R 050943Z FEB 09
FM AMEMBASSY CONAKRY
TO SECSTATE WASHDC 3421
INFO ECOWAS COLLECTIVE
CIA WASHDC
DIA WASHINGTON DC
HQ USAFRICOM STUTTGART GE
DEPT OF COMMERCE WASHDC
DEPT OF TREASURY WASHINGTON DC

UNCLAS CONAKRY 000092 
 
 
E.O. 12958: N/A 
TAGS: ECON EAGR EAID ELTN EIND ENRG EIND ECPS GV
SUBJECT: MIDDLE GUINEA - AN ECONOMIC SNAPSHOT 
 
¶1. (U) SUMMARY. A recent trip into Guinea's mountainous central 
province revealed an impoverished economy dominated by subsistence 
agriculture, low-value-added artisanship, and imported consumer 
goods.  Banks almost exclusively offer only short-term credit at 
interest rates over 21%.  Chronic lack of electricity, crumbling 
transportation infrastructure, and an absence of state support of 
any kind further impede the success of a handful of fledgling 
agricultural co-ops and other entrepreneurs.  END SUMMARY. 
 
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GEOGRAPHICAL OVERVIEW 
--------------------- 
 
¶2. (U) The nation's Puehl-majority heartland of Middle Guinea has an 
area of approximately 49,000 square kilometers (18,900 sq. mi.), or 
twice the size of Maryland.  The province itself encompasses almost 
all of the Fouta Djallon, a mountainous area that begins 40 
kilometers inland and rises to an average height of 1,000 meters 
(3,280 feet).  Temperatures range from 30C (86F) to 36C (96.8F) 
during the day, and can fall to as low as 5C (41F) at night, colder 
than any other part of the country. Informal estimates calculate 
Middle Guinea's population at 1.9 million inhabitants, giving the 
province a density of 38.7 people per square kilometer, roughly that 
of Wisconsin.  The provincial capital of Labe lies 460 kilometers 
from Conakry, or six hours by car.  Other major cities include 
Mamou, Pita, and Dalaba. 
 
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BACKGROUND NOTE: A TRACTOR FOR EVERY VILLAGE 
-------------------------------------------- 
 
¶3. (U) The catastrophic agricultural reforms of the mid 1970s under 
the socialist President Sekou Toure (1958-1984) still linger in 
Middle Guinea's popular imagination, and today invariably work their 
way into any discussion of economic reform.  In that era, Toure 
attempted to make each village self-sufficient in order to spur an 
agricultural great leap forward.  The regime collectivized community 
lands and provided each village with a tractor from the Soviet Union 
or North Korea.  Each village was responsible for paying for the 
tractor with the higher output that would inevitably follow the 
efficiency gains from mechanization.  The government also set up 
state-owned canning plants to capture the fruits of this progress. 
However, the largely illiterate rural population had little idea of 
how to use or maintain modern farming equipment, and when the 
agricultural boom failed to materialize, communities were often 
forced to sell livestock, seed stores, and sometimes even 
cannibalized tractor parts to repay the central government.  Many 
villages were left far worse off economically than before Toure's 
reform.  After 1984, President Lansana Conte abandoned efforts at 
agricultural modernization, and the population returned to 
subsistence farming. 
 
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TRADITONAL, SUBSISTENCE AGRICULTURE DOMINATES ECONOMY 
--------------------------------------------- -------- 
 
¶4. (U) Rice, corn, millet (fonio), peanuts, cassava (manioc), 
sorghum, potatoes, onions, and tomatoes are the primary crops of 
Middle Guinea.  Traditional farming of predominantly small family 
plots, usually without the aid of plow-bearing animals and pulled 
implements, is the main agricultural activity. 
 
¶5. (U) Some local co-operatives exist in or near the region's larger 
towns and take advantage of pooled resources to provide limited 
employment opportunities. A network of rural farmers--the Paysans du 
Fouta Djallon--have also begun a commercialized agriculture project 
supported by the French Development Agency, specializing in 
tomatoes, potatoes, and onions.  However, this effort and others 
like it rely heavily on international assistance and are further 
hampered by seasonal overproduction, lack of storage and 
refrigeration, exorbitantly high interest rates, poor transportation 
infrastructure, and an export ban on food items (septel). 
 
------------------------------------------ 
HERDING HAS NOT REACHED A COMMERCIAL SCALE 
------------------------------------------ 
 
¶6. (U) Cattle, sheep, goats, and poultry are the most common 
livestock in Middle Guinea.  As in agriculture, herders continue to 
use traditional methods when raising their stock.  Animals are 
generally not kept in pens, though sheep and goats often wear stocks 
around their necks that prevent them from entering fenced-in crop 
areas.  Mamadou Diao Diallo, the head of the Regional Agriculture 
and Livestock Directorate told Econoff that lack of adequate 
veterinary care and animal vaccines significantly hinder any 
progress toward commercialized farming.  For example, he said that 
if a bovine herd is kept together even for a moderate length of 
time, it faced a significant risk of contracting a disease that 
could decimate its numbers. Diallo said that slaughterhouses and 
butcher shops in Middle Guinea are generally owned and run as a 
co-operative by members of the Agriculture and Livestock 
Directorate, and added that the Directorate also strives to maintain 
health and hygiene standards. 
 
¶7. (U) Though most families own livestock, Diallo said that large 
grazing animals like cows are not primarily used as a source of food 
for the family.  Rather, families buy them when they have excess 
money, and sell them when they are in financial need.  Thus, these 
animals are a way to store excess capital outside of a banking 
system that most Guineans view as untrustworthy.  Middlemen purchase 
one or two animals at a time from individual herders and ship them 
to Conakry for slaughter and sale when they have acquired enough to 
fill a single truck. 
 
--------------------------------------------- -------- 
COMMERCE IS CONFINED TO FOODSTUFFS AND CONSUMER GOODS 
--------------------------------------------- -------- 
 
¶8. (U) Since the local farmers and herders generally consume locally 
grown crops themselves, households must purchase a significant 
amount of imported rice, sugar, and bread made from imported flour 
to compliment what they grow. As in Conakry, however, a small number 
of rice, sugar, and wheat importers effectively control the local 
market.        Some vegetables--especially those seen as condiments, 
such as peppers, tomatoes, and onions--and many fruits are grown 
specifically for sale.  However, many farmers complain that seasonal 
harvests usually create a market glut, allowing middlemen to dictate 
prices. 
 
¶9. (U) Though official statistics are unavailable, several officials 
interviewed by Econoff said they believed remittances are a large 
part of the economy of the interior.  Both Moneygram and Western 
Union, two of the largest money transfer companies in Guinea, have 
offices in every major city in Middle Guinea, including Mamou, Labe, 
Pita, and Dalaba. 
 
¶10. (U) After foodstuffs, imported consumer goods such as clothing 
from China, Europe, and the United States make up the largest market 
segment.  Individual merchants often personally travel abroad to buy 
single containers of goods, which they then resell in Guinea. 
Extended families often pool resources to increase their buying 
power abroad, and fathers frequently pass their businesses to their 
sons--and occasionally to their daughters--thus alleviating the need 
to acquire scarce start-up capital. 
 
----------------------------------------- 
THIN MARGINS THREATEN ARTISAN ENTERPRISES 
----------------------------------------- 
 
¶11. (U) Artisans, like farmers and herders, also continue to use 
traditional methods for production.  In the Fouta Djallon, 
traditional artisan trades include weaving, soap-making, carpentry, 
cloth-making, tanning, indigo-dyeing, jewelry-making, and pottery. 
Though many workshops are small and run by one or two family members 
such as a father and son or mother and daughter, extended families 
occasionally run larger-scale operations when manufacturing textiles 
or furniture. 
 
¶12. (U) Most artisans operate on very thin profit margins, much of 
which is channeled into buying food and other basic necessities for 
their immediate and extended families.  Several artisan 
co-operatives told Econoff that expanding the scale of their 
operations would reduce costs; however, almost all complained of the 
difficulty of obtaining credit, either for expanding an existing 
business or starting a new business.  Frequently, workshop 
owners--like farmers and herders--said interest rates were too high 
and the loan periods too short to be able to afford on the thin 
operating margins of their various trades. 
 
¶13. (SBU) COMMENT: Several co-operatives throughout the region rely 
on international aid for infusions of capital for start-up or 
expansion.  The German foreign aid agency GTZ is very active in 
promoting self-sufficient workshops in the region.  However, the 
directors of all the local co-operatives worried that many new 
businesses started by GTZ would fail after the projects ended, as 
even the smallest disruption could put them out of business.  END 
COMMENT. 
 
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BANKS PROVIDE MAINLY HIGH-INTEREST, SHORT-TERM LOANS 
--------------------------------------------- ------- 
 
¶14. (U)  Four of Guinea's national commercial banks operate in 
Middle Guinea: the International Bank for Commerce and Industry in 
Guinea (BICIGUI), Societe Generale des Banques en Guinea (SGBG), 
Ecobank, and the First International Bank (FIB).  An official with 
BICIGUI in Labe, Soumaoro Kaba, told Econoff that most of the 
general population spurned commercial banks after a currency 
changeover in the mid-1980s nearly bankrupted many local families. 
"After [the crisis]," he said, "most people won't open an account 
unless they feel that they will be robbed at home."  In fact, he 
said that most banks serve essentially as ways for merchants to move 
cash from their home cities to Conakry to make purchases, or as a 
place to stockpile cash for exchange rate speculation. 
 
¶15. (U) In terms of financial products, Kaba said that most banks 
offer only short or medium-term loans, the maximum for which is 36 
months.  At BICIGUI, the interest rate for all loans is 21.26%.  He 
added that BICIGUI offers various overdraft and short-term loan 
services, and is the only bank in the city that operates an ATM. 
 
--------------------------------- 
CENTRAL BANK "MERELY A PAYMASTER" 
--------------------------------- 
 
¶16. (U) In addition to the commercial banks in Labe, the Central 
Bank of the Republic of Guinea (BCRG) also has a branch in the 
provincial capital.  Talhatou Diallo, the chief accountant of the 
branch, said that the BCRG branch currently does not play a 
regulatory role in the region, and only performs its role as 
overseer of the Guinean treasury.   Therefore, he said that the main 
purpose of the BCRG is to act as government paymaster, collecting 
revenue from the regional government organs, such as Customs, and 
making payments to civil servants. 
 
--------------------------------------------- ----- 
"RURAL CREDIT AGENCY NOT SUITABLE FOR AGRICULTURE" 
--------------------------------------------- ----- 
 
¶17. (U) Apart from commercial banks, only the rural loan agency 
Credit Rural offers loans to individual borrowers for microprojects. 
 The agency has roughly GNF 3.4 billion ($708,000) for lending in 
Mamou.   Submitted projects go before a board for approval.  Mamadou 
Alpha Diallo, the director for the agency in Mamou, said that 
project standards are "very strict," and that only a small number 
are approved.  Most loans, he said, are medium-term or long-term 
loans, between 12-24 months.  The interest rates for his agency 
range between 3.5% and 4% per month (42%-48% per year nominally) for 
agricultural equipment to 24% per year for other purchases.  Diallo 
said the agency has about 11,000 members in the Mamou region who 
both deposit money and take loans. 
 
¶18. (U) Diallo said that collateral is not used to secure the 
agency's loans.  Instead, if a small loan is not repaid, that 
individual's name is simply put on a blacklist.  For larger loans, 
however, the person in default's entire neighborhood is blocked from 
receiving loans.  "In that way," he said, "the pressure--and 
help--of your neighbors is focused on the problem."  In his opinion, 
this system constituted one of the agency's "secrets of success." 
 
¶19. (U) When told that most farmers and herders believe that the 
agency's short-term loans are not generally suitable for financing 
larger-scale agricultural or livestock ventures, Diallo said that 
Credit Rural has assisted several farmers in the past.  He did admit 
that "these projects are not our main focus."  However, he said 
Credit Rural had assisted several individuals to buy and raise 
livestock six months in advance of Tabaski, the Muslim festival of 
sacrifice.  When the borrowers sold the animals shortly before the 
Tabaski feast, he said they earned a significant profit. 
 
¶20. (U)  Given the relatively few credit options available to 
farmers and herders, many involved in the agricultural sector 
lamented the lack of a state-sponsored agricultural bank.  Several 
people told Econoff that such an institution exists in neighboring 
Mali, and that state subsidies to the bank assist in providing 
long-term, low-interest options to farmers operating on thin 
margins. 
 
--------------------------------------------- ------ 
CRUMBLING INFRASTRUCTURE MAJOR IMPEDIMENT TO GROWTH 
--------------------------------------------- ------ 
 
¶21. (U) The transport infrastructure in Middle Guinea is currently 
inadequate and cannot support the growth of agriculture, livestock, 
or industry in the region.  The only paved roads in the region are 
the national Conakry-Kankan highway and its northern Mamou-Labe 
extension, which are pitted with holes and patched with rocks and 
soil.  Contacts told Econoff that transportation fees are high since 
trucks traveling these stretches are more prone to wear, tear, and 
outright breakdown. 
 
¶22. (U) Local officials seldom grade or maintain other roads, making 
the area between Labe and the Senegalese border almost completely 
inaccessible to passenger cars, let alone tractor trailers.  Several 
farmers commented that the area north of Labe is prime for onions, 
cotton, and other crops, but transport costs render farms that start 
there unprofitable. 
 
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ELECTRICITY SUPPLY INADEQUATE FOR REGION 
---------------------------------------- 
 
¶23. (U) As in the rest of Guinea, electricity is scarce and 
available for only limited periods in any given 24-hour period. 
Middle Guinea operated on an isolated power grid for many years, 
powered by the 3.4 MW Kinkon dam built by the Chinese in the 
mid-1960s.  However, the completion of the Garafiri dam in the late 
1990s connected the Fouta Djallon to Guinea's main southwestern grid 
centered on Conakry.  Additionally, a small microdam that remains 
unconnected to the master grid supplies parts of the city of Dalaba. 
 
¶24. (U) The dam's main engineer, Saidio Leno, told Econoff that the 
government has neglected upkeep on many hydroelectric projects.  The 
road to the dam--essentially an unmarked dirt trail through a 
military installation--was unmarked and nearly impassible.  (NOTE: 
The Embassy vehicle blew a tire after running over a four-inch nail 
that lay among the considerable amount of metal debris all along 
this road.  END NOTE.) Equipment along the top of the dam, such as 
hoists, was rusted and appeared non-functional.  The lights along 
the dam had no bulbs and were in some cases stripped of their 
internal wiring.  Like the Garafiri dam, Kinkon does not have a 
cellular telephone tower near its generator station, effectively 
cutting it off from all communications with the rest of the country. 
 
¶25. (U) Leno further related that the government could double the 
generation capacity of Kinkon if it desired, but so far had 
expressed little interest in actually doing so.  Because the dam 
generates electricity by piping reservoir water over about one 
kilometer to a small generation station located more than 800 meters 
below the dam, the electricity utility could add a second pipeline 
and station.  This new station could similarly generate 3.4 MW.  "I 
know it's not much," he told Econoff, "but it could help the 
region."  He said that he has given the same presentation and 
information to many visiting ministers.  "They make promises, but 
they never do anything." 
 
¶26. (U) Currently, Kinkon supplies only the region during the day. 
Because the electricity it supplies is inadequate for the province's 
demands, connected cities and villages receive power according to a 
rotation schedule.  At night, when the grids are linked, the 
electricity utility follows a similar schedule in supplying cities 
on the grid.  However, residents complained to Econoff that even 
when electricity is supplied, its voltage is often insufficient for 
most lights and appliances. 
 
------------------------------------ 
CELL COVERAGE LIMITED OUTSIDE CITIES 
------------------------------------ 
 
¶27. (U) Guinea's five major telecoms--Sotelgui, Intercel, Areeba, 
Orange, and Cellcom--are represented to differing degrees 
throughout, the province.  All five have penetrated and have 
significant coverage in the region's major cities.  Coverage in 
outlying areas deteriorates quickly, and large swaths of territory 
remain without telephones. However, each company has plotted a 
different path to universal coverage. Sotelgui plans to move 
radially outwards frm cities into the outlying subprefectures, 
though a company spokesperson claimed that the lack of electricity 
in many areas prevented service expansion.  By contrast, Areeba and 
Cellcom are currently focusing on achieving a continuous signal 
along major highway links.  All companies claimed to be doing well 
financially. 
 
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COMMENT 
------- 
 
¶28. (SBU)  In spite of its immense agricultural and hydroelectric 
potential, Middle Guinea largely remains economically underdeveloped 
mainly due to state neglect.  As the head of the Chamber of 
Agriculture in Labe wryly noted, "Politics in Guinea starts at the 
Port of Conakry and ends at [the Conakry city limits of] Kilometer 
¶36.  They don't even know we're here."  For decades, the GoG has 
failed to fund highway repair, agricultural subsidies, even 
hydroelectric expansion projects that could directly benefit 
Conakry.  While more creative solutions for the region would include 
public-private partnerships that are not necessarily GoG-run 
projects--an agricultural credit institution, for example--it seems 
clear that the presence or absence of the state will remain one of 
the main factors in the region's future development. END COMMENT. 
 
RASPOLIC