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Guinea

Mining and Infrastructure

February 2010

The World Bank

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Guinea: Mining and Infrastructure

2

Acknowledgements

This Note was prepared by a team including Boubacar Bocoum (Senior Mining

Specialist, COCPO), Boutheina Guermazi (Senior ICT Specialist, CITPO), Dana

Rysankova (Senior Energy Specialist, AFTEG), Jane Hopkins (Senior Agriculture

Economist, AFTAR), Katharina Gassner (Senior Economist, FEUFG), Pascal Dooh-Bill

(Finance Specialist, WBIPP), Peter Kristensen (Sector Leader, AFTEN), and Silue Siele

(Senior Transport Specialist, AFTTR).

A consultant team in Guinea including Habib Diallo for the energy sector, Ibrahima

Soumah for the mining sector, and Bahna Sidibe for the transport sector researched and

compiled available sector data in the country which formed the basis for the analysis

undertaken in this Note. World Bank Country Manager, Siaka Bakayoko, provided

guidance to the team and facilitated interaction with the Government Authorities, and

Koffi Ekouevi kindly provided comments to the final version.

Among many others, the team would like to particularly thank the many participants who

took part in the two-day workshop convened by the Government on December 10 and 11,

2009 focusing on Mining and Infrastructure.


3

Contents Executive Summary ............................................................................................................ 4

1. Guinea’s Mining and Infrastructure Challenge ......................................................... 10

1.1 Country Overview ................................................................................................................ 11

1.2 Infrastructure in Guinea and the link to development ....................................................... 11

1.3 The role of the private sector .............................................................................................. 17

2. The Mining Sector in Guinea .................................................................................... 19

2.1 Overview .............................................................................................................................. 19

2.2 Guinea’s mining potential ................................................................................................... 20

2.3 Harnessing the mining sector for infrastructure investment .............................................. 23

3. Mining and Energy .................................................................................................... 26

3.1 The potential for hydro power ............................................................................................ 26

3.2 The importance of national and regional interconnection ................................................. 29

3.3 Recommendations ............................................................................................................... 30

4. Mining and Transport ................................................................................................ 31

4.1 The transport needs ............................................................................................................ 31

4.2 Recommendations ............................................................................................................... 33

5. Using Guinea’s mining sector as platform for infrastructure development .............. 35

5.1 De-enclaving existing infrastructure ................................................................................... 35

5.2 The mining sector as provider of financing for new infrastructure .................................... 36

5.3 Using royalties to fund public infrastructure ...................................................................... 37

5.4 Recommandations ............................................................................................................... 38

6. Using Infrastructure as a Vehicle for Sustainable Development ............................... 40

6.1 Addressing Economic Geography questions ....................................................................... 40

6.2 Addressing the role of Agriculture ...................................................................................... 40

6.3 Addressing sustainable development questions: environment and social inclusion ......... 41

6.4 Addressing Governance, Transparency, and Anti-corruption ............................................. 43

7. Next steps .................................................................................................................. 45

Annex A1 Additional resources ........................................................................................ 47

Annex A2 World Bank Contacts ...................................................................................... 48

Annex B: Maps ................................................................................................................. 49


4

Executive Summary

Guinea has exceptional subsoil potential. The bauxite deposits of Guinea are estimated at

about one third of the world’s known reserves. Guinea has also about 3 billion tons of

high grade iron ore deposits, gold, potential of 30 million carats of jewelry-quality

diamonds, and several important deposits of silver, zinc, uranium, and platinum, as well

as a potential for oil. The mineral sector has an excellent opportunity to serve as driver

for growth in the country, and the infrastructure required for developing the mineral

sector could well serve for developing other sectors, including agriculture and forestry,

for which the country has also high potential and natural endowments.

In the past, and still today, the infrastructure supporting the mineral sector has mainly

been purpose-built by private mining companies, but is lacking the integrated vision that

would enable economic growth and social development for the broader population, such

as access to roads for agricultural and trade purposes and multi-purpose power stations.

Investment prospects in the mining industry are announced to be considerable, including

by new partners such as China. Depending on commodity prices and the investment risk-

level of the country, potential investments have been estimated to be as much as US$15

to 20 billion. But, there is very little fiscal space in the Government’s own budgets to

initiate major investments. In this situation, it seems appropriate to explore options for

the government to enter into partnership with the private sector to harness the potential

for mining infrastructure to serve multiple purposes.

In order to achieve public-private partnerships, a number of issues need to be addressed

even once agreement on collaboration in principle has been achieved. The identification

of potential multi-purpose infrastructure projects requires clear articulation of a strategy

forward and the setting out of capacity needs and service specification on public and

private side. For the Government, this calls for planning and prioritization of projects and

for preparing and committing to a supporting legal and regulatory framework. For the

private companies, information sharing and willingness to start a dialogue with the

Government are the starting points. Incentives for the private sector to assume the

additional risks of constructing and (where relevant) maintain and operate multi-purpose

infrastructure assets need to be found and addressed early on.

In the particular context of Guinea, options for cross-border solutions to infrastructure

challenges need to be incorporated into all forward planning and project identification

activities. The importance of cross-border infrastructure stems from the potential for

large-scale projects, in particular hydro generation, and the location of the country which

favors transit transport, notably from land-locked neighboring countries to the sea ports


5

on the coast. In a recent Africa wide study, the benefits from regional power integration

alone were estimated at $2 billion/year for the continent.1

The way forward for infrastructure development in Guinea requires an open discussion of

governance issues, in particular given the large role played by extractive industries in the

country. The overall country risk matters, in particular after recent events, but there are a

number of initiatives Guinea benefits from regarding the governance agenda including

the Governance of the Mineral sector – Value chain approach (see separate report), and

the West Africa Mineral Sector Strategic Assessment – WAMSSA (see separate report).

More generally, supporting improved public administration and management beyond

infrastructure should be a strategic aim for the re-engagement of the international

community in Guinea.

In setting out the way forward to initiate the infrastructure debate, it is useful to

distinguish short- and longer-term activities. Table ES1 gives a summary view of the

recommended approach. Key points can be summarized as follows:

Short term activities:

1. Focus on high impact/high feasibility projects

In the short term, the Government and development partners should concentrate

public resources and donor assistance on infrastructure projects which satisfy the

twin-conditions of (i) having a high growth and/or development impact, and (ii)

display advanced preparation and reasonable ease of implementation. Among these

projects are

a) The Western Bauxite Corridor (Boke Pole)

o Rail and port infrastructure (new rail tracks and interconnection with

Anaim rail line; new port facilities in Kamsar)

o Thermal generation plant associated with new planned aluminium plant

(Sangaredi, Kamsar, Dian-Dian)

o Hydro-generation plant Kaleta

b) The Iron Ore Eastern corridor (Nzerekore Pole), in particular discussions

surrounding the Trans-Guinean rail (very long-term), and more importantly

the recent announcement of BHP Billiton and Arelor Mittal about a possible

joint venture related to iron ore in southern Guinea and Northern Liberia,

which is expected to become effective in August 2010.

c) In addition, known bottlenecks should be added to the list of high impact

projects. Among these are, for example,

o road links connecting the country with Cote d’Ivoire, Liberia and Sierra

Leone;

1 World Bank (2009) Africa’s Infrastructure: A time for transformation, Overview.

http://www.infrastructureafrica.org


6

o power transmission lines to tap into the regional network and the West

Africa Power Pool.

2. Initiate dialogue with mining companies on sharing infrastructure

Given the limited resources available to the government from its own budget and

donors, entering into dialogue with private mining operators regarding opening and

possibly expanding purpose-built infrastructure is recommended. This requires at a

minimum i) a discussion of options for exchanging and using mining royalties to fund

infrastructure, and ii) the preparation of the legal and regulatory framework to

implement a mining-infrastructure PPP (public-private partnership).

Shared power generation plant, benefitting mining purposes and local communities,

are relatively tractable projects that can lend themselves to narrowly-defined

negotiations and contracts between the private and public sector. Nonetheless, it

should be envisaged that only the construction, and not the long-term maintenance

and operation of the infrastructure will be taken on by the private sector until the

stability of the political situation and government commitment to public-private

contracts is tested further.

3. Issue a strong policy statement showing commitment and a credible plan

forward

Finally, it is highly recommended that the government issues a strong policy

statement in the short term, setting out a credible approach to the infrastructure

challenge and showing its active engagement on the issue.

Medium to long term activities

4. Develop sector investment plans

In parallel with addressing the investment needs sketched out above, it is

recommended that the government agree on a medium to long-term national

infrastructure policy and associated investment plan in the different sectors. Spelling

out the government’s policy objectives explicitly will allow prioritizing among the

many investment needs the country faces and provide the basis for preparing the

medium to long-term infrastructure project pipeline. A national infrastructure strategy

for Guinea should also be aware of the opportunities offered by regional initiatives,

such as regional power pools harnessing the region’s potential for large scale hydro

generation, and increased road and rail connectivity with neighboring countries to

enhance trade channels.

The implementation of the medium- to long-term strategy requires securing needed

funds from internal and external public and private sources, and capacity building in

the government to ensure appropriate planning, execution and monitoring of policy

objectives and investment projects.

5. Addressing performance gaps of existing infrastructure service providers


7

Assessing the performance of existing service providers, in particular of EDG in the

power sector, and developing a program to address the most pressing shortcomings

should be an integral piece of the strategy forward. Strengthening the technical and

financial capacities of EDG will also allow the company to assist in activities of

national planning of the power grid and generation capacity and be a partner in the

negotiations with the private sector.

6. Know your terrain – Spatial analysis

A spatial analysis can assist the government with setting priorities by formulating the

trade-offs involved in policy choices such as concentrating resources in a small

number of mining areas compared to a strategy aimed at enhancing spatial equity.2

7. Institutional, legal and regulatory framework

It is necessary to review the existing legal and institutional framework to gain a clear

picture of the available options for engaging the private sector in provision of

infrastructure other than via mining companies. This could imply

o private participation in form of Independent Power Producers (IPPs), or water

and power concessions, in particular to maintain and operate infrastructure

built by mining companies whose core strength is not in operation of utility

services;

o the possibility of agribusiness engaging in a PPP arrangements for irrigation

or feeder roads

At the beginning of the engagement with the private sector, is possible to achieve a

limited number of contracts on a one-by-one basis, often with the private sector being

able to dictate the conditions under which it will engage in a joint project with the

government. It is likely that the first public-private contracts concluded in the country

will imply a significant risk premium for the private sector to compensate for political

and economic risk and the risk of an untested government represents. If the situation

improves going forward, the one-by-one approach is costly and inefficient and a

coherent legal and regulatory framework allowing the preparation of a project

pipeline should be developed.

8. Governance framework

The political situation following the December 2008 events has increased the risk profile

of the country and led to a slow-down or halt of planned infrastructure projects.

Moreover, addressing the infrastructure challenge is made more difficult by the three-fold

crisis of food, fuel and financial crisis having reached developing countries in 2008.

2 A team experienced in assisting with this kind of analysis could be mobilized within a short timeframe

from the World Bank’s Spatial Team. The GIS platform assembled for a host of African countries

(including Guinea) under the Africa Infrastructure Country Diagnostic AICD initiative could be used as

starting point for this endeavor. See http://www.infrastructureafrica.org.


8

Previous crisis have shown that infrastructure is among the expenditure categories cut

most severely by governments under financial stress.3 But such behavior comes at great

development cost as subsequent rehabilitation of facilities is exponentially more costly

than regular maintenance; in the medium and long term, inadequate infrastructure slows

economic development and hinders poverty reduction.

The discussion and recommendations provided in this note help identify priorities and

next steps as the country gets back on development track following anticipated 2010

elections.

3 World Bank and IMF Global Monitoring Report 2009; World Bank SDN INFRA note 2009.

Table ExSum 1: Roadmap for the Way Forward

Overarching Objective Next steps (short term activities)

Medium to Long term activities

Strategy Provide policy direction and framework

Issue policy statement on highest level:

set out planned government approach to infrastructure challenge;

articulate a credible strategy going forward;

demonstrate commitment to meeting objectives

Develop sector strategies for each infrastructure sector

Planning Identify infrastructure needs and develop national investment plan

Identify infrastructure bottle-necks the easing of which would have high impact in terms of growth

Review existing

Advanced planning

Identify potential for multi-purpose infrastructure for these

Earmark scarce public funds for

Identification of high-impact projects

Spatial analysis to identify ‘growth corridors’ and priority investment

Private sector dialogue

Achieve mutually beneficial long-term partnership with private sector

Initiate dialogue

Determine mutual standpoint

Legal and regulatory framework

Reduce investment uncertainty

Engage technical assistance for one-off contractual

Review Doing Business environment and develop action plan

Governance Enhance Transparency and accountability in the mining sector

Engage technical assistance to implement a EITI++ approach

Provide TA for negotiation of new mineral sector agreements

Establish a social accountability mechanism

Build capacity of government agencies

1. Guinea’s Mining and Infrastructure Challenge

After a brief general overview, this note will concentrate on the mining, energy and

transport sectors. This is due to the importance of the extractive industry for economic

growth in Guinea and the energy and transport infrastructure needs associated with

mining activities. Energy and transport have broad areas of influence on growth and

social development but also carry risk in terms of environmental and social impacts.

Guinea is a country of about 10 million inhabitants that is regarded as one of the

potentially richest countries in West Africa, thanks to its abundant subsoil potential and

natural endowment for agriculture, as well as for its hydro resources. Recent civil

unrest in Guinea has interrupted the strategic approach to the country’s development

challenges. The country is now in the process of reengaging with development partners

and private investors. Presenting a challenge for any growth strategy formulated going

forward, Guinea has sparse infrastructure networks, which are currently incapable of

providing a broad platform for economic resurgence.

Figure 1: Administrative Map of the Republic of Guinea


11

1.1 Country Overview The last Country Assistance Strategy the World Bank published for the Republic of

Guinea expired in FY06.4 Similar to today, the growth potential of Guinea was

identified as lying in its abundance of minerals, its excellent conditions for agriculture

and its strategic location that favors trade. Internal and external constraints were

identified as keeping Guinea from realizing its potential, including an inhospitable

investment climate due to a weak regulatory framework, institutional and regulatory

constraints on trade and regional integration, and overall weak governance. Exogenous

factors increasing the country’s vulnerability to shocks included the continued

instability in the sub-region and heavy dependence on a single commodity, bauxite, for

export revenue.

Recent political developments including the 2008 coup d’état has put the development

of the country on partial and temporary hold. Past events notwithstanding, once the

political situation has improved sufficiently to attract investors, the country could

catalyze growth in several areas, including:

Mining—Guinea has exceptional subsoil potential. The bauxite deposits of Guinea are

estimated at about one third of world’s known reserves. Guinea has also about 3 billion

tons of high grade iron ore deposits, Gold, potential of 30 million carats of jewelry-

quality Diamonds, and several important deposits of silver, Zinc, Uranium, and

Platinum, as well as a potential for oil.

Agriculture and water resources—Guinea has an abundant natural endowment for

agriculture, forestry and tree crops. The variety of geographic regions and climate

endows Guinea with strong agricultural potential: Guinea enjoys among other things

large areas of arable lands, heavy rain falls and immense water resources which can be

harnessed for power generation. In addition, Guinea has 300km of sea coast that offer

transportation facilities and fisheries.

1.2 Infrastructure in Guinea and the link to development Guinea faces infrastructure challenges linked to it being a low-income, post-conflict

and resource-rich country, a situation aggravated by low population density and

disperse habitat.

Reliable and affordable infrastructure services are critical for sustainable development,

and a necessary condition for reaching economic, social and environmental goals.

Infrastructure has received considerable attention in the context of reducing poverty

and inequality – for example, Dercon et al (2007) estimate that changes in access to

quality roads increased consumption growth in rural Ethiopia by 16% and reduced

poverty by 7%.5 Indirectly, infrastructure influences the achievement of most MDGs,

be they related to outcomes in health, education, gender or income poverty, through its

4 World Bank Country Assistance Strategy for The Republic of Guinea, June 10, 2003.

5 Dercon, Stephan, Daniel Gilligan, John Hoddinott and Tassew Woldehanna (2007), ‘The Impact of Roads

and Agricultural Extension on Consumption Growth and Poverty in 15 Ethiopian Villages’, CSAE WPS

2007-01, University of Oxford, UK.. 5


12

effect on household opportunities. Each year 529,000 women die due to childbirth

complications. Most of these deaths could be prevented through timely access to

essential childbirth-related care, for which road access is crucial.6 In Guinea,

infrastructure accessible to the population at large is lagging due to years of unrest and

instability.

A recent report on the state of infrastructure in 28 African countries finds that by just

about every measure of infrastructure coverage, African countries lag behind their

peers in other parts of the developing world.7 There is however considerable diversity

within the continent and it is helpful to classify countries into types according to their

income level, their political stability and their access to natural resources which

provide foreign currency income to governments. A difference between low- and

middle-income countries can be expected in terms of the state of their infrastructure

sectors.

It is striking, however, to what extent the resource-rich countries lag behind others in

their infrastructure endowment, despite their greater wealth. Guinea finds itself in this

category of countries. In recent years, resource-rich countries have devoted their

additional wealth not to infrastructure development but to paying off their debt. The

governance challenges in a resource-rich environment may also prevent the

transformation of this wealth into infrastructure.

Table 1 below shows summary statistics illustrating the infrastructure gap8 experienced

by low-income Sub-Saharan countries, and in particular the category of resource-rich

countries and fragile countries which have been or still are experiencing conflict, such

as has been the challenge for Guinea. It is interesting to note that oil-exporting

countries have worse infrastructure indicators, in particular in the transport sector than

their peers, suggesting that revenue from natural resources do not necessarily get

invested in these sectors. Countries in conflict fare predictably worst on most

indicators.

6 Wagstaff, A., Cleason, M. 2004, The MDGs for Health: Rising to the Challenges, World Bank,

Washington DC. 7 Africa Infrastructure Country Diagnostic (AICD) 2009, http://www.infrastructureafrica.org.

8 Africa Infrastructure Country Diagnostic (AICD) 2009, http://www.infrastructureafrica.org. Guinea

specific information on Infrastructure gap is in preparation and expected to be available in late 2010.

http://www.infrastructureafrica.org/


13

Table 1: Africa’s Infrastructure Deficit

Note: Road density is in road kilometers per 1,000 kilometer squared (2001); mainline, mobile and

internet density is in subscribers per thousand population (2004); electrical generating capacity is in

megawatts per million population; electricity, water and sanitation coverage are in percentage of

households with access.

Source: Yepes, T., Pierce, J. and Foster, V. 2008. Making Sense of Sub-Saharan Africa’s Infrastructure

Endowment: A Benchmarking Approach. AICD Working Paper 1, World Bank, Washington,

D.C.

In addition to lack of availability of infrastructure in general, Guinea also suffers from

low quality of available services which in turn represent a high cost of doing business

for enterprises. Figure 2 shows the result of enterprise surveys with participating firms

reporting that there are significantly more power outages per month in Guinea than in

other comparable countries in SSA; that firms lose more sales revenue due to outages;

and that the delay in obtaining a mainline telephone connection in Guinea is longer that

the average of Sub-Saharan Africa.

Normalized units Sub-Saharan oil-exporting countries

Sub-Saharan countries in conflict status

Sub-Saharan low-income countries

Other low-income countries

Density of paved road network

14 12 31 134

Density of total road network

70 135 137 211

Mainline density 16 15 10 78

Mobile density 118 44 55 76

Internet density 1.7 1 2 3

Electrical generating capacity

66 39 37 326

Electricity coverage

26 10 16 41

Water household access

59 52 60 72

Sanitation household access

34 27 34 51


14

Figure 2: Quality of Infrastructure in Guinea

Source: Enterprise Surveys, www.enterprisesurveys.org.

Lack of financial resources hampers the expansion of capital-intensive infrastructure

networks and in many low-income countries, governments already spend significant

shares of their GDP on infrastructure and their needs still outstrip existing capacity.9

Geography and population patterns play a role in the particularly challenging situation

of infrastructure in the sub-region in general, and Guinea’s low population density

makes the country more particularly representative of the challenge of geography. The

low economic density makes transport networks and power grids which exhibit

economies of scale and density more expensive to build and maintain (Figure 3).10

Eberhard et al (2008) report that 21 of 48 Sub-Saharan countries have national power

systems that fall below the minimum efficient scale of 200MW for electricity

9 Each year developing countries require between 7% and 9% of their GDP for both maintaining existing

infrastructure and augmenting it to respond to pressing development needs, yet only half of the required

amount is actually spent. See World Bank (2008) Sustainable Infrastructure Action Plan FY09-11 10

Ramachandran Vijaya, Alan Gelb, Manju Kedia Shah (2009), Africa’s Private Sector –What’s wrong

with the Business Environment and what to do about it, Center for Global Development, Washington DC.

0

20

40

60

80

100

120

Number of Power Outages in aTypical Month

Value Lost Due to PowerOutages (% of Sales)

Delay in Obtaining an ElectricalConnection (days)

Average number of Incidents ofWater Insufficiency in a TypicalMonth*

Delay in Obtaining a WaterConnections (days)

Delay in Obtaining a MainlineTelephone Connection (days)


15

generation.11

As a result, their operating costs are relatively higher (US$0.25 per

kilowatt hour compared with US$0.13 found in the continent’s larger power systems).

Figure 3: Link between economic density and infrastructure

Source: World Development Indicators 2008 Edition.

But challenges not related to capital spending are of equal importance in addressing the

future of infrastructure: inadequate sector policies and planning capacities slow

investment programs; service providers are plagued by systematic inefficiencies and

low quality of service; below-cost tariffs make revenue streams insufficient to support

even the operation and maintenance of existing assets; weak governance and regulatory

frameworks lead to misuse of resources; subsidies supposed to address affordability

concerns are ill targeted. Box 1 summarizes the messages on funding needs and

efficiency gaps from a recent comprehensive study of Infrastructure in Africa – the

Africa Infrastructure Country Diagnostic (AICD).

11

Eberhard, A., Foster, V., Briceño-Garmendia, C., Ouedraogo, F., Camos, D. and Shkaratan, M. 2008.

Underpowered: The State of the Power Sector in Sub-Saharan Africa. AICD, Background Paper, World

Bank, Washington, D.C.

0 200 400 600 800 1000 1200

Guinea

SSA

LICs

China

India

High Income

GDP($) per 1,000 sq. km


16

Box1: The Africa Infrastructure Country Diagnostic – an initiative to build the knowledge base for effective action http://www.infrastructureafrica.org/aicd/

“Modern infrastructure is the backbone of an economy and the lack of it inhibits economic growth. This

report shows that investing more funds without tackling inefficiencies would be like pouring water into a

leaking bucket. Africa can plug those leaks through reforms and policy improvements which will serve

as a signal to investors that Africa is ready for business.”

Obiageli Ezekwesili, World Bank Vice President for the Africa Region

The 2009 Africa Infrastructure Country Diagnostic (AICD) is a study conducted with broad multi-donor support in

24 African countries. It shows that the poor state of infrastructure in Sub-Saharan Africa - its power, water, roads,

and information and communications technology (ICT) - cuts national economic growth by 2 percentage points

every year and reduces business productivity by as much as 40 percent. Africa has the weakest infrastructure in

the world, but ironically Africans in some countries pay twice as much for basic services as people elsewhere.

The report estimates that US$93 billion are needed annually over the next decade, more than twice what was

previously thought. Almost half of this amount is needed to address the continent’s current power supply crisis

that is hindering Africa’s growth. The new estimate amounts to roughly 15 percent of the continent’s gross

domestic product (GDP), comparable to what China invested in infrastructure over the last decade.

The study found that existing spending on African infrastructure is much higher than previously known, $45

billion a year. Also surprising was the fact that most of this is domestically financed by African tax payers and

consumers. The study also found that there is also considerable wastage to address; a number of efficiency

improvements could potentially expand the available resources by a further $17 billion.

However, even if major efficiencies are gained there is still a funding gap of $31 billion every year, much of it for

power and water infrastructure in fragile states. Relative to the size of their economies, the funding gap is daunting

for the region’s low-income countries (who would need to spend an additional 9 percent of their GDP) and

particularly for the region’s fragile states (who would need to spend an additional 25 percent of their GDP).

Resource-rich countries like Nigeria and Zambia face a more manageable funding gap of 4 percent of GDP.

Particularly now with the global financial crisis, investing in African infrastructure is critical for Africa’s future.

The report recommends addressing the $17 billion annual efficiency gap and closing the remaining $31 billion

annual funding gap for African infrastructure. Closing the efficiency gap requires improving management of

utilities, ensuring adequate maintenance, promoting regional integration, recovering costs while recasting

subsidies to enable broader access, and improving allocation and spending of public resources. To close the

funding gap a wide range of sources will need, including public budgets, resource rents, local capital markets,

private sector and non-OECD finance, as well as traditional donor assistance.

Countries with the greatest infrastructure needs are often the least attractive to investors. Many of the countries in

Africa will probably take longer than a decade to catch-up on infrastructure and will probably have to use lower

cost technologies. But action is needed urgently, the report argues, and the global financial crisis is underscoring

the need for a massive effort to overhaul Africa’s infrastructure.

http://www.infrastructureafrica.org/aicd/


17

1.3 The role of the private sector

The private sector appears in two roles in the infrastructure market: as user and as

provider. Infrastructure is an important part of the investment climate enabling the

emergence and success of private entrepreneurs: readily accessible, reliable and

affordable infrastructure allows goods and services to reach markets and consumers in

less time and at lesser cost, resulting in a positive impetus on business development

through higher productivity, greater output and higher demand. Project analysis often

finds that infrastructure projects have high social rates of return. Economic Rate of

Returns of World Bank infrastructure projects have been shown to average above 20%

since the 60s and have been as high as 35% in recent years.12

However, in the context of Guinea, it is the potential of the private sector as provider of

infrastructure that stands out. Budget-conscious governments often turn to private

companies with the expectation to share the investment burden for the sector. The

involvement of the private sector in infrastructure takes a number of forms, spanning

the range from simple service contractor over concessionaire to full owner of assets.

Several general points are worth noting before discussing the particular situation of

Guinea:

Private funding of infrastructure remains limited: 70% of infrastructure investment

in the 2000-2005 period originated from governments and state-owned enterprises

(SOEs), only 22% from private sector and 8% from official development aid. In

low-income IDA countries, only 10% of infrastructure is funded from the private

sector.

The success of private sector involvement is strongly reliant on good institutional

and regulatory framework. Quality regulatory framework means not only that rules

have been legislated for, but that there is political commitment to them and that

they are enforced. Surveys of private infrastructure companies show that the

political risk is considered most important by them, outstripping market or macro-

economic risks.13

Private financing does not change the fundamentals of infrastructure provision:

customers or taxpayers (domestic or foreign) must pay for the investments, and

cost-covering tariffs with or without supplementing subsidies to address any real

affordability gap remain the center-piece of all sustainable infrastructure provision,

public or private.

Even without explicit investment role, the private sector can significantly mitigate

the efficiency gap observed in public service delivery. In a recent global study

12

World Bank (2006), Infrastructure at the Crossroads – Lessons from 20 Years of World Bank

Experience. 13

Von Klaudy Stephan, Apurva Sanghi, and Georgina Dellacha (2008), Emerging Market Investors and

Operators – A New Breed of Infrastructure Investors, PPIAF Working Paper No. 7.


18

comparing public and private operators in water and electricity distribution, private

operators were shown to bring about significant efficiency gains over and above

comparable public enterprises: a 12% increase in residential connections for water

utilities, a 19% increase in residential coverage for sanitation services, a 45%

increase in electricity bill collection rates, a 11% reduction in distribution losses, as

well as significant higher labor productivity measures.14

Private investment in infrastructure has undergone two large cyclical movements in the

past couple of decades: after being hailed as the solution to the infrastructure gap in

developing countries in the 1990s and rising to a peak in 1997, it dropped dramatically

at the beginning of this decade. Only in 2004 did private investment in infrastructure

accelerate again to reach a similar volume in 2007 as a decade earlier.15

An interesting

feature of the last recovery of private investment in infrastructure was that there were

many more South-South transactions, with private investors coming from India, Brazil,

China, Russia or the Philippines. A recent survey of Emerging Market Investors and

Operators (EMIOs), defined as companies domiciled/incorporated in low- and middle-

income countries, found that for infrastructure projects reaching financial closure in

1998-2006, these investors mobilized about 44% of private funds.16

From 2008 onwards, the private infrastructure market has suffered from the global

credit crisis and its impact is likely to be felt for some time into the future. The crisis

has made it more difficult for governments across the world to access finance and what

funds are available are more expensive: emerging market spreads reached their highest

levels in six years at the end of October 2008. While private infrastructure projects in

late stages of preparation were still closing in 2008 and 2009, they did so with higher

spreads. Countries with deep local financial markets, such as India, were turning to

domestic debt. However, in most developing countries, private infrastructure projects

are already facing liquidity constraints in reaching closure and rolling over debt. The

financial crisis is expected to reduce not only private investment, but also public aid

flows from bilateral and multilateral donors and IFIs. Even if ODA flows remain

steady or even increase, competing demands have risen.

In initiating a new phase in its infrastructure development, Guinea is adopting a

strategy building on its existing strengths: its wealth in natural resources. Given the

scarcity of resources it faces at this point in time, both due to is recent emergence from

civil unrest and the global situation, the Government is exploring the options of linking

the development of its mining industry with infrastructure service provision, in

particular in the energy and transport areas.

14

Gassner Katharina, Alexander Popov, and Nataliya Pushak (2008), Does Private Sector Participation

Improve Performance in Electricity and Water Distribution?, PPIAF Trends and Policy Options No 6. 15

For detailed information on private participation in infrastructure in all developing regions and sectors,

visit the PPI database: http://ppi.worldbank.org/ 16

Von Klaudy Stephan, Apurva Sanghi, and Georgina Dellacha (2008) as quoted in Footnote 12.


19

2. The Mining Sector in Guinea

2.1 Overview Guinea has ample subsoil resources and its mining sector has long acted as main source

of revenue for the government. Figure 4 illustrates the country-wide distribution of

various minerals.

Figure 4: Mining Resources in Guinea

Source: Consultant Report E.CO.GES – Bureau d’études, de conseil et de gestion (2008), Réalités et

Perspectives du Secteur Energétique.

Private mining concessions are exploited by a series of large international firms.

Companies investing in iron include BHP Billiton, Rio Tinto, Areva and Rio Tinto.

Primary investors in bauxite and alimina include Alcan, Alcoa, Rusal and Mitsubishi,

while Anglo Gold focuses on gold and De Beers on diamonds.


20

New partners such as China are playing an increasingly important role in the mineral

sector in Africa. According to a recent World Bank Report17

, China’s natural resource

imports from Sub-Saharan Africa reached US$22 billion in 2006. Petroleum alone

accounts for almost 80 percent of this trade, with the balance being timber and

minerals. As a result, China now depends on Africa for around 30 percent of its oil

imports, 80 percent of its cobalt imports and 40 percent of its manganese imports.

Overall, Angola is by far the largest trading partner, followed by Republic of Congo,

Equatorial Guinea, Sudan and South Africa.

2.2 Guinea’s mining potential According to consultant reports, there are 12 known mega projects in the mining sector

discussed in the country, as listed in Table 2. These projects represent possible

investment of the magnitude of US$15-20 billion, subject to fluctuation of commodity

prices, cost of energy/oil prices, availability of financing, and the level of risk investors

are willing to take in Guinea (in the recent past, the political risk has outweighed the

appetite of investors).

Figure 5 presents a map of the location of the projected investments.

17

Building Bridges: China’s Growing role as Infrastructure Financier for Sub-Saharan Africa, World Bank

2008


21

Table 2: Prospected mining investment in Guinea (mega- projects only)

Project Resource Strategic Partner

Capacity (million tons per year)

Possible investment ($billion)

Aluminum plant Sangarédi Aluminum Global Alumina/Bhp Billiton

3 3

Aluminum plant Kamsar Aluminum Alcan/Alcoa 1.5 1

Aluminum plant Dian Dian Aluminum Rusal 2.8 2.5

Extension of aluminum plant ACG Frigula

Aluminum Rusal 1.2 0.4

Integrated hydro dam and aluminum smelter project Konkouré

Hydro dam Souapiti Kaléta and aluminum smelter

700 MW 0.24

3

Project Simandou Iron ore Rio Tinto 40 1.5

Project Nimba Iron ore Bhp Billiton 25 1

Transguinean rail and deep sea port

Iron ore transport Rio Tinto and Bhp Billiton

70 5

Project bauxite alumina SBDT

Bauxite Government of Iran

4

Project bauxite gaoual/Koumbia

Bauxite AMC 3

Cement factory Souguéta Limestone German and Danish

1

Project BOT Cogon

TOTAL 17.4

Source: adapted and translated from Consultant Report E.CO.GES – Bureau d’études, de conseil et de

gestion (2008), Réalités et Perspectives du Secteur Energétique, Annex A.


22

Figure 5: Guinea’s mining poles and projected mega projects

Source: Consultant Report E.CO.GES – Bureau d’études, de conseil et de gestion (2008), Réalités et

Perspectives du Secteur Energétique, Annex A.

The potential socio-economic benefits from well-governed mining projects are large.

The various projects identified in Table 2 would certainly need to undergo further

feasibility studies and vetting procedures, but a well managed and governed mineral

sector can represent a catalyst for the future development of the country. According to

the available estimates reproduced in Table 3, over 50,000 jobs could be created in the

construction phase, and about 18,000 permanent jobs result from full operations.

Alongside with a unique opportunity, such development prospects pose evidently a

challenge of building and maintaining a skilled work force in the mining sector.

In terms of revenue generated from the prospective projects, the Government could

receive monies to the order of magnitude of US$ 1.5 billion annually. With such

Carte d’Implantation desSociétés Minières

Carte d'implantation des sociétés minières

Gold

Diamant

BHP-BillitonAlcoa/Alcan

Nzerekore Pole

Boke PoleCarte d’Implantation des

Sociétés Minières

Carte d'implantation des sociétés minières

Gold

Diamant

BHP-BillitonAlcoa/Alcan

Nzerekore Pole

Boke Pole


23

potential revenue generation, the country would need to set up appropriate programs

for investing and stabilizing the income generated so as to establish a consistent annual

revenue stream which could be invested to benefit sustainable development projects,

including further investments in to the mineral sector.

Table 3: Job creation and revenue potential of prospective mining

projects

Project Estimated # of jobs created in construction phase

Estimated # of permanent jobs during operation

Estimated turnover ($ billion)

Estimated revenue for Guinea ($billion)

Aluminum plant Sangarédi 10,000 3,000 1.2 0.2

Aluminum plant Kamsar 5,000 2,000 0.6 0.1

Aluminum plant Dian Dian 5,000 2,000

1.12 0.2


2,000 1,000 0.24 0.03


10,000 3,000 0.8 0.2

Project Simandou 5,000 2,000 3.5 0.3

Project Nimba 3,000 1,000 2.0 0.2

Transguinean rail and deep sea port

15,000 3,000 0.2

TOTAL 55,000 18,000 1.43



2.3 Harnessing the mining sector for infrastructure investment

So far, private mining companies have acted as engine of growth in the infrastructure

sector and have successfully self-provided infrastructure facilities necessary for the

profitable exploitation of mining licenses. The government has in the past explored

options for harnessing the presence of the private sector further and possibilities exist

for linking mining and infrastructure services for greater use of the public. Exploiting

the mining industry in Guinea with mega-projects as sketched out in Table 2, will

require the construction of several new rail lines and several thermal power plants, as

well as the upgrade and expansion of the road network, including a significant number

of bridges over rivers draining the rainfall in excess of 1800 mm/year over the country.


24

Table 4 illustrates the projected energy and transport infrastructure needs for the

projects in Table 2. While the projections date from 2008 and information needs to be

updated to reflect current thinking, the table showcases the additional infrastructure

needed to fully realize the mining potential of the country.

In the event, the global mining sector has been significantly impacted by the

international financial turmoil and the related global economic downturn. Mineral

commodity prices (copper, iron ore, zinc, etc) have fallen significantly in 2008, and the

combination of lower demand for commodities, lower prices, and higher costs is

resulting in production downsizing from existing operations all over the world.

For Guinea specifically, the cancellation of the takeover bid of Rio Tinto by BHP-

Billiton, and the ensuing negative impact on Rio Tinto stocks (minus over 35%)

combined with the high country risk might put at risk plans for linking mining and

infrastructure plans such as the plans for the Trans-Guinean rail.

This global situation means specifically for Guinea that the large projects are likely to

be delayed until the global economic outlook is improved. Project sponsors are

currently reviewing their plans and budget to adapt to the evolving situation. This, in

turn, might provide a window of opportunity to address some of the current systemic

constraints in the mining sector in Guinea if donors are practical and rapid in their

support/facilitation.


25

Table 4: Energy and Transport Needs of Planned Mining Projects

Project Development stage of projects*

Energy needs Transport needs

Aluminum plant Sangarédi Start of construction Thermal generation plant 330MW

20km of new rail line; new jetty at Kamsar port

Aluminum plant Kamsar Feasibility study ongoing Thermal generation plant 165MW

Interconnection with Anaim rail line

Aluminum plant Dian Dian Feasibility study completed

Thermal generation plant 200MW

112km of new rail line; new port facility 40km north of Kamsar


Feasibility study ongoing 33MW


Concept study ongoing 700MW Existing rail link

Iron Ore Project Simandou Feasibility study ongoing NA Trans-Guinean

Iron Ore Project Nimba Feasibility study ongoing NA 100km of new rail to interconnect with Trans-Guinean

Transguinean rail and deep sea port (Iron Ore)

Feasibility of variants ongoing

NA NA

Project bauxite alumina SBDT

Feasibility study completed

NA 325km of pipeline Refitting of 20ha of Port Autonome de Conakry

Project bauxite gaoual/Koumbia

Feasibility study ongoing NA NA

Cement factory Souguéta NA 200 000 ton of coal for calcinations 6MW sourced from EDG

Road link to CBK rail

Project BOT Cogon NA NA NA

Notes to table: * 2008, NA = information not available.




26

3. Mining and Energy

3.1 The potential for hydro power The mining sector potential represents both opportunities and challenges for the

electricity supply system in Guinea, both on the national and local level. At national

level, the share of electricity demand from mining companies is growing rapidly.

Current installed capacity, including mining companies, is about 250MW. According

to estimates, the mining sector electricity demand could increase over 10-fold over the

next 10 years, driving the overall electricity demand well over 1,000MW (see Table 4

for projections of energy needs from planned mega projects).

The mining companies currently auto-generate but could be potential buyers of

electricity if it could be produced and delivered at competitive prices and on reliable

terms. Such existing demand could facilitate development of vast hydro-electric

resources in Guinea, with generation potential estimated to be as high as 6,000MW.

At present, most mining projects utilize thermal energy sources of which the total

capacity is around 139 MW. Repartition on the various existing projects is as follows:

- ACG-l Friguia generates it own energy with 50MW and 17MW thermal diesel

- CBC has 50 MW installed capacity

- SBK is connected to the public network and has also a 5MW thermal plant

- Aurifère in Siguiri has 30 MW installed capacity

- Société minière de Dinguiraye has 30 MW installed capacity

Given the location of the mining sites across the country, and the abundance of water

resources in the country, hydropower is a possible important addition to the pool of

power sources in the country, even while considering that this potential for hydro

would be constituted of relative smaller hydro plants.

The key watersheds zones with their existing and numerous potential sites for hydro

generation are:

The North-West Basin (Boffa, Boké, Fria, Telimele, Gaoual), which is the principle

bauxite zone and also includes the existing rail, has the highest potential for hydro

energy due to the Konkouré river which has the following hydro-energy potential:

- Garafiri (75MW),

- Kaleta (228MW),

- Souapiti (515MW), and

- Amaria (capacity to be determined).

The following mining companies could potentially benefit from the development of

these resources: Compagnie des bauxites de Guinée (CBG), ACG in Fria, CBK in

Kindia, and new projects including sponsored by BHP-Billiton, Alcoa, Rusal, and

Mitsubishi.


27

The Central Region includes part of the bauxite and iron mining zone (Dabola,

Tougué,

Mamou, Faranah, Pita). It is close to the existing hydro plants of

- Tinkisso (1.5MW),

- Boureya (161MW), and

- Koukoutamba (281MW).

This area includes the following mining companies: CVRD (Brazil), Dabola Bauxite

Company (Iran), and CHALCO (China).

The Nort-East Region (Kouroussa, Kankan, Siguiri) has an equally good potential

with possible dams at

- Fomi (90MW) and

- Diaoya (148MW).

In this area, companies include Ashanti Goldfield, Dinguiraye (Guinea), and Semafo

(Morocco and Canada).

The Southern Zone (Kérouané, Beyla, Macenta, and even N’Nzérékoré) has several

good potential sites including

- Morissanako (100MW, currently planned for 2016),

- Gozoguézia (48MW), and

- Zébéla (48MW).

This region has diamonds, but is better known for its high grade iron ore. Aredor is

present in Kérouané for diamonds, Simfer-Rio Tinto in Simandou and Euro Nimba in

Lola for mega iron projects.

In summary, Guinea has vast potential for hydro generation but has so far lacked the

strategy and resources to unlock this potential. Figure 6 highlights the wealth of the

country in this area by setting out all potential hydro generation sites which have been

identified and were at some point examined for their feasibility; in a number of cases,

advanced project plans have already been elaborated.


28

Figure 6: Guinea’s potential in hydro power

Applying selection criteria including (i) demand from mining companies, (ii) demand

for other commercial interests, industrial and non-mining sectors, and taking into

account domestic priorities of reducing imports of oil, and utilizing the regional

potential in energy trade, the most important sites for hydro development emerge as

summarized in Table 5. Indicative construction dates pre-date the recent period of

political turmoil.

Table 5: Priority hydro power development sites

Site Capacity (MW) Estimated construction

date (pre-dating 2008)

Kaleta 228 2012

Souapiti 515 2014

Morissanannko 100 2016

Kassa 135 2016

Amaria 665 2019

Gozoguezia 48 2024

Total 1,691


29

3.2 The importance of national and regional interconnection Any construction of new generation plant needs to be accompanied by development of

the transmission and distribution network in order to counteract the current tendency of

‘economic islands’ developing in proximity to mining activity. Mining companies are

often involved in service provision for surrounding communities, but the fragmented

structure increases costs at a national level and creates disparities between regions and

communities. The partnership with private mining companies in the provision of

essential services such as water and electricity should be embraced; nonetheless,

significant benefits are likely to come from the integration of private initiatives into a

national long-term investment plan. In terms of transmission backbone, the map below

represents a schematic view of the network that would cover the country and provide

interconnection with the neighboring states.

Figure 7: Existing and planned transmission lines


30

3.3 Recommendations Comparatively low cost hydro electricity, if developed, could serve both mining

companies and domestic and sub-regional consumption. To benefit from these

opportunities, Guinea needs to

develop its transmission backbone, particularly through the interconnection

with the neighboring countries in the framework of WAPP;

develop a limited number of large-scale hydro-electric projects, demonstrating

the potential for private sector involvement and PPPs. The preparation of the

following projects is currently being actively pursued under the WAPP

umbrella: (i) OMVG energy project including Guinea’s interconnection with

Senegal and Guinea Bissau, and Kaleta hydro plant (240MW) on the Konkuré

river, (ii) Souapiti hydroelectric plant (500 MW) on the same river, (iii) Fomi

(90MW) developed in the framework of the Niger basin, and (iv) CLSG

project, including Guinea’s interconnection with Liberia, Sierra Leone and Cote

d’Ivoire. The OMVG and CLSG transmission lines would intersect mining

areas in Guinea’s north-west and south-east.

develop an enabling framework for the private sector investment in new hydro

generation, including (i) a clear and stable policy, legal and regulatory

framework (PPAs for sales to the regional and national grids, rights to sell

energy to third parties and/or retail sales through a mini-grid etc.). The

framework should also target medium, small and mini-hydro projects which

could be also harnessed for electricity access expansion (see below); and (ii)

active promotion and development support (e.g. matching grants supporting

feasibility studies).

continue institutional, financial and technical strengthening of EDG, so that

EDG converts itself into a viable buyer, able to deliver the new power supply to

the final users.

At the local level there are two scales of issues and recommendations, for mining

companies and village level electrification.

Mining companies are currently auto-producing energy and in many cases are

supplying power to their workers and their communities, in some cases for free. Given

EDG’s lack of capacity to expand the network, the pressures are increasing on the

mining areas to provide electricity supply to rapidly growing mining towns and

communities. The mining sector is in general interested in contributing to the

electrification of the areas of their intervention, but they are not well suited to provide

retail service. There is, however, a good potential to develop partnerships among the

mining companies and private operators to co-finance electrification projects, with the

mining companies playing a facilitator role, while distancing themselves from the

system operation. Government/donors could support further expansion of such

systems to the surrounding communities. First experiences are already emerging

(Siguiri, Kamsa) and should be followed closely for lessons learnt.


31

For the village-level electrification, an innovative model, employing local SMEs, has

already been developed by BERD (Bureau d’Electrification Rural Decentralisée) and

could be directly applied to the mining communities. The electrification projects are

financed through a mix of grants, loans and equity contributions, balancing carefully

the rural users’ capacity to pay, subsidy minimization and the provision of incentives to

the developers for efficient operation. New pilots are currently being developed for

renewable energy, including micro-hydro and solar PV. This model, however, suited

only for villages and smaller towns, and is not suited for larger mining towns.

In order to benefit from these opportunities, Guinea should

develop an enabling framework for the private sector investment in independent

mini-grids beyond the BERD level. This, in particular, includes opening up the areas

where EDG has a concession and is not providing the service to new entrants, clarify

regulatory oversight, including tariff setting, provision and/or facilitation of

financing for the access expansion (in some countries, for example, output-based

subsidies are used to provide incentives to the private sector operators to further

expand access), support to renewable energy generation etc.

institutionalize BERD - BERD is currently a project implementation entity of a

World Bank program, and unless the agency (BERD) and the fund (FERD) are

institutionalized and replenished, they will not be able to finance projects beyond

2009.

community outreach – a very good communication and community outreach strategy

needs to be developed for the mining communities targeted by the new PPP model,

through which capacity and willingness to pay needs to be carefully assessed and the

necessity to pay for electricity carefully explained, so that sustainable service can be

provided which can benefit a larger share of population in the mining influence

areas. Building alliances with CRDs is of outmost importance.

4. Mining and Transport

4.1 The transport needs Similar to other African countries, Guinea is facing a deficit in all modes of transport

infrastructure (road, rail, port- and air-traffic), mainly due to a lack of funding. The road

network has progressively deteriorated, traffic is often interrupted and roads impassable

during the rainy season. The maritime port sector suffers from insufficient allocation of

land and other resources, and lacks adequate equipment and stevedoring services.

Because of these shortages, the port of Conakry is not taking advantage of its strategic

location on Africa’s West coast and the opportunity to serve as hub for landlocked

regions and other countries is not exploited. Finally, rail services are functioning at

adequate levels only in the mining areas. The rail link Conakry-Kankan has deteriorated

over the years and can only support services on a stretch of approximately 40km at

present. The failure of transport services across all sub-sectors has clear negative impact

on Guinea’s economy. Without functioning transport network, the potential offered by


32

the rich mineral and agricultural resources of the country cannot be exploited in any

meaningful and effective manner.

In order to circumvent the lack of public infrastructure in a sector which suffers in

addition from planning and coordination failure between a number of public agencies, the

mining companies active in the country are building their own rail and road links and are

putting in place purpose-built port infrastructure. Similar to what is happening in the

power sector, these privately motivated initiatives are taking place outside any national

development policy or long-term infrastructure investment plan. There is thus a lack of

coordination and failure to capture any economies of scale or scope which might exist. In

addition, the needs of the population at large remain unanswered, and economic activity

other than mining remains excluded from the benefits of access to transport services and

therefore trade.

Regarding transport services in the North East and Center regions of the country via the

Trans-Guinean rail link, the government of Guinea has expressed its wish to undertake

construction with help of the international community, including the World Bank, and

with participation of the mining companies active in these regions. The Government’s

support of this project is driven by concerns that the political situation makes the use of

Sierra Leone’s port facilities undesirable, as well as the discovery of iron deposits

expected to yield up to 10 billion tons of ore in the center of the country. Given the size

of the rail investment foreseen and the additional need for associated new port

investments to fully operationalize the Trans-Guinean rail link, a full feasibility study to

gain a clear picture of all technical and financial requirements necessitated by the project

are the necessary next step. All available options to satisfy the transport needs of the

country should remain open before taking final decisions.


33

Figure 8: Medium-term National Road Plan

4.2 Recommendations More generally, the following points are put forward for the way forward for Guinea’s

transport sector:

In order to avoid a multiplication of privately owned and operated rail and road

services, which does not allow to capture economies of scale and scope inherent in

transport services, the government is urged to develop a national transport policy.

This would integrate purpose-built mining infrastructure in a regional and national

system which can make facilities available to the population at large given proper

consideration the needs of and compensation for the private sector.

The possibility of establishing a rail fund (similar to a road fund) is put forward for

further consideration. Such a fund would receive contributions from all users of rail

services, including mining companies. A commission representing all stakeholders –

private companies, national and regional government, and users from the general

public - could be put in charge of supervising the fund. The recruitment of a


34

management team receiving the vote of confidence from all groups is an option to be

considered.

Based on the example of collaboration that occurred between CBG, GAC and Rio

Tinto in the Kamsar region, the Government should encourage the sharing of

transport infrastructure between mining companies. Regarding the existing Kamsar

collaboration, a formalization of the arrangement with an integration of the port of

Kamsar under a PPP contract is submitted for consideration.

The government is encouraged to undertake social and environmental impact studies

for infrastructure projects going forward in order to ensure that future investment

leads to long-term sustainable development of the country in the future.


35

5. Using Guinea’s mining sector as platform for infrastructure development

Infrastructure brought about by mining projects can facilitate the provision of essential

services such as electricity or all-weather roads to communities around the mining sites.

Public-private service provision schemes should be explored by the Government in this

context.

There are essentially three different channels through which mining development and

infrastructure development can be linked:

De-enclaving existing mining infrastructure and making it accessible to other

users;

Upgrading/expanding infrastructure with the help of mining companies under a

PPP model; and

Using mining royalties to fund publicly provided infrastructure at national level

5.1 De-enclaving existing infrastructure The idea behind de-enclaving is to use existing infrastructure built and operated by the

mining industry for mining purposes for a wider use. This involves offering the surplus

output of mining power plants to commercial and household users, making private roads

accessible to broader traffic, and opening dedicated mine railways and ports to third-party

traffic.

The attraction of de-enclaving is that it makes use of existing infrastructure and avoids

long planning and construction delays. Moreover, it takes advantage of the presence of a

private party that has a proven track record in the reliable provision of electricity or

transport services. De-enclaving therefore has the potential to make services essential for

development available within a short time frame. When considering implementing de-

enclaving several questions need however be carefully considered:

Is there excess capacity in the existing infrastructure so that a broader demand can be

satisfied? Are existing facilities technically compatible with other traffic?

What is the basis of negotiation with the current provider? In other terms, what are

the incentives that would make the private sector open its infrastructure?

Will additional infrastructure need to be provided (e.g. feeder roads, port storage and

stevedoring services, power transformer stations, etc) in order to make the existing

infrastructure accessible? The provision and operation of additional infrastructure,

and the adapting and upgrading of existing facilities leads to considering the different

roles of the private and public sector in infrastructure. The next subsection discusses

this in greater detail.

How is necessary adaptation and additional infrastructure going to be provided and

construction paid for? How will maintenance be provided and paid for? (again, this is

a PPP question - see next sub-section)

How will the services provided to the broader public be costed, priced and user

revenues collected (where appropriate)?


36

If there is insufficient or unsuitable existing capacity to satisfy additional demand to

the desirable degree, is the expansion, adaption or upgrade of existing capacity at the

same location preferable to considering the construction of new capacity at a different

location? For example, the existing mining plant might not be anywhere near the

utility’s transmission network. Or the mining railway bypasses densely populated

areas. Addressing these issues leads to questions of spatial efficiency and national

planning of investments.

5.2 The mining sector as provider of financing for new infrastructure If the mining companies accept to take responsibility for the expansion of their existing

infrastructure platform and the provision of additional capacity of the country, a series of

policy questions needs to be addressed regarding the responsibilities of the private and

the public sector for the construction, maintenance and operation of the facilities. A range

of options is open, from pure private provision, to public-private partnerships (PPPs), to

the private sector only acting as construction overseer (for upgrading of rural roads, for

example).

PPP options vary in the demand they impose on the government in terms of planning,

negotiation, implementation and supervision. Skills and expertise develop slowly over

time and a gradual approach to complex schemes is recommended. In order for the

Government to come to a mutually beneficially agreement linking private mining

interests with public infrastructure objectives it is necessary that the provisions for such a

PPP arrangement exist. Despite of a tradition of private involvement in the mining sector,

private participation in Guinea has so far lacked a transparent framework and common

legal approach. Successful private participation is occurring, such as in the recent

negotiations involving the Conakry-Kankan rail link. But as a general rule, negotiations

with the government have mostly occurred on a bilateral basis and have used opaque

evaluation and selection criteria for the issuance of licences and contracts. Instances of

reneging on contracts from the part of the Government are known. Such an environment

raises the country risk perceived by potential entrants. Several institutional layers dilute

accountability mechanisms and hinder coordination between agencies. A national

strategy for the infrastructure sectors is lacking. Finally, skilled and experienced staff is

scarce on the government side.

One way in which the mining companies could be incentivized to take on infrastructure

responsibilities is by offering a ‘royalities versus infrastructure’ swap. This can be an

attractive proposal for the mining companies as they will essentially be paid to provide

additional commercial activity – the construction and maintenance of a road might not be

their main business but it can be an additional lucrative activity in which the inputs in

terms of skills, labor and capital are compensated at a reasonable rate.

On the government side, drawing on the expertise of the private sector allows to mitigate

capacity shortages in the public sector in terms of skill and human resources. It also

represents a solution to annual budget constraints, although in the event of an exchange

of infrastructure against (a share of) mining royalties what is occurring is not a budget

expansion, but rather a deliberate allocation of state resources to a given sector.


37

Finally, governance issues associated with the public management of revenues earned on

natural resources are avoided by engaging in a swap (see also discussion of governance

issues further in the note).

Key issues to consider in negotiations of a partnership between the government and the

private sector are:

the costing of the services to be provided –a balance needs to be struck between the

government receiving an appropriate quantity and quality of infrastructure services

and the mining company having a incentive of entering into the swap with the

government. Too much money paid (or retained) by the private company means the

government has less money to spend on other causes; too little return offered on the

risk taken, and the private sector will not enter into the partnership. External controls

and audits of the investment and construction plans submitted by the private company

are necessary. Worth considering is also the delivery principle underlying Output-

based Aid (OBA). OBA is based on the principle of payment for delivery of a verified

functioning service output (i.e. a certain number of commercial or household power

connections, or a fixed number of well-maintained road or rail kilometers), rather

than input payments (eg, $$$ investment in a transmission line).

long-term optimal planning- as mentioned earlier in this note, existing infrastructure

might only have a limited potential to respond to the national need for essential

transport and energy services. Moreover, once the demand considered is of regional

or national scale rather than for a mining operation only, other technologies might

become attractive (economies of scale will make high initial capital cost options

competitive). Thermal plants developed by the mining industry might be more costly

than large-scale hydro plant which serve a larger population and a mix of industrial,

commercial and residential users. If larger scale projects for mixed purpose are being

considered, mining companies might co-finance hydropower development with the

government as they have an interest in getting future access to lower cost power.

That said, given the recent tumultuous period, it is prudent to start any public-private

partnership effort with a small number of tractable projects rather than complex mega

projects with require great expertise and extensive preparation.

5.3 Using royalties to fund public infrastructure

Under regular circumstances, governments receive the revenue from the exploitation of

their natural resources alongside other tax revenues. These public funds are then re-

allocated in the budget across all services a government provides for its citizens,

including hospitals, schools, water treatment plant and other infrastructure. Even if the

policy decision is taken that a significant share of mining royalties will be re-invested by

the government in physical infrastructure such as roads, power plants and, this is a way to

distribute the revenues earned from the exploitation of natural resources to areas outside

of the mining areas. In this manner, disparities between communities and regions can be

attenuated and different growth areas and sectors supported (eg, Guinea can also build up

its agribusiness). Infrastructure services in which it seems unlikely mining companies

will be interested (nor have the same competitive advantage), such as irrigation and roads


38

construction outside the mining corridors, could be funded from a national ‘Infrastructure

Fund’. While such a fund would be alimented by mining royalties, the government is not

bound to consider mining interests as main focus of where investments funded from the

fund would be located, or which services they concern.

Among the chief challenges to consider in the case of setting up purpose-specific funds,

such as an infrastructure fund, are the following:

governance and anti-corruption issues – any fund set up with dedicated revenues

(eg, royalties from mining operations) and set apart from the regular budgeting

process requires stringent governance, control and audit mechanisms in order to

avoid misuse of funds;

reduction of government room for maneuver - ring-fencing a share of

government revenues from the annual budget cycle safeguards long-term

investment projects and avoids costly rescheduling and delays caused by the

overall workings of government. Security of multi-year funding is very important

for long-term infrastructure investment projects but it also means that the

government has less head room in the budget to make discretionary decisions

from year to year. If all public funds are tied up from the start, then budgeting for

new items is not possible and reallocations which are a necessary feature of

planning are complicated.

capacity for medium-and long-term planning and budgeting – in order to

effectively utilize the fund, medium and long-term budget and project planning is

required. In countries where there are limited capacities, the creation of additional

centers for rare skilled personnel alongside existing ministerial planning

departments might aggravate shortages in all cases.

On a smaller, one-project scale, a model that might be emulated and in which donors

have a role to play is “enclave” infrastructure project financing in which the

infrastructure is build using non sovereign funding guaranteed through a dedicated

account in which mining companies pay lease/usage fees along the model of ANAIM in

which the WB was the financier, or the current discussions between GAC and the African

Development Bank on transport infrastructure in Kamsar.

5.4 Recommandations Review of the legal framework and the options it allows for participation of the

private sector in infrastructure provision. Such an assessment of the existing legal

structures needs to take central and decentralized functions into account.

Establishment of a legal framework for public private partnership in infrastructure

following best practice. This would involve where possible the adaptation of existing

laws and institutions rather than the creation of new legal structures.

Implementation of the PPP framework with the possible establishment of a PPP Unit

in the government (with the Ministry of Finance as most likely line ministry)

A reference document recommended for its pragmatic way of summarising the approach

to PPP specifically for Africa is contained in the «Attracting investors to African public


39

private partnerships: a project preparation guide», World Bank ICA PPIAF 2009. It

provides helpful advice to governments engaged in PPPI, while being clear on the

challenges involved in the process of negotiating a contract that satisfies all parties needs

and withstands the challenge of time. Figure 9 provides a schematic view of the roadmap

governments face.18

Figure 9: Practical implementation of Infrastructure PPPs

18

Another reference document more specifically for the rail sector: Review of selected railway

concessions in Sub-Sahara Africa: World Bank 2006


40

6. Using Infrastructure as a Vehicle for Sustainable Development

6.1 Addressing Economic Geography questions The notion of growth poles emerges as relevant topic in the case of Guinea given the

geographically concentrated location of mining activities. The policy question at the core

of economic geography is the following: given the availability of $1 of infrastructure

investment, where will the highest return be from that $1? Will it be if the $ is invested in

the areas where there is already active mining activity (to enhance existing production),

or will it be if the $ is invested in areas so far neglected (to foster the emergence of

diverse economic activity)? Will the answer differ if the government pursues a strategy

of highest growth versus a strategy of poverty reduction and balanced development?

Development in the country has so far largely followed a corridor approach, with mining

activities being the driving force. While this can make sense in terms of favoring the

growth areas, it also leaves the country more vulnerable to shocks such as the drop in

commodity prices experienced in 2008. A more diversified investment strategy in terms

of growth poles and spatial equity, for example through new emphasis on providing good

infrastructure services for agricultural areas, might be considered medium- to long-term.

The Ministry of Mines and Geology has initialized in 2008 a series of infrastructure

planning seminars starting with the Kamsar-Boke-Sangeredi corridor. Seminars for

corridor or growth pole regions will follow. The World Bank has established a Spatial

Team for the purpose of analyzing the linkages between spatial allocation of resources

and growth and development. It is recommended that the government undertake a spatial

analysis which will help formulating the trade-offs involved in policy choices such as

concentrating resources in a small number of mining areas compared to a strategy aimed

at enhancing spatial equity.19

6.2 Addressing the role of Agriculture The National Policy for Agricultural Development - Vision 2015 (Politique Nationale de

Developpement Agricole (PNDA) – Vision 2015) was adopted in July 2007. The strategy

has three pillars: (i) reinforce food security through increased productivity and

diversification of food staples; (ii) increase agricultural revenue through the development

of economic opportunities and improved market access; (iii) improve the enabling

environment.

To implement this strategy, the government identified the following programs: (i)

enhancing food crop production/productivity including through water management

infrastructure; (ii) agricultural export promotion of industrial crops (coffee, cashew, oil

palm, rubber, cotton and cola nut) and horticultural crops (mangoes, pineapples, bananas,

19

See the World Developing Report 2009: Reshaping Economic Geography for a general discussion of the

topic. For an example of how spatial analysis is being used to aid the government policy making and

investment prioritization process, see also Lall, Schroeder and Schmidt (2009), Identifying spatial

efficiency – equity trade-offs in territorial development policies. Evidence from Uganda, World Bank

Policy Research Working Paper, No WPS 4966.


41

vegetables); (iii) development of market access infrastructure (rural roads, warehouses,

cold storage facilities, markets, transformation facilities,…); (iv) input market

development; (v) support for advisory services and capacity building of producer

organizations; and (vi) agricultural finance.

The main issue is that large scale infrastructure (roads, rails, dams, energy) planning in

Guinea is primarily considered for the mining sector and less to other development

objectives, including the potential for agriculture, food security, and economic growth

from other sectors. If a national transport and energy plan is developed as discussed

earlier in this note, the main arteries for the agriculture sector should be included in the

mapping of infrastructure and projects with converging interests be prioritized. In any

event, assistance is needed with strategic planning and prioritization of objectives within

the agriculture sector, including phasing/sequencing of specific interventions.

The possibility of PPP in infrastructure has been discussed earlier in this note. If the legal

and institutional framework for such partnerships can be established in the country,

agriculture projects present a further opportunity for the public and private sector to

collaborate on service delivery. Among the priority projects related to agriculture, water

management (irrigation) and market access infrastructure in the lower part of the Kamsar-

Boke-Sangaredi corridor stand out. To have the intended impact on agricultural

productivity and economic growth, this infrastructure needs to be accompanied by

appropriate technological packages, quality advisory services and market information,

functioning input market/distribution systems, agricultural financial services, and actors

capable of responding.

6.3 Addressing sustainable development questions: environment and social inclusion The mining, energy and transport sectors have broad areas of influence, including in

terms of environmental and social impacts; however, the latter should be treated in their

own right in separate documents.

The West Africa Minerals Sector Strategic Assessment (WAMSSA) has identified

policy, institutional and regulatory adjustments required for integrating environmental

and social considerations into mining sector development in West Africa. Priority issues

to be dealt with are listed in the graphic below:


42

West Africa Mineral Sector Strategic Assessment Regional Validation Workshop

WAMSSA Recommendations 1. Adopt strategic, cluster focused, permanent multi-stakeholder framework for addressing mineral sector policy and development decisions

Assess priority regional and national mineral clusters to become the primary focus of mineral sector infrastructure and governance improvements

Create permanent regional, national and local multi-stakeholder bodies to help develop appropriate policy frameworks

2. Strengthen environmental governance

Address mining-induced deforestation, loss of biodiversity, and pollution of water

Reduce mining-induced land degradation and increase reclamation of mining lands

3. Increase local-level benefits in mining areas

Integrated mineral sector projects into local development plans in order to address poverty

Create training, employment, local supplier and sustainable alternative livelihood opportunities

4. Improving social accountability and mineral sector governance

Eliminate lack of transparency and consistency in policy formulation and decision-making

Provide capacity building and institutional strengthening to all stakeholder groups (government, civil society, industry, etc.)

Minimize disenfranchisement of community from development decision-making processes

Reduce rent-seeking behavior and conditions that lead to distorted benefit-sharing


43

6.4 Addressing Governance, Transparency, and Anti-corruption The main initiative to improve the governance dimension related to extractive industries

such as mining at the global level is the Extractive Industries Transparency Initiative

(EITI) which the World Bank has supported since its launch in 2002. It seeks to help

resource-rich countries maximize the development gains from the exploitation of their

oil, gas, and mineral resources by encouraging greater EI revenue transparency. Through

the verification and full publication of company payments and government revenue from

oil, gas, and mining, EITI helps to safeguard against corruption and provides a powerful

illustration of voluntary engagement of governments, industry, civil society and other

stakeholders to establish a locally implemented global standard.

However, the EITI does not cover all the challenges that the EI bring to developing

countries. Public reporting of EI revenue, though extremely valuable, represents only one

step in improving sector governance and maximizing development outcomes throughout

the EI value chain. How these resources are actually developed and how the revenue

generated ultimately is spent will determine a country’s success in achieving long-term

growth and sustainable development.

The World Bank, with other development partners, is stepping up its efforts to provide a

more integrated and comprehensive approach to natural resource management along the

full value chain, including all the steps of EI development and impact. The EI value chain

encompasses awarding contracts, monitoring operations, collecting taxes, distributing

revenue in a sound manner, and implementing sustainable development projects (see

Figure 10). The value chain approach aims to support countries in their efforts to

translate natural resource wealth into sustainable development. It can be integrated into

the World Bank's Country Assistance Strategies (CAS) for resource-rich client countries

and serve countries with great resource potential that decide to address the resource curse

issues at an early stage of development.

This approach is being piloted in Sub-Saharan Africa, where the significant rise in

commodities prices until 2008 has brought substantial windfall revenue to resource-rich

countries. While high prices present unique opportunities, the weak institutional capacity

in many countries leaves them more vulnerable to the resource curse. A report on EITI++

has been prepared as additional policy note for dialogue with the Government of Guinea.

The process of establishing an EITI++ Office was launched in September 2008 and the

future institutional setup of such an office is currently under discussion.


44

Figure 10: The Extractive Industry Value Chain


45

7. Next steps

It is recognized that the challenges Guinea faces are manifold. Not all can, nor should

they, be addressed simultaneously. Resource constraints, human and financial, as well as

legitimate time demands for preparation and implementation need to be heeded.

Nonetheless, this section provides an attempt at an initial list of actions to be discussed

with the government, its development partners, the private sector and civil society. Each

issue listed below will require additional debate of options and implications and might

require specialized analysis that goes beyond the remit of this note.

(i) Identification of priority investments – these should satisfy the double condition

of high impact/high feasibility and thus focus on projects which are advanced in

the preparation phase. Both public and private resources should be considered for

the options of service delivery, and donor support committed. Among the priority

areas to examine are at this juncture:

a. Boke Rail system and port to evacuate bauxite and alumina (planned

aluminum plants Sangaredi, Kamsar and Dian-Dian); this would require

additional rail interconnections, new facilities at the Kamsar port as well

as an estimated 700MW of new thermal power capacity (see Table 4).

b. Rail link between Simandou to Liberia to allow the evacuation of mining

output from Southern Guinea.

c. Establishment of road connectivity to Cote d’Ivoire, Liberia and Sierra

Leone.

d. Transmission grid interconnection with the West Africa Power Pool.

(ii) Issue a strong policy statement and letters of sector policy showing Government

commitment to infrastructure development in a strategic and step-wise (thus

credible) manner.

(iii) Undertake a study mapping out the legal and institutional options to engage the

private sector, following the adoption of letter of sector policy. A diagnostic

review of existing laws, regulations, processes and institutions needs to be

undertaken to assess the degree to which the current set-up provides an enabling

environment for private participation. Identify one or a small number of pilot PPP

arrangements in mining areas building on the 2006 PPIAF study.

(iv) For the mining sector, issue a policy paper and medium to long term strategy and

investment plan, using the EI Value Chain Approach (EITI++) as instrument to

move these aspects forward.

(v) For the power sector, identify priority prospects among the hydro plant proposed

that can be undertaken with private participation. The first phase of the Kaleta

plant and associated transmission link and distribution network would be a

candidate.


46

(vi) Initiate dialogue with the private sector. Commit to a transparent and accountable

approach in order to signal long-term stability. Build appropriate institutional

mechanisms and capacity to undertake infrastructure project development

activities; bring in external experts for the initial pilot projects.

Longer term, a framework for integrated infrastructure planning should be established.

The objective of such a framework is to provide a strategic approach for sequencing,

prioritizing and financing infrastructure investments in such a way as to maximize their

contribution to economic growth. There are linkages between the spatial analysis and this

supply analysis. Infrastructure planning should be undertaken at national level to take all

needs of the country into account, however, in the face of limited resources, certain

specific corridors (eg Boke) might be considered first, in particular if negotiations are

opened with the private sector on the potential of making mining infrastructure accessible

to the public.


47

Annex A1 Additional resources Relevant infrastructure-related documents for Guinea:

o World Bank (SDN) – Developing Countries and the Financial Crisis:

Infrastructure Diagnostic Tools (May 2009)

o World Bank (SND) – INFRA platform

o World Bank (Spatial team) – Identifying spatial efficiency

o World Bank – EITI++ April 2008 Scoping mission report for Guinea

o World Bank – Guinea Telecom Reform (forthcoming July 2009)

o World Bank – Indonesia: Series of Policy notes (forthcoming July 2009)

o World Bank – West Africa Mineral Sector Strategic Analysis

o PPIAF – Building Bridges (also available in French: Batir des ponts)

o PPIAF – Africa Infrastructure Country Diagnostic (AICD)

o PPIAF and ICA Attracting Investors to African Public-Private Partnerships

Note: all referenced PPIAF publications can be found under www.ppiaf.orf/resources.

The Public-Private Infrastructure Advisory Facility (PPIAF)

PPIAF helps developing countries improve their infrastructure through two main

mechanisms: (i) It offers governments technical assistance on strategies and measures

they can use to tap the full potential of partnerships between the public and private sector,

(ii) It identifies, disseminates, and shares best practices around public-private

partnerships in infrastructure in developing countries. Through grants, PPIAF finances a

range of country-specific and multicountry advisory and related activities to help

governments: (a) Frame infrastructure development strategies to assess the needs of the

country and the potential for private involvement. (b) Create outreach and

communication programs to engage stakeholders and ensure transparency and

accountability, (b) Design and implement policy, regulatory, and institutional reforms, (c)

Design and implement pioneering projects and transactions, (d) Build creditworthiness to

access financing without sovereign guarantees.


48

Annex A2 World Bank Contacts The World Bank staff members listed below were members of the mission to Guinea in

December 2008 and the data gathered by them and information collated is at the basis of

this to this note.

Agriculture Sector: Jane Hopkins, Senior Agriculture Economist

Education Sector : Nathalie Lahire, Senior Education Specialist

Energy Sector: Dana Rysankova, Senior Energy Specialist

Environment Sector : Taoufiq Benouna, Senior Environmental Specialist

Finance for Infrastructure : Pascal Dooh-Bill, Lawyer

Health Sector: Ibrahim Magazi, Senior Health Specialist

Macro Economic Sector: Wilfried Engelke, Senior Economist

Mining sector: Boubacar Bocoum, Senior Mining Specialist

Telecom Sector: Boutheina Guermazi, Senior Regulatory Specialist

Transport Sector: Siélé Silué, Senior Transport Specialist


49

Annex B: Maps Graphique du réseau électrique existant

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