In July last year, Patrick Radden Keefe published a remarkable piece of journalism in the New Yorker. ‘Buried Secrets: How an Israeli billionaire wrested control of one of Africa’s biggest prizes’ told the story of businessmen Beny Steinmetz and the Republic of Guinea’s absurdly large, and almost completely untapped iron ore reserves.

It’s worth reading in full, but here are the crib notes: Steinmetz, who made his money in diamonds and had no experience in the immensely complicated and capital-intensive business of iron ore extraction, somehow procured an exploration licence on the promise of nothing more than a bit of capital investment. This was in 2009. In 2010, Steinmetz sold a 51% percent stake in his Guinea operations to the Brazilian mining company Vale for a tidy $2.5 billion – effectively valuing the exploration licence at $5 billion. Steinmetz pocketed the profit. Guinea, one of the poorest countries in the world, saw nothing from the sale, except for a paltry couple of hundred million dollars in investment.

That’s too bad, you might think. After all, Steinmetz is a businessman, and it’s hardly his fault that he’s very good at what he does. He should not be held responsible for the short-sightedness of the Guinean administration at the time.

Except Steinmetz wasn’t exactly playing by the book. Keefe detailed allegations that Steinmetz’s representatives were in the capital Conakry before and after the deal was signed, distributing diamond-encrusted wristwatches and suitcases full of cash to the key players in the regime of General Lansana Conte; and, after his death, to the military junta that replaced him. Steinmetz, it seemed, had greased more than a few palms on the way to obtaining his extraordinarily lucrative concession.

This only became a problem when Captain Moussa Dadis Camara was shot in the head by an aide – not fatally, but enough to make him unable to govern any longer. This signalled the end of the military junta, which was followed by elections and the appointment of Alpha Conde as president. Conde had returned to Guinea from the diaspora, and was determined to clean up the government, starting with a review of dodgy tenders and contracts. The Steinmetz concession was the most egregious, and he’s been battling ever since to have it rescinded, fighting court battles on several continents to do so.

Keefe’s article left off here, but the story was not finished.

In April this year, Guinea’s cabinet formally stripped Steinmetz’s BSG Resources and Vale of their iron ore rights, noting that it had firm evidence of corruption in awarding permits. BSGR protested, vehemently, arguing that the government was relying on “fabricated claims”. It says it will prepare an international arbitration case against the Guinean government, “where this process will be exposed for the first time to a fair and transparent legal process that establishes the truth and protects our rights”.

Sympathy for BSGR and Vale is in short supply, however, especially now that the Guinean government has announced a new concession worth exponentially more – one that is much closer to the real value. This week, Guinea signed a deal with Anglo-Australian miner Rio Tinto and the Chinese aluminium producer Chinalco that will bring in $20 billion infrastructure investment and job creation. That’s nearly a hundred times what BSGR had invested in the project.

“With massive infrastructure investment, this project is of critical importance for the people of Guinea,” said President Conde. “It’s a nationwide priority that goes beyond the mines and far beyond our generations. With transparent and fair deals, our mining sector has the potential to be a game changer for Guinea.” Conde and his partners in the new venture claim that it could double Guinea’s GDP, and create 45,000 jobs.

If the deal is approved by Guinea’s parliament, the ramifications of it will be felt far beyond Conakry and its surrounds. For far too long, African resources have been exploited by big companies who have bribed, bullied and bull-dozed their way into one-sided deals, often taking advantage of chaotic governments and a lack of expertise. Too often, it has been Africans suffering while foreign corporations inflate their balance sheets and pay dividends to shareholders that far exceed the average per capita income of the countries in which they operate.

In standing up to Steinmetz, Guinea has shown that African governments do have the power to renegotiate and rescind unfair deals concluded in bad faith, and replace them with more equitable arrangements. It is a lesson that other African governments can learn, but also a warning to Western companies that have often operated with impunity in Africa.

It was only in 2010 that the UK passed the Bribery Act, making it an offense to bribe foreign officials; in France, until 1999, bribes were considered legitimate, tax deductible business expenses. These laws have changed, and so has the behaviour of many multinationals. This is to be applauded. But others, like BSGR, still operate on the fringes of legality, and with scant regard for the consequences of their shady dealings on the citizens of affected countries.

Doubtless, the new deal signed by Guinea with Rio Tinto and Chinalco is not perfect. Both these companies will still make handsome profits, and too much of the investment will be directed towards industry-specific infrastructure like railways, ports and of course the massive mines themselves. Nonetheless, it is an incomparably better deal for Guinea than it was getting before, and a sign that President Conde’s government is at least attempting to put citizens first. DM

Read more:

• Buried Secrets: How an Israeli billionaire wrested control of one of Africa’s biggest prizes in the New Yorker
• Rio Tinto and Chinalco sign $20bn Guinea iron ore deal on BBC

Photo: Guinea’s President Alpha Conde looks on at a ceremony to celebrate Sierra Leone’s 50th anniversary of independence from Britain at the National Stadium in the country’s capital city of Freetown, April 27, 2011. Picture taken April 27, 2011. REUTERS/Simon Akam