Despite persistent corruption and fiscal mismanagement, the long-term economic prognosis of Guinea, buoyed by strong 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 through investment agreements in the last two years. Investors should proceed with caution, realizing that the potential for high profits comes with great 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). Bauxite accounts for over half of Guinea’s present exports. 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. Most of the country’s bauxite is exported by Compagnie des Bauxites de Guinee (CBG) [a joint venture between the Government of Guinea, the U.S.-based Alcoa, and the Anglo-Australian firm Rio Tinto], 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. 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. Long term, the Government of Guinea projects that its greatest potential economic driver will be the Simandou iron ore project. It was 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 it has not moved toward producing anything since Rio Tinto left. The infrastructure costs for the project are projected to be USD20 billion, which is enormous considering Guinea’s GDP is less than USD7 billion/year. When fully operational, the project could double Guinea’s GDP. 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 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 400MW Souapiti dam project (valued at USD2.1 billion) begun in late 2015 by the Chinese, who 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 be complete in late 2020 and, with the proper distribution infrastructure, could help Guinea become an energy supplier 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 is beginning Project Te, a 50MW thermal plant on the outskirts of the capital.
Agriculture and Fisheries are another area 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 stabilized exchange rates, refilled government coffers, and increased government revenues. Much of this stabilization lasted until late 2017. Then the government borrowed excessively from the Central Bank (BCRG), threatening its first 2018 International Monetary Fund (IMF) review. Still, growth for 2017 was pegged at a healthy 6.7 percent (down from 10 percent in 2016), but the largely impoverished population felt little of that, placing the government under pressure to deliver tangible development progress. There is a shortage of credit, particularly for small and medium sized enterprises. 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. Guinea has recently updated its Investment Code and renewed efforts to attract international investors. Guinea’s investment promotion agency rolled out a new website (www.invest.gov.gn) in 2016 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.
|TI Corruption Perceptions Index||2017||142 of 175||http://www.transparency.org/
|World Bank’s Doing Business Report “Ease of Doing Business”||2017||163 of 190||http://doingbusiness.org/rankings|
|Global Innovation Index||2017||127 of 128||https://www.globalinnovation
|U.S. FDI in Partner Country ($M USD, Stock Positions)||2015||USD 188||http://www.bea.gov/
|World Bank GNI