Guinea

Executive Summary

Guinea enjoys sizeable endowments of natural resources, energy opportunities, and arable land. However, political tensions, persistent corruption and fiscal mismanagement make the long-term economic prognosis for Guinea mixed. In this context, Guinea has increasingly looked to foreign investment to bolster tax and export revenues and to support infrastructure projects and overall economic growth. China, Guinea’s largest trading partner, has dramatically increased its role in the past few years with a variety of infrastructure investments. Investors should proceed with caution, understanding that the potential for profits comes with significant political risk. Over the past few years, the Government of Guinea (GoG) has implemented reforms to improve various aspects of the investment climate. For example, the GoG reduced property transfers fees from 2 to 1.2% of the value of the property. The time required to obtain a construction permit has been reduced and import procedures have improved. Since 2019, Guinea has implemented a permanent taxpayer identification number system that requires all payments to be made by “Real Time Gross System” (RTGS) immediate transfers.

Endowed with abundant mineral resources, Guinea has the raw materials to be an economic leader in the extractives industry. Guinea is home to a third of the world’s reserves of bauxite (aluminum ore), and bauxite accounts for over half of Guinea’s present exports. Historically, most of the country’s bauxite was exported by Compagnie des Bauxites de Guinee (CBG) (Bauxites Company of Guinea) [a joint venture between the Government of Guinea, U.S.-based Alcoa, the Anglo-Australian firm Rio Tinto, and Dadco Investments of the Channel Islands], via a designated port in Kamsar. While CBG still retains the largest reserves, the Societe Miniere de Boke (SMB) (Mineral Society of Boke), a Franco-Sino-Singaporean conglomerate, has recently surpassed CBG as the largest single producer of bauxite. New investment by SMB and CBG, in addition to new market entrants, are expected to significantly increase Guinea’s bauxite output over the next five to ten years. Guinea also possesses over four billion tons of untapped high-grade iron ore, significant gold and diamond reserves, undetermined amounts of uranium, as well as prospective offshore oil reserves. Artisanal and medium-sized industrial gold mining in the Siguiri region is a significant contributor to the Guinean economy, but some suspect much of the gold leaves the country clandestinely, without generating any government revenue. In the long term, the Government of Guinea projects that its greatest potential economic driver will be the Simandou iron ore project, which is slated to be the largest greenfield project ever developed in Africa. In 2017, the governments of Guinea and China signed a USD 20 billion framework agreement giving Guinea potentially USD 1 billion per year in infrastructure projects in exchange for increased access to mineral wealth. In 2018, the Chinese Group TBEA invested USD 2.89 billion in the bauxite and alumina sector. The project includes development of a bauxite mine, the construction of a port, railroad, and power plant to facilitate the supply chain. The project is estimated to generate USD 406 million in annual revenue for Guinea.

Coordinator of the Africa Renewable Energy Initiative (AREI) under the African Union, President Conde is styling himself and Guinea as a leader in renewable energy. The amended 2013 Mining Code stipulates that raw ore producers in Guinea begin processing raw ore into refined or processed products within a few years of development, depending on the terms of the individual investment and the mandate with the Ministry of Mines. U.S.-based companies are in varying stages of proposing LNG projects to furnish this upcoming tremendous energy need. China is reportedly offering coal-based solutions to meet the potential demand.

Guinea’s abundant rainfall and natural geography bode well for hydroelectric and renewable energy production. The largest energy sector investment in Guinea is the 450MW Souapiti dam project (valued at USD 2.1 billion), begun in late 2015 with Chinese investment, which likewise completed the 240MW Kaleta Dam (valued at USD 526 million) in May 2015. Kaleta more than doubled Guinea’s electricity supply, and for the first-time furnished Conakry with more reliable, albeit seasonal, electricity (May-November). Souapiti was expected to begin to producing electricity in late 2020. Due to the pandemic, the dam will begin producing electricity in 2021. A third hydroelectric dam on the same river, dubbed Amaria, began construction in January 2019 and is expected to be operational in 2024. The Chinese mining firm TBEA is providing financing for the Amaria power plant (300 MW, USD 1.2 billion investment). If corresponding distribution infrastructure is built, and pricing enables it, these projects could make Guinea an energy exporter in West Africa. In addition, U.S.-based Endeavor planned to finish work on Project Te, a 50MW thermal plant on the outskirts of the capital by the end of May 2020 but project completion was delayed due to the COVID-19 pandemic and delays in payment by the Government of Guinea. The government is also looking to invest in solar and other energy sources to compensate for hydroelectric deficits during Guinea’s dry season. Toward that end, the government has entered into several Memoranda of Understanding with the private sector to develop solar projects.

Agriculture and fisheries hold other areas of opportunity and growth in Guinea. Already an exporter of fruits, vegetables, and palm oil to its immediate neighbors, Guinea is climatically well suited for large-scale agricultural production and export. However, the sector has suffered from decades of neglect and mismanagement, lack of transportation infrastructure, and lack of electricity and a reliable cold chain. Guinea is an importer of rice, its primary staple crop. President Alpha Conde has expressed his personal desire to see Guinea’s long-term economy based on agriculture and renewables rather than extractives.

Guinea’s macroeconomic and financial situation is weak. The aftermath of the 2014-2016 Ebola crisis left the government with few financial resources to invest in social services and infrastructure. Lower natural resource revenues stemming from a drop in world commodities prices and ill-advised government loans strained an already tight budget. In 2018 the government borrowed excessively from the Central Bank (BCRG), which threatened the first review of Guinea’s current International Monetary Fund (IMF) program. Lower than forecast natural resource revenues in 2019 due to heavy rains and political violence threatened the fourth review, which Guinea passed in April 2020. In December 2020, the Executive Board of the IMF completed its fifth and sixth reviews of Guinea’s economic performance. The completion of these reviews enabled the immediate disbursement of USD 49.47 million – bringing total disbursements under the program to USD 166.60 million.

There is a shortage of credit, particularly for small- and medium-sized enterprises, and the government is increasingly looking to international investment to increase growth, provide jobs, and kick-start the economy. On March 13, 2020, Guinea confirmed its first Covid-19 case. The pandemic negatively impacted the well-being of households, particularly those working in the informal sector, who have limited access to savings and financial services. Additionally, election related violence surrounding both the March 2020 legislative election and constitutional referendum, as well as the October 2020 presidential election, all negatively impacted Guinea’s growth prospects.

Guinea has passed and implemented an anti-corruption law, updated its Investment Code, and renewed efforts to attract international investors, including a new investment promotion website put in place in 2016 by Guinea’s investment promotion agency to increase transparency and streamline processes for new investors. However, Guinea’s capacity to enforce its more investor-friendly laws is compromised by a weak and unreliable legal system. President Alpha Conde inaugurated the first Trade Court of Guinea on March 20, 2018.

The Private Investment Promotion Agency (APIP-Guinea), under the supervision of the Ministry of Investments and Public Private Partnerships in partnership with the African Development Bank (AfDB) and the International Finance Corporation, organized the Guinea Investment Forum (GUIF) from February 24-26, 2021 in Conakry. The main objective of the event was to mobilize public and private investors for financing and other business opportunities. The forum hosted 1,600 participants, (including 600 in-person and 1,000 online) which included government, technical partners, financial institutions, as well as local and international private sector representatives. The forum saw 51 agreements signed for private projects in mostly the construction, agrobusiness, and hydrocarbon industries. Additionally, the construction and agrobusiness sectors reported an estimated USD221 million in announced financing after the event.