Opinion: In Guinea, corruption continues to hinder economic development

The Republic of Guinea has had a tempestuous half-century under first military dictatorship and then a suite of kleptocratic elected governments, until the current junta took charge in a coup in 2021. Last week, its government was dissolved by the ruling military junta, and strikes and protests are gripping the country. Guinea has stayed afloat despite all this, largely due to its prodigious natural resources, from iron ore and bauxite to gold and diamonds. Brief moments of hope for economic development have gripped Guinea in the past two decades when a select group of global resource companies arrived in the country to not only invest in extraction projects but also fund and implement a range of commercial and civil infrastructure. However, Guineans’ ambition for meaningful, sustained economic development through these partnerships has all too often been dashed by mismanagement and corruption. Infrastructure companies BSG Resources, Gaëta, and Global Voice Group have all experienced expropriation of assets and the reneging on contracts and have consequently taken action against Guinea under international law. This hostile environment was confirmed in Transparency International’s Corruption Perceptions Index earlier this year which ranked Guinea 141 out of 180 countries for public sector corruption, with a Corruptions Perception Index of just 26 — a scoring of perceived levels of public sector corruption, where 100 is very clean. These findings are reflected on the ground: 62% of Guineans thought corruption increased in 2023, with 42% of public sector users having paid a bribe to a public official in that time. Rio Tinto, the British-Australian mining behemoth, is one operator that has managed to operate in Guinea for the past 27 years, having developed a reputation for building strong ties with incumbent governments. Arriving in Guinea in 1997, Rio Tinto quickly obtained the mining rights for two blocks in Simandou, a mountainous region well known for its significant proven iron ore deposits — a crucial component in the global steel-making industry. Despite gaining a strong foothold in the market, Rio Tinto came under intense pressure in 2008 when the Guinean government demanded it return two large sections of its holdings in Simandou. This demand was legitimate given that Rio Tinto had not developed the holdings since 1997. The rights were transferred to BSG Resources, a natural resource development and logistics company owned by the entrepreneur and philanthropist Beny Steinmetz, which promptly began to develop them. BSGR invested $160 million into Simandou between 2006 and 2010 and committed to building a $1.2 billion railway crossing Guinea from the east to its southwestern border with Liberia carrying passengers and natural resources. The Guinea-BSGR partnership appeared as a win-win for both parties, bringing much-needed capital and logistical expertise to Guinea. But the government of Alpha Condé, president from 2010 to 2020, had other ideas. “The losers are the general population of Guinea, deprived of economic opportunity and investment in strategically important sectors.” --— BSGR’s assets were fully expropriated by 2014, ending the company and Beny Steinmetz’s longstanding involvement in Guinea’s economic development. BSGR soon began legal proceedings against the government of Guinea and the episode as a whole has damaged Guinea’s reputation among international investors and in the development community. The losers are the general population of Guinea, deprived of economic opportunity and investment in strategically important sectors, as well as civil infrastructure such as roads, rail, and haulage. The life expectancy of the average Guinean remains at just 59 years of age and the gross domestic product per capita sits at $1,500, according to statistics compiled by the World Bank. Inflation is also heading in the wrong direction at 10%, while foreign direct investment into Guinea remains depressed. Not unusually in West Africa, economic mismanagement has unleashed social unrest, fueling a vicious cycle that led to rapid democratic breakdown, with the country currently ruled by an unelected junta. The lesson for the investment community is that more must be done to safeguard international firms operating in countries where poor governance and mismanagement are ubiquitous — especially when foreign investment is the lifeblood of these nations’ economies. Indeed, such an approach, whereby investors and citizens are treated with equal respect under international law, is in the interests of both parties. There’s seemingly a great deal of work to be done to make sure this approach is the rule, not the exception.