By Moin Siddiqi, Economist
GUINEA, blessed with unused fertile land, water, minerals of all kinds and a favourable climate, is a country in ‘full transition’ where much needs to be built. With the support of development partners, the country possess the means to leverage opportunities in mining, energy and agriculture in order to alleviate poverty, create jobs, and boost shared prosperity, as well as building strong and resilient public delivery systems.
Guinea was on positive development and growth paths before the Ebola epidemic struck the sub-West Africa region in the second-half of 2014. During 2011-13, the government had succeeded in restoring macroeconomic stability, whilst halting a protracted decline in human development indicators. Debt sustainability had also improved with the attainment of the Enhanced Highly Indebted Poor Countries (HIPC) completion point in September 2012. Guinea’s US$2.1bn debt forgiveness (net present value terms) was equivalent to annual savings of US$115mn in debt servicing over the next 20 years, which has increased the fiscal space for critical infrastructure spending.
Equally significant, democracy is now firmly embedded (reflected in two peaceful Presidential elections in November 2010 and October 2015), both won by HE President Alpha Condé. “The newly found political stability and social peace created a healthy environment for a better public governance framework and resumption of international cooperation, a substantial reduction of the external public debt and an improved macroeconomic environment in general,” stated the Government of Guinea.
Medium-term output potential remains strong; however growth is projected well below the levels initially anticipated before the Ebola outbreak. In 2013-14, real GDP growth rates were projected around 5%, accelerating sharply to close to 20% in 2015-16 following the start of a major Simandou iron ore project. However, due to delays in completing the legal framework for the Rio Tinto-led Simandou project and a sharp downturn in international mineral prices – coupled with the Ebola epidemic the projected figures had to be significantly revised.
A Potential Magnet for Global Miners
A largely unexploited mining industry remains a key motor of future investment. The pipeline of proposed FDI inflows in mining and associated infrastructure are estimated at above US$40bn, which is almost six times the country’s GDP in 2015. More than US$13bn could be injected into the production of bauxite and alumina, while iron ore could attract US$30bn over the medium-term from global mining conglomerates.
Subsequently, the economy’s structure could fundamentally change as ‘multiplier effects’ of megaprojects lead to a larger and more diversified industrial base. Megatons projects also offer foreign and local businesses the opportunity to tap procurement and auxiliary related services worth some US$5bn. Specifically, the government is encouraging mining value chain investors to collaborate with local businesses via a joint-venture to bid for procurement tenders projects such as Simandou and others will make available over time.
To encourage a pro-business climate, enhancing Guinea’s international appeal and attracting more sizeable investments for developing the country’s vast mining resources, the new Mining Code has created a Mining Promotion and Development Centre – Centre de Promotion et de Developpement Minier, (CPDM) as a ‘one-stop shop’ to simplify the administrative process for investors. The commissioning of projects in the natural resources sector would greatly boost the government’s tax revenues and reduce its heavy reliance on official development assistance (ODA) in the next decade.
The government considers PPPs as the preferred tool for funding priority projects such as hydroelectric dams and power plants, roads, ports, railways, airports, energy facilities, telecommunications facilities, water treatment plants and irrigation, public buildings, tourist resorts and free zones. Guinea’s own resources are insufficient to implement mega investments – thus it needs greater external support (including FDI), capacity building and policy advice from multilateral institutions for closing the infrastructure gap, thereby achieving robust and inclusive growth in future years.
Sectors such as building and infrastructure, transport and logistics services, mining, renewable energy, hydrocarbons exploration, agriculture and food processing, information technology, manufacturing industries (including steel making); as well as consumer-sectors (banking, and retail distribution) and eco-tourism offer longer-term growth opportunities for the investor community. Guinea offers an open and favourable FDI regulatory regime and firm guarantees against expropriation. Foreign ownership of up to 100% is permitted in commercial, industrial, mining, agricultural and service sectors.
A presidential decree created the Agency for the Promotion of Private Investment (APIP), which acts as a ‘one-stop shop’ since December 2011 for setting-up new companies within a single office, reducing time and costs in the registration process. Despite under-development, the potential of Guinea’s natural, geological and mineral resources should not be underestimated. In this context, higher FDI inflows are pivotal to the national development strategy and unlocking huge untapped resources. Speaking at the 2013 Davos Summit, President Alpha Condé stated; “we know that companies need long-term profitable projects. We are doing everything we can to help companies achieve their objectives while protecting the interests of our people to ensure that our resources can finally play a part in improving their living conditions.”