2010 Investment Climate Statement - Guinea
Guinea constitutes a small, underdeveloped market that, while open to U.S. direct investment in the past, is becoming an increasingly hostile environment for business. In fact, the Economist Intelligence Unit rated Guinea the second most risky country in the world for investment in 2009, largely due to the fragile political situation.
On December 23, 2008, a group of military officers calling themselves the National Council for Democracy and Development (CNDD) took power in a bloodless coup d’etat. Within days, CNDD President Moussa Dadis Camara declared that all commercial contracts negotiated under the former regime would be subject to immediate audit and review. True to his word, Camara waged several contract campaigns in his first six months in power against large international mining companies including Rio Tinto, Rusal, and AngloGold Ashanti. Since September 2009, the insecurity created by government hostility toward investment has been compounded by violent political crackdowns and fracturing within the military. Many companies already operating in Guinea have slowed exploration efforts considerably in fear that falling prices and government intervention could precipitate massive investment losses. New investments also decreased significantly in 2009. Though the political situation seems to be improving as of January, 2010, the future of Guinea’s investment climate will hinge not only on how the next government facilitates outside investment, but also on how well they can control Guinea’s armed forces.
Guinea’s Investment Code of 1987 guarantees, in theory, the right of all individuals to private legal entities of both Guinean and foreign nationality to undertake any economic activity in accordance with current laws and regulations. Foreign ownership of up to 100% is permitted in commercial, industrial, mining, agricultural and service sectors. However, some industries are legally restricted from having a majority foreign ownership, such as radio, television, and newspapers. Revised in 1992, the Investment Code authorizes private investment of all types: foreign private, mixed foreign and local, and mixed public and private. The Guinean government provides a guarantee in the Investment Code that it will not, except for reasons of public interest, take any steps to expropriate or nationalize foreign or locally held assets or businesses. In reality, this guarantee is insufficient protection, and the CNDD claims that all expropriations in 2009 were done in the public interest. In February 2009, the junta government announced its intention to review the Investment Code, but as of the end of year, the 1987 code was still in place.
The Petroleum Code of September 23, 1986 is currently under revision by a commission consisting of members from the Ministry of Commerce, the Ministry of Mines, Ministry of Environment, the Office of the President, and other government cabinets. The commission has not yet announced a completion date. There is currently only one oil company operating in Guinea - U.S. owned Hyperdynamics. At the time of writing, Hyperdynamics is in the process of voluntarily renegotiating their contract with the GOG, and the future of the concession is unclear.
The Mineral Liberalization Policy of 1992, put into effect in 1985, and revised in 1992, legalized wholly private ventures in the mining sector. In theory, the Ministry of Mines adjudicates authorization and licensing at its own discretion, though most licensing negotiations have been unofficially transferred to the Office of the President since the coup d'etat.
In the mining sector, the 1995 Mining Code is the operative legal framework. The Code provides that the Guinean government is entitled to a ‘founder's share' in all gold, diamond and other precious stone mining activities. The founder’s share equals 15% of the capital of the operating company, and no financial contribution may be required from the government for such shares. For ‘substances of special interest,’ such as bauxite, iron ore, and solid hydrocarbons, no such free shares are authorized. The government is still allowed to hold a stake in substances of special interest, but the terms are negotiated on an individual basis. The junta government declared that contracts negotiated under the former regime were negotiated without sufficient percentage of capital being returned to the GOG. Several parts of the Code are currently under review and will likely be revised with higher founder shares for all mining projects.
The Telecommunications Liberalization Policy of 1992 allows for private activity in the “value added” services sector, including cellular, radio, satellite, on-line data transmission, and other services. The Ministry of Communications regulates licensing and administration. In 2007, several new operators entered the market including the U.S./Israeli telecommunications firm Cellcom. While this sector presents tremendous opportunity for growth, price competition from established providers is intense. Established carriers have publicly attempted to thwart other companies from entering the market by utilizing non-price tools, such as refusing to connect existing networks with new entrants. The junta government has increasingly exerted their influence on the telecommunications sector, including forcing several cellular companies to block text messaging capabilities during times of political unrest. There has also been wide scale harassment of radio stations since mid-September, including threats against broadcasting personalities, owners, and property.
The 1995 elimination of the public monopoly on petroleum product importation and commercialization allows private distributors to operate in Guinea. At present, French oil company Total and Shell are the dominant companies in the petroleum sector.
The judicial system, which has been historically underfunded, inefficient, and overtly corrupt, has ruled in favor of government expropriation since the 2008 coup. In September, a local court ruled that the 2006 sale of the Friguia aluminum smelting plant to Russian aluminum company RUSAL should be considered void and returned to the GOG immediately. The decision claimed that the Friguia smelter, valued around US$250m, was purchased for only $22m, therefore making the payment “inadequate” and the contract subject to revocation. The Rusal decision has caused concern among international investors operating in Guinea, especially in light of extensive government audits on two other foreign companies – AngloGold Ashanti and Kenor – as part of the government’s plan to determine the “legality” of their acquisitions under the former regime.
In 2004, the Guinea Alumina (GAC) joint venture (with investments by Global Alumina, BHP Billiton, Dubai Aluminum, and Abu Dhabi’s Mubadala Development) began feasibility studies on a 650 sq. km bauxite mining site. In 2008, the company started the “early works” phase of their project which includes infrastructure construction on the mining site, the refinery facility, and a transportation network. Alcoa and Rio Tinto-Alcan are also in the early construction phase of a smaller refinery in the area. Taken together, they represent the largest private investment in sub-Saharan Africa since the Chad-Cameroun oil pipeline, and could see a 40% increase in Guinea’s bauxite production upon completion. The $5 billion GAC project is currently moving slowly due to falling commodity prices and massive government intervention. Though production from the site was originally scheduled to commence in mid-2012, it is not likely to reach the production stage until 2014 or 2015. GAC announced in November that they plan to continue with the construction of their refining plant in 2011.
Rio Tinto signed an agreement with the GOG in 2003 to develop an 110 sq. km iron mine in Simandou. The company has invested nearly $500 million to date in feasibility studies and early development of their mining site. In December 2008, the government announced that it would be revoking part of Rio Tinto’s Simandou contract. The case is still under consideration in Guinean court. Due to the security situation, government interference, and global commodity prices, Rio Tinto has temporarily slowed its operations at Simandou.
Other international investments have slowed considerably in the face of government harassment. Companies already operating in Guinea have largely decreased operations while new investment has been stifled by the threat of political harassment and instability. Although the GOG has apparently signed an MOU with the Chinese Development Fund and China Sonangol, the details of the deal heave yet to be publicly released (see Foreign Direct Investment Statistics).
Conversion and Transfer Policies
Individuals or legal entities considering investing in Guinea are guaranteed the freedom to transfer the original foreign capital, profits resulting from investment, capital gains on disposal of investment, and fair compensation paid in the case of nationalization or expropriation of the investment, to any country of their choice. Although there have been no recent changes to remittance policies, it is becoming increasingly difficult to obtain foreign exchange in Guinea’s suffering economy. Due to government mismanagement, populist policies, corruption, a nearly 50% decrease in mining revenue, and a termination of nearly all foreign aid, the World Bank reports that Guinea is likely nearing a foreign exchange crisis. Estimates suggest that the current availability of foreign-exchange reserves is equivalent to less than one month of import cover. International transfers are currently using rates up to 30% higher than the official rate.
Expropriation and Compensation
Guinea’s Investment Code states that the GOG will not, except for reasons of public interest, take any steps to expropriate or nationalize investments made by individuals and companies. It also promises fair compensation for expropriated property.
There were two known cases of expropriation in 2009 including Rusal’s Friguia refinery and the northern half of Rio Tinto’s Simandou mining facility (see Openness to Foreign Investment above). No compensation had been rewarded to these companies as of December, 2009. The threat of further expropriation looms, as the junta has repeatedly called for a revision of all contracts negotiated under the regime of Lansana Conte.
The Investment Code states that competent Guinean judicial authorities shall settle disputes resulting from interpretation of the Code in the accordance with laws and regulations. In practice, however, fair settlements may be difficult. When in force, the Guinean constitution mandates an independent judiciary, though many business owners and high level government officials frequently claim that poorly trained magistrates, high levels of corruption, and nepotism plague the administration of justice.
Guinea established an arbitration court in 1999, independent of the Ministry of Justice, to settle business disputes in a less costly and more expedient manner. The Arbitration Court is based on the French system in which arbitrators are selected from among the Guinean business sector, rather than from among lawyers or judges, and are supervised by the Chamber of Commerce.
In 1993, Guinea became a member of the Organisation pour l’Harmonisation du Doit des Affaires en Afrique (Organization for the Harmonization of Commercial Law in Africa), known by its French initials, OHADA, which allows investors to appeal legal decisions on commercial and financial matters to a regional body based in Abidjan. The organization also seeks to create harmonization of commercial law, debt collection, bankruptcy, and secured transactions throughout the OHADA region. The treaty superseded the Code of Economic Activities and other national commercial laws when it was ratified in 2000, though many of the substantive changes to Guinean law have yet to be implemented. U.S. companies seeking to do business in Guinea should be aware that under OHADA, managers may be individually liable for corporate wrongs. See the OHADA website for specific OHADA rules and regulations (http://www.ohada.com). Guinea is also a member of the International Center for the Settlement of Investment Disputes (CSID).
In many cases, the Guinean government does not meet payment obligations to private suppliers of goods and services, both foreign and Guinean, in a timely fashion. There is no independent enforcement mechanism for collecting debts from the government, although some contracts have international arbitration clauses. The government, while bound by law to honor judgments made by the arbitration court, often actively influences the decision itself.
The country’s legal system is largely based on French civil law. However, the Guinean judicial system is reported to be understaffed, corrupt, lacks transparency, and accounting practices are frequently unreliable. U.S. businesspersons should exercise extreme caution when entering contract arrangements, and do so with proper local legal representation. Since taking power in December, the CNDD has reportedly sidelined the role of the formal judiciary in legal proceedings by transferring much of its power to a parallel military legal system. Though the junta abolished the controversial State Secretariat in Charge of Dispute in June, the normal judicial system is still largely ignored by Guinean authorities.
Business executives, Guinean and foreign, have publicly expressed concern for the absence of rule of law in the country. Guinean business leaders have been targeted by the military for burglary and wide-scale harassment. Foreign business workers have been routinely summoned to Camp Alpha Yaya, the operational base of the junta, and asked for large “donations” for CNDD projects. In May, all foreign and domestic companies were forced to attend an event, led by Dadis Camara, in which he demanded that all businesses make significant donations to the CNDD for their “Water and Electricity for All” campaign. Camara threatened that any company who failed to pay would be asked to leave the country.
The GOG’s commitment to accepting binding international arbitration of investment disputes between them and foreign investors has yet to be challenged. Arbitration and contract disputes have largely been resolved outside of legal proceedings since December.
The Investment Code, last revised in 1992, provides for tax advantages for certain priority investments. The government’s priority investments are promotion of small and medium-sized Guinean businesses, development of non-traditional exports, processing of local natural resources and local raw materials, and establishment of activities in less economically developed regions. Priority activities include agricultural promotion, especially of food, and rural development; commercial farming involving processing and packaging; livestock, especially when coupled with veterinary services; fisheries; fertilizer production, chemical or mechanical preparation and processing industries for vegetable, animal, or mineral products; health and education businesses; tourism facilities and hotel operations; real estate development with social benefit; and investment banks or any credit institutions settled outside specified population centers.
Right to Private Ownership and Establishment
There is a right to private property in Guinea. The government’s regulations provide for a complex set of tax and duty exemptions and rebates in order to encourage private investment.
Protection of Property Rights
The Land Tenure Code of 1996 provides a legal base for documentation of property ownership. As with ownership of business enterprises, both foreign and national individuals have the right to own property. However, enforcement of these rights depends on a corrupt and inefficient Guinean legal and administrative system. To date, although the proportion of land dispute cases is significant in relation to all cases filed, it is not clear that enforcement of such judgments is possible.
Guinea is a member of the African Intellectual Property Organization (OAPI) comprised of 15 African countries and the World Intellectual Property Organization (WIPO). OAPI is signatory to the Paris Convention for the Protection of Industrial Property, the Bern Convention for the Protection of Literary and Artistic Works, the Patent Cooperation Treaty, the TRIPS agreement, and several other intellectual property treaties. Guinea modified its intellectual property right laws in 2000 to bring them up to international standards. There have been no formal complaints filed on behalf of American companies concerning intellectual property rights infringements in Guinea. However, it is not certain that an intellectual property judgment would be enforceable, given the general lack of law enforcement. The Property Rights office in Guinea is severely understaffed and underfunded.
Transparency of the Regulatory System
While Guinea’s laws promote free enterprise and competition, the government often lacks transparency in the application of the law. Business owners openly assert that application procedures are sufficiently opaque to allow for corruption, and regulatory activity is often applied based on personal interest.
Major expatriate companies operating in Guinea have reported the government’s periodic failure to rebate value-added taxes or to grant guaranteed tax exemptions. Several businesses reported practices such as judges’ requests for payments to “escrow accounts” pending court decisions. There have also been reports of judges and other government officials closing businesses and demanding arbitrary “taxes” to be paid before allowing them to reopen.
In their annual “Ease of Doing Business” index, the World Bank ranked Guinea as the 173rd out worst country for doing business in the world out of 183 countries. Guinea scored particularly poorly the indicators of “starting a business” with 13 procedural steps required to open even a small business operation, “dealing with construction permits” requiring 32 procedural steps, and “protecting investors” which points out shortcomings in the ‘extent of disclosure index,’ ‘extent of director liability index,’ and ‘ease of shareholder suits.’ (See World Bank indicators: http://www.doingbusiness.org/ExploreEconomies/?economyid=82)
Under the CNDD, several large contracts have been negotiated through the office of the President without any international bidding process. Many of these contracts have been awarded to CNDD loyalists, and the terms of the agreements remain opaque.
New taxes levied by the Ministry of Environment have become a source of contention among many investors. The junta has also shut down several local business operations and demanded that the companies pay arbitrary “taxes” to the regime. Starting last April, both SAG, a subsidiary of AngloGold Ashanti, and Russian mining firm Rusal were ordered to cease operations several times by order of the Ministry of the Environment, pending payment of large “environmental taxes.” Other mining companies were approached by members of the military to install military personnel into superfluous positions with executive salaries.
Efficient Capital Markets and Portfolio Investment
Commercial credit for private and public enterprise is difficult and expensive to obtain in Guinea. The GOG passed a Build, Operate, and Transfer (BOT) convention law in 1998, which provides rules and guidelines for BOT and related infrastructure development projects. The law lays out the obligations and responsibilities of the government and investors and stipulates the guarantees provided by the government for such projects.
The Investment Code allows transfers of income derived from investment in Guinea, the proceeds of liquidating this investment, and the compensation paid in the event of nationalization to any country in convertible currency. The legal and regulatory procedures, while based on French civil law in theory, are not always applied uniformly or transparently.
Individuals or legal entities making foreign investments in Guinea are guaranteed the freedom to transfer the original foreign capital, profits resulting from investment, capital gains on disposal of investment, and fair compensation paid in the case of nationalization or expropriation of the investment, to any country of their choice. Although there have been no recent changes to remittance policies, it is becoming increasingly difficult to obtain foreign exchange in Guinea’s suffering economy. Due to government mismanagement, populist policies, corruption, a nearly 50% decrease in mining revenue, and a termination of nearly all foreign aid, Guinea is likely nearing a foreign exchange crisis. The World Bank estimates that the current availability of foreign-exchange reserves is equivalent to less than one month of import cover.
The Guinean Franc uses a managed floating exchange rate. Over the past year, the spread between the black market rate and the official rate has been as high as 25%. The average official exchange rate for 2009 was around 4,700 to the dollar, though the rate has seen a considerable rise since August 2009. The flourishing parallel currency market, with an average 2009 exchange rate of 5,500 to the dollar, exists due to the under-valuation of the official rate, the difficulty in buying foreign exchange to complete transactions at the Central Bank, and the general informal nature of the majority of Guinea’s commercial transactions. The few commercial banks in Guinea are dependent on the Central Bank for foreign exchange liquidity, making large transfers of foreign currency difficult. In addition, banking regulation, while technically possible, is in practice virtually non-existent. Banking regulations are part of the legal framework; however, lax enforcement is the rule rather than the exception, due to the lack of funding and political will.
Laws governing takeovers, mergers, acquisitions, and cross-shareholding are limited to rules for documenting financial transactions and filing any change of status documents with the economic register. There are no laws or regulations that specifically authorize private firms to adopt articles of incorporation that limit or prohibit investment.
Investors report frequent convocations to Camp Alpha Yaya to discuss investments with Dadis Camara and his inner circle. Often waiting several hours for the meeting to begin, the businesspeople were often demanded to provide massive donations to different campaigns supposedly championed by the CNDD. Others were convoked simply so the junta leader can scold them for any number of issues that are often based in populist rhetoric and expropriation threats.
Competition from State-Owned Enterprises (SOEs)
There are very few fully SOEs in Guinea. While there are some partially SOEs in the telecommunications and mining sectors, there are no formal barriers to competition in those industries. In fact, there are several companies that are currently working in direct competition with these partially SOEs. However, both the electricity and water companies were fully nationalized in 2002, and while there is no formal barrier to competition in these industries, the GOG has refused several private operating proposals that would compete with the national companies.
Corporate Social Responsibility
Several international companies, particularly in the mining sector, employ corporate social responsibility programs (CSR). However, most local companies do not practice CSR. Despite international organizations' efforts to encourage CSR in Guinea, the government has no programs to promote or educate the local business community about CSR.
Political insecurity, along with corruption, is the most significant barrier to investment in Guinea. Following the death of President Lansana Conte on December 22, 2008, a military junta calling themselves the National Council for Democracy and Development (CNDD) took power in a bloodless coup. Immediately following the coup, the USG suspended all but its humanitarian and election assistance to Guinea. The African Union (AU) and the Economic Community of West African States (ECOWAS) suspended Guinea’s membership pending democratic elections and a relinquishment of power by the military junta. Upon taking power, the CNDD and it leader Moussa Dadis Camara, promised to hold democratic elections under which no one from the CNDD would run as candidate. By August 2009, the junta had employed tactics to consolidate power within the government and bolster Camara as a future candidate in the upcoming elections.
After months of public opposition to the tactics of the military regime, the Forces Vives, a group formed of political opposition, civil society, economic actors, and labor unions, organized a large rally at the capital’s soccer stadium to symbolize their rejection of Camara’s potential candidacy. Soon after the rally began within the stadium, members of the Presidential Guard, and elite force under the President’s direct control, entered the facility and opened fire on the crowd, killing at least 150 people and injuring over a thousand others. The Presidential Guard also publicly raped many of the female protestors, sometimes using guns or knives to execute the rapes. In the aftermath of the massacre, the military continued to target political and economic opposition. Please see Human Rights Watch’s report on the massacre for further information on the subject (http://www.hrw.org/en/news/2009/12/17/guinea-stadium-massacre-rape-likely-crimes-against-humanity).
Much of the international community condemned the massacre and the subsequent gross human rights abuses. The European Union (EU) and the AU implemented targeted financial and travel sanctions against the regime. The USG also implemented travel restrictions on many members of the junta while ECOWAS and the EU both imposed an arms embargo on the country. The UN created a special mission of inquiry into the September 28 massacre, which entered the country in December 2009 to investigate the killings.
On December 3, Moussa Dadis Camara was shot by his Aide-de-camp Lt. Abubaker “Toumba” Diakite. The junta leader was immediately flown to Morocco for treatment. After over a month of recuperation in Morocco, Camara flew to Burkina Faso on January 13. On January 15, Camara, Burkinabe President Blaise Compaore, and Guinean Minister of Defense Sekouba Konate signed the Ouagadougou Accord, creating a transition government and naming Konate as the Interim President of Guinea. At the time of writing, the transition government has not yet been formed.
The political, economic, and security environments have deteriorated significantly since the December coup d’etat. The military has frequently acted with impunity and recent political violence has only increased the instances of armed robbery and violent crime by the military. The Ambassadors to Ghana and Mali have both been robbed and carjacked by members of the military. The Ambassador to France was also recently targeted by the military while traveling in his personal vehicle, though no one was injured in the incident.
Several Guinean business owners have been specifically targeted and robbed by members of the military while others have been harassed into providing “donations” requested by the CNDD and the military. Foreign business owners report being repeatedly called in to the Office of the President, Camp Alpha Yaya (a military camp where the CNDD is based), and other ministries where they are threatened and coerced.
The deteriorating security situation has caused several mining and construction companies to draw down their staffing levels and evacuate staff family members. Directly after the September 28 massacre and the assassination attempt on the junta leader, business operations throughout the capital city came to an almost complete halt. Port operations have also slowed significantly since September, with many of Conakry’s importers limiting their orders in preparation for further insecurity.
Political upheaval is not new in Guinea. In January and February of 2007, street demonstrations and a two-month general strike solicited a violent response by the military that resulted in the killing of at least 137 and the injury of at least 1700 others, many of whom were unarmed civilians. The violence ended with the appointment of a consensus Prime Minister in late February of that year. A military mutiny in May 2008 over a disputed pay increase led to several deaths as well.
Although none of these violent events specifically targeted American or foreign investors, they were not only disruptive to business, but also eroded the already tenuous security situation under which investors must operate in Guinea. Although the country’s political future remains unclear, movements toward a civilian-led transition government may improve the investment climate in 2010. The Ouagadougou Accord stipulates democratic elections by July 2010 in which no member of the CNDD or the transition government can run for office. It is still too early to tell whether elections will necessarily change the investment climate in Guinea, but movements to date appear positive.
Poor governance, which includes corruption, is a serious barrier to investment in Guinea. The business and political cultures, along with low salaries, combine to encourage corruption throughout Guinea’s government system. Business is routinely conducted through the payment of bribes rather than by the rule of law. It is common for government officials to demand everything from money to gasoline for their personal use. Though it is illegal to pay bribes in Guinea, there is no enforcement of these laws. In practice, it is difficult and time-consuming to conduct business without paying bribes in Guinea, which as they must comply with the Foreign Corrupt Practices Act, leaves U.S. companies at a disadvantage. Enforcement of the rule of law in Guinea is irregular and inefficient. Businesses report that one must pay a bribe to see that law is enforced, and then a bribe is paid by the offender to reduce or eliminate any penalties.
Upon taking power, the CNDD announced its intention to eliminate corruption in Guinea. These reforms have yet to come to fruition, and businesspeople still report corruption as a major obstacle to investment. In June, the CNDD initiated a public campaign to bolster the electricity and potable water supply throughout Guinea. As part of this proposed plan, the CNDD demanded that all businesses attend a speech given by Camara at a local government building. An official communiqué, read on the radio once on the night before the meeting, claimed that any foreign business who did not attend the speech would be immediately asked to leave the country. At the event, the junta leader announced that all businesses were obligated to give a significant “donation” to the Government of Guinea in order to improve the electricity and water infrastructure. The event lasted several hours and many of the businesses were visited and threatened by military officials until they paid the “donation.”
Bilateral Investment Agreements
Countries with bilateral investment protections agreements with the Guinean government include Belgium, China, France, Germany, Great Britain, Iran, Italy, Japan, Morocco, Nigeria, Saudi Arabia, Senegal, South Africa, South Korea, Switzerland, and Tunisia. See next section for U.S.-Guinea private investment guarantees.
OPIC and Other Investment Insurance Programs
Guinea and the U.S. have an agreement on private investment guarantees in effect since 1962, making investors eligible for Overseas Private Investment Corporation (OPIC) insurance programs.
Guinea’s workforce is largely uneducated. Education in Guinea is compulsory for six years - to the end of primary school - but enforcement mechanisms are limited. In 2009, Guinea scored 173rd out of 177 rated countries in UNESCO’s literacy index, as only 29.5% of Guinea’s population is considered literate.
Guinea’s Labor Code strictly protects the rights of employees and is enforced by the Ministry of Social Affairs. The Labor Code sets forth guidelines in various sectors, the most stringent being the mining sector. Guidelines cover wages, holidays, work schedules, overtime pay, vacation, and sick leave. The National Assembly increased employer rights to hire and fire under the 1999 revision of the Labor Code. Employers no longer need to go through the labor office in order to contract or terminate the work of an employee, and now there is no obligation to hire only Guinean employees. Some employers, including the Guinean Government, avoid paying mandatory benefits by employing people as contractors for years at a time rather than as permanent employees. Many foreign managers cite incidents of theft, low productivity, and difficulty in terminating an employee as major problems. On average, employers must contribute 18% of the value of the employees’ salary toward social security, with an employee contribution of 5%. The Labor Code outlines general guidelines related to health and safety, but the Guinean government has yet to articulate a set of practical occupational standards. The government has limited resources for this activity.
The Labor Code legalized employee labor unions and the right to collective bargaining. In 2006, Guinea’s labor union gained strength and the independent unions joined with the National Labor Confederation (the government union) to form a union coalition that represented a vast majority of organized labor. The unions also had large numbers of retirees and workers in the informal sector supporting their actions. There are about six major unions with national membership, and another eight or nine local unions in Conakry, all of which lobby for improved wages, benefits, and working conditions. They are also often used as avenues for political dissent.
The law provides that the government should support children’s rights and welfare, although in practice, the government does not have the capability, or the political will, to curb the high rate of child labor. By law, the minimum age for employment is 16 years. Apprentices may start to work at 14 years of age. Workers and apprentices under the age of 18 are not permitted to work at night, for more than 10 consecutive hours, or on Sundays. The Labor Code also stipulates that the Minister of Labor maintain a list of occupations in which women and youth under the age of 18 cannot be employed. In practice enforcement by ministry inspectors is limited to large firms in the modern sector of the economy.
Government policy provides for tuition-free, compulsory primary school education for six years, and an average of 79% of children were enrolled in primary school in 2008. However, only around 71% of girls attended primary school.
Foreign-Trade Zones/Free Ports
There are no Foreign-Trade/Free Ports in Guinea
Foreign Direct Investment
Statistics on FDI are difficult to obtain in Guinea. Although there are no statistics available for FDI in 2009, experts assess that they will show a significant decrease in foreign investment from the historically high $1.35bn 2008 level (around 4% of GDP). The 2008 spike from around US$380m in 2007 was caused by a growing interest in Guinea’s mineral resources. Political instability and falling global commodity prices likely contributed to a sharp drop in FDI and precipitated an estimated 4.5% decrease in GDP in 2009. Despite a rise in FDI from 2004-2008, Guinea suffered a sharp decrease in new FDI in 2009 due to political instability and the government’s public review of foreign contracts.
In 2004, the Guinea Alumina (GAC) joint venture (with investments by Global Alumina, BHP Billiton, Dubai Aluminum, and Abu Dhabi’s Mubadala Development) began feasibility studies on a 650 sq. km bauxite mining site. In 2008, the company began the “early works” phase of their project which includes infrastructure construction on the mining site, the refinery facility, and a transportation network. Alcoa and Rio Tinto-Alcan are also in the early construction phase of a smaller refinery in the area. Taken together, they represent the largest private investment in sub-Saharan Africa since the Chad-Cameroun oil pipeline, and could see a 40% increase in Guinea’s bauxite production upon completion. The $5 billion GAC project is currently moving slowly due to falling commodity prices and massive government intervention. Though production from the site was originally scheduled to commence in mid-2012, it is now not likely to reach the production stage until 2014 or 2015. GAC announced in November that they plan to continue with the construction of their refining plant in 2011.
Rio Tinto signed an agreement with the GOG in 2003 to develop a 110 sq. km iron mine in Simandou. The company has invested nearly $500 million to date in feasibility studies and early development of their mining site. In December 2009, the government announced that it would be revoking part of Rio Tinto’s Simandou contract. The case is still under consideration in Guinean court. Due to the security situation, government interference, and global commodity prices, Rio Tinto has temporarily slowed its operations at Simandou.
Three gold mining companies, Societé de Miniére de Dinguiraye (SMD), Societé Aurifére de Guineé (SAG – a subsidiary of AngloGold Ashanti), and SEMAFO have significant investments in Guinea’s interior, though small-scale artisanal mining is also a major factor in that sector. Guinea’s largest diamond mine, formerly operated by AREDOR, was recently awarded to Bouna Mining Corporation led by CNDD advisor Bouna Keita. Though the purchase reportedly cost the Corporation $30 million, the bidding process was not transparent or public. A majority of Guinea’s diamond production is artisanal.
Hyperdynamics, a U.S. oil exploration company, is in the process of relinquishing 64% of their 31,000 sq. km offshore oil concession to the government. Many other companies have expressed interest in the relinquished concession, but there is speculation that the CNDD has already awarded much of the acreage to China Sonangol, a joint venture between the Angolan national oil company and Duyuan International Development. Duyuan is the main shareholder in the Chinese International Fund (CIF), a company with which the Government of Guinea signed a Memorandum of Understanding for a nearly US$2.2 billion mining and infrastructure deal in July, 2009. On October 10, the Ministry of Mines announced that the government had negotiated a deal with the CIF totaling US$7bn over five years. Although the terms of the deal have not been released, the MOU stipulates for a joint venture between the CIF, China Sonangol, and the government of Guinea. The new oil company which is to be named the Guinean Development Corporation (GDC) will be 15% government owned with the option of further expansion. Local media reports that the new oil company has received the rights to much of Hyperdynamics’ former offshore oil concession, though these reports have not been verified by the GOG.
The MOU also outlines a CIF funded plan for extensive infrastructure development including the construction of railways, roads, ports, hydroelectric power stations, city transportation infrastructure, and the creation of a national airline. No specific timeline for funding has been publicly announced. If the funding is released, it will represent the largest deal negotiated under the junta regime.