The head of Guinea’s interim government, Mamady Doumbouya, has ordered foreign mining companies to build bauxite refineries to ensure fair revenue sharing, upsetting a long-standing arrangement that has seen most of the continent’s resources exported in the Raw Form and refined abroad.
The Guinean interim government’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 – comes with prospects for economic revival.
The order for local refinement is not new. However, the non-compliance of the mining firms has become a major concern for the government.
The minister of mines, Moussa Magassouba, had said in 2022 that the mining companies were required by the Guinean state’s conventions (since 1983 for CBG) to build refineries.
Speaking in 2022, Doumbouya warned that non-compliance with these conventions “is a cause of nullity” and their application is “non-negotiable” for the government. Transforming the ore on site “is becoming unavoidable, it is a necessity and must be done without delay”.
He insisted that companies that violate refinery construction deadlines would face penalties.
It is not clear how this policy will be implemented, considering the time frame within which such an order will be achieved, but many Guineans say the order shows a bold approach to reclaiming the country’s wealth.
The mining sector provided $544 million to government accounts in 2018, more than 30% of the state budget, an amount that hardly represents the value that the complete value chain of the resources represent.
Guinea is the world’s second-largest producer of bauxite accounting for around 22% of the world production. However, it possesses the world’s largest reserves, with an estimated 7.4 billion tonnes. The country is also the world’s second largest producer. China imports about half of its bauxite needs from Guinea.
It hosts the world’s largest untapped reserve of iron ore and is also the seventh-largest miner of gold in Africa. It also has 30 million to 40 million carats of diamond reserves.
In spite of this almost unparalleled mineral wealth, Guinea remains one of the poorest, least developed countries on the planet. Estimates show that it ranks 182 out of 191 countries in the UN’s Human Development Index.
Guineans have long protested that this mineral wealth has never trickled down to the people. Political watchers say this social distortion is largely the result of endless corruption scandals and poor management of the sector. Notably, in 2017, the country’s mines minister was convicted of taking millions of bribes in exchange for mining deals.
It is uncertain how this position will affect agreements reached recently for the commencement of the Simandou mine project to mine the world’s largest and purest iron ore reserve.
The Guinean government had ordered work to stop in July 2022, to force the shareholders to agree on joint venture terms. At the time, authorities said they needed clarification on how the country’s interests would be preserved as the companies would tap into Simandou’s more than 4 billion tonnes of ore.
All parties eventually signed a pact that guaranteed 15% of the Simandou iron ore, as well as a 15% stake of free and non-dilutable in railway and port infrastructure, to the government. There was also a reaffirmation of previously-stated commitments to eventually open the railway to passenger services and other users.
Doumbouya was quoted by Bloomberg News as saying: “My ambition is for the Simandou project to serve as a real catalyst for the economic development of Guinea, and allow the country to become a major player in the world iron ore market.”
The Guinean government’s push to renegotiate terms of previous agreements, and to assert the country’s right to greater benefits from its wealth, fits into a pattern that is being witnessed in the Sahelian states of Mali and Burkina Faso as well, where the military leaderships are also imposing strict demands on investors to ensure the retention of a larger percentage of resource revenue.
Guineans are hopeful that the government’s push to reassert the country’s sovereign rights to the wealth from its resources will chart a new course that would greatly improve living standards.
