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FACTBOX-Key political risks to watch in Guinea

Fri, 10 Feb 2012 14:07 GMT

Source: reuters // Reuters

By Saliou Samb

CONAKRY, Feb 10 (Reuters) - Guinea's President Alpha Conde plans to review mining contracts and cut the size of the army in 2012, risking the wrath of international investors and the country's notoriously unruly soldiers.

The agenda, aimed at boosting the economy and cementing fragile gains in security, was announced on the anniversary of his first year in office in the West African state last month.

Guinea is the world's largest supplier of the aluminum ore bauxite and has vast deposits of iron ore that have drawn billions of dollars in planned investments, but it is struggling to emerge from decades of political turmoil.

Tension between Conde and the opposition has eased after the government agreed to delay legislative elections that the opposition said were being organised unfairly. The polls, key to reviving foreign aid programmes that were cut during junta rule in 2009, will be held "as soon as possible", Conde said.

Guinea's transition to civilian rule in late 2010, in elections seen as the country's first free polls since independence from France, was seen as a powerful example for the region after years of military leadership.

But age-old ethnic tensions are still simmering.

POLITICS

Since Conde won the Nov. 7, 2010, election, his security forces have cracked down on supporters of his chief political rival Cellou Dalein Diallo, who conceded defeat in the poll.

What to watch:

- Legislative elections. No date has been set for parliamentary elections that were delayed from late 2011 due to a row with the opposition. A planned reform of Guinea's voter roll and the polls could be the next flashpoint for street violence, though Conde has defused tensions somewhat by agreeing to hold talks with opposition leaders over how the elections are organised. Donor nations have urged Guinea to set a date for the polls and the European Union has said it will only resume full cooperation with Guinea after they are held.

- Protests and ethnic tension. Three people were killed in protests in late September when rock-throwing demonstrators clashed with security forces using teargas grenades and truncheons. Opposition figure Diallo has repeatedly accused Conde of sidelining his constituents, which include many of his fellow ethnic Peul, Guinea's largest ethnic group.

Conde and Diallo drew support essentially on ethnic lines and the election rekindled ethnic tensions. Conde is from the Malinke ethnic group, like 35 percent of the population; Diallo is a Peul, a group making up some 40 percent.

- Military unrest. Guinea's army has a history of meddling in politics and some military elements were implicated in an assassination attempt targeting Conde in July. The government said 26 military officers and 13 civilians had been arrested in connection with the attack and said they had spoken of links to political and business circles.

Conde's military reform effort could heighten tensions if soldiers feel they are being stripped of power. In late December Guinea announced the forced retirement of 4,600 soldiers as part of the drive to shrink the force and improve discipline.

Conde appointed himself defence minister, giving him direct involvement in a military reform effort started by junta leader Sekouba Konate. The military has a reputation for brutality and indiscipline.

MINING AND INDUSTRY

Guinea, which relies on minerals for more than 70 percent of exports, is planning to review all mining contracts to "clean up the business environment" and ensure they comply with a recently revised mining code.

It is the world's biggest shipper of bauxite, the feedstock ore for aluminium. RUSAL, with its Friguia complex, has a capacity for 640,000 tonnes of alumina a year which it ships around the world for further refining into aluminium.

Guinea also produces gold, and iron ore is its major growth industry. Joint ventures by Rio Tinto and Chinalco, and Vale and BSG Resources, are between them spending more than $5 billion on the Simandou and Zogota iron ore projects.

What to watch:

- Mining review. It is unclear to what degree the review will provoke complaints from investors. RUSAL said existing contracts could not be altered unilaterally.

Guinea adopted a new mining code in September that lifted the state share in mining projects from 15 percent to 35 percent. The new state share includes a 15 percent free carry, a clause the mining companies say will eat directly into their profits and make new investment less likely.

- China has shown growing interest in Guinea. Apart from the Rio-Chinalco JV to develop the Simandou iron ore project, Guinea is in advanced talks with state-owned China Power Investment to develop a bauxite mine and build an alumina refinery, deep water port and a power plant in deals worth nearly $6 billion.

- Labour relations. Workers have shown frustration over pay and conditions repeatedly over recent years, and have proven they can significantly affect output with strike action.

Ongoing labour negotiations became messy in December at RUSAL's Friguia plant after a union leader said the refinery was shut down by management to pressure workers seeking higher pay. RUSAL officials denied the operations at the plant were shut.

Workers at Guinea CBG downed also their tools for 48 hours in early December at the Alcoa, Rio Tinto and Guinean government bauxite joint venture over wage negotiations, the company said.

- Disputes with government. Aside from looming contract reviews, Guinea has a long history of disputes with major companies. Chief among them were a decision to remove Rio Tinto's rights to part of the Simandou iron ore development , ongoing disagreements with RUSAL over pollution and back taxes, the cancellation in March of a deal with France's Getma International to manage Conakry's container port, and the transfer of the deal to port group Bollore. . In April Conde cancelled an agreement with Vale to upgrade a 640 km railway.

- New projects. Large-scale new projects would be a boost for the new government. BHP Billiton is, with Global Alumina, Dubai Aluminium Co and Mubadala Developments, a shareholder in Guinea Alumina Corporation, a joint venture that plans to build a 3.3-million tonne a year alumina refinery.

- Guinea has approved a $2 billion plan by British firm Herman Trading to build a 150,000 barrel per day oil refinery. The plant will be built in Guinea's western Boffa region and will start producing at between 6,000 and 10,000 bpd next year before reaching full capacity after five years.

SOCIETY AND WIDER ECONOMY

Annual mining revenues worth around $100 million to the government have not been enough to alleviate poverty in Guinea, which is ranked 170 out of 182 in the U.N. Human Development Index of living standards.

What to watch:

- Donors coming back. The European Union in 2009 suspended development aid and withdrew a plan for a fishing partnership with Guinea. But foreign donors will want to reward democratic progress by swiftly unblocking aid and Guinea's new leaders can expect help from Brussels and ex-colonial power France.

EU development chief Andris Piebalgs visited Guinea in May 2011 and said the country had made progress towards democracy and full cooperation could resume after legislative elections. No date has been set for those polls.

- Infrastructure improvements. Many Guineans have no electricity or running water, and less than a third of the population is literate. The new government will come under pressure to make improvements.

At least one person was killed during riots in the bauxite mining town of Kamsar in January over power outages. (Writing by Richard Valdmanis and Bate Felix; editing by Philippa Fletcher)