What impact does the Guinea coup have on Chinese enterprises?

Written by Zhou Xueling

On September 5th, news of a military coup in Guinea emerged, with the 83-year-old president being detained by the military, and a video was released showing him sitting on a sofa in a confused state.

Where is Guinea? Why is the world paying attention to this coup? What impact does this coup have on us? This article will answer these questions all at once.

01 Where is Guinea?

Most people may not know where Guinea is when they hear about the coup, while a small number of those familiar with international news or world geography might ask, which Guinea?

Indeed, there are three Guineas in Africa—Guinea Republic, Guinea-Bissau, and Equatorial Guinea; there is also Papua New Guinea in Southeast Asia.

There is also an unmarked Papua New Guinea in Southeast Asia.

The term Guinea means "West Africa" in Portuguese. As for why there is a Guinea in Southeast Asia, it is because Portuguese colonizers found that some indigenous people on certain islands resembled West Africans, so they simply called them all Guinea.

Guiné

The coup occurred in the Republic of Guinea located in West Africa, so it is generally referred to simply as Guinea.

02 What is the economic structure of Guinea?

Guinea is rich in resources such as aluminum, iron, uranium, gold, and diamonds, with bauxite reserves estimated to reach 4 billion tons, accounting for a quarter of the world's total reserves. Since 2017, Guinea has replaced Australia as the world's largest bauxite exporter, supplying 55% of China's bauxite imports.

The Boké region in western Guinea has a massive bauxite mine, with reserves estimated at 2.3 billion tons, accounting for 57% of the country's aluminum resources, and a grade of over 45%; the Simandou mountain range in the south has the Simandou iron ore mine, which is currently the largest undeveloped iron ore mine in the world, with reserves of about 2.4 billion tons, where the grades of zones 1 and 2 exceed 65%, even surpassing those in Australia and Brazil.

Besides the mining sector, the primary industry is actually the most important for people's livelihoods.

Although Guinea is located near the equator, it has abundant water resources and fertile soil, giving it a natural advantage in agricultural development. It can not only achieve food self-sufficiency but has also previously generated a large amount of foreign exchange, with bananas, pineapples, mangoes, and coffee being important export agricultural products. According to the World Bank, agriculture is the main source of employment in Guinea, accounting for 52% of the employed population and 57% of rural household income.

However, since the development of the mining industry, the mining sector and the non-mining sector in Guinea have been very unbalanced.

In 2016-2017, Guinea's mining GDP growth rate reached 50%, while the non-mining growth rate was only about 5%. Last year, during the pandemic, Guinea's actual GDP grew by 5.2%, slightly lower than 5.6% in 2019; it looks quite impressive, but in fact, it was only because of strong aluminum demand in 2020, which led to an 18.4% increase in Guinea's mining activities, while non-mining grew only by 2.5%, and the inflation level faced by the people was as high as over 10%.

In 2019, Guinea's exports were dominated by minerals and gold.

03 Why the coup?

Simply put, the money earned from selling minerals was not distributed reasonably, the non-mining sector's economic growth was slow, and the wealth gap was large. Coupled with the pandemic, it became unsustainable.

04 Which Chinese enterprises have a presence in Guinea?

In the previously mentioned Boké region, China Aluminum has invested over $500 million in the southern part of this mining area, taking two years to complete China's largest bauxite project in Guinea, the Boffa project, with an annual production capacity of 12 million tons.

Guinea's share in China's bauxite imports has been rising.

The Simandou iron ore project has also been taken over by Chinese enterprises. In June last year, the Guinean cabinet approved the basic mining agreement for Simandou iron ore zones 1 and 2, completing cooperation negotiations with the Winning Consortium; prior to this, a Chinese consortium led by China Aluminum Group and China Baowu held a 39.95% stake in zones 3 and 4, with the remaining shares held by Rio Tinto (45.05%) and the Guinean government (15%). The Simandou project is expected to become an important iron ore supply to replace Australia.

As a supporting project, China Railway Construction has built several railways, connecting transportation from bauxite and iron ore mining areas to industrial parks and ports. In July this year, China Railway Construction announced the completion of the railway construction from Boffa to Boké, facilitating transportation from the mines to the port, which will play a significant role in Guinea's aluminum resource exports in the future.

At the end of the Simandou railway, the Winning Consortium plans to build a deep-water port to solve the last stop for iron ore exports.

In addition, China Road and Bridge has undertaken the Guinea CMD highway project, which starts from the capital and is an important part of Guinea's National Highway No. 1.

05 What is the latest news?

On Monday, China Aluminum issued a statement saying that all of its projects in Guinea are operating normally.

The coup leader Mamady Doumbouya stated on Monday that he hopes the mining industry will "continue production" and adhere to existing mining agreements; a government spokesperson said that land and air borders were reopened that day.

According to the maritime media Gard, there have been no reports of interruptions at Guinea's Kamsar port so far, although crew changes at all ports have been temporarily suspended; the security threat in Guinea remains high.

Although news of the coup in Guinea caused aluminum prices to surge to historical highs, the prices subsequently fell back. On Monday, China Aluminum issued a statement saying that all of its projects in Guinea are operating normally.