In the lush mountains of Simandou in southeast Guinea sit some of the world’s richest untapped reserves of iron ore. The Simandou reserves are divided into four blocks, controlled by two separate consortia, both with significant Chinese stakes. After decades of negotiations, a convention signed in April this year opened the door to mining the deposits. This could unsettle current industry players and position Guinea as one of the world’s top iron ore exporters. While some Guineans are ready to reap the fruits of this mega project, others question who stands to benefit from the deal.
Deadly protests on July 17 in Beyla, a town serving the Simandou mines, underscore that scepticism. It’s “déjà vu” for an extractives sector that has yet to improve the lives of millions of Guineans. Since 2015, Guinea has strengthened its global position as a mineral exporter with reforms of its mining sector. These reforms paid off: both the extraction and the exports of bauxite (aluminium ore) increased fivefold between 2015 and 2023. But you can’t eat mineral ores, and the wealth of the mining sector has not brought broader prosperity to most Guineans. As the Simandou reserves come online, could the story be different this time?
Simandou will generate about USD $20 billion in infrastructure development, create thousands of jobs, facilitate transport, and result in many connected activities along the railway corridor. More than 600 km of new, multiuse railway lines and new port facilities will allow the export of up to 120 million tonnes of mined iron ore a year.
That’s a promising start, but Guinea and neighbouring countries also need high-grade ores to produce iron and steel for the development of infrastructure and manufacturing industries. Infrastructure investment alone cannot transform the economy; unlocking industrial potential through value addition along the iron and steel value chain is crucial. In addition to the infrastructure, the Simandou project should establish local and regional iron and steel production facilities that could create additional jobs, boost local economies, and produce higher-value products such as construction materials and machinery to drive industrialization and reduce import dependency.
Guineans want the project to tangibly improve their lives, but responsibility for delivering this change doesn’t just rest on the shoulders of large corporations. Simandou is also a challenge for the public sector. The mega project will test the government’s ability to be innovative, agile, transparent, accountable, and more efficient. If Simandou is to benefit the people of Guinea, there will need to be important changes in the country’s public administration.
A new breed of civil servants
Readying Guinea’s economy to absorb US$ 20 billion in infrastructure is no easy task, despite a new law that aims to ensure the participation of Guinean companies. The law sets out a legal framework requiring local content in public-sector projects, including in areas such as employment and training, supply of local goods and services, and transfer of technology. But Guinea needs robust operational guidelines and a monitoring and evaluation system to implement the law and track progress. The Simandou project is already underway, but are there enough firms with the technical, financial, and managerial capabilities required to adequately respond to solicitations while also meeting the quality expectation of a large corporation?
Ensuring the law benefits Guinean small and medium enterprises (SMEs) requires a government that is agile, adaptive, and willing to experiment and serve—characteristics that have not always been evident in previous administrations. Yuen Yuen Ang, a political science professor, describes a culture of “bureaucratic entrepreneurship and risk-taking” that was crucial to China’s success. Guinea can learn from China’s industrial success while avoiding its mistakes. The public sector will need to be more entrepreneurial, open to feedback, and flexible when engaging with stakeholders, especially SMEs. Guinea needs public servants at the service of its economy, understanding entrepreneurs’ needs and solving their problems.
Increasing funding
Access to funding remains a major constraint for local firms. In the context of a banking sector that has often preferred government bonds over financing the economy, Simandou may have a silver lining. Nigeria’s experience could be instructive. During the presidency of Olusegun Obsanajo, the Central Bank of Nigeria played a key role in promoting national champions and creating jobs with clear incentives, which directed more funding to Nigerian firms. Furthermore, Guinea could diversify financing sources available for SMEs by providing a conducive environment for more venture capital and investment funds. This would also help maximize the financing for income-generating activities led by women and young entrepreneurs in the areas around the mining project.
Learning from the past
Experience within and outside Guinea can inform a more strategic government approach to ensuring there is both economic opportunities and shared prosperity. Learning and sharing knowledge should guide the actions of a public administration that often buries past actions that it did not conceive. Learning from and scaling the know-how of agencies like the Sub-contracting and Partnership Bureau will be crucial in supporting local SMEs. The experience of the Local Economic Development Fund (FODEL) also provides practical lessons. The FODEL shows that access to local supply chain opportunities by businesses will be optimized if local infrastructure constraints (access to renewable energy or quality roads) are lifted.
Decision-making at the local level
The Simandou project will test the capacity of local government and its ability to interact and coordinate with the central administration. Public sector action should be premised on the subsidiarity principle—whereby decision-making authority is placed as close to the people affected as possible—and aim to support what can be more easily achieved at the local level, maximizing the impact of actions on the ground. Again, the FODEL brings interesting lessons with its first year of implementation. So does China, which has allowed local governments to “explore solutions according to local conditions based on need and feasibility.” Central government should be prompted to set the scene with “central mandates” tailored “for local implementation with local initiatives,” as explained by professor Ang. It should also strive to widely share information and data about initiatives and their results.
Improved transparency and accountability
Transparency, accountability, and technology-induced efficiency are key for a public administration that is being already tested, as shown with recent protests. Simandou is expected to generate about an additional US$ 2 billion in revenues and to double gross domestic product in the first year of its exploitation. In managing those revenues and implementing the project, stakeholders should consider transparency, information-sharing, and regular communication to ensure buy-in and co-creation with communities. Leveraging technology will allow stakeholders to efficiently collect data and to analyse and release it. Simandou is an opportunity for the government to improve fiscal transparency, and area where Guinea has plenty of room to improve according to the International Budget Partnership’s Open Budget Survey. The government should also seize the moment to direct resources to sectors like health and education, invest in infrastructure development, and promote green jobs.
The Simandou project may very well be the linchpin of Guinea’s economic growth in the next decade or so. Despite the large corporations involved in the project, much still rests on the shoulders of the public sector. Guinea’s public sector, like many on the continent, must undergo a sweeping transformation to unlock the county’s development. Aiming to export iron as soon as 2025 is an understandable goal but should not be the only one for government. Other success indicators must include the transformation of Guinea’s economy, value addition in the mining sector, the rise of national champions, the protection of the environment, and the emergence of a new breed of committed public servants with skin in the game. This is how Simandou will not become much ado about nothing.
Malado Kaba is the managing director of Falémé Conseil and the former economy and finance minister of Guinea.
Disclaimer
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
