africa

Africa at a Fork in the Road: Taking Off or Disappointment Once Again?
in the lead firm’s business strategy and to shifts in its demand (e.g. the relocation
of production in another country). To ensure the sustainability of local business, the
client base must be diversified. Such diversification could take place, in a protected
market, through the development of local demand. In a country like Guinea, unfortunately,
local demand is not strong and sophisticated enough to substitute for the
demand of lead firms: budget constraints affect the scope of public procurement,
and local firms or consumers do not demand such high standards as multinational
corporations. The sustainability of high value-added and high quality services thus
depends on international demand and exports. Hence import substitution policies
that require the lead firm to source its inputs locally, without ensuring that the local
suppliers are internationally competitive, would be bound to fail. Movement up the
value chain should take place in an open competitive environment and be sustained
by strategies for export promotion and diversification to reduce the risks of participation
in GVCs—and in particular of dependence upon a single lead firm.
Guinea is a perfect illustration of this new trade and development paradigm. A
mining rush created a large demand for services in that country. In some sectors
that are protected, for instance due to a lack of tradability, the sudden increase
in demand generated inflation: this was the case, for instance, for housing and
hospitality services that cannot be imported (although, in turn, this created a large
demand for construction services to remedy the lack of housing facilities offering
sufficiently high quality and safety standards for the mining companies). In other
sectors, like engineering or retail/import of mining materials, both domestic and
foreign companies benefited from the surge in demand. Guinea made significant
efforts to build capacity and bring local suppliers up to the standards of the mining
companies. These efforts had a cost, and many local services suppliers contracted
debts to invest in production capacities (e.g. for trucks or other mining/quarrying
machinery) and workforce development. Recent years saw a temporary withdrawal
of the mining companies, in response to a drop in aluminum prices. Lacking local
public and private demand, many companies had to lay off qualified personnel and
went to the edge of bankruptcy. The companies that have survived, and could wait
until the mining companies came back, are either domestic branches of foreign
companies that could reallocate some of their staff and benefit from the support of
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