Financial Transparency Coalition

Guinea is the world’s largest producer of the mineral Bauxite, which is the main source of aluminum. Guinea also possesses reserves of hydropower and solar power, and it exports other valuable minerals: it’s the world’s fifth largest producer of iron ore and it also produces gold and diamonds.

Historically, however, Guinea has experienced tremendous difficulty in profiting from this potential. Correspondingly, Guinea has high rates of poverty, high inflation, and low levels of tax revenues. According to a joint study by Global Financial Integrity and the African Development Bank, Guinea lost about 10 percent of its GDP in illicit financial flows between 1980 and 2009.

Since it gained independence from France in 1958, Guinea has been dominated by three major authoritarian leaders, each seizing and solidifying power using military force and rigged elections. Guinea reached a turning point, however, on governance in recent years, holding its first free and competitive democratic presidential and legislative elections in 2010 and 2013, respectively. According to Freedom House, Guinea has shown steady improvements in transparency and governance, since the election of President Alpha Condé in 2010.

Given its history, however, it should come as no surprise that Guinea ranks 150 out of 177 on Transparency International’s 2013 Corruption Perception Index and Freedom House still labels the nation “partly free.”

Corruption often precludes nations like Guinea from profiting from their natural resource wealth. Conversely, natural resource wealth itself can lead to corruption. In either direction, there is a relatively well-documented association between natural resource wealth and poor governance, most notably corruption, in the literature. For example, Leite and Weidman (2002) use a cross-country model to find that larger exports of fuels and ores are associated with worse corruption scores, while agriculture and food exports are related to better scores. There are also some empirical studies that have shown resource wealth, particularly in minerals and ore, lead to increased corruption.

Recognizing these important dynamics, since Guinea has begun its transition to fledgling democracy, it has instituted some important reforms in its extractive industries sector. For example, Guinea joined the Extractive Industries Transparency Initiative (EITI) in 2007—and after a suspension during its socio-political crisis in 2009—it renewed its membership in 2012.

In 2011, Guinea developed a mining code that sets a 35% government ownership threshold for mining companies, and mandates those companies to sign a code of conduct against corrupt practices. Earlier this year, Guinea launched a website that publishes mining titles and contracts online. The President of Guinea’s Technical Committee, Nava Touré, commented: “The launch is a major step in creating the transparency we are seeking to develop in Guinea’s mining sector.”

In a telling anecdote on the subject of transparency and corruption, this month the government of Guinea decided to strip BSG Resources of its mining concessions after an investigation revealed the company had obtained them through corruption. Specifically, the report alleges that BSGR paid bribes totaling about $3 million to the wife of then-dictatorial ruler Lansana Conté between 2006 and 2008.

These are all huge, and relatively unexpected, steps toward developing transparency in extractive industries for this nation—an important strategy for reducing corruption and tax evasion. As Caroline Kende-Robb, Executive Director of the Africa Progress Panel, has pointed out, “a country like Guinea is now publishing contracts online. They have now 60 contracts online within the last year. Nobody thought that that would happen about a year ago.”

In many ways, the subjects of transparency, governance, and corruption are so tightly interwoven that it is difficult to isolate the movement of one from another. For example, Guinea is now increasing transparency because it has improved governance, but these changes will likely reduce corruption, which should also further improve governance. Guinea may now be swept up in a fledgling, yet self-reinforcing, virtuous cycle between these dynamics. That would be nothing but a good thing for this transitional democratic nation.