Conde faces battle to revive Guinea economy after reelection

Reuters News
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Posted: Oct 26, 2015 9:07 AM

By Saliou Samb

CONAKRY (Reuters) - Guinean President Alpha Conde's emphatic reelection appears to have subdued a combative opposition but a lingering Ebola outbreak and a slump in metals prices are dogging his plan to revive the West African state's economy.

Frequent demonstrations by opposition parties angry at Conde's election in 2010 deterred investors during his first five-year term. At least 60 people died in protests in Africa's largest exporter of bauxite, the raw material for aluminum.

But this time the opposition has failed to take to the streets despite crying fraud at Conde's presidential election victory on Oct. 11, when he won 58 percent of the 4 million votes cast.

European Union observers gave the election a clean bill of health, despite organizational shortcomings, and the main opposition leader Cellou Dallein Diallo has not appealed to Constitutional Court against Conde's victory, although he has until Tuesday to do so.

Opposition leaders appear cowed by a slump in their vote from 2010, analysts say. Support for Diallo, a former prime minister, fell 8 percentage points to 31 percent after Conde spent lavishly and campaigned hard in an opposition stronghold.

Conde's popularity was also boosted by providing a reliable mains electricity supply to the capital Conakry, something governments have failed to achieve for 50 years, thanks to the Chinese-built Kaleta hydroelectric dam that came online in May.

Conde - who under the constitution is due to step down at the end of his second term in 2020 - has an opportunity to soothe Guinea's confrontational and ethnically divided politics, analysts say. In a possible sign of an overture, he met on Friday the leader of the opposition Union of Republic Forces, Sidya Toure, who came third in the vote.

"The government needs to adopt a reconciliatory line and be modest in victory," said political analyst Mohamed Camara, a law professor at Sonfonia university in Conakry. "Tensions will not explode but there are conditions in place for resentment to become more pronounced."

According to an Economy Ministry report, political tensions sapped investment in Conde's first term. Economic growth slipped to 2.3 percent in 2013 before sinking to 1.1 percent last year when Ebola struck.

Guinea, which has lost about 2,500 people to Ebola, is the only country in West Africa still with active cases. With the virus continuing to hurt activity and investment, the government predicts growth will slow to just 0.9 percent this year, according to Economy Ministry official Emmanuel Sossouadouno.

IRON ORE, ELECTRICITY PROJECTS

Conde is pinning many of his hopes on a $20 billion planned development of the half of the giant Simandou mine that is controlled by Rio Tinto. Before the election, Conde said he had asked the British-Australian miner to submit feasibility studies before December for the deposit, which could produce 100 million of tonnes of iron ore a year.

But with global prices for the metal near multi-year lows, analysts say Rio may try to stall the investment schedule while keeping its hands on the asset in the hope of rebound.

"Looking at current commodity prices, it is difficult to see a revival in mining investment in the region in the short term," said Colin Hamilton, the head of commodity research at Macquarie Group, when asked about Rio's role in Simandou.

Aboubacar Diallo, a local member of the Extractive Industries Transparency Initiative (EITI) which promotes open management of mineral resources, agreed that delays to the project were likely but said the high quality of ore from Simandou would guarantee its development.

Last month Conde unexpectedly suspended plans to retender the other half of Simandou, which was withdrawn from BSGR - part of Israeli billionaire Beny Steinmetz's conglomerate - following a corruption inquiry. BSGR has threatened to sue companies that invest in its former license area.

By contrast, investment in less risky projects in the bauxite sector - where Guinea controls one-third of global reserves - has remained robust.

In May the Compagnie des Bauxites de Guinée (CBG), which is 51 percent-owned by a consortium controlled by Alcoa, Rio Tinto and Dadco Investments - announced a $1 billion expansion to increase its annual production capacity to 23.5 million tonnes by 2018.

Abu Dhabi state-owned investment fund Mubadala [MUDEV.UL] and the Investment Corporation of Dubai are leading a $5 billion investment in a giant bauxite project. Production is due to start by 2017, with completion of an alumina refinery by 2022.

Central to Conde's efforts to start of energy-intensive production of aluminum is another hydroelectric scheme, the planned 500 megawatt dam at Souapiti. The government has already signed a memorandum of understanding with China Water Electric (CWE) for the $1.2 billion project.

"Souapiti could help the country to establish aluminum smelters," EITI's Diallo said. "Guinea could also start exporting power to neighboring countries, which would boost government revenues."

(Reporting by Daniel Flynn; editing by David Stamp)