March 4, 2015 / 10:15 AM / 5 years ago

Guinea bets on mining for post-Ebola economic recovery

CONAKRY (Reuters) - Guinea’s economy is likely to take a $2 billion hit from a regional Ebola outbreak that has killed nearly 10,000 people, and the country is relying on mining to drive growth once the virus is contained, the finance minister said.

Guinea is the world’s top exporter of the aluminium ore bauxite and produces diamonds and gold but its economy, estimated by the World Bank at $6 billion in 2013, has been crippled by Ebola.

Mohamed Diare said the disease delayed feasibility studies on the Simandou iron ore mine but the African Development Bank (AfDB) had pledged to help bring in some $900 million to fund infrastructure at the stalled project, seen as one of the world’s biggest untapped reserves of iron ore.

Guinea, neighbouring Liberia and Sierra Leone have paid a heavy human toll in the outbreak that has spread from a remote Guinean forest into regional capitals over the course of the last year.

More than 2,000 people have died in Guinea, where the disease has devasted the important agricultural sector, with fields lying fallow, and where mining, the primary economic motor, has been paralysed by the withdrawal of foreign staff.

Speaking during the Reuters Africa Investment Summit, Diare said that gauging the full impact of the outbreak is tricky as about 40 percent of activity takes place in the informal economy.

“But if we just take the formal sector ... with a drop in growth from 4.5 percent to 1 percent you already have some idea,” he said of estimates for last year.

“So I think that the losses could go beyond $2 billion.”

The World Bank is expecting the economy to contract by 0.2 percent this year, down from an October estimate of positive growth of 2 percent and a pre-outbreak forecast of 4.3 percent.

Meanwhile the epidemic has cost Guinea’s government coffers over $142 million in customs and tax revenues, Diare said.

GROWTH BUILT ON MINING

There has been a sharp drop in the number of new Ebola infections in the region, raising hopes that the epidemic might be waning. However, health officials in Guinea recently botched over 20 blood tests, leading to the release of at least four Ebola-positive patients, highlighting remaining risks.

“The end of Ebola will immediately allow the big mining projects to get back on track. Our economic growth will be built around our mining hubs,” Diare said.

Aside from bauxite, diamonds and gold, Guinea is home to the Simandou range, believed to hold some of the world’s richest iron ore but politics, geography and court cases mean it remains in the ground. Ebola has compounded that.

In one of the most concrete steps yet, last May, in the midst of the epidemic, Guinea signed a deal with Rio Tinto, Chinalco and the International Finance Corporation to set out conditions for the $20 billion infrastructure investment needed to launch Simandou.

Diare said a six-month target for finalising a feasibility study under the investment framework had been affected by the Ebola outbreak but the government was encouraged by Rio Tinto’s continuing investment in the project.

An AfDB official, who asked not to be named, said the bank would provide a $300 million loan to the project would help secure a further $600 million in loans from other sources.

Diare said state bauxite miner CBG would be back on track to reach its goal of boosting annual production to 20 million tonnes of ore from 13 million in the coming years.

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