
A country that is well grounded by successful indigenous
retailers is seen as an important step to economic
development this will in turn reduce poverty rate because it
has been proven that in recent decades small and medium
firms form a base in the reduction of unemployment rate in a
country as it is carried out in most developed countries
around the world and has accounted for major employment
opportunities, sales and profit (especially in the area of
services such as hair dressing , dry cleaning, restaurant, car
repairs etc) in the developed countries.
Retailers are seen to posses great potential in contributing to
nation building but their efforts are hardly recognized as
they operate in a very small scale / low levels, low capital
base and they are there for seen defenseless which leads to
their subsequent collapse. To foster an impact on indigenous
retailers conducive business, access to resources (i.e.
financial, human, material, technology, etc) needs to be put
in place and also, creating promotional business activities for
successful indigenous retailers.
Those retailers that may be successful competitors over
there foreign counterpart will expand and diversify seeking
more challenging options there by creating new employment
opportunities for sierra Leoneans, creating mere investment
opportunities and so reduce employment rate. This concept
was suggested by Mc Nair (1958) and subsequently analyzed
by Hollander (1960) it holds that new types of retailers
usually enters the market as low-status, low-margin, low-
price operators. Gradually they acquire more elaborate
establishment and facilities with both increased
Investment and higher operating cost. Finally, they mature
as higher-cost, higher-price merchant, vulnerable to newer
types who, in turn, go through the same pattern.
Those new employees would be paying tax from their
personal earning and also paying tax indirectly by
purchasing taxable commodities in the market. They will also
find convenient dwelling houses whether self constructed or
rented, were tax rate or bills would be paid. Their economic
standard will rise and they will have to get married and have
children who would be sent to school.

After retailers would have succeeded in generating revenue

for the country the government would then have reasonable
sum in their funds which would be used in their consolidated
funds which would be used in developing the country. This
revenue can be used by the country to build school, hospital,
roads etc. also salaries and remunerations for teachers and
other public servants would be paid on time. This will create
a very positive impact on the quality and standard of
education thereby creating an increase in literacy rate
especially among the youth making them become more
sober minded thereby reducing security risk and other social
hazard like prostitution and drug addictions to promote
quality and basic education
Having gone through the above, it is therefore worthwhile to
carry out an investigation on the above topic hence justifying
the study of this nature.

1.5 Research Questions

This research is aimed at bringing out the factors which are
seen responsible for the slow growth of the retail sector in
Sierra Leone.
Questions such as ;
1. What is responsible for the slow growth of the retail sector
in Sierra Leone?
2. What are the responsibilities of government towards the
development of the retail industry in Sierra Leone?
3. Are there any effective government policy on the retail
sector?
4. What are the types of retail trade in Sierra Leone?
5. What are the significant of the retail trade?
6. what is the effect of retailing on the economy.

1.6 Scope

Having in minded the importance of retailing as a

component of the marketing channel, this study will
concentrate on a selective view of the entire Freetown urban
area within a period of seven years ranging from 2001 –
2008 inclusive. The location and time frame selected is as a
result of the most effective retail trading transaction being
carried out in Freetown and relating to our study will be
obtained.

1.7 Organization Of Work

Research is a requirement for the award of a Bachelor in

Science degree in Business Administration, there for it will be
divided in to five chapters. Chapter one as highlighted above
will look at the general background of the study, chapter two
will review relevant literature related to the study. This will
form the basis on which research questions would be asked.
Chapter three would spell out clearly the methods used to
gather information (data) and how these data would be
analyzed. Chapter four would contain the presentation and
analysis of the data collected in chapter three. It would also
help to answer the research questions in chapter one.
Chapter five which would be the final chapter would contain
summary, conclusion and recommendation for government,
retailers and further researchers.