Guinea-Bissau is no longer in the news for the wrong reasons. The small West African country has returned to democratic rule after the unfortunate coup détat of 2012. With the return of political stability, the country must contend with the equally serious problem of bringing the economy back on the path of growth. Minister of Finance Mr Geraldo Martins says that the economy is projected to grow at a modest 2.4 percent this year, an improvement on the last year’s 0.3 percent. In this discussion, he goes over President José Mario Vaz’s plans to pursue sensible reforms and policies that will, hopefully, make political upheaval of the sort that threw the country into chaos a thing of the past. And, of course, get the economy not only working again but also firing on all cylinders
What are your plans to revamp the Guinea-Bissau economy?
In the short term, priority must go to restoring delivery of basic social services, such as salary payments, electricity and water distribution to the population, education as well as health. So far, we have been quite successful in this regard.
In the medium term, we will focus on the development and implementation of a national strategy aimed at promoting sustained growth and reducing poverty. The strategy will be aligned with the main priorities identified in the government’s programme which is to restore macro-economic stability, develop human capital and build infrastructure.
How do you intend to harness the potential of your country in natural resources such as bauxite, phosphate and petroleum?
Our key natural resources include phosphate, granite, clay, bauxite, unexploited deposits of petroleum and limestone. Until recently, mineral exploitation was restricted to small-scale production of granite, sand and gravel, clay and limestone. Gold, bauxite, phosphate, and heavy minerals remain unexploited. We are keen to hold talks with interested mining companies for the exploitation of bauxite and phosphate. Bauxite reserves in Boe (Southern part of the country) amounts to about 113 million metric tons. The government intends to mobilize financing for the construction of a deepwater port in Buba (Southern part of the country) to facilitate exploitation of bauxite.
What are the major challenges facing the economy of Guinea-Bissau?
Clearly, the first is how to get the economy back on track. Our economy has suffered greatly since the April 2012 coup d’état. GDP dropped from 5.3 per cent in 2011 to -1.5 per cent in 2012, although it experienced a slight recovery to 0.3 per cent in 2013. We intend to fast-track the recovery and put the country on a path to sustainable economic development.
For that to happen, political stability is key. The good news is that after two years of political transition, Guinea-Bissau has successfully elected a president, a parliament and a government in elections considered democratic and transparent by all national and international observers. More importantly, representatives of the opposition parties have joined the government, making it easy to reach political consensus around a set of important issues.
We hope to take advantage of this new promising context to unleash the country’s enormous economic potential.
Major structural reforms will need to be adopted to boost growth, and reduce poverty and unemployment.
Support from the development partners is important during this critical phase and we want the development partners engaged with Guinea-Bissau. We are partnering with the World Bank in the area of agriculture and agro-business by expanding our cashew transformation, increasing rice production, and supporting entrepreneurship in other sectors of the economy.
What effort is the government making to attract foreign direct investment to Guinea-Bissau?
Government is working hard to improve the country’s fiscal stance and reform public administration and the business environment in an effort to grow a viable private sector. Efforts have been made to build on and consolidate recent improvements in the investment climate to reduce the costs associated with doing business and enterprise creation. For example, the Center for the Formalization of Enterprises (CFE) has drastically reduced the time and cost to start a business. The CFE, which opened its doors in May 2011, has already had a major impact in easing the process of starting a business by combining all essential services needed to create a business under a one-stop shop. The business taxation regime is also being simplified and small businesses are being encouraged to enter the formal sector.
The World Bank’s ‘Doing Business 2012 Report’ noted that the number of procedures required to start a business in Guinea-Bissau dropped from 17 to 9, and the time from 216 to 9 days during 2011-2012. In 2014, it stands at one day. The report also observed that the business start-up cost fell from 183.3 percent of gross national income per capita to 49.8 percent.
What type of investors are you aiming to attract to Guinea-Bissau?
We need foreign investment in the agricultural sector to enable us to achieve food security and improve export earnings. With agriculture employing about 83 percent of the labour force and contributing 64 percent to GDP, private sector participation in agribusiness would not only lead to greater output in our major staple crops such as rice, corn, millet, and sorghum but also in cash crops including palm kernels, cashew nuts, and peanuts. It will also help to reduce dependency of the sector on public sector’s limited resources.
Other areas of focus for foreign direct investment are the manufacturing, mining, energy and power sectors. We intend to significantly scale-up investment in the manufacturing sector which still constitutes a small part of Guinea-Bissau’s economy, contributing approximately 15% a year to GDP. And we would like to see more investment in agro-industries, considering agriculture’s leading role as a main employer of labour.
What measures do you think development finance institutions and donor countries could take to assist countries like yours which are struggling to rebuild their economies after a period of political instability?
Guinea-Bissau needs the support of all donors, bilateral and multilateral to achieve economic development and build institutions. We need specific investments in capacity building and, of course infrastructure which is key for economic development. The country needs technical assistance in several areas such as fiscal reforms, public finance management, public administration etc in order to build capacity. All these must also be done alongside the up-scaling of our financial sector, which will have to grow strong enough to power our development efforts with credit made available to the productive sector.
Youth unemployment is a challenge to every African country. What are your strategies for tackling this social problem?
Youth unemployment is a global phenomenon and not just an African problem. Youths are the building blocks of any society and without their inputs no country can develop peacefully. The stability of our country rests on the shoulders of the youths who make up about a third of the population. We are developing policies that will help get them engaged in productive activities like agribusiness, tourism and services.
For example, a recently approved $8.2million credit from IDA will be used to create jobs and enhance food security by expanding the cashew agribusiness, increase rice production and support entrepreneurship in other sectors of the economy. Through this, we intend to enhance shared prosperity by getting the youth active in the agribusiness. Cashew is one of our most important agricultural products engaging about 55 percent of households in the country.
A revitalized agricultural sector will no doubt go a long way to alleviate poverty especially among the youth.
Guinea-Bissau like many other African countries with weak manufacturing base depends on unprocessed exports for growth and foreign receipts, leaving it at the mercy of global price fluctuations. What are the present administration’s strategies to change this dynamic?
Development requires economic transformation and industrialization to move gradually from an agrarian base to an industrial one. Guinea-Bissau has the potential to achieve sustainable growth by converting our vast natural/raw materials (primary products) into finished products (such as cashew nuts) for export as the Asian countries are doing. The challenge is not only to successfully transform the economy, but also to do it in a sustainable way.