Guinea junta likely to back down on mining pledges

Guinea’s ruling junta is not well liked. Mamady Doumbouya’s removal of former President Alpha Condé, himself deeply unpopular, in September 2021, was met with widespread glee and parties in the streets of bustling Conakry.

Yet he has since fallen out of favour. The junta’s dithering approach to announcing when civilian rule would return, and its increasing authoritarianism and vicious crackdown on dissent, have been met with disapproval.

Large anti-junta street protests have broken out in the capital, Conakry. Many political parties and civil society movements have repeatedly refused to engage with a national dialogue deemed to be crucial to the transition.

Yet, the junta’s increasingly nationalistic approach to the mining sector, which comprises 35% of GDP, has raised some hopes that the country’s latest military takeover – it has witnessed three since independence in 1958 – will bring with it something positive.

Sitting on a gold mine, and more

Guinea is home to a variety of valuable and high-quality minerals. It is the world’s second-largest producer of bauxite, accounting for around 22% of the world production. It hosts the world’s largest untapped reserve of iron ore. Guinea is also the seventh-largest miner of gold in Africa and has 30m to 40m carats of diamond reserves.

These resources are vital for the economy. The mining sector provided $544m to government accounts in 2018, more than 30% of the state budget. But despite this almost-unparalleled mineral wealth, Guinea remains one of the poorest, least developed countries on the planet. It ranks 182 out of 191 countries in the UN’s Human Development Index. Its children on average spent 2.2 years in school in 2021, in comparison to 13.4 in the UK.

Guineans have long been frustrated that the riches they live among have never trickled down to the people. This is largely the result of endless corruption scandals and poor management of the sector. Notably, in 2017, the mines minister was convicted of taking millions of bribes in exchange for mining deals.

Meanwhile, the Simandou mine project has been stalled repeatedly. Simandou is believed to have the world’s largest and purest iron ore reserve. “This project is close to the national psyche and has been on the cards for 25 years, but it has not progressed quickly enough for Guineans,” says one mining expert, who wishes to remain anonymous.

President Condé also allowed many mining companies to operate without respect for human rights or the environment and often helped them to avoid public scrutiny by allowing them to keep audits of their operations confidential.

“The monitoring of mining projects has been neglected for a long time,” notes Mohamed Cisse, Guinea Program Associate at the Natural Resource Governance Institute. “Before the coup over 95% of mining companies in Guinea were non-compliant with various laws.”

Martin Roberts is associate director, sub-Saharan Africa, economics and country risk, at S&P Global Market Intelligence. He explains: “An IMF report five months before the coup pointed out that most of the contracts signed since the mining code’s introduction a decade earlier were far from compliant. Some companies were perceived to be falsifying their transactions with subsidiaries to concentrate profits in lower tax jurisdictions, for example.”

A mining sector in the interests of Guinea

Junta leader Mamady Doumbouya is seeking to change this dynamic. Eye-catchingly for many Guineans who feel they have been robbed of their country’s riches for decades, he has repeatedly declared that the mining sector will henceforward be in the “interest of Guinea”.

This has entailed a series of new regulations that have startled investors. Crucially, Doumbouya has ruled with an iron fist at Simandou, refusing to allow companies to progress with the project until joint venture terms have been agreed and financing and profits distributed adequately and fairly for Guinea.

“The junta has been more aggressive and clearer on their demands at Simandou,” says Jim Wormington, senior researcher and advocate at Human Rights Watch. This approach has led to repeated stoppages of the project since he came to power and threats that Doumbouya will find alternative companies to bring the project to fruition if they do not comply.

Negotiations appear to have finally made some ground, following a 10-day Guinean state visit to China – where three of the four key shareholders are based – in January. The project is due to resume in March, though further delays are likely if companies fail to submit to Guinea’s terms.

It is not just Simandou that has been affected by a slew of new demands from the ruling junta. In April 2022, the junta ordered mining companies to develop local refineries for bauxite. It mandated that companies must produce a clear timetable for constructing refineries by the end of May that year or face severe consequences.

“Condé was pushing for companies to refine locally,” says Wormington, “But the junta has been more forceful so far.” Other new regulations have included plans to ensure that the value of minerals being mined is calculated by the government rather than mining companies, as has historically been the case, so as to ensure that the appropriate level of taxation is being paid.

The junta has also sought to amplify local content regulations and increase the minimum threshold for partnering with Guinean companies. “The government fast-tracked legislation through the interim CNT parliament to adopt a new local content law on 22 September,” explains Roberts. “This is intended to identify clearly the roles that should be reserved for Guinean nationals, as well as set out rules relating to their salaries and working conditions.”

All that glitters is not gold

But Doumbouya’s efforts may not be the magic bullet that boosts Guinea’s development prospects over the next five years. “It is the same situation that prevails.” explains Amadou Bah, executive director of Action Mines Guinée, an NGO that seeks to improve the sustainable development of the mining sector. “Even if Doumbouya is engaged in the right rhetoric, nothing much has changed.”

Although the junta has ordered companies to comply with new regulations, it has often fallen short of punishing those who fail to follow through.

“There is a discrepancy between what the junta has said in public and what happens in practice.” says the anonymous mining expert. “It has threatened everything up to expropriation as punishment for failing to comply with its policy whims, but this has not come to pass.”

“Despite the statements of the current government, it remains to be seen whether they will do more to implement and enforce local content provisions.” adds Cisse. Many mining companies are continuing to operate as normal, despite the flurry of rhetoric and decrees demanding more concerted contributions to Guinean development.

This softening stance is likely due to the junta’s growing understanding of just how dependent the Guinean economy is on the mining sector. “A hardline stance is being abandoned gradually as the transitional government realises the extent of its dependence on the mining industry to bring in essential revenue,” says Roberts. “A hastily-organised mining conference on 31 August 2022 featured a clear message from new interim prime minister Bernard Goumou that existing accords and conventions would be respected,” he adds.

There may also be a mounting sense of how impracticable the demands the junta has made are. For example, requirements that miners immediately begin work on local processing facilities are impossible without a more reliable power supply in Guinea. Equally, engaging local businesses in mining projects is challenging without better education and training opportunities for Guineans.

So far, Doumbouya has appeared to generate marginally better tax revenues from the mining sector – increasing from 1.7% of GDP in 2020 to 2.1% in 2021, according to the World Bank, but it is unclear that his actions are doing much more than this.

Even if Doumbouya were to be successful in gaining more for Guinea from its wealth of natural resources, it is not yet clear that the general populace would benefit.

“In a practical sense.” muses Wormington, “until you fix the governance, it is hard to see any real positive change… The assumption that these steps are good for Guinea has to assume, number one, that mining revenues are redistributed effectively.”