The Republic of Guinea is in West Africa. It is bordered by Guinea-Bissau, Senegal, and Mali to the North, Liberia and Sierra Leone to the South, Côte d’Ivoire to the East, and the Atlantic Ocean to the West. It covers an area of 245,857 square kilometers and has 300 kilometers of Atlantic coastline. Guinea has a tropical climate with a rainy season (May to October) and a dry season (November to April).
The presidential election of November 7, 2010 marked the return of Guinea to constitutional order after the army seized power on December 23, 2008. After a difficult period of military transition, the election of the first democratically elected President, Mr. Alpha Condé, and the new political context, paved the way for new economic opportunities for Guinea. A series of reforms were introduced and Guinea reached completion point for the Heavily Indebted Poor Countries (HIPC) Initiative in September 2012. To complete the political transition, Guineans went to the polls on September 28, 2013 to elect 114 members to the new parliament. The voting process was peaceful and the results are expected in a few days. The last legislative elections took place in 2002.
In 2012, the population of Guinea was estimated at 11.3 million (with a population density of 47.2 per square kilometer and an urbanization rate of 31%). With a natural growth rate of 3.1%, the Guinean population is young (45% of Guineans are between the ages of 15 and 19).
In 2011/2012, the gross enrolment rate was 81% for boys and 73.5% for girls. Per capita GDP was about $450 in 2012. The 2012 Limited Poverty Evaluation Survey showed that 55.2% of the population is considered to be poor, compared with 53% in 2007 and 40.3% in 1995.
The number of persons living in extreme poverty has also doubled. Most of the poor are still living in rural areas. The results of the 2012 survey show that 64.7% of the rural population is considered to be poor, compared with 32.1% for the urban population. However, poverty is increasing more in urban areas, mainly because of the increase in prices for essential goods, the rural exodus, and the employment crisis.
The Guinean economy is dominated by mining and the rural sector. Ongoing implementation of the 2012-2014 economic and financial program, supported by the IMF Extended Credit Facility, helped to reduce macroeconomic imbalances. In 2012, despite the international crisis, economic activity remained strong, supported by higher investments in agriculture and the mining sector. Real GDP grew by 3.9% in 2011 to reach 4.8% in 2012, compared with 1.9% in 2010. However, electricity supply difficulties continue to adversely affect economic activities.
Recent government finance reforms have enhanced the stability of the macroeconomic framework. The Central Bank of the Republic of Guinea has kept its prime rate at 22% and the bank reserve requirement at 22%, compared with 16.75 and 7.5% respectively in early 2011. In 2012, the growth of the broadly defined money supply was 5.3%, compared with 9.4%, mainly because of exceptionally high mining revenue in 2011. Inflation averaged 13% at end-2012, compared with 21.4% in 2011. This performance is attributable to restrictive monetary policy, increased rice production and the measures adopted by the Government to facilitate the supply of essential goods.
Achievement of the Completion Point under the Enhanced HIPC Initiative
Guinea has made considerable progress and met the requirements for debt relief under the Enhanced Heavily Indebted Poor Countries Initiative, so as to reduce its external debt to manageable levels. In September 2012, the IMF and the World Bank approved Guinea’s attainment of the completion point under the Enhanced HIPC Initiative. Guinea was thus able to benefit from the Multilateral Debt Relief Initiative (MDRI).
This debt cancellation amounted to $2.13 billion. Following this approval, the Paris Club creditors agreed on October 25, 2012 to cancel almost all the debt of the Republic of Guinea ($655.9 million or 99.2% of the total). The positive consequence was that Guinea’s total debt was reduced from 65.9% of GDP in 2011 to 19% of GDP in 2012. The debt-to export ratio and the debt-to-income were 5.3% and 6.7% respectively in 2013, compared with 9.5% and 13.2% in 2012.
In addition, in February 2013 the United States cancelled Guinea’s entire bilateral debt in the amount of $93 million. France opted for cancellation in the form of conversion (Debt Reduction–Development Contract) in the amount of 174 million euros to finance priority development projects.
The mining sector currently consists of industrial-scale mining of bauxite, alumina, and gold. It accounts for about 20% of GDP, 80% of foreign currency earnings, and 20 to 25% of government revenue. It provides over 10,000 direct jobs and over 100,000 indirect and ancillary jobs. Recent changes in mining policy since the advent of democracy in Guinea are reflected in the Mining Code adopted in September 2011. The fiscal provisions of this Code are being amended by the Government. New approaches include the creation of the Société guinéenne du patrimoine minier (SOGUIPAMI), a government-owned corporation. One of its goals is to own government shares and interest (up to 35% under the new Code) in mining companies and infrastructures (up to 51% under the new Code). Guinea has also embarked on a process of renegotiating all existing mining agreements.
The World Bank is helping the Government to manage the mining sector by providing financial support since 2005 and is continuing to do so by:
- Technical assistance to the sector ($20 million) for capacity-building and systems of governance of key institutions for management of the mining sector in Guinea.
- A grant of $495,000 for development of the master plan for auxiliary mining infrastructures.
- A grant of $850,000 to support negotiations.
Agriculture is the main activity for almost 80% of the population of Guinea and the main livelihood for 57% of rural inhabitants. As is the case in most African countries, agriculture is essential for the attainment of the goals of poverty reduction and food security in Guinea. Guinean agriculture is extensive, dominated by a traditional farming system and highly dependent on rainfall for 95% of the area under crops; the area of irrigated land is insignificant (30,200 hectares).
Agriculture contributes less than 20% of GDP and its share has declined steadily in recent years.
Guinea does, however, have considerable untapped agricultural potential, with natural conditions suitable for cultivation of a wide range of agricultural products. It is estimated that there are 6.2 million hectares of potential arable land, of which 25 are farmed and less than 10% are cultivated on an annual basis. Rainfall is abundant, ranging from 1,100 to 4,000 mm and the river plains have considerable potential. Guinea has a river network covering 6,500 kilometers and a continental shelf measuring 43,000 square kilometers with sizeable surface water and groundwater resources.
In December 2012, the Guinean Government adopted the National Agricultural Investment and Food Security Plan (PNIASA). Its main goal is to enhance food security by diversifying and increasing food and animal production to promote food sovereignty and to increase agricultural revenue by developing economic opportunities and improving market access, as well as by developing cross-cutting support measures to guarantee effectiveness of investments.
Guinea has considerable hydroelectric potential, estimated at over 6,000 MW, so that the country could meet its domestic needs, including for the mining sector, and export electricity to neighboring countries. Electrification is currently estimated at 17%, including 3% for rural areas.
In 2011, Guinea’s urban electricity production capacity was 130 MW but demand was estimated at 240 MW, resulting in frequent power outages in the capital, Conakry. The urban electricity sector is managed by Électricité de Guinée (EDG). The company is facing difficulties because of ageing infrastructures and lack of investment and maintenance, electricity theft, unpaid invoices, and sizeable financial losses.
The role of the private sector in the Guinean economy is small, as is that of banking. Few companies contract bank loans. As a result, following a round table on the investment climate held in March 2011, and with the support of the International Finance Corporation (IFC), the Government introduced a series of reforms to improve the investment and business climate.
IFC Operations in Guinea
The International Finance Corporation (IFC), the private sector arm of the World Bank Group, now has an office in Guinea and is involved in two areas—investment and advisory services.
In the area of investments, IFC is present in Guinea in the mining sector (Simandou project) in partnership with the Guinean Government, Rio Tinto, and Chinalco. The Corporation has invested $185 million in this project, which is its largest investment in Sub-Saharan Africa.
The program to improve the investment climate has two components—the program to reform business law and the program on investment policies and fiscal reform.