Despite persistent corruption and fiscal mismanagement, the long-term economic prognosis for Guinea, buoyed by sizeable endowments of natural resources, energy opportunities, and arable land, remains promising. Constrained by an austere budget, Guinea has increasingly looked to foreign investment and the private sector to stimulate growth. China, Guinea’s largest trading partner, has dramatically increased its role in the last two years through investment agreements. Investors should proceed with caution, realizing that the potential for high profits comes with significant risk.
Blessed with abundant mineral resources, Guinea has the potential to be an economic leader in the extractives industry. Guinea is home to over half the world’s reserves of bauxite (aluminum ore), and bauxite accounts for over half of Guinea’s present exports. Most of the country’s bauxite is exported by the Compagnie des Bauxites de Guinee (CBG) [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. Societe Miniere de Boke (SMB), a Franco-Sino-Singaporean conglomerate, has surpassed CBG as the largest single producer of bauxite in the world. New investment by SMB and CBG, in addition to new market entries, are expected to significantly increase Guinea’s bauxite output over the next five to ten years. The Aluminum Corporation of China (Chalco), the Guinea Alumina Corporation (GAC), and Alufer are relative newcomers to the bauxite industry and are still growing. 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 suspicion exists that 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. Chalco bought out Rio Tinto’s shares in the project in 2017, and the Guinean government is anxious to move forward with developing the iron ore concessions. The Guinean government is using Simandou revenue in long-term planning but the project has not moved toward producing anything since Rio Tinto’s departure. The infrastructure costs for the project are projected to be USD 20 billion, which is enormous considering Guinea’s GDP is less than USD 7 billion/year. When fully operational, the project could double Guinea’s GDP. In 2017, the governments of Guinea and China signed a USD20 billion framework agreement giving Guinea potentially USD1 billion per year in infrastructure projects in exchange for increased access to mineral wealth. The results of previous Chinese infrastructure projects, however, have been mixed: power projects have had a positive impact, but others, like the Nongo stadium, have been less successful.
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 USD2.1 billion), begun in late 2015 with Chinese investment, which likewise completed the 240MW Kaleta Dam (valued at USD526 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 is due to begin regulating the water available to the Kaleta Dam in September 2019 and will begin to produce electricity in late 2020. A third hydroelectric dam on the same river is in the early stages of development – Chinese mining firm TBEA is providing financing for the Amaria power plant (300 MW, USD1.2 bn investment), with financial negotiations for the Build-Operate-Transfer (BOT) arrangement in process leading to the final determination of the tariff to be paid by the Guinean energy operator EDG. With proper distribution infrastructure, these projects are expected to lead Guinea to become an energy exporter in West Africa. The government is also looking to invest in solar and other energy sources to compensate for lost hydroelectric production during Guinea’s dry season. To that end, U.S.-based Endeavor has started work on Project Te, a 50MW thermal plant on the outskirts of the capital. The World Bank is sponsoring four 50MW solar projects in the Kankan region.
Agriculture and fisheries are 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. However, the sector has suffered from decades of neglect and mismanagement, while the 2014-2015 Ebola crisis hit the agricultural workforce hard. Guinea is also 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 rather than extractives.
Guinea’s macroeconomic and financial situation is weak. The Ebola crisis stifled Guinea’s economic growth prospects in 2014 and 2015, leaving the government with few financial resources to invest in infrastructure. Lower natural resource revenues stemming from a drop in world prices and ill-advised government loans have strained an already tight government budget. However, improved macroeconomic discipline in 2016-2017 stabilized exchange rates, refilled government coffers, and increased government revenues. Much of this stabilization lasted until late 2017 when the government borrowed excessively from the Central Bank (BCRG), threatening its first 2018 International Monetary Fund (IMF) review. Still, growth for 2018 was a healthy 8.7 percent (down, however, from 10 percent in 2016), but the largely impoverished population felt little of that, placing the government under pressure to deliver tangible economic development. 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.
In 2017, Guinea passed and implemented an anti-corruption law, but it has yet to be tested in court. The country has recently 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 (www.invest.gov.gn) to increase transparency and streamline investment. However, Guinea’s capacity to enforce its more investor-friendly laws is compromised by a weak and unreliable legal system. President Alpha Condé inaugurated the first Trade Court of Guinea on March 20, 2018. The aim of the Trade Court is to improve the business environment for local and foreign investors but it remains to be seen what effect it will have.
|TI Corruption Perceptions Index||2018||138 of 180||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report “Ease of Doing Business”||2019||152 of 190||http://www.doingbusiness.org/rankings|
|Global Innovation Index||2018||119 of 126||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, stock positions)||2016||$11||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita (Atlas method||2017||$790||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|