GeographyIQ.comGeographyIQ.com
  Home
  Rankings


A B C D E F
G H I J K L
M N O P Q R
S T U V W Y
Z          


Currency Converter

 


World > Africa > Guinea > Economy (Notes)

Guinea - Economy (Notes)


ECONOMY
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 high-grade 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 fee-collection 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.


Facts at a Glance: Geography - People - Government - Economy - Communications - Transportation - Military - Climate - Current Time - Ranking Positions
Notes and Commentary: People - Economy - Government and Political Conditions - Historical Highlights - Foreign Relations - Relations with U.S.



Facts at a Glance
Geography
People
Government
Economy
Communications
Transportation
Military
Climate
Current Time
Ranking Positions


Notes and Commentary
People
Economy
Government and Political Conditions
Historical Highlights
Foreign Relations
Relations with U.S.





   Privacy & Disclaimer

   Portions of this site are based on public domain works from the U.S. Dept. of State and the CIA World Fact Book
   All original material copyright © 2002 - GeographyIQ.com. All Rights Reserved.
   For comments and feedback, write to us at [email protected].