Since 2011, Guinea has been plagued by conflict between the two major ethnic groups supporting rivalling political parties. President Condé is mainly backed by the Malinke – who represent 35% of the population – while opposition leader Cellou Dalein Diallo is predominantly supported by Peul herders who make up for 40% of the population. The fact that political parties in Guinea are ethnically based forms a persistent threat to security and political stability. Demonstrations for democratic progress are held regularly and frustrations over the missing impact of natural riches on living conditions often lead to violent strikes and riots.

The fragmented opposition finally managed for the repeatedly delayed local elections to be held on 4 February. However, after opposition leader Diallo alleged election fraud, violence erupted in the capital Conakry and in the centre of the country. The opposition fears that president Condé, in power since 2010, will seek to change the constitution to secure a third term during the 2020 presidential elections. The president is being accused of installing loyalists across the country at local level to enable a constitutional revision.

Impact on country risk

Guinea is gradually recovering from a severe double shock caused by the Ebola epidemic and the crash of international iron ore prices. Moreover, dragging legal procedures together with political uncertainty and (violent) civil unrest slowed down mining investments for years. Since 2016, Guinea’s mining sector has embarked on a gradual revival, being the world’s largest bauxite exporter and holding one of the biggest and most lucrative iron ore deposits in the world (blocked by legal disputes). Its strong economic growth projections, around 6% over the coming years, are mostly the result of mining investments and major infrastructure projects financed by China. Indeed, the poor country’s domestic savings rate is still negative, meaning growth is spurred by external capital. Due to its high import dependency and limited revenue collection, Guinea is saddled with huge current account deficits (-25% of GDP in 2017) mostly financed by foreign direct investment capital inflows on the one hand, and donor and multilateral support on the other. Guinea traditionally has low gross foreign exchange reserves of less than one month of import cover, generating a high risk for non-payment in current transactions. External debt levels remain confined (projected at 31.5% of GDP by the end of 2018) and servicing these debts only absorbs around 3% of the yearly export returns. This is mainly explained by the lacking access to international financial markets and the limited level of debt-creating funding.

Despite excessive natural riches, the political and legal uncertainty, institutional weakness and civil turbulence continue to obstruct durable progress and development. As a consequence of economic and financial weaknesses and political uncertainty, Credendo classifies Guinea in the highest medium- to long-term political risk category 7/7, while for short-term political risk, Guinea is classified in 6/7.

Analyst: Louise Van Cauwenbergh – l.vancauwenbergh@credendo.com