For more than twenty years, Simandou has been presented as a project with the potential to boost Guinea's economic development significantly. As iron ore production gets underway, the government in Conakry must guarantee that the resulting revenues are effectively channeled toward poverty reduction and addressing inequality.

Guinea officially began mining operations at Simandou on Tuesday, November 11, developing one of the world’s largest undeveloped iron ore reserves. The International Monetary Fund (IMF) projects that the project could boost Guinea’s gross domestic product (GDP) by 26 percent by 2030 and double the value of the country's mineral exports.

These bold forecasts reflect how much the government in Conakry is counting on Simandou to transform the economy and bring prosperity, as shown by the ambitious "Simandou 2040" development program. While the revenue windfall from this resource could set a new course for one of the world’s poorest nations, disciplined management of funds will be essential for any genuine progress.

Corruption Report Dampens Enthusiasm

Excitement over the launch has been tempered by persistent concerns about Guinea's mineral governance, highlighted the day before the ceremony. In a report quoted by local media on Sunday, the National Transition Council (CNT) noted that a 100-million-dollar "entry ticket" fee paid by the Chinese steel group BAOWU to join the project has still not appeared in the public accounts.

These bold forecasts reflect how much the government in Conakry is counting on Simandou to transform the economy and bring prosperity, as shown by the ambitious "Simandou 2040" development program. 

"As part of efforts to boost administrative revenue collection, the CNT reiterates its call for the actual recovery of funds from BAOWU’s entry ticket into the Simandou project, estimated at 864 billion Guinean francs, and urges the relevant departments to ensure its regularization and transfer to the Public Treasury," stated the CNT’s Planning, Financial Affairs, and Budgetary Control Commission.

Bauxite Precedent Raises Red Flags

With Simandou, Guinea aims to disrupt the global hierarchy of iron producers. Conakry is targeting the premium market segment, as Simandou’s high-grade ore, grading 65 percent iron, could position the country as a key supplier for the low-carbon steel industry. Guinean Mines Minister Bouna Sylla said this unique characteristic would allow the country to secure "high prices" for Simandou iron.

Simandou is not Guinea’s first mineral resource of global importance. The country already hosts the world’s largest bauxite reserves, a potential that has recently made Guinea the world’s top exporter of the aluminum-producing ore. According to the Extractive Industries Transparency Initiative (EITI), the bauxite sector accounted for 44 percent of mineral exports in 2022, while the mining sector overall contributed 20 percent to GDP, 17 percent to state revenue, and 6.5 percent of total employment.

Issues seen in the bauxite sector are likely to resurface in the Simandou revenue cycle. They include favoritism in fiscal annexes of key agreements, manipulation of export volumes and quality, mispricing through transfer pricing, collusion between mining companies and tax authorities to reduce tax adjustments, and political interference in tax audits.

However, bauxite exploitation has not yet brought major improvements to Guinea’s economic development. Despite average annual GDP growth exceeding 5.1 percent between 2019 and 2023, the poverty rate rose by seven percentage points during the same period, pushing an additional 1.8 million people into poverty.

A 2023 report on corruption in the Guinean mining sector, published by local civil society organizations, detailed numerous corruption risks undermining both the collection and management of mining revenues. Issues seen in the bauxite sector are likely to resurface in the Simandou revenue cycle. They include favoritism in fiscal annexes of key agreements, manipulation of export volumes and quality, mispricing through transfer pricing, collusion between mining companies and tax authorities to reduce tax adjustments, and political interference in tax audits.

These findings suggest that the structural weaknesses already visible in the bauxite sector could easily reappear with Simandou iron if deep reforms to mineral governance are not undertaken. In terms of transparency, authorities have yet to publish the agreement signed between the state and the companies involved in the Simandou project, 75 percent of which are Chinese-owned. The expected rise in public revenue without institutional reform does not guarantee better living conditions for the population. Instead, it risks entrenching predatory practices, fueling resource misallocation, and trapping Guinea in a new resource curse cycle where mineral abundance breeds economic fragility rather than development.

Charting a Path to Inclusive Growth

To avoid repeating past mistakes, Guinea has stated its intention to embed Simandou within a broader economic transformation strategy. This is the main ambition of the "Simandou 2040" program, presented by authorities as a national emergence plan designed to move beyond simple mineral extraction. The strategy aims for inclusive development that leverages natural resources while focusing on sustainable economic diversification.

International financial institutions, however, view this ambition with caution. The IMF believes Simandou can drive growth only if revenues are strategically reinvested. Its simulations show that using resources equivalent to 3 percent of GDP for public investment could accelerate non-mining growth, reduce the debt-to-GDP ratio more rapidly, and support employment.

Built around 122 projects and 36 reforms grouped under five pillars: agriculture and food industry, education, infrastructure and technology, the economy, and health, Simandou 2040 seeks to prevent the dissipation of mining revenues by channeling part of the proceeds toward productive sectors, human capital investment, and infrastructure capable of generating jobs and reducing poverty.

International financial institutions, however, view this ambition with caution. The IMF believes Simandou can drive growth only if revenues are strategically reinvested. Its simulations show that using resources equivalent to 3 percent of GDP for public investment could accelerate non-mining growth, reduce the debt-to-GDP ratio more rapidly, and support employment. The Fund warns that without targeted policy action, the project’s social impact would remain limited. Macroeconomic models suggest Simandou would lower the poverty rate by only 0.6 percentage points and could even increase inequality.

The World Bank offers a complementary perspective. It estimates that Simandou could raise Guinea’s revenue-to-GDP ratio to 17.3 percent by 2030, up from 12.8 percent in 2023, provided reforms are strengthened. Yet even that figure would remain below the 20 percent convergence target of the West African Economic and Monetary Union (WAEMU) and the Economic Community of West African States (ECOWAS). The Bank suggests that Simandou’s transformative effect will depend less on the ore itself than on the state’s capacity to convert mining income into productivity gains and job creation.

For all Guineans to benefit from the project’s expected returns, Conakry must ensure impeccable governance, transparent and disciplined revenue management, and investments that respond to the population’s real needs, especially in employment and basic infrastructure

Ultimately, the message emerging from both the Simandou 2040 program and the warnings of international institutions is clear. For all Guineans to benefit from the project’s expected returns, Conakry must ensure impeccable governance, transparent and disciplined revenue management, and investments that respond to the population’s real needs, especially in employment and basic infrastructure. Without such rigor, an influx of foreign currency could deepen the same imbalances seen during the bauxite boom, heighten social tensions, and reinforce dependence on a volatile resource rent instead of building the diversified economy the authorities aspire to create.

Emiliano Tossou