Download 17 National Economy 17.1 Introduction This chapter

17
National Economy
17.1
Introduction
This chapter considers the Simandou Project’s impacts on the national economy. The chapter considers the
Project as a whole and does not distinguish between mine, rail or port components in relation to their
respective impacts. Potential impacts of the Project include changes to:
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national employment and procurement;
government revenue;
foreign currency earnings and the exchange rate;
dependence on minerals and associated volatility;
prices and inflation (including terms of trade); and
Gross Domestic Product (GDP).
Following an assessment of the significance of these impacts, the chapter considers how the Project will
mitigate negative impacts as well as enhance positive benefits through its Regional Development Strategy
(RDS) and Social Management Framework (SMF).
Further details of the chapter structure are as follows:
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Section 17.2 provides a description of the approach used for the assessment, including a definition of
the study area and the methods used to assess impacts;
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Section 17.3 presents the assessment of impacts from the Project in the absence of specific actions to
mitigate negative impacts and enhance positive impacts;
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Section 17.4 describes the SMF and the mitigation measures that are proposed as part of the strategy
to mitigate impacts on the national economy, and then assesses the residual impacts after mitigation;
and
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Section 17.5 provides a summary of findings.
The assessment in this chapter draws extensively on baseline information presented in Chapter 16:
Socio-Economic and Community Baseline. For a full understanding of potential socio-economic and
community impacts associated with the Project, the reader should also consult the following chapters:
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Chapter 18: Employment and Economic Development;
Chapter 19: In-Migration;
Chapter 20: Land Use and Livelihoods;
Chapter 21: Social Structures and Community Life;
Chapter 22: Community Health, Safety, and Security;
Chapter 23: Labour and Working Conditions;
Chapter 24: Ecosystem Services; and
Chapter 25: Human Rights.
17.2
Approach
17.2.1
Study Area
Development of the Simandou Project will have a wide range of effects on socio-economic and community
conditions over geographic areas ranging from the immediate area around the Simandou Port to the whole
of Guinea. The study area for impacts on the national economy has been defined as the whole of Guinea.
Details regarding regional and local study areas applied to other socio-economic and community
assessments in this SEIA can be found in Chapter 16: Socio-Economic and Community Baseline.
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17.2.2
Legal and Other Requirements
This assessment has been prepared in line with applicable Guinean laws and development policies as well
as international and Rio Tinto standards. Details regarding specific legal and other requirements relevant to
the assessment of socio-economic and community impacts, including impacts on the national economy, can
be found in Chapter 16: Socio-Economic and Community Baseline.
17.2.3
Prediction and Evaluation of Impacts
To develop an understanding of potential impacts on the national economy throughout the Simandou
Project’s lifetime (including construction and operation of the mine, railway and port and closure of the
mine), Rio Tinto has developed a preliminary macroeconomic model that takes into account the Project’s
investment plan, outputs, and key economic data and trends. First constructed in 2008 and regularly
updated since, the model uses socio-economic, population and labour data produced by authorities such as
the Republic of Guinea’s Ministry of Planning, the International Monetary Fund (IMF), and the United Nations
(UN).
The projections from this preliminary macroeconomic model are based on:
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a Net Present Value (NPV) model of the Project as determined by Rio Tinto, using external consensus
price forecasts, a nominal average Project load of 95 mtpa, and 3% of the Project’s capital expenditure
spent domestically; and
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historical and future predicted economic data, including GDP, monetary and trade data and forecasts of
world inflation and trade prices.
These data points feed into projections based on Guinean policy and data, including fiscal and monetary
policy, domestic demand, imports and exports, and foreign exchange and inflation. The outputs of the model
include projections on government finances (revenue expenditure, debt and debt service); GDP components;
financial aspects (monetary exchange, US exchange rate and inflation); and aspects of trade, including
imports and exports in mining and non-mining sectors.
The model is being updated to assess the Project’s impact in relation to the current economic circumstances
and most recent Project description. This will be done in full collaboration with the Government,
development agencies and local universities. The outcome of the updated analysis will be fully disclosed to
the public during 2013 and the tool will be made available to the Guinean Government for their use and
ongoing application.
The preliminary findings of the model relative to Project impacts on the national economy are discussed in
Section 17.3 below. Given the methodology described above and the number of external influences on the
national economy over the Project lifetime, this assessment, unlike other assessments in this SEIA, does not
consider the degree of a potential impact (eg minor, critical) but only notes whether the impact is
considered positive or negative.
17.3
Assessment of Impacts on the National Economy
17.3.1
Overview
This section presents an assessment of potential impacts of the Simandou Project on the national economy
of Guinea – that is, on macroeconomic conditions in the country and the main administrative regions within
which the Project will be developed and operated.
This will be one of the largest global investments in a mining venture and one of the largest infrastructure
projects in Africa. It will have a significant impact on Guinea’s national economy, as well as the economy of
the towns and villages in the prefectures and sub-prefectures affected by its development.
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In addition to the direct impacts mentioned in Section 17.1, the Project will bring benefits to the economic
and social environment of the country through its various development programmes, infrastructure
improvements and partnerships with the Republic of Guinea and other stakeholders, as well as further
induced opportunities. These will be strategically implemented and managed through the Regional
Development Strategy as described in Section 17.4.2.1. Recent analysis undertaken by the Project has
identified the potential for up to US$ 3 billion per year in new economic activity within the zone most closely
affected by the project. The Project is continuing to develop this scenario and will analyse this outside of the
scope of the SEIA.
Findings from the assessment are described in sections 17.3.2 through 17.3.6 below.
17.3.2
National Employment and Procurement
17.3.2.1
Employment Creation
Employment opportunities include direct employment by the Project, indirect employment through the
Project’s suppliers, and induced employment generated through spending and associated job creation in the
economy. These benefits have already started to arise, with employment of approximately 2 500 people
from Guinea by Quarter 1 of 2012, of whom 770 are directly employed by Simfer and the remainder through
contractors and sub-contractors. This represents a 60% increase in employment of Guinean nationals in 12
months. At present in 2011, 85% of Simfer’s labour force is Guinean.
These opportunities will result in increased income and spending in the economy, and further benefits in
terms of enhancing works skills and experience in the country. The Project also offers exposure to the
requirements of a multinational corporation, enhancing the population’s capabilities to better participate and
compete in a global economy and further the development of a knowledge-based workforce.
Large numbers of people will be employed during the construction of the Project, with latest December 2011
estimates envisaging an average of 13 000 full time equivalent (FTE) jobs being provided between 2012 and
2015, with a peak of up to 15 600 FTE jobs at the construction phase’s most intensive period. A scaled
down construction workforce will continue until 2017. Indirect and induced employment, as determined by
the preliminary macroeconomic model, suggests that for every FTE job created during construction, a further
5.29 jobs will be created across Guinea, resulting in the creation of a further 82 000 jobs in the broader
economy.
By the time the Project as a whole reaches full capacity, it is expected to have an operational workforce of
approximately 5 400 personnel. The employment multiplier, as estimated by the Project through the
preliminary macro-economic model, suggests that for every FTE job created during operations, a further 4.72
jobs will be created in the supply chain across Guinea. Thus a potential 25 000 further jobs will be created in
the broader economy during operation. The Project will continue to prioritise employment of Guinean
nationals.
Further details of the employment created by the Project and the port component in particular, focusing on
the local level, is discussed in Chapter 18: Employment and Economic Development.
17.3.2.2
Procurement Opportunities
All Project phases will generate large contracts for the purchase of equipment and other goods and services.
This will give rise to opportunities for businesses at the local, regional, and national levels, which will be
significant for the Guinean economy. The Project has already created opportunities for suppliers, with over
US$ 100 million equivalent in GNF to Guinean suppliers and contracts to over 350 different Guinean
companies. In Q1 2012, local spend has already reached more than US$ 50 million equivalent – a more
than doubling of the average quarterly spend of 2011.
The Project will continue to prioritise conducting business with national suppliers, focusing in particular on
those located in Prefectures related to the Project, and is partnering with the Government and various other
stakeholders in ensuring that national procurement is maximised. The procurement opportunities associated
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with the port component of the Project are further described in Section 17.5, and in more detail in
Chapter 18: Employment and Economic Development.
Project procurement and expenditure from workers during the Project’s construction and operation phases is
expected to result in the growth and diversification of the economy in of the study area. Increased income
from direct and indirect employment will also allow for improved living conditions. Those benefiting from
Project employment opportunities are likely to experience significant uplift in their economic status,
particularly if longer-term employment opportunities are gained. Economic development and growth
associated with the port component of the Project at a local level is further described in Chapter 18:
Employment and Economic Development.
The impact of employment and procurement at the national level will be experienced as a positive impact on
the economy. The degree of this impact in relation to the port component of the Project, and at a local level,
is further assessed in Chapter 18: Employment and Economic Development.
17.3.3
Government Revenue
Government revenue will be affected by the royalties and taxes that the Project will pay in relation to mining
production once the Project is operational. The payment of royalties and taxes is a legislative requirement
under Guinean mining law. These payments have already started to feed into the national economy. In
2011, the project made payments of over US$ 700 million to the Republic of Guinea. Most of this was by
way of the one-off Settlement Agreement payment, with additional contributions from payroll, land and other
taxes paid by the Project.
The Project is anticipating to commence commercial production of iron ore in 2015 and ultimately to reach a
capacity of 95 mtpa at full production. The Project will pay royalties at 3.5 % of FOB (1) price of the iron ore
throughout the life of the mine.
Most of taxes will be paid at the central level to the Public Treasury of the Republic of Guinea; the Social
Investment Fund (which is a commitment to engage in local community support), amounting to 0.25% of
Simfer SA annual turnover, will be disbursed locally (2).
Government revenues from royalties and taxes are reallocated into various types of expenditure including
recurrent expenditure, grants, repayment of loans and development spending, all of which have the potential
for multiple positive impacts. The impact of Project revenues cannot be accurately quantified at this stage as
the allocation of increased government revenue to development locally or nationally or into other purposes is
unknown. Nonetheless, for the operating lifetime of the Project, increased government revenue as a result of
payment of taxes and royalties will be experienced as a positive impact at a national level and to a more
limited extent at a local level through the Social Investment Fund. However, the degree of impact of these
tax payments will be dependent on Government allocation of spend.
Upon closure of the mine, the payment of royalties and taxes will stop, leading to a decrease in government
revenues and resulting expenditure in the economy. The impact of this cannot be predicted as it will depend
on how other sources of revenue have grown and the proportion provided by the Project at the time of
closure. If this was to remain at the level predicted for the early years of operation its cessation would have
a negative impact on government finances.
17.3.4
Foreign Currency Earnings and the Exchange Rate
The intention of the Project is to export the iron ore produced from the Simandou Mine. This raises the risk
of currency appreciation with consequences for other export sectors and the wider economy. The effect is
(1) FOB (Free on Board) refers to the international trade term describing responsibilities between buyer and seller in respect of delivery
of a product (delivery point, transfer of title and risks, insurance).
(2) The ‘Social Investment Fund’ refers to a yet to be named fund comprising 0.25% of the Simandou Project’s annual turnover, which
will spent on development activities for communities living in proximity to the Project as required by the Simandou Basic Convention. As
of the writing of this report, the agency or agencies – existing or new – to which the Social Investment Fund will be paid had yet to be
agreed upon with the government. The Social Investment Fund is planned for implementation at first commercial production.
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sometimes referred to as ‘Dutch disease’, that is the negative impact on an economy of anything that gives
rise to a sharp inflow of foreign currency (often prevalent in countries with an abundance of mineral and
petroleum resources). This leads to currency appreciation, making the country’s other products less price
competitive on the export market. It also results in higher levels of cheap imports and, in more industrial
countries, can lead to de-industrialisation as industries apart from resource exploitation are moved to
cheaper locations.
Iron ore is expected to contribute to more than 85% of exports by value but this is not expected to lead to a
large inflow of foreign currency into Guinea. During operations, revenues are expected to be earned
offshore with the funds needed for local expenditure being remitted back to Guinea. During construction,
from a national perspective, the proportion of Simandou construction expenditure spent locally will not be
significant. As a result the Project is anticipated to have no significant direct impact on the exchange rate.
Any effect that does occur will be primarily driven by the Republic of Guinea’s use of Project taxes, royalties
and dividends.
The Simandou economic model assumes that these impacts can be reasonably managed and that other
factors such as domestic inflation and Guinea’s terms of trade will determine the exchange rate. If these
assumptions are built into the model, the exchange rate against the US$ initially peaks during construction
and then levels off and lowers over time.
17.3.5
Dependence on Minerals and Associated Volatility
To date, the Guinean economy has suffered from a lack of diversification, and an overdependence on
revenues from the bauxite industry. As a result, the country has been exposed to volatility in the
international price of bauxite, which in turn has been reflected in the movements of government revenues,
the fiscal deficit and trade balances.
In recent years, the Republic of Guinea has started to promote diversification within the mining sector and to
encourage the production of intermediate goods such as alumina. However, assuming all else remains
equal, if the Project goes ahead and is followed by other major mining projects, the government could
become overly dependent on mining revenues, in particular the iron and alumina industries. There is a
danger that Guinea, which has already become vulnerable to the price of bauxite, will find itself equally, if not
more, vulnerable to the price of iron and alumina. This would be reflected in fiscal revenues, trade and the
exchange rate.
Increased dependence on minerals and associated volatility as a result of the Project’s iron ore production
would be experienced as a negative impact at a national level and could continue over the long term, if the
Government is unable to exercise sound macroeconomic policy over the years of the Project’s operation.
17.3.6
Changes in Prices and Inflation (including Terms of Trade)
The increased demand for goods and services as a result of large capital investments can lead to inflationary
effects, and a potential negative impact, on the economy. At the national level the main counter to inflation
driven by a resources boom will be competent macroeconomic management through government policy.
Given this assumption, the Simandou preliminary economic model sees inflation levels stabilise at
acceptable levels over time particularly during the time of steady state production.
Risks of inflation at a local level will be more significant, and is discussed further in Chapter 18: Employment
and Economic Development.
17.3.7
Gross Domestic Product (GDP)
All of the impacts described above are expected to contribute to substantial growth in Guinea’s GDP,
particularly from the time that the Project reaches steady state production. This growth is expected due to
payments to government through royalties and tax contributions, to employees through wages, to local
suppliers through contracts and to capital providers through dividends and capital repayments. This can be
thought of as the value that a firm has added to bought-in factors by its processes of production. If the
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Project was operating at its planned steady state today, its turnover would potentially be equivalent to over
100% of current GDP. In taking other factors into account, the preliminary macroeconomic model indicates
that the Project is actually expected to significantly increase the size of the Guinea economy at steady state
production, even before considering any multiplier effect (1). The Project offers Guinea one of the largest
capital investment projects in Africa, with a direct economic contribution that will be made up of:
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taxes, including corporation tax (30%); royalties (3.5% of FOB value) and the Community Investment
Fund;
labour costs;
repayment of Capital, Interest and Dividends;
economic Contribution (Value Added); and
payment to Suppliers and expatriate staff.
Overall, the Project will have a positive impact on the economy and GDP of Guinea through the payment of
taxes, royalties, community investment, labour payments, purchase of goods and services, and repayment of
capital. With the potential to significantly increase the size of the Guinean economy when operational, the
Project presents an important opportunity to enhance benefits through sound government policy and the
development of a healthy commercial environment.
17.4
Mitigation and Residual Impacts
17.4.1
Overview
This section presents Project mitigation measures for potential impacts on the national economy. As noted
in the impact assessment above, these impacts include changes to:
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national employment and procurement;
government revenue;
foreign currency earnings and the exchange rate;
dependence on minerals and associated volatility;
prices and inflation (including terms of trade); and
Gross Domestic Product (GDP).
As background to the mitigation measures presented, this section first describes the Regional Development
Strategy (RDS) and Social Management Framework (SMF) through which the Project will address socioeconomic and community impacts. The section then summarises all mitigation measures for impacts on the
national economy. Finally, the section assesses the residual impact significance for the impacts following
the application of mitigation measures.
17.4.2
Framework for Mitigation Measures
To mitigate adverse socio-economic impacts and enhance positive benefits among the communities in which
it operates, the Project has developed a Social Management Framework (SMF). The SMF falls under the
Project’s Regional Development Strategy (RDS) and is designed to help to fulfill its objectives.
17.4.2.1
Regional Development Strategy
The Regional Development Strategy (RDS) identifies the ways in which the Project can facilitate and support
linkages between the entire region affected by the Simandou Project and national and local development
initiatives in Guinea. The Project aims to extend benefits beyond the life of the Simandou Mine by
integrating sustainability considerations into all Project decisions and partnering with local and international
organisations on development issues. The objectives of the RDS are for the Project to:
(1) A multiplier in this case would indicate how a direct contribution to GDP would cause further indirect increases to the GDP. Due to
the uncertainty around accuracy of multipliers, these have not been applied to Simfer’s preliminary macroeconomic model.
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avoid a net adverse impact on socio-economic conditions;
become a catalyst of growth so that the Project, the government, donors and other investors can direct
resources to well planned development initiatives in a coordinated way; and
to the extent possible, ensure that local development aspirations are met.
Stakeholder involvement is considered critical to the Project’s alignment with Guinean development
objectives. Accordingly, the Project will establish a dedicated multi-sector forum or institution (referred to at
present as the ‘Regional Development Forum’) representing the Project, various levels of government,
communities, and other stakeholders in 2012. The Project will also provide funding for the first regional
economic plan. Thereafter, the Project envisions that its role would be that of a catalyst and long term
stakeholder rather than owner, and that funding for the process in the mid- and long-term would be delivered
through a fund established for this purpose (referred to at present as the ‘Simandou Development Fund’).
17.4.2.2
Social Management Framework
The Social Management Framework (SMF) provides a structure for the detailed design and implementation
of the Project’s social mitigation measures, which will be captured in a series of Social Management Plans.
As illustrated in Figure 17.1, the SMF groups social mitigation measures into a number of programmes under
four themes: Urban and Rural Planning; Employment Creation and Livelihoods; Community Health, Safety,
and Security; and Cultural Heritage and Awareness. These themes serve to highlight linkages between
mitigation measures developed for different impacts and to promote coordination of efforts during detailed
mitigation design and implementation. The Social Management Plans will build upon the SMF to describe
detailed actions, indicators and targets for each theme to be achieved through their respective programmes.
The detailed design and implementation of the SMF mitigation measures will be influenced by a number of
factors, as detailed below.
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Prioritisation: The Project will prioritise mitigation measures that address negative impacts and risks,
with special attention given to negative impacts anticipated to be of major or critical significance.
Implementation timeframes will take into account the Project schedule and apply urgency in delivering
measures that meet immediate needs in the first year of a given phase (eg construction), which may
then be enhanced and expanded in subsequent years to encourage broader and lasting benefits. The
Project will also consider appropriate target populations for mitigation, first prioritising Project affected
communities (both those affected directly by Project activities and indirectly by in-migration pressures)
and vulnerable groups within those communities over other potential beneficiaries. Recognising that
impacts, risks, and affected populations (including vulnerable groups) may change over time, the Project
will adapt its prioritisation process to findings from ongoing monitoring as necessary.
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Alignment: Where possible, the Project will align its mitigation with the development policies and plans
of local communities and government authorities (eg Local Development Plans, Poverty Reduction
Strategy Paper) and objectives identified in relevant development forums (eg Simandou Development
Forum, the Village Support Programme [PACV]). However, broader efforts to positively transform
Guinea’s socio-economic environment will fall under the responsibility of the RDS. While it is anticipated
that the RDS and SMF will work together to maximise the value of mitigation by identifying appropriate
partnerships and avoiding programmatic gaps or overlaps with other development entities, the SMF will
initially maintain Project attention on the timely mitigation of negative impacts in Project-affected
communities.
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Figure 17.1 Simandou Project Social Management Framework
REGIONAL DEVELOPMENT STRATEGY
SOCIAL MANAGEMENT FRAMEWORK
• Vision and Objectives • Organisation • Funding • Programmes • Schedule • Communication • Monitoring and Evaluation Programme Development
Prioritisation
Project Affected Peoples
Beneficiaries
Alignment
Impacts and Risks
Urban and Rural Planning
Development
Policies
Project Phase
Employment Creation and
Livelihoods
Regional Development Forum
PACV
Studies and
Analysis
Community Health, Safety,
and Security
Cultural Heritage and
Awareness
Resettlement and Livelihood Restoration
(PARC Framework and Implementation)
Community Health
Tangible Heritage
In-Migration
Community Safety and
Security
Intangible Heritage
Employee Housing
Agriculture and Food Security
Infrastructure
Local Procurement
Human Rights
SME Development
Employment and Work
Readiness
Stakeholder Engagement
Consultation, Information Exchange, and Partnerships
Capacity Building
Government
Donors
Communities
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Civil Society
and NGOs
Private
Sector
Grievance Management
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Stakeholder Engagement: The Project will engage a variety of stakeholders to consult, exchange
information, and work in partnership on detailed mitigation design and implementation. Consultation
with Project affected communities in particular will be a critical factor in the design of the Social
Management Plans. Any concerns regarding mitigation measures or Project activities will be managed
through the Project Grievance Procedure (see Annex 1G: Simandou Project Grievance Procedure) and
the outcomes arising from grievance resolution will inform the evolution of mitigation. In addition, the
Project will support capacity building within government and civil society organisations to enhance their
capabilities over time to participate in mitigation design, implementation, and monitoring. The Project
Stakeholder Engagement Plan (see Annex 1F: Simandou Project SEIA Stakeholder Engagement Plan)
will describe the processes by which these engagements and partnerships will be managed. The
Project will regularly review the efficacy of its engagement and partnerships and adapt activities when
appropriate to support the achievement of its mitigation targets.
The following sub-sections detail the planned mitigation measures for impacts on the national economy. A
comprehensive list of social mitigation measures is provided in Volume V: Social and Environmental
Management Plan.
17.4.3
Mitigation of Impacts on the National Economy
The Project recognises that it has the potential for significant impacts on the economic development of
Guinea and for communities in the study area. It has therefore committed to optimising positive impacts and
mitigating negative impacts through a number of programmes conducted within the principles of sound
corporate governance, responsible corporate citizenship, and transparent business interactions with affected
communities.
The Project’s ability to directly act on Guinea’s national economy is constrained. Guinea’s ability to benefit
from the economic opportunities that the Project offers at a national level will depend on good governance,
fiscal transparency, and support for local capacity building initiatives that strengthen the workforce and
provide a commercial environment in which new businesses can thrive.
The Project will therefore seek to support Guinea’s creation of a strong macroeconomic environment by
working with the Republic of Guinea and other stakeholders throughout the life of the Project and through the
design of mitigation and optimisation measures that align with the government’s economic development
objectives. No SMF programmes are proposed specifically in relation to the national economy, however, the
Project’s SMF Alignment and Stakeholder Engagement activities will be designed to stimulate government
capacity in managing macroeconomic impacts and to inform the development of complementary economic
development programmes at the local level (see Chapter 18: Employment and Economic Development).
These Alignment and Stakeholder Engagement activities will include the following.

Maximising employment of Guinean nationals through programmes within the Project’s Employment
Creation and Livelihoods theme. These programmes include Employment and Work Readiness, Local
Procurement, SME Development and Agriculture and Food Security, as described in Section 18.4.3 of
Chapter 18: Employment and Economic Development.

Giving preference to procuring goods and services within Guinea, provided that suppliers meet Project
requirements for delivery, quality and health, safety, and environment (HSE) standards, and that local
access to goods and services is maintained. Local suppliers are defined as sole traders, small and
medium enterprises (SMEs), or corporations, principally owned by permanent resident(s) of Guinea with
the primary business activity being undertaken within Guinea.

Maximising national procurement through the Project’s ‘Guinea Buy Local Programme’ (GBLP), a
programme developed in partnership with the IFC. Beginning in 2012, the GBLP will operate with a
budget of approximately US$ 4-5 million over three years, with 70% of funding provided by the Project
and 30% provided by the IFC. The Project will continue to support the GBLP or other local procurement
activities in partnership, where available and appropriate, with the IFC or other donors, civil society
organisations, or NGOs beyond this three year period to address needs throughout the Project lifecycle.
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
Continuing the development of a sophisticated, quantitative macroeconomic model capable of assessing
the impact of Simandou and other projects, on the Guinean economy. This will be done by sponsoring
an independent external macroeconomist to develop it to a point at which it can be handed to
Government, with associated training for relevant officials in the public administration. This will permit a
deep understanding of the economic conditions under which Simandou will be developed and, in turn,
its implications for the host economy. It is expected that this will also provide an open platform for the
Republic of Guinea, multilateral agencies, civil society, and other stakeholders to consider the use and
management of long-term mineral revenues and the broader economic impact of the Project. The
government will thus be better placed to design and implement a set of targeted policies and measures
aimed to maximise the positive effects of mining at this large scale, and to reduce the risks of negative
economic implications, which are often referred to as the 'Resource Curse'.
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Collaborating with the Republic of Guinea to make payments of taxes and royalties in a transparent,
accurate and timely manner during the operation phase. As a corporate member of the Extractive
Industries Transparency Initiative (EITI), Rio Tinto will ensure that sound financial principles and
accounting processes are in place for its business and will publish an annual statement of taxes and
royalties paid.
In relation to dependence of the economy on the minerals sector, and associated volatility, working with
the Republic of Guinea to encourage use of revenues from the Project to promote economic
diversification as part of a wider industrial policy and supporting efforts to this end.

17.4.4
Residual Impacts
With implementation of the above mitigation measures, impacts on the national economy are anticipated to
be mainly positive, with some negative impacts associated with exchange rate volatility and inflation effects.
Residual impacts related to the national economy have not been determined here, due to the constraints on
the Project’s ability to directly act on Guinea’s national economy. As discussed above, Guinea’s ability to
benefit from the economic opportunities that the Project offers at a national level will depend on good
governance, fiscal transparency, and support for local capacity building initiatives that strengthen the
workforce and provide a commercial environment in which new businesses can thrive. The residual impacts
related to employment and economic development, at a local level, are addressed in Chapter 18:
Employment and Economic Development.
17.5
Summary of Findings
Potential impacts on the national economy and associated mitigation measures are summarised in
Table 17.1.
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Table 17.1 Summary of Potential Impacts on the National Economy
Impact Description
Impact
Assessment
SMF
Key Mitigation Measures
Employment and procurement by the Project,
prioritising opportunities for Guinean nationals,
Positive
will result in increased income and spending in
the economy, along with other benefits.
Regional Development Strategy
Government revenue
Upon conclusion of the tax holiday, the
Project’s tax contributions are expected to be
5% of GDP.
Guinea’s ability to benefit from the economic opportunities that the Project
offers at a national level will depend on good governance, fiscal
transparency, and support for local capacity building initiatives that
strengthen the workforce and provide a commercial environment in which
new businesses can thrive.
Alignment
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Development Policies (eg EITI)
The Project will therefore seek to support Guinea’s creation of a strong

Regional Development Forum
macroeconomic environment by working with government and other

Studies and Analysis
stakeholders throughout the lifetime of the Project and designing mitigation
and optimisation measures for national and local SMF programmes that
Programmes
align with the government’s economic development objectives. Specifically,

Employment and Work
the Project will:
Readiness
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SME Development

maximise the employment of Guinean nationals through the Project’s

Local Procurement
Employment Creation and Livelihoods theme;

Agriculture and Food Security

give preference to procuring goods and services within Guinea and
maximising national procurement through the Project's 'Guinea Buy
Local Programme' (GBLP);
Stakeholder Engagement
Positive
Foreign currency earnings and the exchange
rate
The Project will not significantly impact foreign Not Significant
currency earnings and the exchange rate
because revenues from the Project will be
earned offshore.
Dependence on minerals and associated
volatility
There is the potential for government
revenues to become over-dependent on
mining, making the economy vulnerable to
volatility in commodity prices.
Prices and inflation (including terms of trade)
Increased demand for goods and services as
a result of large capital investments can lead
to inflationary effects in the economy.
Negative
Social Management Framework:

Negative

Consultation, Information
Exchange, and Partnerships
Capacity Building
Gross Domestic Product
The Project has the potential to significantly
increase the size of the Guinean economy
during operation.

continue to develop the Simandou macroeconomic model to assist in
understanding and managing impacts on the national economy
throughout the Project lifetime, and hand over of the model to
Government, along with appropriate training;

collaborate with the Republic of Guinea to make payments of taxes and
royalties in a transparent, accurate and timely manner during the
operation phase. As a corporate member of the Extractive Industries
Transparency Initiative (EITI), Rio Tinto will ensure that sound financial
principles and accounting processes are in place for its business and
will publish an annual statement of taxes and royalties paid; and

work with government to encourage use of revenues from the Project
to promote economic diversification as part of a wider industrial policy
and support efforts to this end.
Positive
Simandou SEIA Volume III Port
Chapter 17: National Economy
17-11