Natural resources in Guinea-Bissau: Getting it right from the start
Guinea-Bissau is one of Africa’s richest countries when it comes to natural resource endowment. Beyond having great biodiversity, its soil is fertile and hosts a multitude of minerals. Also, in addition to known and visible timber and fishing resources, it has been known for the past 40 years that there are significant deposits of bauxite, phosphates and heavy sand in the country.
Phosphate deposits were identified over 40 years ago in the region of Farim, and the first feasibility studies regarding their exploration were completed in the mid-1980s. Since then, however, no company has been able to kick-off full-scale digging of the 100 or so million tons of ore identified. Over the past 10 years, the government-issued licenses to explore the site changed hands between companies, for reasons mainly due to technical inability to perform required work. Since 2009, and with an interval lost period due to the 2012 coup d’état, the licence-holding company has moved ahead with an updated environmental and social impact assessment presently near completion, thus opening the way for operations.
Bauxite deposits have also been identified near the historical city of Boé. First spotted in the 1950s, they were never commercially viable due to low world prices, but as these have trebled over the past few decades, the economic prospects have become more enticing. In 2007, a lease was granted to a firm named Bauxite Angola, which has recently made announcements of investments of up to USD 500 million. These investments should also cover the rehabilitation of road networks for exports, and the first stages of building a deep seaport in the city of Buba.
Oil prospects have also instigated interest in the country. In total, 14 offshore blocks have been licenced to several firms which have been exploring them. Recent reports give hope that offshore deposits from these blocks may to be the first economically exploitable hydrocarbons in the country, although these are only preliminary estimates.
Such natural resources endowment gives hopes for the country. Yet history has taught us that cautious optimism, rather than hope, should be in order. There is plenty of evidence in political economy literature of a so-called “resource curse”, showing that resource abundance may be negatively correlated with economic growth, with successful peace-building, as well as with the level of democracy – all of which have been challenges for Guinea-Bissau since its independence. With this in mind and considering that the country is still at the early stages of extractive resource development, Guinea-Bissau should heavily invest in strengthening governance ahead of the resource rents. This way, it will be able to ensure that the opportunities natural resources can bring about are positive and do not turn into drivers of fragility.
Although not a mineral-related natural resource, timber presents an interesting case. Guinea-Bissau is rich in timber, and in particular of the redwood type. In 2011, a new timber law was approved by Parliament conditioning licences to environmental and social prerequisites, including environmental and social impact assessments and reforestation plans. However, reports on the ground suggest that during the transition period following the 2012 coup d’état, licensing has expanded to reach an estimated 61 licenses issued in 2014, while in 2012-2013 only 15 were granted.
Concurrently, laws allow only for processed timber to be exported, and while there are less than a handful of processing facilities, data from the NGO Global Timber UK indicate that timber exports to China increased from 80 cubic metres in 2007 to more than 15,000 m3 in 2013, far above capacity. Facing such plunder, the new government has decided to halt timber exports altogether. Ultimately, this highlights to extent to which governance shortcomings (allowing for no controls over the environmental aspects and no local value-addition as required by the law), can greatly undercut benefits the country could gain from its resources.
In terms of governance, natural resources and extractive industries in particular can have a two-fold impact. On the one-hand, they can impact economic governance through massive inflows of money generated. In this regard, joining the EITI initiative would be a great start. Other schemes such as the Open budget initiative for more transparency in spending/receipts, or simply national tools for greater transparency in economic governance and accountability should be prioritised. A second effect can be of an environmental and social nature. To mitigate impacts, the country should follow-up closely with international compacts such as the European Union’s FLEGT (Forest Law Enforcement, Governance and Trade) for timber. Most importantly, it should also build capacity in that respect. To date, the Ministry of Natural Resources in understaffed and would be overwhelmed if it were to have to deal with environmental and social impact assessments of oil operations, bauxite mining, logging, etc., or even with those related to the construction of a new port.
These observations are a call to enhance governance by setting up international standards for resource governance. But we should always remember that standards and processes are useful if followed. As these are developed moving forward, the country should always have an eye on the efficiency of its enforcement mechanisms. In the case of Guinea-Bissau, as is the case in a number of other West African nations, considering that resources exploitation has yet to materialise, the country has a tremendous opportunity: it should not focus on maximising rent from the resources as fast as possible, but rather on how to set the base for getting them right.
Yannis Arvanitis is the Principal Country Economist for Guinea-Bissau in the AfDB’s West Africa Department.