Guinea
Richly endowed with minerals, Guinea possesses over 25 billion metric tons (MT) of
bauxite--and perhaps up to one-half of the world's reserves. In addition, Guinea's
mineral wealth includes more than 4-billion tons of high-grade iron ore, significant
diamond and gold deposits, and undetermined quantities of uranium. Guinea has
considerable potential for growth in the agricultural and fishing sectors. Soil, water, and
climatic conditions provide opportunities for large-scale irrigated farming and agro
industry. Possibilities for investment and commercial activities exist in all these areas,
but Guinea's poorly developed infrastructure and rampant corruption continue to present
obstacles to large-scale investment projects.
Joint venture bauxite mining and alumina operations in northwest Guinea historically
provide about 80% of Guinea's foreign exchange. The Compagnie des Bauxites de
Guinea (CBG) is the main player in the bauxite industry. CBG is a joint venture, in which
49% of the shares are owned by the Guinean Government and 51% by an international
consortium led by Alcoa and Alcan. CBG exports about 14 million metric tons of highgrade bauxite every year. The Compagnie des Bauxites de Kindia (CBK), a joint venture
between the Government of Guinea and Russki Alumina, produces some 2.5 million MT
annually, nearly all of which is exported to Russia and Eastern Europe. Dian Dian, a
Guinean/Ukrainian joint bauxite venture, has a projected production rate of 1 million MT
per year, but is not expected to begin operations for several years. The Alumina
Compagnie de Guinée (ACG), which took over the former Friguia Consortium, produced
about 2.4 million tons of bauxite in 2004, which is used as raw material for its alumina
refinery. The refinery supplies about 750,000 MT of alumina for export to world markets.
Both Global Alumina and Alcoa-Alcan have signed conventions with the Government of
Guinea to build large alumina refineries with a combined capacity of about 4 million MT
per year.
Diamonds and gold also are mined and exported on a large scale. AREDOR, a joint
diamond-mining venture between the Guinean Government (50%) and an Australian,
British, and Swiss consortium, began production in 1984 and mined diamonds that are
90% gem quality. Production stopped from 1993 until 1996, when First City Mining of
Canada purchased the international portion of the consortium. By far, most diamonds
are mined artisanally. The largest gold mining operation in Guinea is a joint venture
between the government and Ashanti Gold Fields of Ghana. SMD also has a large gold
mining facility in Lero near the Malian border. Other concession agreements have been
signed for iron ore, but these projects are still awaiting preliminary exploration and
financing results.
The Guinean Government adopted policies in the 1990s to return commercial activity to
the private sector, promote investment, reduce the role of the state in the economy, and
improve the administrative and judicial framework. Guinea has the potential to develop, if
the government carries out its announced policy reforms, and if the private sector
responds appropriately. So far, corruption and favoritism, lack of long-term political
stability, and lack of a transparent budgeting process continue to dampen foreign
investor interest in major projects in Guinea.
Reforms since 1985 include eliminating restrictions on agriculture and foreign trade,
liquidation of some parastatals, the creation of a realistic exchange rate, increased
spending on education, and cutting the government bureaucracy. In July 1996, President
Lansana Conté appointed a new government, which promised major economic reforms,
including financial and judicial reform, rationalization of public expenditures, and
improved government revenue collection. Under 1996 and 1998 International Monetary
Fund (IMF)/World Bank agreements, Guinea continued fiscal reforms and privatizations,
and shifted governmental expenditures and internal reforms to the education, health,
infrastructure, banking, and justice sectors. Cabinet changes in 1999 as well increasing
corruption, economic mismanagement, and excessive government spending combined
to slow the momentum for economic reform. The informal sector continues to be a major
contributor to the economy.
The government revised the private investment code in 1998 to stimulate economic
activity in the spirit of free enterprise. The code does not discriminate between foreigners
and nationals and provides for repatriation of profits. While the code restricts
development of Guinea's hydraulic resources to projects in which Guineans have
majority shareholdings and management control, it does contain a clause permitting
negotiations of more favorable conditions for investors in specific agreements. Foreign
investments outside Conakry are entitled to more favorable benefits. A national
investment commission has been formed to review all investment proposals. The United
States and Guinea have signed an investment guarantee agreement that offers political
risk insurance to American investors through the Overseas Private Investment
Corporation (OPIC). In addition, Guinea has inaugurated an arbitration court system,
which allows for the quick resolution of commercial disputes.
Until June 2001, private operators managed the production, distribution, and feecollection operations of water and electricity under performance-based contracts with the
Government of Guinea. However, both utilities are plagued by inefficiency and
corruption. Foreign private investors in these operations departed the country in
frustration.
In 2002, the IMF suspended Guinea's Poverty Reduction and Growth Facility (PRGF)
because the government failed to meet key performance criteria. In reviews of the
PRGF, the World Bank noted that Guinea had met its spending goals in targeted social
priority sectors. However, spending in other areas, primarily defense, contributed to a
significant fiscal deficit. The loss of IMF funds forced the government to finance its debts
through Central Bank advances. The pursuit of unsound economic policies has resulted
in imbalances that are proving hard to correct.
Under then-Prime Minister Diallo, the government began a rigorous reform agenda in
December 2004 designed to return Guinea to a PRGF with the IMF. Exchange rates
have been allowed to float, price controls on gasoline have been loosened, and
government spending has been reduced while tax collection has been improved. These
reforms have not slowed down inflation, which hit 27% in 2004 and 30% in 2005.
Depreciation is also a concern. The Guinea franc was trading at 2550 to the dollar in
January 2005. It hit 5554 to the dollar by October 2006.
Despite the opening in 2005 of a new road connecting Guinea and Mali, most major
roadways connecting the country's trade centers remain in poor repair, slowing the
delivery of goods to local markets. Electricity and water shortages are frequent and
sustained, and many businesses are forced to use expensive power generators and fuel
to stay open.
Even though there are many problems plaguing Guinea's economy, not all foreign
investors are reluctant to come to Guinea. Global Alumina's proposed alumina refinery
has a price tag above $2 billion. Alcoa and Alcan are proposing a slightly smaller refinery
worth about $1.5 billion. Taken together, they represent the largest private investment in
sub-Saharan Africa since the Chad-Cameroun oil pipeline. Also, an American oil
company, Hyperdynamics, has recently signed an agreement to develop Guinea's
offshore oil deposits.
The west coast of Africa is now ripe for oil development, and Guinea is actively being
courted in this endeavor. Hyperdynamics and Guinea signed a psa in 2006, and have
been diligently bringing oil exploration into the final stages. It is thought by many of the
large oil companies that the west coast of Africa, which Guinea centers, might be able to
supply the United States with near thirty percent of oil within ten years.