Sunshine and Clouds above Guinea’s Bauxite Mining Future
Guinea accounts for more than a quarter of bauxite reserves and appears to have become the largest bauxite exporter to China in the space of two years. Energy is being applied to securing new agreements (with all comers) that will further boost export earnings, domestic revenue and multiuser transport infrastructure. That said, there is evidence that in this rush, operators are missing Environmental Social Governance (ESG) concerns of key stakeholders. They must also take note of political risks on the immediate horizon.
Situation Report
Between 1999 and 2008, Guinea grew on average 3.5% per annum compared to 5.5% for Sub-Saharan Africa as a whole. However, for the next ten years, the rankings were reversed (5.2% per annum for Guinea between 2009 and 2018 against 4.2% for the region). Much of this is explained by a dramatic expansion in Guinean gold and bauxite activity after 2015. More still is on the way, potentially.
There is a busy field of international players signing on the dotted line for mining and concomitant infrastructure projects. In April-May of this year for example, the Private Infrastructure Development Group's Emerging Africa Infrastructure Fund (EAIF) announced a USD40 million loan to the Emirati Guinea Alumina Corporate (GAC) for development of a greenfield bauxite mine and associated infrastructure.[1]
This includes:
Upgrading existing railway
New railway tracks
Marine trestle (bridge) at Kamsar port
GAC’s ambition is that its project will add “at least 3% to GDP” and provide “permanent jobs to approximately 1,000 people.” The second is a crucial point. GAC’s project is in Boke prefecture, which has been home to (a) much of the mining activity in the country, and (b) large demonstrations in 2017 against the perceived low level of mining industry job creation and infrastructure development. Local stakeholders have also criticised major projects in Boke for damaging the environment and health outcomes, or violating land and water rights locally without adequate compensation.
There are other risks on the horizon: legislative and presidential elections foremost.
Facing the end of his two-term limittwo-term limit, it seems President Alpha Conde feels that there is nothing sweet about parting; it’s all sorrow. Legislative elections were expected to take place at the start of this year but are now slated for end 2019. Conde may contest again or the electoral calendar may slip further (legislative and presidential). Opposition groups are minded to push back. In terms of the potential for conflagration we should note that local elections in 2018 saw clashes in Boke, in the capital Conakry and elsewhere, more recently opposition groups, civil society and organised labour have protested against political dynamics including third-termism.
Outlook
In addition to EAIF’s GAC bauxite mining and infrastructure investment project, Indian firm Ashapura’s signed an iron ore mining agreement last month and Rio Tinto is reportedly looking for ways to reprise its iron mining inter alia; all on top of a busy field of announcements last year.
On the ground, the impression is that over and above ESG considerations, government authorities are prioritising pace and quantum of investment, domestic revenue mobilisation and ancillary benefits such as multiple user infrastructure. Consequently, good relations with central government, provincial and local officials might nevertheless miss serious reputational risks of the kind expressed in the 2017 protests and a recent HRW report. Project developers and their investors should therefore place emphasis on internal structures, implementation and monitoring, and local participation.
In addition, the negative political risk outlook is a concern. Even where there is cross-party support for projects, the political calendar now raises the risks of disruptive events such as (a) legislative elections or their postponement in Nov-Dec 2019, (b) a subsequent parliamentary vote on constitutional reform, and (c) 2020 presidential elections or their postponement.
[1]Part of a larger USD750 million facility funded by the IFC, AfDB, Export Development Canada and others