British private equity investors are turning their attention to Sierra Leone, the West African country that is trying to recover from its decade-long civil war.

Ranked by the UN Development Programme in its Human Development Index (HDI) as the least developed of 177 countries surveyed, Sierra Leone suffers high unemployment and illiteracy rates and President Koroma’s year-old Government is struggling to contain endemic corruption.

Tom Cairnes, the co-founder, with Niall O’Cathasaigh, of the Sierra Leone Investment Fund, which trades in the capital, Freetown, as ManoCap, says that only robust investments to boost indigenous businesses will help to spur economic growth in the nation of 6.3 million people. “Sierra Leone has fantastic agricultural and mineral resources and a large and young labour force — it shouldn’t be the bottom country in the HDI,” he said.

ManoCap invests in small to medium-sized agriculture, fisheries and light manufacturing enterprises but not in lucrative mineral deals.

The leaking of donor funds through official corruption in many developing economies has prompted aid agencies to explore the use of venture capital in a change that is expected to yield more meaningful benefits for poor communities.

This is how Britain’s Department for International Development (DfID) financed ManoCap’s facility for training local entrepreneurs last year. Mr Cairnes said: “For every dollar that DfID provides to us, we raise another ten in investment capital.”

However, it is unclear how benefits of such investment from the West flow to those at the bottom of society.

The UK gives an annual £40 million in development assistance to Sierra Leone, where most businesses are sole proprietorships whose assets are not registered in the name of the business. As a result, local entrepreneurs find it hard to access bank loans or attract external funding.

Mr Cairnes said: “If we employ Sierra Leoneans in the next five to ten years, create business management schemes and bring people through managerial processes within our business, we would be creating the next generation of managers [and] this is the only way to change the lives of the majority of the people.”

Critics say that some British investors in Sierra Leone are interested only in exploiting a weak legal system. ManoCap’s founders insist that they are not being opportunistic by investing in the country, which does not have employment or minimum wage legislation, but want to help it to develop by building skills. ManoCap has so far invested about £500,000 in three businesses employing up to 200 workers and is seeking finance from British investors to expand its portfolio.

ManoCap has an advisory board led by Lord Stevenson of Coddenham, chairman of HBOS, and includes figures from private equity. The fund hopes to use members’ networks and expertise to find funds and talent to strengthen its African investments.

The writer is a David Astor Journalism Award Trust (Dajat) Fellowship winner on professional development attachment with The Times

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