Guinea: Risk Assessment
Country Rating1
Rating: D
Business Climate Rating1
Rating: D
Risk Assessment2
Dependence of economic growth on the mining sector
Guinea Conakry was hit successively by an oil and food crisis in 2007/08, a coup late 2008, and then the global recession in 2009. In 2010, the provision of basic services (electricity, water, transport) continues to be irregular, making investments and projects from abroad uncertain. Despite persistent political instability and inflationary surges (15%), GDP growth was positive in 2010 thanks to the increase in mining exports (60% of total exports, 20% of GDP). Sales abroad will likely continue to grow in 2011 and make it possible to sustain growth. Several large industrial projects have been planned in the bauxite and iron ore sector with the corresponding exploration and exploitation contracts won by Anglo-Australian, Brazilian, and Chinese multinationals in exchange for commitment on investments in infrastructure. Concluded by the military Junta formerly in power on terms nonetheless far from being in the country's best interests, the contracts have fulled distrust among international donors. Cleaning up the mining cadastral and ensuring the optimal utilization of mining resources will thus likely be the focus of initial measures taken by the recently elected president.
Debt cancellation delayed by governance problems
The installation of the new government is also expected to pave the way for reviving the process of public foreign-debt cancellation ($3.2 billion), blocked by the IMF and the World Bank since 2009 as a result of the military coup, the default on debt interest payments and the country's failure to pay its annual membership contribution. By 2009, Guinea had met practically every formal condition necessary to reach the completion point under the HIPC initiative. That process is expected to begin to go forward again after the final announcement of the presidential election outcome, provided the political climate becomes stable. The pending debt cancellation is expected to pave the way for increases in priority spending (health, education) and investments in infrastructure.
A difficult transition to democracy
In November 2010, after 52 years of authoritarian regimes, Guineans voted for the first time in a free presidential election with a voter turnout of 67%. Alpha Condé, age 72, the historic opponent, won the election with 52.5% of the votes cast. This outcome was unexpected: winning just 18% of the votes cast, he was swamped in the first round by Cellou Dalein Diallo (44%), of the Peul ethnic group. The interplay of alliances and the extent of the ethnic vote enabled him to overcome his opponent's lead and win a majority of the votes cast. A crucial factor was the support of the Sousous and the Forestiers who rallied behind Alpha Condé to prevent the Peuls, who represent about a third of the Guinean population and dominate the economy, from also controlling the highest rungs of political power. Since the results were announced, however, a mounting wave of violence has swept the country, exacerbating the climate of insecurity and uncertainty. The troops assigned the mission of preserving law and order are expected to continue to act with due restraint until the state of emergency is lifted. The election results will only be declared final after review by the supreme court of complaints of massive fraud in the second round of voting in the presidential election. The victory by Alpha Condé is likely to be made official, but there is still a danger that the Army might retake power, especially if Cellou Dalein Diallo fails to concede defeat.
Strengths
- 40% of the world’s bauxite reserves
- Iron, gold, uranium, diamond, and oil deposits still widely unexploited
- Extensive hydroelectric potential
Weaknesses
- Dependence on imports of energy and foodstuffs
- Infrastructure deficiencies, a major hindrance to production and marketing activities
- Chronic political instability compounded by ethnic conflicts
- Business environment undermined by legal uncertainty