72373
Guinea
Mining and Infrastructure
February 2010
The World Bank
Guinea: Mining and Infrastructure
Acknowledgements
This Note was prepared by a team including Boubacar Bocoum (Senior Mining
Specialist, COCPO), Boutheina Guermazi (Senior ICT Specialist, CITPO), Dana
Rysankova (Senior Energy Specialist, AFTEG), Jane Hopkins (Senior Agriculture
Economist, AFTAR), Katharina Gassner (Senior Economist, FEUFG), Pascal Dooh-Bill
(Finance Specialist, WBIPP), Peter Kristensen (Sector Leader, AFTEN), and Silue Siele
(Senior Transport Specialist, AFTTR).
A consultant team in Guinea including Habib Diallo for the energy sector, Ibrahima
Soumah for the mining sector, and Bahna Sidibe for the transport sector researched and
compiled available sector data in the country which formed the basis for the analysis
undertaken in this Note. World Bank Country Manager, Siaka Bakayoko, provided
guidance to the team and facilitated interaction with the Government Authorities, and
Koffi Ekouevi kindly provided comments to the final version.
Among many others, the team would like to particularly thank the many participants who
took part in the two-day workshop convened by the Government on December 10 and 11,
2009 focusing on Mining and Infrastructure.
2
Guinea: Mining and Infrastructure
Contents
Executive Summary ............................................................................................................ 4
1.
Guinea’s Mining and Infrastructure Challenge ......................................................... 10
1.1 Country Overview ................................................................................................................ 11
1.2 Infrastructure in Guinea and the link to development ....................................................... 11
1.3 The role of the private sector .............................................................................................. 17
2.
The Mining Sector in Guinea .................................................................................... 19
2.1 Overview.............................................................................................................................. 19
2.2 Guinea’s mining potential ................................................................................................... 20
2.3 Harnessing the mining sector for infrastructure investment .............................................. 23
3.
Mining and Energy .................................................................................................... 26
3.1 The potential for hydro power ............................................................................................ 26
3.2 The importance of national and regional interconnection ................................................. 29
3.3 Recommendations............................................................................................................... 30
4.
Mining and Transport ................................................................................................ 31
4.1 The transport needs ............................................................................................................ 31
4.2 Recommendations............................................................................................................... 33
5.
Using Guinea’s mining sector as platform for infrastructure development .............. 35
5.1 De-enclaving existing infrastructure ................................................................................... 35
5.2 The mining sector as provider of financing for new infrastructure .................................... 36
5.3 Using royalties to fund public infrastructure ...................................................................... 37
5.4 Recommandations............................................................................................................... 38
6.
Using Infrastructure as a Vehicle for Sustainable Development ............................... 40
6.1 Addressing Economic Geography questions ....................................................................... 40
6.2 Addressing the role of Agriculture ...................................................................................... 40
6.3 Addressing sustainable development questions: environment and social inclusion ......... 41
6.4 Addressing Governance, Transparency, and Anti-corruption ............................................. 43
7.
Next steps .................................................................................................................. 45
Annex A1 Additional resources ........................................................................................ 47
Annex A2 World Bank Contacts ...................................................................................... 48
Annex B: Maps ................................................................................................................. 49
3
Guinea: Mining and Infrastructure
Executive Summary
Guinea has exceptional subsoil potential. The bauxite deposits of Guinea are estimated at
about one third of the world’s known reserves. Guinea has also about 3 billion tons of
high grade iron ore deposits, gold, potential of 30 million carats of jewelry-quality
diamonds, and several important deposits of silver, zinc, uranium, and platinum, as well
as a potential for oil. The mineral sector has an excellent opportunity to serve as driver
for growth in the country, and the infrastructure required for developing the mineral
sector could well serve for developing other sectors, including agriculture and forestry,
for which the country has also high potential and natural endowments.
In the past, and still today, the infrastructure supporting the mineral sector has mainly
been purpose-built by private mining companies, but is lacking the integrated vision that
would enable economic growth and social development for the broader population, such
as access to roads for agricultural and trade purposes and multi-purpose power stations.
Investment prospects in the mining industry are announced to be considerable, including
by new partners such as China. Depending on commodity prices and the investment risklevel of the country, potential investments have been estimated to be as much as US$15
to 20 billion. But, there is very little fiscal space in the Government’s own budgets to
initiate major investments. In this situation, it seems appropriate to explore options for
the government to enter into partnership with the private sector to harness the potential
for mining infrastructure to serve multiple purposes.
In order to achieve public-private partnerships, a number of issues need to be addressed
even once agreement on collaboration in principle has been achieved. The identification
of potential multi-purpose infrastructure projects requires clear articulation of a strategy
forward and the setting out of capacity needs and service specification on public and
private side. For the Government, this calls for planning and prioritization of projects and
for preparing and committing to a supporting legal and regulatory framework. For the
private companies, information sharing and willingness to start a dialogue with the
Government are the starting points. Incentives for the private sector to assume the
additional risks of constructing and (where relevant) maintain and operate multi-purpose
infrastructure assets need to be found and addressed early on.
In the particular context of Guinea, options for cross-border solutions to infrastructure
challenges need to be incorporated into all forward planning and project identification
activities. The importance of cross-border infrastructure stems from the potential for
large-scale projects, in particular hydro generation, and the location of the country which
favors transit transport, notably from land-locked neighboring countries to the sea ports
4
Guinea: Mining and Infrastructure
on the coast. In a recent Africa wide study, the benefits from regional power integration
alone were estimated at $2 billion/year for the continent.1
The way forward for infrastructure development in Guinea requires an open discussion of
governance issues, in particular given the large role played by extractive industries in the
country. The overall country risk matters, in particular after recent events, but there are a
number of initiatives Guinea benefits from regarding the governance agenda including
the Governance of the Mineral sector – Value chain approach (see separate report), and
the West Africa Mineral Sector Strategic Assessment – WAMSSA (see separate report).
More generally, supporting improved public administration and management beyond
infrastructure should be a strategic aim for the re-engagement of the international
community in Guinea.
In setting out the way forward to initiate the infrastructure debate, it is useful to
distinguish short- and longer-term activities. Table ES1 gives a summary view of the
recommended approach. Key points can be summarized as follows:
Short term activities:
1. Focus on high impact/high feasibility projects
In the short term, the Government and development partners should concentrate
public resources and donor assistance on infrastructure projects which satisfy the
twin-conditions of (i) having a high growth and/or development impact, and (ii)
display advanced preparation and reasonable ease of implementation. Among these
projects are
a)
The Western Bauxite Corridor (Boke Pole)
o Rail and port infrastructure (new rail tracks and interconnection with
Anaim rail line; new port facilities in Kamsar)
o Thermal generation plant associated with new planned aluminium plant
(Sangaredi, Kamsar, Dian-Dian)
o Hydro-generation plant Kaleta
b) The Iron Ore Eastern corridor (Nzerekore Pole), in particular discussions
surrounding the Trans-Guinean rail (very long-term), and more importantly
the recent announcement of BHP Billiton and Arelor Mittal about a possible
joint venture related to iron ore in southern Guinea and Northern Liberia,
which is expected to become effective in August 2010.
c) In addition, known bottlenecks should be added to the list of high impact
projects. Among these are, for example,
o road links connecting the country with Cote d’Ivoire, Liberia and Sierra
Leone;
World Bank (2009) Africa’s Infrastructure: A time for transformation, Overview.
http://www.infrastructureafrica.org
1
5
Guinea: Mining and Infrastructure
o power transmission lines to tap into the regional network and the West
Africa Power Pool.
2. Initiate dialogue with mining companies on sharing infrastructure
Given the limited resources available to the government from its own budget and
donors, entering into dialogue with private mining operators regarding opening and
possibly expanding purpose-built infrastructure is recommended. This requires at a
minimum i) a discussion of options for exchanging and using mining royalties to fund
infrastructure, and ii) the preparation of the legal and regulatory framework to
implement a mining-infrastructure PPP (public-private partnership).
Shared power generation plant, benefitting mining purposes and local communities,
are relatively tractable projects that can lend themselves to narrowly-defined
negotiations and contracts between the private and public sector. Nonetheless, it
should be envisaged that only the construction, and not the long-term maintenance
and operation of the infrastructure will be taken on by the private sector until the
stability of the political situation and government commitment to public-private
contracts is tested further.
3. Issue a strong policy statement showing commitment and a credible plan
forward
Finally, it is highly recommended that the government issues a strong policy
statement in the short term, setting out a credible approach to the infrastructure
challenge and showing its active engagement on the issue.
Medium to long term activities
4. Develop sector investment plans
In parallel with addressing the investment needs sketched out above, it is
recommended that the government agree on a medium to long-term national
infrastructure policy and associated investment plan in the different sectors. Spelling
out the government’s policy objectives explicitly will allow prioritizing among the
many investment needs the country faces and provide the basis for preparing the
medium to long-term infrastructure project pipeline. A national infrastructure strategy
for Guinea should also be aware of the opportunities offered by regional initiatives,
such as regional power pools harnessing the region’s potential for large scale hydro
generation, and increased road and rail connectivity with neighboring countries to
enhance trade channels.
The implementation of the medium- to long-term strategy requires securing needed
funds from internal and external public and private sources, and capacity building in
the government to ensure appropriate planning, execution and monitoring of policy
objectives and investment projects.
5. Addressing performance gaps of existing infrastructure service providers
6
Guinea: Mining and Infrastructure
Assessing the performance of existing service providers, in particular of EDG in the
power sector, and developing a program to address the most pressing shortcomings
should be an integral piece of the strategy forward. Strengthening the technical and
financial capacities of EDG will also allow the company to assist in activities of
national planning of the power grid and generation capacity and be a partner in the
negotiations with the private sector.
6. Know your terrain – Spatial analysis
A spatial analysis can assist the government with setting priorities by formulating the
trade-offs involved in policy choices such as concentrating resources in a small
number of mining areas compared to a strategy aimed at enhancing spatial equity.2
7. Institutional, legal and regulatory framework
It is necessary to review the existing legal and institutional framework to gain a clear
picture of the available options for engaging the private sector in provision of
infrastructure other than via mining companies. This could imply
o private participation in form of Independent Power Producers (IPPs), or water
and power concessions, in particular to maintain and operate infrastructure
built by mining companies whose core strength is not in operation of utility
services;
o the possibility of agribusiness engaging in a PPP arrangements for irrigation
or feeder roads
At the beginning of the engagement with the private sector, is possible to achieve a
limited number of contracts on a one-by-one basis, often with the private sector being
able to dictate the conditions under which it will engage in a joint project with the
government. It is likely that the first public-private contracts concluded in the country
will imply a significant risk premium for the private sector to compensate for political
and economic risk and the risk of an untested government represents. If the situation
improves going forward, the one-by-one approach is costly and inefficient and a
coherent legal and regulatory framework allowing the preparation of a project
pipeline should be developed.
8. Governance framework
The political situation following the December 2008 events has increased the risk profile
of the country and led to a slow-down or halt of planned infrastructure projects.
Moreover, addressing the infrastructure challenge is made more difficult by the three-fold
crisis of food, fuel and financial crisis having reached developing countries in 2008.
2
A team experienced in assisting with this kind of analysis could be mobilized within a short timeframe
from the World Bank’s Spatial Team. The GIS platform assembled for a host of African countries
(including Guinea) under the Africa Infrastructure Country Diagnostic AICD initiative could be used as
starting point for this endeavor. See http://www.infrastructureafrica.org.
7
Guinea: Mining and Infrastructure
Previous crisis have shown that infrastructure is among the expenditure categories cut
most severely by governments under financial stress.3 But such behavior comes at great
development cost as subsequent rehabilitation of facilities is exponentially more costly
than regular maintenance; in the medium and long term, inadequate infrastructure slows
economic development and hinders poverty reduction.
The discussion and recommendations provided in this note help identify priorities and
next steps as the country gets back on development track following anticipated 2010
elections.
3
World Bank and IMF Global Monitoring Report 2009; World Bank SDN INFRA note 2009.
8
Table ExSum 1: Roadmap for the Way Forward
Strategy
Overarching Objective
Next steps (short term
activities)
Medium to Long term
activities
Provide policy direction
and framework
Issue policy statement on
highest level:

Develop sector strategies
for each infrastructure
sector

Identification of high-impact
projects
Spatial analysis to identify
‘growth corridors’ and
priority investment



Planning
Identify infrastructure
needs and develop
national investment
plan





set out planned
government approach
to infrastructure
challenge;
articulate a credible
strategy going forward;
demonstrate
commitment to meeting
objectives
Identify infrastructure
bottle-necks the easing
of which would have
high impact in terms of
growth
Review existing
Advanced planning
Identify potential for
multi-purpose
infrastructure for these
Earmark scarce public
funds for

Private sector
dialogue
Achieve mutually
beneficial long-term
partnership with private
sector


Initiate dialogue
Determine mutual
standpoint
Legal and
regulatory
framework
Reduce investment
uncertainty

Engage technical
assistance for one-off
contractual

Review Doing Business
environment and develop
action plan
Governance
Enhance Transparency
and accountability in the
mining sector

Engage technical
assistance to implement
a EITI++ approach
Provide TA for
negotiation of new
mineral sector
agreements

Establish a social
accountability mechanism
Build capacity of
government agencies


1. Guinea’s Mining and Infrastructure Challenge
After a brief general overview, this note will concentrate on the mining, energy and
transport sectors. This is due to the importance of the extractive industry for economic
growth in Guinea and the energy and transport infrastructure needs associated with
mining activities. Energy and transport have broad areas of influence on growth and
social development but also carry risk in terms of environmental and social impacts.
Guinea is a country of about 10 million inhabitants that is regarded as one of the
potentially richest countries in West Africa, thanks to its abundant subsoil potential and
natural endowment for agriculture, as well as for its hydro resources. Recent civil
unrest in Guinea has interrupted the strategic approach to the country’s development
challenges. The country is now in the process of reengaging with development partners
and private investors. Presenting a challenge for any growth strategy formulated going
forward, Guinea has sparse infrastructure networks, which are currently incapable of
providing a broad platform for economic resurgence.
Figure 1: Administrative Map of the Republic of Guinea
Guinea: Mining and Infrastructure
1.1 Country Overview
The last Country Assistance Strategy the World Bank published for the Republic of
Guinea expired in FY06.4 Similar to today, the growth potential of Guinea was
identified as lying in its abundance of minerals, its excellent conditions for agriculture
and its strategic location that favors trade. Internal and external constraints were
identified as keeping Guinea from realizing its potential, including an inhospitable
investment climate due to a weak regulatory framework, institutional and regulatory
constraints on trade and regional integration, and overall weak governance. Exogenous
factors increasing the country’s vulnerability to shocks included the continued
instability in the sub-region and heavy dependence on a single commodity, bauxite, for
export revenue.
Recent political developments including the 2008 coup d’état has put the development
of the country on partial and temporary hold. Past events notwithstanding, once the
political situation has improved sufficiently to attract investors, the country could
catalyze growth in several areas, including:
Mining—Guinea has exceptional subsoil potential. The bauxite deposits of Guinea are
estimated at about one third of world’s known reserves. Guinea has also about 3 billion
tons of high grade iron ore deposits, Gold, potential of 30 million carats of jewelryquality Diamonds, and several important deposits of silver, Zinc, Uranium, and
Platinum, as well as a potential for oil.
Agriculture and water resources—Guinea has an abundant natural endowment for
agriculture, forestry and tree crops. The variety of geographic regions and climate
endows Guinea with strong agricultural potential: Guinea enjoys among other things
large areas of arable lands, heavy rain falls and immense water resources which can be
harnessed for power generation. In addition, Guinea has 300km of sea coast that offer
transportation facilities and fisheries.
1.2 Infrastructure in Guinea and the link to development
Guinea faces infrastructure challenges linked to it being a low-income, post-conflict
and resource-rich country, a situation aggravated by low population density and
disperse habitat.
Reliable and affordable infrastructure services are critical for sustainable development,
and a necessary condition for reaching economic, social and environmental goals.
Infrastructure has received considerable attention in the context of reducing poverty
and inequality – for example, Dercon et al (2007) estimate that changes in access to
quality roads increased consumption growth in rural Ethiopia by 16% and reduced
poverty by 7%.5 Indirectly, infrastructure influences the achievement of most MDGs,
be they related to outcomes in health, education, gender or income poverty, through its
4
World Bank Country Assistance Strategy for The Republic of Guinea, June 10, 2003.
Dercon, Stephan, Daniel Gilligan, John Hoddinott and Tassew Woldehanna (2007), ‘The Impact of Roads
and Agricultural Extension on Consumption Growth and Poverty in 15 Ethiopian Villages’, CSAE WPS
2007-01, University of Oxford, UK.. 5
5
11
Guinea: Mining and Infrastructure
effect on household opportunities. Each year 529,000 women die due to childbirth
complications. Most of these deaths could be prevented through timely access to
essential childbirth-related care, for which road access is crucial.6 In Guinea,
infrastructure accessible to the population at large is lagging due to years of unrest and
instability.
A recent report on the state of infrastructure in 28 African countries finds that by just
about every measure of infrastructure coverage, African countries lag behind their
peers in other parts of the developing world.7 There is however considerable diversity
within the continent and it is helpful to classify countries into types according to their
income level, their political stability and their access to natural resources which
provide foreign currency income to governments. A difference between low- and
middle-income countries can be expected in terms of the state of their infrastructure
sectors.
It is striking, however, to what extent the resource-rich countries lag behind others in
their infrastructure endowment, despite their greater wealth. Guinea finds itself in this
category of countries. In recent years, resource-rich countries have devoted their
additional wealth not to infrastructure development but to paying off their debt. The
governance challenges in a resource-rich environment may also prevent the
transformation of this wealth into infrastructure.
Table 1 below shows summary statistics illustrating the infrastructure gap 8 experienced
by low-income Sub-Saharan countries, and in particular the category of resource-rich
countries and fragile countries which have been or still are experiencing conflict, such
as has been the challenge for Guinea. It is interesting to note that oil-exporting
countries have worse infrastructure indicators, in particular in the transport sector than
their peers, suggesting that revenue from natural resources do not necessarily get
invested in these sectors. Countries in conflict fare predictably worst on most
indicators.
6
Wagstaff, A., Cleason, M. 2004, The MDGs for Health: Rising to the Challenges, World Bank,
Washington DC.
7
Africa Infrastructure Country Diagnostic (AICD) 2009, http://www.infrastructureafrica.org.
8
Africa Infrastructure Country Diagnostic (AICD) 2009, http://www.infrastructureafrica.org. Guinea
specific information on Infrastructure gap is in preparation and expected to be available in late 2010.
12
Guinea: Mining and Infrastructure
Table 1: Africa’s Infrastructure Deficit
Normalized units
Sub-Saharan
oil-exporting
countries
Sub-Saharan
countries
in
conflict status
Sub-Saharan lowincome countries
Other
income
countries
Density of paved
road network
14
12
31
134
Density of total
road network
70
135
137
211
Mainline density
16
15
10
78
Mobile density
118
44
55
76
Internet density
1.7
1
2
3
Electrical
generating
capacity
66
39
37
326
Electricity
coverage
26
10
16
41
Water
access
59
52
60
72
34
27
34
51
household
Sanitation
household access
low-
Note: Road density is in road kilometers per 1,000 kilometer squared (2001); mainline, mobile and
internet density is in subscribers per thousand population (2004); electrical generating capacity is in
megawatts per million population; electricity, water and sanitation coverage are in percentage of
households with access.
Source: Yepes, T., Pierce, J. and Foster, V. 2008. Making Sense of Sub-Saharan Africa’s Infrastructure
Endowment: A Benchmarking Approach. AICD Working Paper 1, World Bank, Washington,
D.C.
In addition to lack of availability of infrastructure in general, Guinea also suffers from
low quality of available services which in turn represent a high cost of doing business
for enterprises. Figure 2 shows the result of enterprise surveys with participating firms
reporting that there are significantly more power outages per month in Guinea than in
other comparable countries in SSA; that firms lose more sales revenue due to outages;
and that the delay in obtaining a mainline telephone connection in Guinea is longer that
the average of Sub-Saharan Africa.
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Guinea: Mining and Infrastructure
Figure 2: Quality of Infrastructure in Guinea
120
100
80
60
Number of Power Outages in a
Typical Month
Value Lost Due to Power
Outages (% of Sales)
Delay in Obtaining an Electrical
Connection (days)
40
20
0
Average number of Incidents of
Water Insufficiency in a Typical
Month*
Delay in Obtaining a Water
Connections (days)
Delay in Obtaining a Mainline
Telephone Connection (days)
Source: Enterprise Surveys, www.enterprisesurveys.org.
Lack of financial resources hampers the expansion of capital-intensive infrastructure
networks and in many low-income countries, governments already spend significant
shares of their GDP on infrastructure and their needs still outstrip existing capacity.9
Geography and population patterns play a role in the particularly challenging situation
of infrastructure in the sub-region in general, and Guinea’s low population density
makes the country more particularly representative of the challenge of geography. The
low economic density makes transport networks and power grids which exhibit
economies of scale and density more expensive to build and maintain (Figure 3).10
Eberhard et al (2008) report that 21 of 48 Sub-Saharan countries have national power
systems that fall below the minimum efficient scale of 200MW for electricity
9
Each year developing countries require between 7% and 9% of their GDP for both maintaining existing
infrastructure and augmenting it to respond to pressing development needs, yet only half of the required
amount is actually spent. See World Bank (2008) Sustainable Infrastructure Action Plan FY09-11
10
Ramachandran Vijaya, Alan Gelb, Manju Kedia Shah (2009), Africa’s Private Sector –What’s wrong
with the Business Environment and what to do about it, Center for Global Development, Washington DC.
14
Guinea: Mining and Infrastructure
generation.11 As a result, their operating costs are relatively higher (US$0.25 per
kilowatt hour compared with US$0.13 found in the continent’s larger power systems).
Figure 3: Link between economic density and infrastructure
GDP($) per 1,000 sq. km
High Income
India
China
LICs
SSA
Guinea
0
200
400
600
800
1000
1200
Source: World Development Indicators 2008 Edition.
But challenges not related to capital spending are of equal importance in addressing the
future of infrastructure: inadequate sector policies and planning capacities slow
investment programs; service providers are plagued by systematic inefficiencies and
low quality of service; below-cost tariffs make revenue streams insufficient to support
even the operation and maintenance of existing assets; weak governance and regulatory
frameworks lead to misuse of resources; subsidies supposed to address affordability
concerns are ill targeted. Box 1 summarizes the messages on funding needs and
efficiency gaps from a recent comprehensive study of Infrastructure in Africa – the
Africa Infrastructure Country Diagnostic (AICD).
11
Eberhard, A., Foster, V., Briceño-Garmendia, C., Ouedraogo, F., Camos, D. and Shkaratan, M. 2008.
Underpowered: The State of the Power Sector in Sub-Saharan Africa. AICD, Background Paper, World
Bank, Washington, D.C.
15
Guinea: Mining and Infrastructure
Box1: The Africa Infrastructure Country Diagnostic – an initiative to build the
knowledge base for effective action
http://www.infrastructureafrica.org/aicd/
“Modern infrastructure is the backbone of an economy and the lack of it inhibits economic growth. This
report shows that investing more funds without tackling inefficiencies would be like pouring water into a
leaking bucket. Africa can plug those leaks through reforms and policy improvements which will serve
as a signal to investors that Africa is ready for business.”
Obiageli Ezekwesili, World Bank Vice President for the Africa Region
The 2009 Africa Infrastructure Country Diagnostic (AICD) is a study conducted with broad multi-donor support in
24 African countries. It shows that the poor state of infrastructure in Sub-Saharan Africa - its power, water, roads,
and information and communications technology (ICT) - cuts national economic growth by 2 percentage points
every year and reduces business productivity by as much as 40 percent. Africa has the weakest infrastructure in
the world, but ironically Africans in some countries pay twice as much for basic services as people elsewhere.
The report estimates that US$93 billion are needed annually over the next decade, more than twice what was
previously thought. Almost half of this amount is needed to address the continent’s current power supply crisis
that is hindering Africa’s growth. The new estimate amounts to roughly 15 percent of the continent’s gross
domestic product (GDP), comparable to what China invested in infrastructure over the last decade.
The study found that existing spending on African infrastructure is much higher than previously known, $45
billion a year. Also surprising was the fact that most of this is domestically financed by African tax payers and
consumers. The study also found that there is also considerable wastage to address; a number of efficiency
improvements could potentially expand the available resources by a further $17 billion.
However, even if major efficiencies are gained there is still a funding gap of $31 billion every year, much of it for
power and water infrastructure in fragile states. Relative to the size of their economies, the funding gap is daunting
for the region’s low-income countries (who would need to spend an additional 9 percent of their GDP) and
particularly for the region’s fragile states (who would need to spend an additional 25 percent of their GDP).
Resource-rich countries like Nigeria and Zambia face a more manageable funding gap of 4 percent of GDP.
Particularly now with the global financial crisis, investing in African infrastructure is critical for Africa’s future.
The report recommends addressing the $17 billion annual efficiency gap and closing the remaining $31 billion
annual funding gap for African infrastructure. Closing the efficiency gap requires improving management of
utilities, ensuring adequate maintenance, promoting regional integration, recovering costs while recasting
subsidies to enable broader access, and improving allocation and spending of public resources. To close the
funding gap a wide range of sources will need, including public budgets, resource rents, local capital markets,
private sector and non-OECD finance, as well as traditional donor assistance.
Countries with the greatest infrastructure needs are often the least attractive to investors. Many of the countries in
Africa will probably take longer than a decade to catch-up on infrastructure and will probably have to use lower
cost technologies. But action is needed urgently, the report argues, and the global financial crisis is underscoring
the need for a massive effort to overhaul Africa’s infrastructure.
16
Guinea: Mining and Infrastructure
1.3 The role of the private sector
The private sector appears in two roles in the infrastructure market: as user and as
provider. Infrastructure is an important part of the investment climate enabling the
emergence and success of private entrepreneurs: readily accessible, reliable and
affordable infrastructure allows goods and services to reach markets and consumers in
less time and at lesser cost, resulting in a positive impetus on business development
through higher productivity, greater output and higher demand. Project analysis often
finds that infrastructure projects have high social rates of return. Economic Rate of
Returns of World Bank infrastructure projects have been shown to average above 20%
since the 60s and have been as high as 35% in recent years.12
However, in the context of Guinea, it is the potential of the private sector as provider of
infrastructure that stands out. Budget-conscious governments often turn to private
companies with the expectation to share the investment burden for the sector. The
involvement of the private sector in infrastructure takes a number of forms, spanning
the range from simple service contractor over concessionaire to full owner of assets.
Several general points are worth noting before discussing the particular situation of
Guinea:

Private funding of infrastructure remains limited: 70% of infrastructure investment
in the 2000-2005 period originated from governments and state-owned enterprises
(SOEs), only 22% from private sector and 8% from official development aid. In
low-income IDA countries, only 10% of infrastructure is funded from the private
sector.

The success of private sector involvement is strongly reliant on good institutional
and regulatory framework. Quality regulatory framework means not only that rules
have been legislated for, but that there is political commitment to them and that
they are enforced. Surveys of private infrastructure companies show that the
political risk is considered most important by them, outstripping market or macroeconomic risks.13

Private financing does not change the fundamentals of infrastructure provision:
customers or taxpayers (domestic or foreign) must pay for the investments, and
cost-covering tariffs with or without supplementing subsidies to address any real
affordability gap remain the center-piece of all sustainable infrastructure provision,
public or private.

Even without explicit investment role, the private sector can significantly mitigate
the efficiency gap observed in public service delivery. In a recent global study
World Bank (2006), Infrastructure at the Crossroads – Lessons from 20 Years of World Bank
Experience.
13
Von Klaudy Stephan, Apurva Sanghi, and Georgina Dellacha (2008), Emerging Market Investors and
Operators – A New Breed of Infrastructure Investors, PPIAF Working Paper No. 7.
12
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Guinea: Mining and Infrastructure
comparing public and private operators in water and electricity distribution, private
operators were shown to bring about significant efficiency gains over and above
comparable public enterprises: a 12% increase in residential connections for water
utilities, a 19% increase in residential coverage for sanitation services, a 45%
increase in electricity bill collection rates, a 11% reduction in distribution losses, as
well as significant higher labor productivity measures.14
Private investment in infrastructure has undergone two large cyclical movements in the
past couple of decades: after being hailed as the solution to the infrastructure gap in
developing countries in the 1990s and rising to a peak in 1997, it dropped dramatically
at the beginning of this decade. Only in 2004 did private investment in infrastructure
accelerate again to reach a similar volume in 2007 as a decade earlier. 15 An interesting
feature of the last recovery of private investment in infrastructure was that there were
many more South-South transactions, with private investors coming from India, Brazil,
China, Russia or the Philippines. A recent survey of Emerging Market Investors and
Operators (EMIOs), defined as companies domiciled/incorporated in low- and middleincome countries, found that for infrastructure projects reaching financial closure in
1998-2006, these investors mobilized about 44% of private funds.16
From 2008 onwards, the private infrastructure market has suffered from the global
credit crisis and its impact is likely to be felt for some time into the future. The crisis
has made it more difficult for governments across the world to access finance and what
funds are available are more expensive: emerging market spreads reached their highest
levels in six years at the end of October 2008. While private infrastructure projects in
late stages of preparation were still closing in 2008 and 2009, they did so with higher
spreads. Countries with deep local financial markets, such as India, were turning to
domestic debt. However, in most developing countries, private infrastructure projects
are already facing liquidity constraints in reaching closure and rolling over debt. The
financial crisis is expected to reduce not only private investment, but also public aid
flows from bilateral and multilateral donors and IFIs. Even if ODA flows remain
steady or even increase, competing demands have risen.
In initiating a new phase in its infrastructure development, Guinea is adopting a
strategy building on its existing strengths: its wealth in natural resources. Given the
scarcity of resources it faces at this point in time, both due to is recent emergence from
civil unrest and the global situation, the Government is exploring the options of linking
the development of its mining industry with infrastructure service provision, in
particular in the energy and transport areas.
14
Gassner Katharina, Alexander Popov, and Nataliya Pushak (2008), Does Private Sector Participation
Improve Performance in Electricity and Water Distribution?, PPIAF Trends and Policy Options No 6.
15
For detailed information on private participation in infrastructure in all developing regions and sectors,
visit the PPI database: http://ppi.worldbank.org/
16
Von Klaudy Stephan, Apurva Sanghi, and Georgina Dellacha (2008) as quoted in Footnote 12.
18
Guinea: Mining and Infrastructure
2. The Mining Sector in Guinea
2.1 Overview
Guinea has ample subsoil resources and its mining sector has long acted as main source
of revenue for the government. Figure 4 illustrates the country-wide distribution of
various minerals.
Figure 4: Mining Resources in Guinea
Source: Consultant Report E.CO.GES – Bureau d’études, de conseil et de gestion (2008), Réalités et
Perspectives du Secteur Energétique.
Private mining concessions are exploited by a series of large international firms.
Companies investing in iron include BHP Billiton, Rio Tinto, Areva and Rio Tinto.
Primary investors in bauxite and alimina include Alcan, Alcoa, Rusal and Mitsubishi,
while Anglo Gold focuses on gold and De Beers on diamonds.
19
Guinea: Mining and Infrastructure
New partners such as China are playing an increasingly important role in the mineral
sector in Africa. According to a recent World Bank Report17, China’s natural resource
imports from Sub-Saharan Africa reached US$22 billion in 2006. Petroleum alone
accounts for almost 80 percent of this trade, with the balance being timber and
minerals. As a result, China now depends on Africa for around 30 percent of its oil
imports, 80 percent of its cobalt imports and 40 percent of its manganese imports.
Overall, Angola is by far the largest trading partner, followed by Republic of Congo,
Equatorial Guinea, Sudan and South Africa.
2.2 Guinea’s mining potential
According to consultant reports, there are 12 known mega projects in the mining sector
discussed in the country, as listed in Table 2. These projects represent possible
investment of the magnitude of US$15-20 billion, subject to fluctuation of commodity
prices, cost of energy/oil prices, availability of financing, and the level of risk investors
are willing to take in Guinea (in the recent past, the political risk has outweighed the
appetite of investors).
Figure 5 presents a map of the location of the projected investments.
Building Bridges: China’s Growing role as Infrastructure Financier for Sub-Saharan Africa, World Bank
2008
17
20
Guinea: Mining and Infrastructure
Table 2: Prospected mining investment in Guinea (mega- projects only)
Project
Resource
Strategic
Partner
Aluminum plant Sangarédi
Aluminum
Aluminum plant Kamsar
Aluminum
Global
Alumina/Bhp
Billiton
Alcan/Alcoa
Aluminum plant Dian Dian
Aluminum
Extension of aluminum
plant ACG Frigula
Aluminum
Integrated hydro dam and
aluminum smelter project
Konkouré
Hydro dam Souapiti
Kaléta and
aluminum smelter
Project Simandou
Iron ore
Rio Tinto
40
1.5
Project Nimba
Iron ore
Bhp Billiton
25
1
Transguinean rail and deep
sea port
Iron ore transport
Rio Tinto and
Bhp Billiton
70
5
Project bauxite alumina
SBDT
Project bauxite
gaoual/Koumbia
Cement factory Souguéta
Bauxite
Government of
Iran
AMC
4
German and
Danish
1
Bauxite
Limestone
Capacity
(million tons
per year)
3
Possible
investment
($billion)
3
1.5
1
Rusal
2.8
2.5
Rusal
1.2
0.4
700 MW
3
0.24
3
Project BOT Cogon
TOTAL
17.4
Source: adapted and translated from Consultant Report E.CO.GES – Bureau d’études, de conseil et de
gestion (2008), Réalités et Perspectives du Secteur Energétique, Annex A.
21
Guinea: Mining and Infrastructure
Figure 5: Guinea’s mining poles and projected mega projects
Carte d’Implantation
des
Boke Pole
Sociétés Minières
Alcoa/Alcan
BHP-Billiton
Gold
Diamant
Carte d'implantation
des sociétés
minières
Nzerekore
Pole
Source: Consultant Report E.CO.GES – Bureau d’études, de conseil et de gestion (2008), Réalités et
Perspectives du Secteur Energétique, Annex A.
The potential socio-economic benefits from well-governed mining projects are large.
The various projects identified in Table 2 would certainly need to undergo further
feasibility studies and vetting procedures, but a well managed and governed mineral
sector can represent a catalyst for the future development of the country. According to
the available estimates reproduced in Table 3, over 50,000 jobs could be created in the
construction phase, and about 18,000 permanent jobs result from full operations.
Alongside with a unique opportunity, such development prospects pose evidently a
challenge of building and maintaining a skilled work force in the mining sector.
In terms of revenue generated from the prospective projects, the Government could
receive monies to the order of magnitude of US$ 1.5 billion annually. With such
22
Guinea: Mining and Infrastructure
potential revenue generation, the country would need to set up appropriate programs
for investing and stabilizing the income generated so as to establish a consistent annual
revenue stream which could be invested to benefit sustainable development projects,
including further investments in to the mineral sector.
Table 3: Job creation and revenue potential of prospective mining
projects
Project
Estimated # of
permanent jobs
during operation
Estimated
turnover ($
billion)
Estimated
revenue for
Guinea
($billion)
Aluminum plant Sangarédi
Estimated #
of jobs
created in
construction
phase
10,000
3,000
1.2
0.2
Aluminum plant Kamsar
5,000
2,000
0.6
0.1
Aluminum plant Dian Dian
5,000
2,000
1.12
0.2
Extension of aluminum plant
ACG Frigula
2,000
1,000
0.24
0.03
Integrated hydro dam and
aluminum smelter project
Konkouré
10,000
3,000
0.8
0.2
Project Simandou
5,000
2,000
3.5
0.3
Project Nimba
3,000
1,000
2.0
0.2
Transguinean rail and deep
sea port
15,000
3,000
0.2
TOTAL
55,000
18,000
1.43
Source: adapted and translated from Consultant Report E.CO.GES – Bureau d’études, de conseil et de
gestion (2008), Réalités et Perspectives du Secteur Energétique, Annex A.
2.3 Harnessing the mining sector for infrastructure investment
So far, private mining companies have acted as engine of growth in the infrastructure
sector and have successfully self-provided infrastructure facilities necessary for the
profitable exploitation of mining licenses. The government has in the past explored
options for harnessing the presence of the private sector further and possibilities exist
for linking mining and infrastructure services for greater use of the public. Exploiting
the mining industry in Guinea with mega-projects as sketched out in Table 2, will
require the construction of several new rail lines and several thermal power plants, as
well as the upgrade and expansion of the road network, including a significant number
of bridges over rivers draining the rainfall in excess of 1800 mm/year over the country.
23
Guinea: Mining and Infrastructure
Table 4 illustrates the projected energy and transport infrastructure needs for the
projects in Table 2. While the projections date from 2008 and information needs to be
updated to reflect current thinking, the table showcases the additional infrastructure
needed to fully realize the mining potential of the country.
In the event, the global mining sector has been significantly impacted by the
international financial turmoil and the related global economic downturn. Mineral
commodity prices (copper, iron ore, zinc, etc) have fallen significantly in 2008, and the
combination of lower demand for commodities, lower prices, and higher costs is
resulting in production downsizing from existing operations all over the world.
For Guinea specifically, the cancellation of the takeover bid of Rio Tinto by BHPBilliton, and the ensuing negative impact on Rio Tinto stocks (minus over 35%)
combined with the high country risk might put at risk plans for linking mining and
infrastructure plans such as the plans for the Trans-Guinean rail.
This global situation means specifically for Guinea that the large projects are likely to
be delayed until the global economic outlook is improved. Project sponsors are
currently reviewing their plans and budget to adapt to the evolving situation. This, in
turn, might provide a window of opportunity to address some of the current systemic
constraints in the mining sector in Guinea if donors are practical and rapid in their
support/facilitation.
24
Guinea: Mining and Infrastructure
Table 4: Energy and Transport Needs of Planned Mining Projects
Project
Energy needs
Transport needs
Aluminum plant Sangarédi
Development stage of
projects*
Start of construction
Thermal generation
plant 330MW
Aluminum plant Kamsar
Feasibility study ongoing
Aluminum plant Dian Dian
Feasibility study
completed
Thermal generation
plant 165MW
Thermal generation
plant 200MW
20km of new rail line;
new jetty at Kamsar
port
Interconnection with
Anaim rail line
112km of new rail
line;
new port facility
40km north of
Kamsar
Extension of aluminum
plant ACG Frigula
Feasibility study ongoing
33MW
Integrated hydro dam and
aluminum smelter project
Konkouré
Concept study ongoing
700MW
Existing rail link
Iron Ore Project Simandou
Feasibility study ongoing
NA
Trans-Guinean
Iron Ore Project Nimba
Feasibility study ongoing
NA
Transguinean rail and deep
sea port (Iron Ore)
Feasibility of variants
ongoing
NA
100km of new rail to
interconnect with
Trans-Guinean
NA
Project bauxite alumina
SBDT
Feasibility study
completed
NA
Project bauxite
gaoual/Koumbia
Cement factory Souguéta
Feasibility study ongoing
NA
NA
Project BOT Cogon
NA
200 000 ton of coal
for calcinations
6MW sourced from
EDG
NA
325km of pipeline
Refitting of 20ha of
Port Autonome de
Conakry
NA
Road link to CBK rail
NA
Notes to table: * 2008, NA = information not available.
Source: adapted and translated from Consultant Report E.CO.GES – Bureau d’études, de conseil et de
gestion (2008), Réalités et Perspectives du Secteur Energétique, Annex A.
25
Guinea: Mining and Infrastructure
3. Mining and Energy
3.1 The potential for hydro power
The mining sector potential represents both opportunities and challenges for the
electricity supply system in Guinea, both on the national and local level. At national
level, the share of electricity demand from mining companies is growing rapidly.
Current installed capacity, including mining companies, is about 250MW. According
to estimates, the mining sector electricity demand could increase over 10-fold over the
next 10 years, driving the overall electricity demand well over 1,000MW (see Table 4
for projections of energy needs from planned mega projects).
The mining companies currently auto-generate but could be potential buyers of
electricity if it could be produced and delivered at competitive prices and on reliable
terms. Such existing demand could facilitate development of vast hydro-electric
resources in Guinea, with generation potential estimated to be as high as 6,000MW.
At present, most mining projects utilize thermal energy sources of which the total
capacity is around 139 MW. Repartition on the various existing projects is as follows:
- ACG-l Friguia generates it own energy with 50MW and 17MW thermal diesel
- CBC has 50 MW installed capacity
- SBK is connected to the public network and has also a 5MW thermal plant
- Aurifère in Siguiri has 30 MW installed capacity
- Société minière de Dinguiraye has 30 MW installed capacity
Given the location of the mining sites across the country, and the abundance of water
resources in the country, hydropower is a possible important addition to the pool of
power sources in the country, even while considering that this potential for hydro
would be constituted of relative smaller hydro plants.
The key watersheds zones with their existing and numerous potential sites for hydro
generation are:
The North-West Basin (Boffa, Boké, Fria, Telimele, Gaoual), which is the principle
bauxite zone and also includes the existing rail, has the highest potential for hydro
energy due to the Konkouré river which has the following hydro-energy potential:
- Garafiri (75MW),
- Kaleta (228MW),
- Souapiti (515MW), and
- Amaria (capacity to be determined).
The following mining companies could potentially benefit from the development of
these resources: Compagnie des bauxites de Guinée (CBG), ACG in Fria, CBK in
Kindia, and new projects including sponsored by BHP-Billiton, Alcoa, Rusal, and
Mitsubishi.
26
Guinea: Mining and Infrastructure
The Central Region includes part of the bauxite and iron mining zone (Dabola,
Tougué,
Mamou, Faranah, Pita). It is close to the existing hydro plants of
- Tinkisso (1.5MW),
- Boureya (161MW), and
- Koukoutamba (281MW).
This area includes the following mining companies: CVRD (Brazil), Dabola Bauxite
Company (Iran), and CHALCO (China).
The Nort-East Region (Kouroussa, Kankan, Siguiri) has an equally good potential
with possible dams at
- Fomi (90MW) and
- Diaoya (148MW).
In this area, companies include Ashanti Goldfield, Dinguiraye (Guinea), and Semafo
(Morocco and Canada).
The Southern Zone (Kérouané, Beyla, Macenta, and even N’Nzérékoré) has several
good potential sites including
- Morissanako (100MW, currently planned for 2016),
- Gozoguézia (48MW), and
- Zébéla (48MW).
This region has diamonds, but is better known for its high grade iron ore. Aredor is
present in Kérouané for diamonds, Simfer-Rio Tinto in Simandou and Euro Nimba in
Lola for mega iron projects.
In summary, Guinea has vast potential for hydro generation but has so far lacked the
strategy and resources to unlock this potential. Figure 6 highlights the wealth of the
country in this area by setting out all potential hydro generation sites which have been
identified and were at some point examined for their feasibility; in a number of cases,
advanced project plans have already been elaborated.
27
Guinea: Mining and Infrastructure
Figure 6: Guinea’s potential in hydro power
Applying selection criteria including (i) demand from mining companies, (ii) demand
for other commercial interests, industrial and non-mining sectors, and taking into
account domestic priorities of reducing imports of oil, and utilizing the regional
potential in energy trade, the most important sites for hydro development emerge as
summarized in Table 5. Indicative construction dates pre-date the recent period of
political turmoil.
Table 5: Priority hydro power development sites
Site
Capacity (MW)
Kaleta
Souapiti
Morissanannko
Kassa
Amaria
Gozoguezia
Total
228
515
100
135
665
48
1,691
Estimated construction
date (pre-dating 2008)
2012
2014
2016
2016
2019
2024
28
Guinea: Mining and Infrastructure
3.2 The importance of national and regional interconnection
Any construction of new generation plant needs to be accompanied by development of
the transmission and distribution network in order to counteract the current tendency of
‘economic islands’ developing in proximity to mining activity. Mining companies are
often involved in service provision for surrounding communities, but the fragmented
structure increases costs at a national level and creates disparities between regions and
communities. The partnership with private mining companies in the provision of
essential services such as water and electricity should be embraced; nonetheless,
significant benefits are likely to come from the integration of private initiatives into a
national long-term investment plan. In terms of transmission backbone, the map below
represents a schematic view of the network that would cover the country and provide
interconnection with the neighboring states.
Figure 7: Existing and planned transmission lines
29
Guinea: Mining and Infrastructure
3.3 Recommendations
Comparatively low cost hydro electricity, if developed, could serve both mining
companies and domestic and sub-regional consumption. To benefit from these
opportunities, Guinea needs to
 develop its transmission backbone, particularly through the interconnection
with the neighboring countries in the framework of WAPP;
 develop a limited number of large-scale hydro-electric projects, demonstrating
the potential for private sector involvement and PPPs. The preparation of the
following projects is currently being actively pursued under the WAPP
umbrella: (i) OMVG energy project including Guinea’s interconnection with
Senegal and Guinea Bissau, and Kaleta hydro plant (240MW) on the Konkuré
river, (ii) Souapiti hydroelectric plant (500 MW) on the same river, (iii) Fomi
(90MW) developed in the framework of the Niger basin, and (iv) CLSG
project, including Guinea’s interconnection with Liberia, Sierra Leone and Cote
d’Ivoire. The OMVG and CLSG transmission lines would intersect mining
areas in Guinea’s north-west and south-east.
 develop an enabling framework for the private sector investment in new hydro
generation, including (i) a clear and stable policy, legal and regulatory
framework (PPAs for sales to the regional and national grids, rights to sell
energy to third parties and/or retail sales through a mini-grid etc.). The
framework should also target medium, small and mini-hydro projects which
could be also harnessed for electricity access expansion (see below); and (ii)
active promotion and development support (e.g. matching grants supporting
feasibility studies).
 continue institutional, financial and technical strengthening of EDG, so that
EDG converts itself into a viable buyer, able to deliver the new power supply to
the final users.
At the local level there are two scales of issues and recommendations, for mining
companies and village level electrification.
Mining companies are currently auto-producing energy and in many cases are
supplying power to their workers and their communities, in some cases for free. Given
EDG’s lack of capacity to expand the network, the pressures are increasing on the
mining areas to provide electricity supply to rapidly growing mining towns and
communities. The mining sector is in general interested in contributing to the
electrification of the areas of their intervention, but they are not well suited to provide
retail service. There is, however, a good potential to develop partnerships among the
mining companies and private operators to co-finance electrification projects, with the
mining companies playing a facilitator role, while distancing themselves from the
system operation. Government/donors could support further expansion of such
systems to the surrounding communities. First experiences are already emerging
(Siguiri, Kamsa) and should be followed closely for lessons learnt.
30
Guinea: Mining and Infrastructure
For the village-level electrification, an innovative model, employing local SMEs, has
already been developed by BERD (Bureau d’Electrification Rural Decentralisée) and
could be directly applied to the mining communities. The electrification projects are
financed through a mix of grants, loans and equity contributions, balancing carefully
the rural users’ capacity to pay, subsidy minimization and the provision of incentives to
the developers for efficient operation. New pilots are currently being developed for
renewable energy, including micro-hydro and solar PV. This model, however, suited
only for villages and smaller towns, and is not suited for larger mining towns.
In order to benefit from these opportunities, Guinea should
 develop an enabling framework for the private sector investment in independent
mini-grids beyond the BERD level. This, in particular, includes opening up the areas
where EDG has a concession and is not providing the service to new entrants, clarify
regulatory oversight, including tariff setting, provision and/or facilitation of
financing for the access expansion (in some countries, for example, output-based
subsidies are used to provide incentives to the private sector operators to further
expand access), support to renewable energy generation etc.
 institutionalize BERD - BERD is currently a project implementation entity of a
World Bank program, and unless the agency (BERD) and the fund (FERD) are
institutionalized and replenished, they will not be able to finance projects beyond
2009.
 community outreach – a very good communication and community outreach strategy
needs to be developed for the mining communities targeted by the new PPP model,
through which capacity and willingness to pay needs to be carefully assessed and the
necessity to pay for electricity carefully explained, so that sustainable service can be
provided which can benefit a larger share of population in the mining influence
areas. Building alliances with CRDs is of outmost importance.
4. Mining and Transport
4.1 The transport needs
Similar to other African countries, Guinea is facing a deficit in all modes of transport
infrastructure (road, rail, port- and air-traffic), mainly due to a lack of funding. The road
network has progressively deteriorated, traffic is often interrupted and roads impassable
during the rainy season. The maritime port sector suffers from insufficient allocation of
land and other resources, and lacks adequate equipment and stevedoring services.
Because of these shortages, the port of Conakry is not taking advantage of its strategic
location on Africa’s West coast and the opportunity to serve as hub for landlocked
regions and other countries is not exploited. Finally, rail services are functioning at
adequate levels only in the mining areas. The rail link Conakry-Kankan has deteriorated
over the years and can only support services on a stretch of approximately 40km at
present. The failure of transport services across all sub-sectors has clear negative impact
on Guinea’s economy. Without functioning transport network, the potential offered by
31
Guinea: Mining and Infrastructure
the rich mineral and agricultural resources of the country cannot be exploited in any
meaningful and effective manner.
In order to circumvent the lack of public infrastructure in a sector which suffers in
addition from planning and coordination failure between a number of public agencies, the
mining companies active in the country are building their own rail and road links and are
putting in place purpose-built port infrastructure. Similar to what is happening in the
power sector, these privately motivated initiatives are taking place outside any national
development policy or long-term infrastructure investment plan. There is thus a lack of
coordination and failure to capture any economies of scale or scope which might exist. In
addition, the needs of the population at large remain unanswered, and economic activity
other than mining remains excluded from the benefits of access to transport services and
therefore trade.
Regarding transport services in the North East and Center regions of the country via the
Trans-Guinean rail link, the government of Guinea has expressed its wish to undertake
construction with help of the international community, including the World Bank, and
with participation of the mining companies active in these regions. The Government’s
support of this project is driven by concerns that the political situation makes the use of
Sierra Leone’s port facilities undesirable, as well as the discovery of iron deposits
expected to yield up to 10 billion tons of ore in the center of the country. Given the size
of the rail investment foreseen and the additional need for associated new port
investments to fully operationalize the Trans-Guinean rail link, a full feasibility study to
gain a clear picture of all technical and financial requirements necessitated by the project
are the necessary next step. All available options to satisfy the transport needs of the
country should remain open before taking final decisions.
32
Guinea: Mining and Infrastructure
Figure 8: Medium-term National Road Plan
4.2 Recommendations
More generally, the following points are put forward for the way forward for Guinea’s
transport sector:
 In order to avoid a multiplication of privately owned and operated rail and road
services, which does not allow to capture economies of scale and scope inherent in
transport services, the government is urged to develop a national transport policy.
This would integrate purpose-built mining infrastructure in a regional and national
system which can make facilities available to the population at large given proper
consideration the needs of and compensation for the private sector.
 The possibility of establishing a rail fund (similar to a road fund) is put forward for
further consideration. Such a fund would receive contributions from all users of rail
services, including mining companies. A commission representing all stakeholders –
private companies, national and regional government, and users from the general
public - could be put in charge of supervising the fund. The recruitment of a
33
Guinea: Mining and Infrastructure


management team receiving the vote of confidence from all groups is an option to be
considered.
Based on the example of collaboration that occurred between CBG, GAC and Rio
Tinto in the Kamsar region, the Government should encourage the sharing of
transport infrastructure between mining companies. Regarding the existing Kamsar
collaboration, a formalization of the arrangement with an integration of the port of
Kamsar under a PPP contract is submitted for consideration.
The government is encouraged to undertake social and environmental impact studies
for infrastructure projects going forward in order to ensure that future investment
leads to long-term sustainable development of the country in the future.
34
Guinea: Mining and Infrastructure
5. Using Guinea’s mining sector as platform for
infrastructure development
Infrastructure brought about by mining projects can facilitate the provision of essential
services such as electricity or all-weather roads to communities around the mining sites.
Public-private service provision schemes should be explored by the Government in this
context.
There are essentially three different channels through which mining development and
infrastructure development can be linked:
 De-enclaving existing mining infrastructure and making it accessible to other
users;
 Upgrading/expanding infrastructure with the help of mining companies under a
PPP model; and
 Using mining royalties to fund publicly provided infrastructure at national level
5.1 De-enclaving existing infrastructure
The idea behind de-enclaving is to use existing infrastructure built and operated by the
mining industry for mining purposes for a wider use. This involves offering the surplus
output of mining power plants to commercial and household users, making private roads
accessible to broader traffic, and opening dedicated mine railways and ports to third-party
traffic.
The attraction of de-enclaving is that it makes use of existing infrastructure and avoids
long planning and construction delays. Moreover, it takes advantage of the presence of a
private party that has a proven track record in the reliable provision of electricity or
transport services. De-enclaving therefore has the potential to make services essential for
development available within a short time frame. When considering implementing deenclaving several questions need however be carefully considered:





Is there excess capacity in the existing infrastructure so that a broader demand can be
satisfied? Are existing facilities technically compatible with other traffic?
What is the basis of negotiation with the current provider? In other terms, what are
the incentives that would make the private sector open its infrastructure?
Will additional infrastructure need to be provided (e.g. feeder roads, port storage and
stevedoring services, power transformer stations, etc) in order to make the existing
infrastructure accessible? The provision and operation of additional infrastructure,
and the adapting and upgrading of existing facilities leads to considering the different
roles of the private and public sector in infrastructure. The next subsection discusses
this in greater detail.
How is necessary adaptation and additional infrastructure going to be provided and
construction paid for? How will maintenance be provided and paid for? (again, this is
a PPP question - see next sub-section)
How will the services provided to the broader public be costed, priced and user
revenues collected (where appropriate)?
35
Guinea: Mining and Infrastructure

If there is insufficient or unsuitable existing capacity to satisfy additional demand to
the desirable degree, is the expansion, adaption or upgrade of existing capacity at the
same location preferable to considering the construction of new capacity at a different
location? For example, the existing mining plant might not be anywhere near the
utility’s transmission network. Or the mining railway bypasses densely populated
areas. Addressing these issues leads to questions of spatial efficiency and national
planning of investments.
5.2 The mining sector as provider of financing for new infrastructure
If the mining companies accept to take responsibility for the expansion of their existing
infrastructure platform and the provision of additional capacity of the country, a series of
policy questions needs to be addressed regarding the responsibilities of the private and
the public sector for the construction, maintenance and operation of the facilities. A range
of options is open, from pure private provision, to public-private partnerships (PPPs), to
the private sector only acting as construction overseer (for upgrading of rural roads, for
example).
PPP options vary in the demand they impose on the government in terms of planning,
negotiation, implementation and supervision. Skills and expertise develop slowly over
time and a gradual approach to complex schemes is recommended. In order for the
Government to come to a mutually beneficially agreement linking private mining
interests with public infrastructure objectives it is necessary that the provisions for such a
PPP arrangement exist. Despite of a tradition of private involvement in the mining sector,
private participation in Guinea has so far lacked a transparent framework and common
legal approach. Successful private participation is occurring, such as in the recent
negotiations involving the Conakry-Kankan rail link. But as a general rule, negotiations
with the government have mostly occurred on a bilateral basis and have used opaque
evaluation and selection criteria for the issuance of licences and contracts. Instances of
reneging on contracts from the part of the Government are known. Such an environment
raises the country risk perceived by potential entrants. Several institutional layers dilute
accountability mechanisms and hinder coordination between agencies. A national
strategy for the infrastructure sectors is lacking. Finally, skilled and experienced staff is
scarce on the government side.
One way in which the mining companies could be incentivized to take on infrastructure
responsibilities is by offering a ‘royalities versus infrastructure’ swap. This can be an
attractive proposal for the mining companies as they will essentially be paid to provide
additional commercial activity – the construction and maintenance of a road might not be
their main business but it can be an additional lucrative activity in which the inputs in
terms of skills, labor and capital are compensated at a reasonable rate.
On the government side, drawing on the expertise of the private sector allows to mitigate
capacity shortages in the public sector in terms of skill and human resources. It also
represents a solution to annual budget constraints, although in the event of an exchange
of infrastructure against (a share of) mining royalties what is occurring is not a budget
expansion, but rather a deliberate allocation of state resources to a given sector.
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Guinea: Mining and Infrastructure
Finally, governance issues associated with the public management of revenues earned on
natural resources are avoided by engaging in a swap (see also discussion of governance
issues further in the note).
Key issues to consider in negotiations of a partnership between the government and the
private sector are:
 the costing of the services to be provided –a balance needs to be struck between the
government receiving an appropriate quantity and quality of infrastructure services
and the mining company having a incentive of entering into the swap with the
government. Too much money paid (or retained) by the private company means the
government has less money to spend on other causes; too little return offered on the
risk taken, and the private sector will not enter into the partnership. External controls
and audits of the investment and construction plans submitted by the private company
are necessary. Worth considering is also the delivery principle underlying Outputbased Aid (OBA). OBA is based on the principle of payment for delivery of a verified
functioning service output (i.e. a certain number of commercial or household power
connections, or a fixed number of well-maintained road or rail kilometers), rather
than input payments (eg, $$$ investment in a transmission line).

long-term optimal planning- as mentioned earlier in this note, existing infrastructure
might only have a limited potential to respond to the national need for essential
transport and energy services. Moreover, once the demand considered is of regional
or national scale rather than for a mining operation only, other technologies might
become attractive (economies of scale will make high initial capital cost options
competitive). Thermal plants developed by the mining industry might be more costly
than large-scale hydro plant which serve a larger population and a mix of industrial,
commercial and residential users. If larger scale projects for mixed purpose are being
considered, mining companies might co-finance hydropower development with the
government as they have an interest in getting future access to lower cost power.
That said, given the recent tumultuous period, it is prudent to start any public-private
partnership effort with a small number of tractable projects rather than complex mega
projects with require great expertise and extensive preparation.
5.3 Using royalties to fund public infrastructure
Under regular circumstances, governments receive the revenue from the exploitation of
their natural resources alongside other tax revenues. These public funds are then reallocated in the budget across all services a government provides for its citizens,
including hospitals, schools, water treatment plant and other infrastructure. Even if the
policy decision is taken that a significant share of mining royalties will be re-invested by
the government in physical infrastructure such as roads, power plants and, this is a way to
distribute the revenues earned from the exploitation of natural resources to areas outside
of the mining areas. In this manner, disparities between communities and regions can be
attenuated and different growth areas and sectors supported (eg, Guinea can also build up
its agribusiness). Infrastructure services in which it seems unlikely mining companies
will be interested (nor have the same competitive advantage), such as irrigation and roads
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Guinea: Mining and Infrastructure
construction outside the mining corridors, could be funded from a national ‘Infrastructure
Fund’. While such a fund would be alimented by mining royalties, the government is not
bound to consider mining interests as main focus of where investments funded from the
fund would be located, or which services they concern.
Among the chief challenges to consider in the case of setting up purpose-specific funds,
such as an infrastructure fund, are the following:
 governance and anti-corruption issues – any fund set up with dedicated revenues
(eg, royalties from mining operations) and set apart from the regular budgeting
process requires stringent governance, control and audit mechanisms in order to
avoid misuse of funds;
 reduction of government room for maneuver - ring-fencing a share of
government revenues from the annual budget cycle safeguards long-term
investment projects and avoids costly rescheduling and delays caused by the
overall workings of government. Security of multi-year funding is very important
for long-term infrastructure investment projects but it also means that the
government has less head room in the budget to make discretionary decisions
from year to year. If all public funds are tied up from the start, then budgeting for
new items is not possible and reallocations which are a necessary feature of
planning are complicated.
 capacity for medium-and long-term planning and budgeting – in order to
effectively utilize the fund, medium and long-term budget and project planning is
required. In countries where there are limited capacities, the creation of additional
centers for rare skilled personnel alongside existing ministerial planning
departments might aggravate shortages in all cases.
On a smaller, one-project scale, a model that might be emulated and in which donors
have a role to play is “enclave” infrastructure project financing in which the
infrastructure is build using non sovereign funding guaranteed through a dedicated
account in which mining companies pay lease/usage fees along the model of ANAIM in
which the WB was the financier, or the current discussions between GAC and the African
Development Bank on transport infrastructure in Kamsar.
5.4 Recommandations



Review of the legal framework and the options it allows for participation of the
private sector in infrastructure provision. Such an assessment of the existing legal
structures needs to take central and decentralized functions into account.
Establishment of a legal framework for public private partnership in infrastructure
following best practice. This would involve where possible the adaptation of existing
laws and institutions rather than the creation of new legal structures.
Implementation of the PPP framework with the possible establishment of a PPP Unit
in the government (with the Ministry of Finance as most likely line ministry)
A reference document recommended for its pragmatic way of summarising the approach
to PPP specifically for Africa is contained in the «Attracting investors to African public
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Guinea: Mining and Infrastructure
private partnerships: a project preparation guide», World Bank ICA PPIAF 2009. It
provides helpful advice to governments engaged in PPPI, while being clear on the
challenges involved in the process of negotiating a contract that satisfies all parties needs
and withstands the challenge of time. Figure 9 provides a schematic view of the roadmap
governments face.18
Figure 9: Practical implementation of Infrastructure PPPs
18
Another reference document more specifically for the rail sector: Review of selected railway
concessions in Sub-Sahara Africa: World Bank 2006
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Guinea: Mining and Infrastructure
6. Using Infrastructure as a Vehicle for Sustainable
Development
6.1 Addressing Economic Geography questions
The notion of growth poles emerges as relevant topic in the case of Guinea given the
geographically concentrated location of mining activities. The policy question at the core
of economic geography is the following: given the availability of $1 of infrastructure
investment, where will the highest return be from that $1? Will it be if the $ is invested in
the areas where there is already active mining activity (to enhance existing production),
or will it be if the $ is invested in areas so far neglected (to foster the emergence of
diverse economic activity)? Will the answer differ if the government pursues a strategy
of highest growth versus a strategy of poverty reduction and balanced development?
Development in the country has so far largely followed a corridor approach, with mining
activities being the driving force. While this can make sense in terms of favoring the
growth areas, it also leaves the country more vulnerable to shocks such as the drop in
commodity prices experienced in 2008. A more diversified investment strategy in terms
of growth poles and spatial equity, for example through new emphasis on providing good
infrastructure services for agricultural areas, might be considered medium- to long-term.
The Ministry of Mines and Geology has initialized in 2008 a series of infrastructure
planning seminars starting with the Kamsar-Boke-Sangeredi corridor. Seminars for
corridor or growth pole regions will follow. The World Bank has established a Spatial
Team for the purpose of analyzing the linkages between spatial allocation of resources
and growth and development. It is recommended that the government undertake a spatial
analysis which will help formulating the trade-offs involved in policy choices such as
concentrating resources in a small number of mining areas compared to a strategy aimed
at enhancing spatial equity.19
6.2 Addressing the role of Agriculture
The National Policy for Agricultural Development - Vision 2015 (Politique Nationale de
Developpement Agricole (PNDA) – Vision 2015) was adopted in July 2007. The strategy
has three pillars: (i) reinforce food security through increased productivity and
diversification of food staples; (ii) increase agricultural revenue through the development
of economic opportunities and improved market access; (iii) improve the enabling
environment.
To implement this strategy, the government identified the following programs: (i)
enhancing food crop production/productivity including through water management
infrastructure; (ii) agricultural export promotion of industrial crops (coffee, cashew, oil
palm, rubber, cotton and cola nut) and horticultural crops (mangoes, pineapples, bananas,
19
See the World Developing Report 2009: Reshaping Economic Geography for a general discussion of the
topic. For an example of how spatial analysis is being used to aid the government policy making and
investment prioritization process, see also Lall, Schroeder and Schmidt (2009), Identifying spatial
efficiency – equity trade-offs in territorial development policies. Evidence from Uganda, World Bank
Policy Research Working Paper, No WPS 4966.
40
Guinea: Mining and Infrastructure
vegetables); (iii) development of market access infrastructure (rural roads, warehouses,
cold storage facilities, markets, transformation facilities,…); (iv) input market
development; (v) support for advisory services and capacity building of producer
organizations; and (vi) agricultural finance.
The main issue is that large scale infrastructure (roads, rails, dams, energy) planning in
Guinea is primarily considered for the mining sector and less to other development
objectives, including the potential for agriculture, food security, and economic growth
from other sectors. If a national transport and energy plan is developed as discussed
earlier in this note, the main arteries for the agriculture sector should be included in the
mapping of infrastructure and projects with converging interests be prioritized. In any
event, assistance is needed with strategic planning and prioritization of objectives within
the agriculture sector, including phasing/sequencing of specific interventions.
The possibility of PPP in infrastructure has been discussed earlier in this note. If the legal
and institutional framework for such partnerships can be established in the country,
agriculture projects present a further opportunity for the public and private sector to
collaborate on service delivery. Among the priority projects related to agriculture, water
management (irrigation) and market access infrastructure in the lower part of the KamsarBoke-Sangaredi corridor stand out. To have the intended impact on agricultural
productivity and economic growth, this infrastructure needs to be accompanied by
appropriate technological packages, quality advisory services and market information,
functioning input market/distribution systems, agricultural financial services, and actors
capable of responding.
6.3 Addressing sustainable development questions: environment and
social inclusion
The mining, energy and transport sectors have broad areas of influence, including in
terms of environmental and social impacts; however, the latter should be treated in their
own right in separate documents.
The West Africa Minerals Sector Strategic Assessment (WAMSSA) has identified
policy, institutional and regulatory adjustments required for integrating environmental
and social considerations into mining sector development in West Africa. Priority issues
to be dealt with are listed in the graphic below:
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Guinea: Mining and Infrastructure
West Africa Mineral Sector Strategic Assessment
Regional Validation Workshop
WAMSSA Recommendations
1. Adopt strategic, cluster focused, permanent multi-stakeholder framework for
addressing mineral sector policy and development decisions

Assess priority regional and national mineral clusters to become the primary
focus of mineral sector infrastructure and governance improvements

Create permanent regional, national and local multi-stakeholder bodies to help
develop appropriate policy frameworks
2. Strengthen environmental governance

Address mining-induced deforestation, loss of biodiversity, and pollution of water

Reduce mining-induced land degradation and increase reclamation of mining
lands
3. Increase local-level benefits in mining areas

Integrated mineral sector projects into local development plans in order to
address poverty

Create training, employment, local supplier and sustainable alternative livelihood
opportunities
4. Improving social accountability and mineral sector governance

Eliminate lack of transparency and consistency in policy formulation and
decision-making

Provide capacity building and institutional strengthening to all stakeholder groups
(government, civil society, industry, etc.)

Minimize disenfranchisement of community from development decision-making
processes

Reduce rent-seeking behavior and conditions that lead to distorted benefitsharing
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Guinea: Mining and Infrastructure
6.4 Addressing Governance, Transparency, and Anti-corruption
The main initiative to improve the governance dimension related to extractive industries
such as mining at the global level is the Extractive Industries Transparency Initiative
(EITI) which the World Bank has supported since its launch in 2002. It seeks to help
resource-rich countries maximize the development gains from the exploitation of their
oil, gas, and mineral resources by encouraging greater EI revenue transparency. Through
the verification and full publication of company payments and government revenue from
oil, gas, and mining, EITI helps to safeguard against corruption and provides a powerful
illustration of voluntary engagement of governments, industry, civil society and other
stakeholders to establish a locally implemented global standard.
However, the EITI does not cover all the challenges that the EI bring to developing
countries. Public reporting of EI revenue, though extremely valuable, represents only one
step in improving sector governance and maximizing development outcomes throughout
the EI value chain. How these resources are actually developed and how the revenue
generated ultimately is spent will determine a country’s success in achieving long-term
growth and sustainable development.
The World Bank, with other development partners, is stepping up its efforts to provide a
more integrated and comprehensive approach to natural resource management along the
full value chain, including all the steps of EI development and impact. The EI value chain
encompasses awarding contracts, monitoring operations, collecting taxes, distributing
revenue in a sound manner, and implementing sustainable development projects (see
Figure 10). The value chain approach aims to support countries in their efforts to
translate natural resource wealth into sustainable development. It can be integrated into
the World Bank's Country Assistance Strategies (CAS) for resource-rich client countries
and serve countries with great resource potential that decide to address the resource curse
issues at an early stage of development.
This approach is being piloted in Sub-Saharan Africa, where the significant rise in
commodities prices until 2008 has brought substantial windfall revenue to resource-rich
countries. While high prices present unique opportunities, the weak institutional capacity
in many countries leaves them more vulnerable to the resource curse. A report on EITI++
has been prepared as additional policy note for dialogue with the Government of Guinea.
The process of establishing an EITI++ Office was launched in September 2008 and the
future institutional setup of such an office is currently under discussion.
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Guinea: Mining and Infrastructure
Figure 10: The Extractive Industry Value Chain
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Guinea: Mining and Infrastructure
7. Next steps
It is recognized that the challenges Guinea faces are manifold. Not all can, nor should
they, be addressed simultaneously. Resource constraints, human and financial, as well as
legitimate time demands for preparation and implementation need to be heeded.
Nonetheless, this section provides an attempt at an initial list of actions to be discussed
with the government, its development partners, the private sector and civil society. Each
issue listed below will require additional debate of options and implications and might
require specialized analysis that goes beyond the remit of this note.
(i)
Identification of priority investments – these should satisfy the double condition
of high impact/high feasibility and thus focus on projects which are advanced in
the preparation phase. Both public and private resources should be considered for
the options of service delivery, and donor support committed. Among the priority
areas to examine are at this juncture:
a. Boke Rail system and port to evacuate bauxite and alumina (planned
aluminum plants Sangaredi, Kamsar and Dian-Dian); this would require
additional rail interconnections, new facilities at the Kamsar port as well
as an estimated 700MW of new thermal power capacity (see Table 4).
b. Rail link between Simandou to Liberia to allow the evacuation of mining
output from Southern Guinea.
c. Establishment of road connectivity to Cote d’Ivoire, Liberia and Sierra
Leone.
d. Transmission grid interconnection with the West Africa Power Pool.
(ii)
Issue a strong policy statement and letters of sector policy showing Government
commitment to infrastructure development in a strategic and step-wise (thus
credible) manner.
(iii)
Undertake a study mapping out the legal and institutional options to engage the
private sector, following the adoption of letter of sector policy. A diagnostic
review of existing laws, regulations, processes and institutions needs to be
undertaken to assess the degree to which the current set-up provides an enabling
environment for private participation. Identify one or a small number of pilot PPP
arrangements in mining areas building on the 2006 PPIAF study.
(iv)
For the mining sector, issue a policy paper and medium to long term strategy and
investment plan, using the EI Value Chain Approach (EITI++) as instrument to
move these aspects forward.
(v)
For the power sector, identify priority prospects among the hydro plant proposed
that can be undertaken with private participation. The first phase of the Kaleta
plant and associated transmission link and distribution network would be a
candidate.
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Guinea: Mining and Infrastructure
(vi)
Initiate dialogue with the private sector. Commit to a transparent and accountable
approach in order to signal long-term stability. Build appropriate institutional
mechanisms and capacity to undertake infrastructure project development
activities; bring in external experts for the initial pilot projects.
Longer term, a framework for integrated infrastructure planning should be established.
The objective of such a framework is to provide a strategic approach for sequencing,
prioritizing and financing infrastructure investments in such a way as to maximize their
contribution to economic growth. There are linkages between the spatial analysis and this
supply analysis. Infrastructure planning should be undertaken at national level to take all
needs of the country into account, however, in the face of limited resources, certain
specific corridors (eg Boke) might be considered first, in particular if negotiations are
opened with the private sector on the potential of making mining infrastructure accessible
to the public.
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Guinea: Mining and Infrastructure
Annex A1 Additional resources
Relevant infrastructure-related documents for Guinea:
o World Bank (SDN) – Developing Countries and the Financial Crisis:
Infrastructure Diagnostic Tools (May 2009)
o World Bank (SND) – INFRA platform
o World Bank (Spatial team) – Identifying spatial efficiency
o World Bank – EITI++ April 2008 Scoping mission report for Guinea
o World Bank – Guinea Telecom Reform (forthcoming July 2009)
o World Bank – Indonesia: Series of Policy notes (forthcoming July 2009)
o World Bank – West Africa Mineral Sector Strategic Analysis
o PPIAF – Building Bridges (also available in French: Batir des ponts)
o PPIAF – Africa Infrastructure Country Diagnostic (AICD)
o PPIAF and ICA Attracting Investors to African Public-Private Partnerships
Note: all referenced PPIAF publications can be found under www.ppiaf.orf/resources.
The Public-Private Infrastructure Advisory Facility (PPIAF)
PPIAF helps developing countries improve their infrastructure through two main
mechanisms: (i) It offers governments technical assistance on strategies and measures
they can use to tap the full potential of partnerships between the public and private sector,
(ii) It identifies, disseminates, and shares best practices around public-private
partnerships in infrastructure in developing countries. Through grants, PPIAF finances a
range of country-specific and multicountry advisory and related activities to help
governments: (a) Frame infrastructure development strategies to assess the needs of the
country and the potential for private involvement. (b) Create outreach and
communication programs to engage stakeholders and ensure transparency and
accountability, (b) Design and implement policy, regulatory, and institutional reforms, (c)
Design and implement pioneering projects and transactions, (d) Build creditworthiness to
access financing without sovereign guarantees.
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Guinea: Mining and Infrastructure
Annex A2 World Bank Contacts
The World Bank staff members listed below were members of the mission to Guinea in
December 2008 and the data gathered by them and information collated is at the basis of
this to this note.










Agriculture Sector: Jane Hopkins, Senior Agriculture Economist
Education Sector : Nathalie Lahire, Senior Education Specialist
Energy Sector: Dana Rysankova, Senior Energy Specialist
Environment Sector : Taoufiq Benouna, Senior Environmental Specialist
Finance for Infrastructure : Pascal Dooh-Bill, Lawyer
Health Sector: Ibrahim Magazi, Senior Health Specialist
Macro Economic Sector: Wilfried Engelke, Senior Economist
Mining sector: Boubacar Bocoum, Senior Mining Specialist
Telecom Sector: Boutheina Guermazi, Senior Regulatory Specialist
Transport Sector: Siélé Silué, Senior Transport Specialist
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Guinea: Mining and Infrastructure
Annex B: Maps
Graphique du réseau électrique existant
49