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Africa Rising: Guinea reworks its deal with mining companies

Development experts say Guinea's new mining code may be its best chance to ensure the world's largest supplier of aluminum ore gets a fair share of the profits. The question: will the new law be enforced?

By Drew HinshawCorrespondent / September 13, 2011



Dakar, Senegal

Hard as raw rock, Guinea's mining code may be the toughest new law in Africa. The only problem? Guinea's miners don't dig it.

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Last week, the most mineral rich country this side of the Congo signed into action 106 pages of updated rules affecting the mining companies that operate here.

There are oodles of them: European, American, Chinese.

The new law would allow Guinea to purchase rights of up to 35 percent of all money made off their mines and to hike export taxes on mineral shipments. It was the keystone of President Alpha Condé's campaign, last year, to become Guinea's first democratically elected leader after five decades of misrule by dictators.

But the law is "senseless," the world's largest maker of aluminum, United Co. Rusal, said in an e-mail to Bloomberg News.

"Any investor of good sense will look for investment opportunities somewhere outside Guinea," according to Rusal.

Maybe so, maybe not.

"There's always been that kind of argument – that companies will go elsewhere," said Bonnie Campbel, author of "Mining in Africa." She went on to say, "I think we're at a turning point now. There's a growing awareness in the political and economic role minerals should play."

Besides, in Guinea's case, companies may not have much of an elsewhere. The Britain-sized woodland country sits on half the world's supply of bauxite, the ore crushed up to make aluminum. It also holds gold, iron, and diamonds.

For years, dictators, starting with Sékou Touré, sold off that pay-dirt for some of the lowest royalty rates on earth – and with little oversight on where the money went.

Guinea's new rules – which force companies to publish mining contracts and undergo audits – is "a very significant step forward," said Legal Adviser Patrick Heller for Revenue Watch.

"This is an extremely progressive code," he said. "From the perspective [of] good governance, this is one of the strongest codes in Africa, and it holds up elsewhere in the world."

His concern? This isn't the first law Guinea has signed to crack down on its lucrative – and venal – mining industry. Guinea's 1995 code, Heller said, "was not a terrible law."

"The problem," he said, "was that it was never followed."

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