Extractives: A Transformational Opportunity
© Rio Tinto

The $20 billion Simandou project offers Guinea a real opportunity to transform its economy, making a $5.6 billion contribution that will effectively double the country’s gross domestic product. The project also has the potential to ensure that the benefits of big mining are widely distributed through shared infrastructure development and capacity building for local businesses.

Hampered by long delays and the Ebola outbreak, few would suggest that making progress on Africa’s largest combined iron ore and infrastructure project has been easy. However, once at full production, annual payments to the government are forecast to reach up to $1.5 billion.

“When fully operational, the project has the potential to double the country’s current GDP,” says Ismael Diakité, Managing Director Guinea at Rio Tinto, one of the partners in the project.

“At full production, the project will provide direct, indirect, and related employment for about 45,000 people,” says Dr Yansane Kerfalla, Guinea’s Minister of Mining and Geology.

Yet the project is not just a large mining operation producing 100 million tons per annum at full production that can deliver sizeable government revenues and create jobs. It also represents an integrated approach to economic development.

Growth corridor

Crucially, it includes a 650km railway linking southeast Guinea with the coast along what is known as the Southern Growth Corridor; new and upgraded roads and fiber and wireless communications; and a new deepwater port at Morebaya river near Forecariah.

This new infrastructure opens up tremendous opportunities. For example, the port will for the first time allow large cargo ships access to Guinea. This dramatically increases the country’s export prospects, reducing transportation costs significantly and increasing trade capacity.

Meanwhile, it is estimated that economic activity of at least $3 billion per year could be generated in the Southern Growth Corridor, along with up to 100,000 jobs in a wide range of sectors. In Guinea’s 2013 Poverty Reduction Strategy Paper, the corridor has been identified as a key policy tool in promoting economic growth.

Local supplier development

However, to reap these economic rewards, the government and the private sector need to work closely together to build capabilities among a very broad set of stakeholders. Importantly, this includes local suppliers. “The state is prioritizing maximization of local content among its objectives,” says Kerfalla. “SMEs will have access to opportunities and will improve their capacities.”

These local suppliers could benefit from providing goods and services during both construction and the operation of the mine.

“That’s where we and our partners come in—in trying to prepare Guineans for those opportunities,” says Christian Mulamula, IFC Principal Investment Officer, Infrastructure and Natural Resources—Mining.

Part of the task ahead is to help local suppliers meet international mining companies’ standards on things such as health and safety and to assist them in making contact with international companies that are looking to become suppliers to the project and may need commercial partners on the ground.

Since 2008, IFC has worked with the project’s partners—the Republic of Guinea, Rio Tinto, and Aluminium Corporation of China (Chinalco)—to establish a training platform for small and medium-sized businesses. About 2,000 participants from roughly 500 SMEs have so far benefited.

“We work in partnership with our stakeholders, such as local communities, business leaders, and authorities,” explains Diakité. “This collaborative approach helps us increase our understanding of the expectations and also the local capacities.”

One critical aspect of the Local Supplier Development Program, in terms of long-term sustainability, is a ‘training-of-trainers’ program. This program ensures that capacity will endure after the initial project is over.

“That’s been really well received,” says Stephanie Sines, IFC Operations Officer based in Guinea. “Because when the project kicks off, there will be so much demand, it could create a bottleneck in terms of capacity building. This way, our reach is much broader.”

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