Guinea's economic recovery will be driven in the medium term by strong growth in bauxite mining. However, investors in the sector will face a number of elevated risks. Protests against the pollution and power cuts caused by mining can often turn violent and may disrupt the movement of mineral produce. Despite improvements the business environment remains challenging and inactive concessions face risk of expropriation.
Death and injury risks during protests are elevated in Guinea, as demonstrations often turn violent. Protests are often motivated by the expansion of mining, which locals claim to have caused power cuts, pollution and shortages of clean water. In September 2017 civil unrest occurred in Boké, following a power cut. Protestors set up roadblocks to prevent the movement of mining cargo and burned the headquarters of the ruling party, whilst the police used live ammunition and tear gas in an attempt to disperse people. As a result, mining firms operating in Guinea should be aware that they may be the target of violent protests, elevating property damage, death and injury risks.
Protest risks are also elevated as a result of delayed local elections. Local elections were last held in 2005 and the main opposition party, the Union of Guinean Democratic Forces, has called for protests to pressure the government into holding the elections.
On 2 August 2017, tens of thousands of people attended a demonstration in Conakry, delaying the movement of goods to the city’s port. There are also growing concerns that President Alpha Condé will seek to extend presidential term limits to allow him to remain in office beyond two terms. This move would likely elevate conflict risks in Guinea.
Guinea’s economy continues to show signs of recovery following the 2013- 2016 Ebola epidemic, driven by robust performance in the mining, infrastructure and agricultural sectors.
Guinea began exporting bauxite to China in 2015, and successfully expanded its role as an export partner following bauxite export bans in Indonesia and Malaysia. As a result, bauxite production is forecasted to grow by 9.0% in 2018.
Despite the economic recovery, sovereign credit risks will be elevated in Guinea in the medium term outlook. During the Ebola epidemic, government expenditure rose significantly despite a sizeable drop-off in revenues. As a result, the budget deficit in 2016 was 6.8% of GDP.
The government funded this deficit through increased borrowing, and will continue to expand its external debt burden in the coming years. External debt is forecasted to constitute 80% of total government debt by 2026, from 38.4% in 2016. However, the government is expected to implement fiscal consolidation measures in the coming years. These measures are expected to slow government expenditure growth to an average of 11% between 2017 and 2026, compared to 25% in the previous decade.
The mining sector has often been the focus of interventionist activity by the Guinean government. Recently, Condé has appeared keen to consolidate the bauxite sector in the hands of larger companies, leading to some cases of expropriation. In March 2016, the government expropriated three mining licenses belonging to Yemen's HSA Group without compensation.
The company has since suggested that it will begin proceedings against Guinea at the International Centre for Settlement of Investment Disputes (ICSID). In May 2017, ICSID also began hearing a case brought by mining firm BSGR over its right to compensation if the Guinean government decides to sell the company’s rights to two blocks in the Simandou iron ore deposit. In 2010, an investigation recommended that BSGR’s rights to the blocks should be removed, if it were found that they were obtained by corrupt means.
Despite these incidents, contract alteration and expropriation risks have moderated in recent years. The 2013 Mining Code grants the government up to a 15% share in mining projects, reducing the incentive to intervene in the sector in order to expand revenues.
* Some markets are closed on Guinea, however, each risks will be evaluated on a case by case basis
In this month's Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for Spain, Indonesia, Togo and United Arab Emirates, all of which have been the subject of recent enquiries from JLT's client base.
The monthly Risk Outlook is supported by JLT’s proprietary country risk rating tool, World Risk Review (WRR) which provides risk ratings across nine insurable perils for 197 countries. The country risk ratings are generated by a proprietary, algorithm-based modelling system incorporating over 200 international sources of data.
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For further information, please contact Eleanor Smith, Political Risk Analyst on +44 (0)121 626 7837 or email firstname.lastname@example.org
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