investing in Gabon - Developing Markets R… · 2012 InvestIng In gABOn 3 Publisher: Chris Gerrard...

2012

Gaboninvesting in

2 InvestIng In gABOn 2012

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12012 InvestIng In gABOn

i am delighTed to participate

in the first U K - G a b o n I n v e s t m e n t Forum being held today in London.

I am very pleased with the interest that British business has shown in Gabon and I am determined to realise opportunities for mutual benefit and shared advantage.

Gabon today is one of the most prosperous countries in sub-Saharan Africa. We are blessed with immense natural resources, but most importantly we have a clear vision of where we are going as a nation.

I was elected on the basis of my vision to build a progressive and self-confident nation. We refer to it as ‘Gabon Emergent’ – or Emerging Gabon. Our ambition is bold. We aim to become an emerging economy by 2025. To achieve this we have charted a course to develop competitive manufacturing and service sector industries while preserving our natural environment. These three pillars – Green Gabon, Industrial Gabon and Services Gabon, underpin our national development strategy.

Gabon is in a unique position today. With a small population, a wealth of natural resources and a long tradition of political stability, we have a firm basis on which to sustain rapid economic development. Geographically Gabon serves as a good hub for investors interested in West, Central and Southern Africa, representing a market of over 130 million potential consumers.

I have travelled extensively during the last two years soliciting investors and economic partners from all corners of the globe to help us to develop our economy and sustain jobs and livelihoods for the Gabonese people. We have concluded many new partnerships during this time and attracted billions of dollars of foreign direct investment. I am eager to diversify our economic partnerships still further and to attract more investors from nations and companies who may traditionally have overlooked Gabon.

Our strategy is clear ; we want to partner with companies and investors who are looking for long term sustainable returns. We are seeking partners with a commitment to help us to realise the full value of our assets in Gabon. I view our strategy as ‘open source’. That is to say, we have no prejudices. We want to work with the best companies in the world. We want to partner with businesses that possess the technologies and the technical skills we need to be competitive in a globalised economy.

My government recognises the responsibility we have to guarantee the security and predictability of the business environment in Gabon. We also take seriously our responsibility to defend and promote the interests of our citizens and the natural environment that we have been blessed with, and we expect our partners to do so also. We are investing in skills training for our youth, so that they can support our economy and build our future. Some of these young people may go on to work for you. Some of them may serve as suppliers to you. As a State, we are committed to ensuring that our private sector partners can depend on a pool of talented employees in Gabon. We are committed

HE President Ali Bongo Ondimba

Foreword

too to building the infrastructure that companies like yours need to better serve consumers in Gabon and beyond our borders. Our National Master Plan for Infrastructure includes 21 major projects and a total investment of more than US$11bn over six years.

I am here with senior members of my government today to share with you our plans and our ambitions; to share with you our ideas and to hear yours. I am here too to share with you the commitment of the State of Gabon to strengthen and extend the bilateral relationship we enjoy with the United Kingdom.

Several of our private sector partners are here today also, participating in this Forum. I hope that their testimonials and your interactions with them will serve to persuade you that our plans are not mere aspirations or promises, but rather that they are encapsulated in reforms and new approaches to public-private partnerships that are already taking shape in Gabon.

It is my sincere wish that our two countries enjoy quality bilateral relations founded on a common understanding, diplomatic cooperation, sound investments and commercial partnerships that will drive our vision for Emerging Gabon. I hope that this day will be a milestone in the development of these relations.

I would like to thank and congratulate all those who have laboured to make today’s Forum a success.

I wish you all a constructive and engaging Forum.

HE President Ali Bongo Ondimba


On

behalf of D e v e l o p i n g M a r k e t s A s s o c i a t e s (DMA) may I welcome you to this, the first

ever UK-Gabon Investment Forum, held in the sumptuous Art Deco surroundings of the Park Lane Hotel. As a point of reference, the hotel was built in 1920 by Sir Bracewell Smith, a property investor, Conservative politician and former Lord Mayor of London whose family also owned the Ritz Hotel and who was, for many years, the chairman of Arsenal football club.

The wide range of participants in today’s Forum not only highlights the international investment capital which is London today but also the very real interest which now exists in Africa as an increasingly attractive investment destination. And, within the continent itself, especially the countries of West and Central Africa, many of which are today posting some of the fastest rates of economic growth anywhere in the world.

Gabon is in many respects a symbol of this new African renaissance. A young

country, now led by a new leader intent on bringing change, Gabon has striven to produce a coherent national development strategy – under the broad title of “Gabon Emergent”’ – which has three clear pillars of action - Green Gabon, Industrial Gabon and Services Gabon. As His Excellency The President says in his foreword, “we have a clear vision of where we are going as a nation”.

That vision will require the involvement of the private sector to help bring about success. DMA is therefore delighted that the president and the Gabonese government delegation have seen fit to come to London in this year to seek such partnerships. 2012 has been a seminal year for London, a year in which we were privileged to see the very best of human endeavour and revel in an intoxicating atmosphere of challenge, achievement and success. For many African countries that is an atmosphere which they face every day, as they struggle to overcome challenges both natural and manmade. Nevertheless, along with the challenges, many countries of the continent can also point to achievement and success. In particular they have proved resilient to the global recession which damaged so many other countries and can now look forward – cautiously but optimistically – to a burgeoning future. As many observers

Atam Sandhu, Chief Executive, Developing Markets Associates

Introduction

have already said, Africa’s time is now, but to achieve success based on truly solid foundations the continent needs the commitment and support of others.

For many in this room today Gabon may be a country which arouses passing interest but perhaps less understanding. I hope that by the end of today’s Forum that interest will have been quickened, fuelled by a greater understanding – of what the government is striving to achieve, of how it plans to reach its targets, and, most importantly, of what opportunities now exist for investors who are prepared to partner with Gabon and be part of that achievement and success. This first UK-Gabon Investment Forum sets out to lift the veil on the Gabon of today and to encourage investors to go and see for themselves – the first step on the road to future partnership.

I hope that you enjoy the presentations, the exchanges and the networking, that it proves a productive day and that you leave with a fuller understanding of the country which is today Gabon Emergent.

Atam Sandhu CEO Developing Markets Associates


Publisher: Chris GerrardContributors: Jonathan Levack, Gary Ginsberg, Alastair Masser, Natalia Debczak-Debski, Robyn KingstonArt Director: Steven JonesConference Team: Deanne Lintorn, Frazer Lang, Rebecca Isaacs, Alison HamiltonConference Directors: Leon Isaacs, Atam Sandhu, Roger Martin

CorrespondenceDeveloping Markets Associates Ltd (DMA), 150 Tooley Street, London, SE1 2TUemail: [email protected] | web: www.developingmarkets.com | www.moneymove.org | www.sendmoneypacific.org

DMA acknowledge the assistance of all the individuals and organisations who have contributed to this publication and give special thanks to Africa Practice for their input and advice. The views expressed herein are the opinions of the authors, and do not necessarily represent the Embassy of Gabon, the Government of Gabon or DMA. All rights reserved. No part of this publication may be reproduced or transmitted in any form without the written permission of the publisher.

Published by Developing Markets Associates Ltd (DMA) Printed by Woodrow Press Picture credits: Reuters, Parcs Gabon, APIEX, i-stockphoto.com

© Developing Markets Associates Ltd

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Contents

Contents


Rich in naTural resources and home to just 1.5 million people, Gabon is the third richest

country in Africa per capita. At nearly US$11,600 per person Gabon falls well within the realms of an upper middle income country, although the distribution of wealth among the population is somewhat uneven. The country’s fortunes are set to continue. The International Monetary Fund (IMF) expects the Gabonese economy to expand by 6.1% this year followed by growth of at least 2% per annum over the next five years. Indeed, Gabon’s foundations are solid. Fiscally, the country’s position is sound, although the economy is prone to oil price volatility and external shocks. High oil prices have allowed the government to maintain a large positive fiscal balance of an average of 7.8% of GDP from 2005 to 2010 – a figure that is set to continue over the next couple of years at least. External

debt is also low. Gabon’s total external debt stock is well below 15% of GDP and decreasing. According to the IMF’s World Economic Outlook, published in October 2012, Gabon’s external position is now strengthening to the extent that the country is set to become a net creditor. So, what’s the catch?

An overly dependent economy

The major challenge facing Gabon is its dependence on oil. First discovered in the 1970s, the industry has long been the backbone of the Gabonese economy. Home to some of the largest reserves in sub-Saharan Africa, the oil industry continues to constitute around half of GDP. But Gabon’s golden era has passed. Production peaked in the 1990s when output surpassed 370,000 barrels of oil per day but has

since declined to just under 250,000. Much of peak production derived from the Rabi Kounga onshore oil field, where output was over 200,000 barrels per day in the mid-1990s. But Rabi Kounga has since matured and is today responsible for producing less than 25,000 barrels a day.

In many eyes, the country is now overly reliant on an industry in decline. A point underlined during the recent global financial crisis when price volatility saw the country’s oil revenue drop sharply from 21.1% of GDP in 2008 to 16.3% in 2009. In turn, 2009 witnessed a mild recession – the first since 2000 – when the economy experienced a 1.4% contraction. So reliant is Gabon that the government is still dependent on the oil industry for an average of nearly two-thirds of fiscal revenues and 80% of all export revenues over the last five years.

Economic Overview

gabon: the long road to diversification by Jonathan Levack

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Gabon, as such, could be classed as a classic rentier economy.

But can this last? Some estimate that Gabon’s reserves could be expended by as early as 2025. New offshore discoveries have been made and exploration continues but no finds have yet rivalled Rabi Kounga in size. The BP 2012 Statistical Review of World Energy, on the other hand, puts Gabon’s proven oil reserves to be in the region of 3.7 billion barrels with a reserve to production ratio of just over 41 years. The World Bank, too, forecasts production to remain robust. The Bank expects Gabon will pump in the region of 175,000 barrels a day in the 2020s, 150,000 in the 2030s and 145,000 in the 2040s – down from an average of 235,000 during the current decade. Regardless of how long they will last, Gabon’s reserves are declining and the economy will need to diversify rapidly to alleviate some of the challenges associated with slowing production.

Outside of the oil industry, minerals represent Gabon’s second biggest export. Gabon is the world’s second largest producer of manganese dioxide; the country is home to 25% of the world’s manganese reserves. In fact so significant are the country’s reserves that Gabon is expected to surpass South Africa as the largest producer of manganese by the middle of the current decade. The country also has significant iron ore, niobium (used in alloys), phosphates and zinc deposits that could be important revenue streams moving forward. With commodity prices expected to stay relatively strong in the near future, Gabon is well placed to generate significant income from its natural resource wealth while prices are high. But reliance on its mineral wealth, too, means Gabon can be vulnerable to external shocks, has had little incentive to develop the wider economy and employs a relatively small proportion of the population.

A Bold Blueprint for the future

Long benefiting from its substantial natural resource wealth, the country has now acknowledged the pressing need for reform and diversification. Emergent Gabon (Le Gabon Emergent) is the country’s master plan to address the economy’s shortcomings. First presented in 2009, the economic programme aims to modernise the country and transform the economy by 2025 through accelerated

growth and poverty reduction. Based on three strategic pillars – Gabon Industriel, Gabon Vert and Gabon des Services, Gabon Emergent aims to see Gabon become an emerging economy by 2025. According to the World Bank, unlike previous strategies, Emergent Gabon “now looks to capitalise on Gabon’s comparative advantages in the regional and global landscape.”

The plan is as wide-ranging as it is well thought out. The first pillar, Gabon Industriel, intends to develop the country’s industrial capacity to process its own raw materials. Plans include developing support for the oil and gas industry, the country’s mining sector as well as other industries including construction, infrastructure and manufacturing. Gabon Vert aims to ensure the sustainable management and development of the country’s natural resources. Sitting on the equator, Gabon is rich in forestry. 80% of the country’s surface, around 21 million hectares, is covered in tropical forests, of which 10.7 million hectares are allocated to concessions for timber production. Currently worth in the region of US$450mn a year in export

skills if it hopes to achieve the desired results in these sectors.

The government understands the role of foreign direct investment in supporting its three pillar plan and is taking active steps to encourage it. The Nkok Special Economic Zone (SEZ) is a case in point. Opened in 2011, the new SEZ is a joint venture between Singaporean agriculture supply chain manager and processor Olam International and the Government of Gabon. Located 25kms from Libreville, the government claims that Nkok is the largest free trade zone in Central Africa and will attract up to US$1bn in foreign direct investment annually. 70% of the land available is reserved for foreign investors, who will benefit from fiscal incentives, including exemption from corporation tax for a decade followed by a 10% flat rate. Companies are also being offered cheap power and long supply contracts on raw materials. According to the Financial Times, 55 investors have already purchased space at Nkok, including US-processor Timberwolf Tropical Hardwoods, Malaysian group BSG and Nigerian plywood manufacturer John Bitar and Co.

revenues (a large proportion of which goes to China), the government is keen to further develop the sector and become a world leader in certified sustainable tropical timber products. In 2010, the government banned the export of unprocessed timber to encourage local processing and the export of finished goods. Libreville now aims to see Gabon process 100% of its own timber, up from 45% in 2009. The Gabon Vert pillar, too, will focus its attention on agriculture. Currently, agriculture accounts for less than 5% of GDP yet, according to the US Department for Commerce, engages 35% of the workforce and only 2% of the country’s landmass. The aim now is to grow the sector to be worth 20% of GDP. The final pillar, Gabon des Services, has the objective of making the country a centre of excellence in areas such as financial services, telecommunications, eco-tourism and value-added services. Crucially the government will have to address education and local workforce

In line with Gabon Vert, the US$210mn investment was originally intended to focus on wood processing and allow the country to develop value-added industries in the timber sector. Indeed, when fully operational the zone will have an annual processing capacity of one million cubic metres of timber. But the benefits on offer have attracted more than just the timber industry. Indian power, mining and iron alloy firm Abhijeet plans to open a ferromanganese smelting plant and associated 300 MW power plant at Nkok. In a recent interview, Sanjay Dey, General Manager of Abhijeet Gabon, explained the company’s entrance into the country. “One of the biggest reasons for investing in Gabon was the opening of the special economic zone which offers various tax incentives. At the same time, it is very important to have the raw material sources close by, which Gabon has.” Abhijeet is not the only Indian company interested. Oxford Business Group reported that India-based Ellora

Economic Overview

“Based on three strategic pillars – Gabon industriel, Gabon vert and Gabon des Services, Gabon emergent aims to see Gabon become an emerging economy by 2025


Paper Mills has signed an agreement to launch a paper pulp factory at Nkok. Olam International, too, is reported to be considering a palm oil plantation and fertilizer plant at the site.

Encouraged by the initial interest in Nkok, the government is looking to develop a second SEZ on Mandji Island near Port Gentil, again in conjunction with Olam International. Originally envisaged in the mid-1990s, the idea of a Port Gentil SEZ was revived with Olam taking a 36% equity stake in the project. The remaining equity is held by the government (24%) and local investors (40%). Whereas the original focus of Nkok was the timber industry, Port-Gentil will focus more on the hydrocarbons industry given its location. A US$1.2bn petrochemicals plant, jointly constructed by Olam and India-based Tata Chemicals, is expected as is a new refinery, with South Korea’s SK Energy interested in its construction.

riGhtinG WronGS of the pASt

The government is now engaging in genuine efforts to address many of the challenges of the past. President Ali Bongo

has personally vowed to tackle corruption after four decades of patronage and a lack of transparency. The government has actively sought the assistance of various international organisations in addressing corruption, including the World Bank and IMF. The World Bank’s recent country partnership strategy notes, “the government recognises that improvements in transparency and accountability are critical if Gabon is to compete on a global scale.” Indeed, the president has been refreshingly ruthless in addressing the issue. Ministers found to be guilty of corruption have been sacked and in October 2010 he ordered the arrest of several officials accused of involvement in a multi-million dollar scandal. Seemingly the policy is having some effect. Gabon ranked 100th in Transparency International’s 2011 Corruption Index – room for improvement, yes, but an impressive jump of 10 places on the country’s ranking the previous year. Gabon is also renewing efforts to fully comply with the Extractive Industries Transparency Initiative (EITI), having been a “candidate country” since 2007. “Close to compliant” in 2010, the country is expected to demonstrate compliance with EITI rules by the end of this year.

Doing business in Gabon is still far from easy. The country remains in the bottom 15% of the World Bank’s annual Ease of Doing Business index but has been making impressive progress in recent years. Ranked 173rd in 2010, Gabon has since moved up to 156th place in the 2012 edition. The 2012 edition noted genuine progress in access to credit as a major contributor to the country’s jump up the index. The country has also witnessed a marked improvement in governance. According to the Mo Ibrahim Index of African Governance, Gabon’s overall score has risen from 48.3/100 in 2006 to 53.6/100 in 2012, which sees the country occupy 22nd place overall in this year’s index – a significant improvement on 2011, when it ranked 27th. Gabon also scores above both the African and Central African averages. In the case of Central Africa, Gabon ranks a full 13 points ahead of its average neighbour.

Infrastructure is, too, a focus of the government’s attention. The World Economic Forum’s 2012-13 Global Competitiveness Report identified Gabon’s lack of infrastructure as the biggest impediment to doing business in


the country. In response to the country’s infrastructure deficit, the government established a new office responsible for coordinating the country’s wide ranging National Infrastructure Plan. The National Infrastructure Agency (ANGT) is working with US engineering giant Betchel to implement the US$12bn plan that will take six years to complete and comprises 21 major projects. Within the total budget, US$3bn is earmarked for improving power generation, a further US$3bn towards developing the mining sector and US$3.5bn will be allocated to transport projects, including roads, ports and railways. Significant funds will also be directed towards housing, water and sewage projects in and around the greater Libreville area.

A StronG BASe

Major investment in infrastructure, incentives for investors and improving governance have been a fillip for the economy, particularly the nonoil sector. The World Bank forecasts nonoil growth to consistently outstrip oil growth over the next four years. But the oil and gas industry will continue to play a central role in the economy, and future activity as well as investment should not be ruled out. As previously discussed, BP put Gabon’s current reserve to production ratio at over four decades. Yes, production levels are unlikely to return to the peaks witnessed in the 1990s but the industry may not yet be in terminal decline – output is expected to remain above 150,000 barrels a day for at least the next 20 years. The industry is seemingly enthusiastic about current and future prospects. Marathon Oil recently returned to the country after a gap of three years to explore for oil and gas in 2013. In addition, Gabon currently has 42 offshore deepwater and ultra-deepwater blocks available for exploration by international investors. Deepwater pre-salt formations off the coast of Gabon are similar to those in Brazil, which yielded the largest find in the Western Hemisphere in three decades. Ophir Energy, for example, is now focusing its attention on exploring for pre-salt potential in its existing concessions.

Gas reserves, too, may one day be exploitable. Gabon currently lacks the infrastructure to fully exploit its estimated reserves of at least 28 billion cubic metres (1 trillion cubic feet, or 220 million barrels of oil equivalent). The country currently uses 85 million

cubic metres (3 billion cubic feet) of gas annually to feed power plants in Libreville and Port Gentil but associated gas is either flared or re-injected. The Mining Ministry is now exploring ways to boost gas production – the government plans to reduce flaring by 60% by 2015 – and best utilise its resources. An increase in installed generation capacity as well as encouraging a petrochemicals industry is rumoured to be under consideration.

Downstream, a new refinery on Mandji Island is set to replace Gabon’s existing Sogara facility. The government signed a letter of intent in early 2012 with the South Korean conglomerate SK Energy to construct a new 50,000 barrel a day facility. To be based in the Port Gentil Special Economic Zone, the new refinery is expected to be open by 2017. When operational, the new US$1bn facility will more than double Gabon’s refinery capacity with half of all output planned for export. According to current plans, the refinery will produce LPG, diesel (much of which will be used domestically), jet fuel and other refined products.

Other extraction industries are also likely to fare well. Gabon’s iron ore reserves boast enormous potential. With proven reserves of 1.5 billion tons and potential reserves estimated at nearer 4 billion tons, the country’s Belinga concession is attracting serious attention. But the US$3.5bn project has had its problems. Rights were first awarded to China Machinery Engineering Corporation but were rescinded due to the slow development of the asset. Australian mining giant BHP Billiton was rumoured to be close to a deal in early 2012 but the government has recently confirmed that a decision on rewarding the rights could wait until as late as 2014. Gabon is also home to around 15% of the world’s niobium, an important component in high performance alloys often used in high-grade structural steel, jet engines and gas pipelines. According to the US Department of Commerce, Indian group Mohan Exports India PVT has expressed an interest in managing some of the country’s other mineral resources too.

credit Where credit’S due

Gabon’s prospects are also gradually being recognised. The IMF, for example, recently upgraded its growth forecasts to

6.1% in 2012. Foreign direct investment has risen and is currently estimated to amount to US$900mn every year. The World Bank recently agreed a new four year partnership strategy with Gabon, with a US$250mn lending programme that, in its words, “is more ambitious than the previous one.” Ratings agency Fitch upgraded Gabon’s credit rating in April 2012 from BB- to BB and revised the country’s outlook to positive from stable – another sign of the increasing international confidence in the Gabonese economy. Politically and socially the country is also finding its place on the map. Gabon was a non-permanent member of the United Nations Security Council in 2010-11 and, more recently, co-hosted the 2012 African Nations Cup with Equatorial Guinea. Gabon is seen as increasingly competitive too. The World Economic Forum’s (WEF) 2012-13 Global Competitiveness Report ranks Gabon 9th of 38 African economies assessed and the highest ranked sub-Saharan African oil exporter, 99th in the report’s overall standings; Gabon is now one of only six sub-Saharan African countries classed as a “transition economy” or higher. Indeed, WEF’s classification places Gabon alongside such economies as Egypt, Qatar and the Philippines. Proof of Its recognition of the reforms Gabon has made over the past five years.

Despite recent reform and investment, there are still obstacles to overcome. The local market is limited, skilled labour is somewhat scarce and the economy has not yet sufficiently diversified. The country is still heavily reliant on the oil and gas industry and needs to continue to develop a diverse and efficient nonoil economy. The country’s ability to attract foreign investment will, in the words of the World Bank, “depend largely on the success of efforts to accelerate and diversify its economic growth.” But the prospects are very promising. Gabon has taken great strides in recent years and has adopted an ambitious plan to take the country forward. It will rely on growth across a range of sectors from the oil and gas industry and mining through to timber processing and agriculture. The strategy will be underpinned by a significant infrastructure upgrade over the next decade. Governance and economic management have improved but will need to continue to do so. If Gabon continues on its current path then a stable, diverse and fruitful future is very much achievable.

Economic Overview


2007 2008 2009 2010 2011 2012 2013 2014 2015Real GDP 5.6 2.3 -1.4 6.6 4.8 6.3 3.3 2.7 2.6 Oil 3.4 -1.4 -4.5 9.8 1 0.9 -4.5 -0.4 -0.6 Nonoil 6.2 3.4 -0.5 5.7 5.9 6.9 4.1 3.5 3.4

tABle 1GDP GROWTH (%)

Sources: world Bank, Imf, AeO. figures for 2012 onwards are projections.

2007 2008 2009 2010 2011 2012 2013 2014 2015Current Account Balance (% of GDP)

17 24 6 8.9 12.3 10.3 6.3 5.8 4.6

FDI (US$ billions) 0.78 0.77 0.59 0.57 0.85 0.9 0.9 0.78 0.7

tABle 2EXTERNAL SECTOR

Sources: world Bank, Imf, AeO. figures for 2012 onwards are projections.

CHArt 1EXPORTS (2011, %)

90.8%

2.6%

6%

Source: wtO

Agricultural Products

fuel and mining Products

manufacturates

CHArt 2IMPORTS (2011, %)

6.3%

75.3%

18%

Source: wtO

Agricultural Products

fuel and mining Products

manufacturates


Economic Overview

250,000

150,000

200,000

100,000

CHArt 5 FORECAST OIL PRODUCTION (BARRELS PER DAY)

Source: world Bank

235,000

190,000

150,000 145,000

2011-2020 2021-2030 2031-2040 2041-2050

0

20

60

40

80

100

CHArt 3 EXPORT DESTINATIONS (2011, %)

Source: wtO

usA eu (27) China malaysia south Korea

59

17.9

84 1.6

0

20

60

40

80

100

CHArt 4 IMPORT SOURCES (2011, %)

Source: wtO

eu (27) usA China Japan Cameroon

65.1

7.1 4.92.1 2.1


introduction

Whilst Gabon has a small population and per capita income is high by African standards, the economy is overly reliant upon the oil industry. The government is determined to facilitate an effective transition to a more sustainable and diversified economy supported by tourism, its services industry and the country’s rich mineral resources. Development of these new trade sectors has to date been hindered by a lack of adequate infrastructure across the country, but in recent years the government has actively taken steps to remedy the situation.

the nAtionAl infrAStructure mASter plAn

In his inaugural speech in September 2009, President Ali Bongo Ondimba stressed the importance of providing

Gabon with reliable infrastructure to drive economic growth, in relation to the sixth component of his agenda for social change. He stated: “Our transport infrastructure (roads, ports, airports, railways and production tracks) will be upgraded by rehabilitating inadequate infrastructure and building critical new sections. By 2016, the whole of Gabon should therefore be well-connected, to enable our country to position itself as a benchmark regional hub. “ The country is part of the CEMAC (Economic and Monetary Community of Central Africa) market, and improvements in domestic infrastructure would offer significant international trade opportunities.

In order to realise this agenda, in October 2010 the government established the National Agency for Major Works (L’Agence Nationale Des Grands Travaux – ANGT). The government has appointed US-based Bechtel – a company with global experience in project management, engineering and construction – to assist ANGT in the development of a national infrastructure plan and its subsequent implementation. ANGT is supervising the technical and financial elements of all infrastructure projects proposed under the aegis of the national plan.

The government announced the launch of the National Infrastructure Master Plan in 2010. The Plan provides for the implementation of 21 projects over six years, at a total estimated cost of c.US$11.8bn (supported by international development assistance).

InfrastructureInfrastructure

“in october 2012, president Bongo ondimba stated: “we are working to double our energy production capacity by the end of 2013.

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Infrastructure

The Plan addresses transport and urban regeneration issues, as well as the establishment of new economic zones. The following major developments, some explored in more detail elsewhere in this article, are key:

Greater Libreville Management and Planning Scheme

Power – Infrastructure (estimated cost: c.US$3bn)

Transport – Infrastructure: roads, railways, ports (estimated cost: c.US$3.5bn)

Development of the mining sector (estimated cost: c.US$3.26bn)

Development of the tourism sector (estimated cost: c.US$85mn)

Mandji Island (Port-Gentil) Establishment of a Special Economic Zone

Establishment of the National Agency for Major Works (c.US$340mn).

Some of this investment was directed at preparation for the African Cup of Nations, held in January 2012. For this event, the continent’s pre-eminent football tournament, a public works programme was set in train encompassing the construction of football stadia, hotel accommodation and the upgrading of roads and airports.

In related moves, the African Development Bank (AFDB) is seeking to improve the capacity of government to support public-private partnerships in order to facilitate economic diversification, as well as supporting human capital development aimed at creating a highly-skilled workforce.

GABon emerGent

The country’s specific objectives in the infrastructure sector dovetail with “Gabon Emergent” the broader government strategy of sustainable development and economic diversification. Gabon Emergent has three pillars: Gabon Vert (Green Gabon), Gabon Industriel (Industry Gabon) and Gabon des Services (Services Gabon), each an important part of the broader design to transform the oil-reliant economy, promoting development of the country’s energy, mining, timber, eco-tourism and agro-industry potential.

SeZS

The government has decided to establish special economic zones (SEZs) in order to drive economic development forward and promote inward investment.

The Special Economic Zone of Nkok, close to Libreville, extends to 1,100 hectares, and will be principally focused on the timber industry. Nkok is a joint venture between the state and Olam International of Singapore

The second SEZ is the special tax concession zone on the island of Mandji (adjacent to Port-Gentil), covering an area of 1,500 hectares, in which it is anticipated a facility will be constructed for the storage and subsequent export of liquefied natural gas (LNG).

Basic local infrastructure will be developed as a corollary of the establishment of each SEZ.

trAnSport

A comprehensive programme of renewal and expansion of the country’s transport sector is a central objective of the national plan.

roAdS

The road network extends to 9,170 km but, of this, only 1,055 km is asphalted and the remainder is unpaved. Less than 20% of the unpaved network is in good condition and heavy seasonal rainfall is a principal cause of deterioration on all routes. The declared six-year objective – which embraces the national “Road Network Development Programme” (PARR) – is the rehabilitation and construction of over 3,300 km of roads, carrying 80% of traffic, and developing major trans-Gabon arteries.

Specific projects offering the potential for inward investment include:

renovation of route nationale 1 – widening a section of the route between Libreville and Ntoum to improve transport links between Libreville and the interior.

renovation of Boulevard triomphal – one of the capital’s most important construction and road widening schemes.

the glass road project – a major redevelopment of Libreville’s road grid,

which will include the line of the future Libreville bus network. The scheme is central to the government’s plans for urban regeneration, and provides for wholesale redevelopment of the capital’s roads and the consequent improvement of the living and working conditions of the capital’s residents.

More than ten other road maintenance and development projects are currently in progress around the country, all projected to deliver before the end of 2016.

rAilWAyS

The rail network, opened in the 1980s, is 640 km of standard gauge line linking the port of Owendo, just south of Libreville, to Franceville. A number of rail infrastructure programmes are under consideration, including proposals to renovate and increase the capacity of the existing line; to extend the network to the iron ore reserves of Belinga; to develop the existing station and transport hub of Ndjolé (which supports traffic up the Ogooué River); and to establish a new line (at an estimated cost of US$1bn) to the planned Deep Water Seaport at Mayumba from Franceville, opening up a new route to the sea for raw materials from the interior.

Air trAnSport And AirportS

Air transport is of crucial importance to national aspirations, given the limited road and rail network. Gabon has three international airports – at Libreville, Port-Gentil and Franceville – and 41 other public airports. The state has been active in expanding the country’s air links and a number of significant projects affecting the existing international airports are either underway or at an advanced stage of planning.

the extension of leon m’ba airport at libreville – completion of this EUR30mn project is scheduled for February 2013. Private investors in the airport include Air France, Total and the Marseilles Chamber of Commerce. However, freight and passenger traffic continues to increase and it is anticipated the new facilities will not be able to meet the capital’s future needs. Consequently, a site of 1,500 hectares has been earmarked at Andem, some 60 km distant, to build a new international airport. French company Egis Avia is the technical consultant on the Andem project.


Port-gentil – the country’s specialist oil port, suffers from poor transport connections with the rest of the country. Total Gabon has invested US$60mn in upgrading Port-Gentil airport’s facilities including an extended runaway of 2,600 m and a new air terminal which will be in operation by mid-2013. Air France and Lufthansa have both declared an interest in operating direct flights to Europe.

Other projects include upgrading the airport at Mayumba to an international standard; and completing the refurbishment and extension of the international airport at Mvengue, in Franceville.

SeAWAyS And portS

In November 2010, the Gabon Ports Authority signed a management agreement with the Singapore Ports Authority to improve and extend the country’s maritime infrastructure. The two main specialised ports at Owendo (goods) and Port-Gentil (oil) are scheduled for modernisation and

expansion; a new Deep Water Seaport will be constructed at Mayumba; and a proposed deep water port will be built at Santa Clara to support the Belinga iron ore trade.

The government plans to develop some of the 3,300 km of river routes traversing the country as trade and freight corridors; currently only around 20% are in commercial use. A new, major port will be constructed at Lambaréné (on the Ogooué river) and a smaller facility at Mendorove, near Port-Gentil.

enerGy And WAter Supply

High electricity costs and poor supply have been highlighted as impediments to economic growth and improvements in distribution and power production are integral to the success of the wider diversification programme. According to International Energy Agency figures, in 2009 Gabon’s national electrification rate was 36.7%, suggesting 900,000 people were without electricity; current estimates suggest urban electrification is nearer

80% but the countryside remains at 35%. Similarly, provision of drinking water is subject to shortfalls and cuts; increasing access to drinking water and energy for all citizens is therefore a national priority.

Gabon’s existing energy production is 350 MW but the country’s prospective energy production capacity is estimated at 5,000 to 6,000 MW once gas reserves, renewable sources and its considerable hydroelectric power potential are taken into account. And in October 2012, President Bongo Ondimba stated: “we are working to double our energy production capacity by the end of 2013.”

To this end, a US$2.4bn investment programme has been engaged to develop the country’s hydropower potential and to set up an Interconnected National Grid, which will increase energy production to 1200 MW by 2020. Additional local biomass and small run of the river hydro plants will be used to service remote communities. Meanwhile, hydropower potential is estimated at around 8,000 MW and Gabon aspires to be in a position to export up to 3,000 MW by 2030. Around US$5bn in investments will be required to develop these additional projects, which represent a significant investment opportunity both for sovereign funds and the private sector alike.

The national six-year plan will reform the energy and water sector, setting up a national electricity market and prioritising hydropower and other renewables (solar, wind and biomass).

By 2016, it is planned that three new hydro-electric dams will come on-stream: FE2 Falls (built by ETDE, owned by Paris-based Bouygues), Impératrice and Grand Poubara. The latter, a 160 MW facility on the Ogooué river and the largest hydropower facility in Gabon, is being constructed by Chinese dam builder Sinohydro Corp. In addition, 5,000 km of new transmission lines will be in place by the end of the period.

Gabon has 1 trillion cubic feet of proven natural gas reserves according to the Oil & Gas Journal; two new thermal power stations are due to open in 2014 designed to take advantage of this underused resource.

The Société d’Electricité et d’Eaux du Gabon (SEEG), Gabon’s national utility company, owns and runs Gabon’s water


Infrastructure

and electricity services. French company Veolia owns 51% of SEEG following a tender in 1997, which awarded the concession on a 20-year basis.

houSinG

Gabon has an estimated housing deficit of 200,000 units; the deficit for Libreville alone is 160,000 units. To tackle this growing demand, in 2010 the government announced a national annual construction target of 5,000 units and approved a new urban development policy, the Smart Code, in partnership with the private sector, to build new fully-integrated urban developments on the outskirts of major cities.

Projects currently under way include;

i) A 5,000-unit public housing unit/new town scheme, known as “Libreville 2”, being constructed near Nkoltang, 27 km from the capital. The development will include administrative buildings, shops, green spaces and a school.

ii) The new district of Agondjé, in the north of Libreville, which will provide 7,000 public/private housing units, a state-of-the-art road network, numerous amenities, commercial areas, schools and administrative services.

iii) In June 2012 the government announced a new 5,000-unit construction project in Cap Esterias, 30 km north of Libreville, with funding from the Banque Gabonaise de Développement.

These new towns are designed as flagship projects providing the models for future urban construction and renewal.

The drive to kick-start housing construction was underpinned by structural reforms intended to streamline the sector’s regulatory framework: principal among these reforms were the reorganisation

of the Ministry of Housing – resulting in the establishment of a National Agency for Urban Planning, Topographical Studies and the Land Registry – and the creation of a National Housing Council.

The new planning regime has had some success in attracting inward investment: Indian construction company RPP Infra Projects recently announced the confirmation of domestic and international funding (secured through the Ministry of Housing) for the first phase of a EUR250mn (US$356mn) housing project to build 10,000 houses in the period 2012-15.

ict

This sector offers significant growth potential and was identified in Gabon des Services (Services Gabon), the third pillar of Gabon Emergent, as a key driver of the new economy.

Libreville was first connected to the SAT undersea cable linking Africa and Europe in 2002. The intervening 10 years has seen the privatisation of state utility Gabon Telecom (the company is now owned by Maroc Telecom) and the increasing liberalisation – and matching growth – of the telecommunications sector. Public-private partnerships (PPPs) will be prioritised going forward.

Current figures suggest that fixed and mobile penetration rates stand at 5% and 97% respectively; (with 350,000 mobile phone subscribers); and 5.76% of the population are internet users, though high-speed access remains limited. The government’s ambitions are: to develop and extend broadband coverage; to improve the quality of the telecommunications network, increasing speed and access; to develop ICT services at the national and regional level; and to develop a digital administration by moving government services online. The ultimate objective is for Gabon to export IT services to the region and beyond.

In 2009, Microsoft signed an agreement with Gabon to assist with development of the country’s digital strategy, and the company is opening a regional base in Libreville.

The development of high-speed fibre-optic capacity is the first plank in the government’s strategy and a number of projects are in train:

Gabon is a partner in the EUR458mn Africa Coast to Europe (ACE) fibre-optic cable project, led by France Telecom and scheduled to arrive late in 2012, ACE should facilitate the installation of an optical fibre network throughout Gabon – a link between Libreville, Mayumba and Port-Gentil is currently prioritised – and provide additional regional interconnectivity.

A further regional initiative is the Central African Backbone (CAB) project, approved by the World Bank in 2009. This is a ten-year programme designed to implement a transnational fibre-optic network for CEMAC countries. In May 2012, the government signed a US$58mn loan agreement with the World Bank to support this initiative.

It has been recognised that progress in IT telecommunications infrastructure must be matched by the provision of a qualified workforce if the sector is to thrive. The government is therefore prioritising IT education in schools and it will look to build a centre to train more teachers and administrators, to improve ICT skills in the workforce and support innovation in the sector.

And now that fibre-optic infrastructure is in place, the government has awarded the first 3G licence to Airtel” (October 2011). These developments will signify the arrival of Gabon as a major regional player in the sector.

SummAry

Significant infrastructural expansion and improvement is central to the Gabon government’s efforts to diversify the economy, encourage private sector development and reduce its dependence on petroleum. Underpinning its strong political will with detailed policies and painstaking financial planning, the government has now created an attractive environment for inward investment in the infrastructure sector.

“Significant infrastructural expansion and improvement is central to the Gabon government’s efforts to diversify the economy, encourage private sector development and reduce its dependence on petroleum.


the discovery of major oil deposits shortly after independence catapulted Gabon

to a position as sub-Saharan Africa’s third largest oil producer, behind only Nigeria and Angola. It now stands as the sixth largest crude oil producer in sub-Saharan Africa with the region’s fourth largest proven reserves. In the decades since production began in the early 1970s, oil has served as the lifeblood of the Gabonese economy, and remains responsible for around 50% of the country’s GDP and about 58% of government revenues, ensuring that Gabon has consistently enjoyed a GDP per capita in excess of four times the regional average. With total oil production from existing fields believed to have peaked

this year and in the immediate absence of major new discoveries, Gabon’s president Ali Bongo Ondimba has embarked upon an ambitious programme of economic diversification. At its heart is a focus on developing the considerable promise of Gabon’s other attractive sectors, principally mining.

GABon’S oil Sector

Gabon has an estimated 2 billion barrels of proven oil reserves, the fourth-largest in sub-Saharan Africa behind Nigeria, Angola, and North and South Sudan. Currently, over 90% of annual production is exported, with around 50% destined

Looking to the Future: Hydrocarbons and Mining

Hydrocarbons and Mining


“The government has expressed a determination to redefine the terms and conditions within which it is able to exploit its natural resources, lending a greater emphasis to environmental protection


for the US ahead of other notable export markets in the European Union and Malaysia. Gabon’s offshore Rabi-Kounga field contains the vast majority of these proven oil reserves, with additional significant deposits located in the offshore Tchatamba Marin and Etame fields. The Rabi field, arguably Gabon’s greatest success, significantly boosted the country’s total output in the 1990s and reached a rate of production of 217,000 bbl/d at its peak in 1997. Although still one of Gabon’s largest producing fields, it has now matured with production gradually declining to about 23,000 bbl/d.

In response, the government is seeking to attract substantial inward investment to explore new prospects which, it is believed, will result in fresh discoveries of oil in sufficient quantities to offset the declining production from existing fields. The government is currently finalising regulatory terms to facilitate new deepwater exploration. Following the cancellation of the 10th Licensing Round in October 2010 the government has instead opted to enter into direct negotiations with the many interested parties for the 42 deep and ultra deepwater blocks on offer, signaling a renewed focus upon the country’s latent pre-salt potential.

And this potential is considerable. Offshore Brazilian pre-salt discoveries have generated significant investor interest in Gabon’s own likely deposits. The recent giant field discoveries in the Synrift sequence of the Santos and Campos basins of Brazil have stimulated an intense interest in the likelihood of discovering a so-called ‘twin basin’, situated in Gabon’s deep Dentale basin.

The country’s pre-salt potential had been largely untapped until the recent discovery of oil by the US-based Harvest Natural Resources at its Ruche-1 wildcat well in the pre-salt layers offshore Gabon in June 2011. The following month, the company had a second major discovery at the same well. Brazil’s Petrobras has since joined pre-salt exploration activities, acquiring a 50% stake in Ophir Energy’s Production-Sharing Contract (PSC). Petrobras is expected to apply its extensive experience in Brazil to capture deepwater pre-salt layers in Gabon that have thus far lain unexplored, contributing to a future which Gabon’s Minister for Oil, Etienne Ngoubou, believes will be “a flourishing era” for the industry.

Simultaneously, the government is also encouraging investment intended

to prolong the life of existing fields. Total is increasing investment to boost production from its offshore Anguille oil field, one of the largest in Gabon. The government has also sought investment from smaller companies willing to develop Gabon’s numerous smaller fields which in the short-term promise to ably off-set declines in production from larger fields. At the start of November, India’s flagship oil company Oil India Ltd announced it had started drilling operations at the onshore block in Shakthi, around 250km from Libreville.

This investment climate reflects both the government’s determination to attract inward investment as well as the enormity of potential returns. As in the past, Gabon’s oil sector is currently dominated by foreign oil companies. Total is the largest operator in Gabon and has

been present in the country for over 80 years. The company’s equity production averaged 71,000 bbl/d in 2009. Shell and its subsidiary Shell Gabon together are the second largest producers followed by Perenco, which produces 65,000 bbl/d from its four offshore fields. The fourth largest, Addax, has interest in five PSCs, covering both offshore and onshore license areas at their five producing fields.

The government has expressed a determination to redefine the terms and conditions within which it is able to exploit its natural resources, lending a greater emphasis to environmental protection in accordance with its ‘Green Gabon’ initiative. Final bids will also be decided not just on technological expertise and financial returns, but on the extent to which operators are prepared to provide local infrastructure, investment, training


“Alongside Gabon’s proven minerals, there is much speculation over hitherto undiscovered deposits, most notably diamonds


and jobs. The government is also expected to strengthen local content requirements in a bid to address youth unemployment, part of wider efforts to avoid a repetition of oil worker strikes led by the National Organisation of Oil Employees, which temporarily disrupted production in April 2011.

To this end, the government created the Gabon Oil Company (GOC) in June 2011, to increase the government’s involvement in oil production by taking equity stakes in future awards and to enhance its own knowledge of the sector. GOC represents a somewhat belated successor to the Société Nationale Petrolière Gabonaise which was disbanded in 1987. Although ownership of oil and gas resources is typically vested in the state, foreign companies

are allowed to take large equity stakes in exploration and development through PSCs. Such developments have placed the relationship between government and industry on a more sustainable footing, and Total and other operators remain confident about Gabon’s business climate, which continues to enjoy “a reputation of stability for the investor” according to Adrian Drewett, Chairman of Shell Gabon.

A neW frontier?

Oil production in Gabon is likely to continue to form the central pillar of the Gabonese economy for many years to come, despite declining yields. Nevertheless, the Gabonese government is addressing the increasingly pressing need to diversify the nation’s economy,

with public investment designed to increase foreign investment in additional sectors, increasing considerably in the past two years, a trend that is likely to continue well into the future.

And nowhere is the potential of Gabon’s burgeoning sectors more in evidence than in its mining. Gabon benefits from a wealth of mineral reserves, and is home to significant proven deposits of manganese, niobium and iron ore, alongside smaller deposits of uranium, gold and diamond. Bélinga, located in the heart of the Gabonese rainforest, is home to an estimated 1 billion tons of high-grade ore. China’s Machinery Enginering Corporation (CMEC) was initially awarded exploitation rights in a 2007, but subsequently lost the concession due to concerns over the environmental impact of the project. The government is currently conducting an assessment of the deposit due to conclude in 2014, according to Regis Immongault, Gabon’s Minister of Industry and Mines, after which the concession will be formally awarded.

Elsewhere, Gabon’s mineral industry is dominated by the production of manganese, with proven reserves in

“Gabon’s future hand is likely to be immeasurably strengthened by mounting interest in its mining sector, spearheaded by the country’s sizable manganese and iron ore deposits


the region of 21 million tons. In 2010, the country ranked fourth among the world’s leading producers of manganese, accounting for about 11% of global production. According to the US Geological Survey, Gabon produced 1.5 million tons of manganese in 2011, and is already the world’s second-largest producer of manganese dioxide, with ambitions to overtake South Africa as the largest by 2015. According to the Financial Times, Gabon is anticipated to soon have the capacity to produce 15% of the world’s niobium, and some 900 sites have been identified for potential exploitation.

This latent potential has not gone unnoticed. Comilog, the mining company jointly owned by France’s Eramet and the Gabonese government, has long enjoyed a position as the country’s largest and oldest manganese producer, and currently operates in the Moanda region around 400km east of Libreville, producing around 20,000 tons per year of manganese metal, and 65,000 tons per year of silico-manganese. It is now considering an investment in rare earths that “could run into billions” over many years, assuming that tests prove successful, according to Philippe Vecten, Managing Director of Eramet’s manganese division and Chief Executive of Eramet Comilog Manganese. Yet whilst such established companies are set to expand their operations, newer ones are looking at Gabon with interest. China’s Huazhou Mining signed an agreement in 2010 to operate a huge new manganese mine in central Gabon. Huazhou Mining, a subsidiary of China’s CITIC Bank Group, reputedly plans to invest CFA40bn (US$85mn) in the mine at M’Bembele, 200 kilometres southeast of the capital.

Alongside Gabon’s proven minerals, there is much speculation over hitherto undiscovered deposits, most notably diamonds. Diamond production in Gabon peaked at 50,000 ct in the 1940s, though very little modern exploration has since taken place over the 100,000 km2 where diamonds are known to occur. Recent exploration by SouthernEra around Makongonio near the border with neighbouring Congo revealed kimberlitic indicator mineral anomalies comprising spinel (some exhibiting diamond inclusion chemistry), rare ilmenite and micro-diamond. In October 2004 SouthernEra discovered eight possible kimberlitic bodies sub-cropping in various small streams that are positive

for kimberlitic indicators. As recently as 2010, the Makongonio region remained the object of extensive investigation by both SouthernEra and Canadian compatriot Cogemat, whilst only this year two ultramafic dykes were discovered in trenches within the Kango diamond permit, in northwestern Gabon.

concluSion

The abundance of natural resources in Gabon – much of which still lays undiscovered – bodes well for the future. Whilst oil production is gradually declining as current fields mature, Gabon still has considerable existing reserves. 2013 is set to see further consolidation and optimisation of current deposits, with declining production from larger fields offset by that from smaller ones. Furthermore, Gabon’s untapped pre-salt potential is generating considerable

interest and investment, and promises to deliver a sizable dividend as its promise is realised.

Whilst the need for economic diversification is all-too apparent, the government is making significant progress in opening up new sectors to investment. Gabon’s future hand is likely to be immeasurably strengthened by mounting interest in its mining sector, spearheaded by the country’s sizable manganese and iron ore deposits. With so much of Gabon’s oil and mining reserves still to be explored, both truly represent a new frontier. Taken together, such resources offer Gabon a unique opportunity to achieve its aspiration to become an emerging country by 2025. In recent decades, Gabon’s economy has been driven by the certainty of oil. In future decades, there are no such guarantees. Yet there is also no shortage of potential.



the decision by the Confederation of African Football to award the co-hosting

rights for the 2012 Africa Cup of Nations to Gabon and Equatorial New Guinea brought a boost to Gabon as well as international focus on the nation as an economy. The games brought extra public investment in improving infrastructure, particularly in terms of road building and the construction of stadia. Moreover, this policy is set to continue over 2012-2013 as the government’s strategy looks to encourage domestic and foreign private investment through the Special Economic Zones (SEZs).

A GroWinG Sector

A growing contributor to the development of the economy is the role of Small & Medium Enterprises (SMEs) and Micro, Small & Medium Enterprises (MSMEs). Encouraging local enterprise and creating an environment where the smaller business can get off the ground and thrive is fundamental to a diverse and

healthy economy. The number of SMEs in Gabon increased by 22.3% through 2010-2011; in 2011 the economy as a whole saw a 5.8% increase in GDP. This explosion of new enterprises is partly spurred on by government administrative reforms underpinned by its strategy for economic diversification. Gabon is developing new areas for investment which in turn is creating a network of local SMEs. IT and commercial sectors have shown the largest increases with a 23.5% rise in IT related SMEs and a 21.3% in speciality retail and wholesale trade and imports. Gabon’s ICT sector will see further growth in 2013 with the arrival of the country’s second sub-marine fibre-optic cable – part of the Africa Coast to Europe (ACE) project. Gabon Telecom announced a 25% reduction to the cost of broadband subscriptions in August 2012 as part of an effort in supporting development in Gabon. Airtel Gabon has lowered its costs for mobile internet access as it prepares to launch commercial 3G services after being awarded

the country’s first 3G licence in October 2012.

SpeciAl economic ZoneS – developinG the BuSineSS environment

The government has been implementing reforms and investment since 2009 to encourage home grown enterprises to grow. Part of this programme is the development of the Multi-Product Special Economic Zone (SEZ) initiated in partnership with the Singapore based firm Olam International, Since 2010 The Republic of Gabon has brought in a 100% log export ban to encourage local wood production and manufacturing. The zone focuses specifically on the timber industry and its processing activities, encouraging export of value added products, generating employment opportunities and opening up foreign exchange. One of the main species available in Gabon’s forests is Okoume, world renowned in the manufacture

Small Medium Enterprises and the business environment

SMEs

© R

eute

rs


of plywood. Government policies encouraging local SMEs encourage foreign companies to work with local companies – directly benefitting the local economy. In addition to the benefits for the timber industry, the zone has the added advantage of creating demand and business opportunities in various other sub-sectors such as electronics and electrical components; manufacturing; cable; plastics etc.

The zone has been set up around the town of Nkok and firms setting up here will be exempt from taxes on profit for ten years, after which time they will pay 10%. The processing plant has a capacity of 1 million cu metres of wood a year, creating in the region of 9,000 jobs. It also brings with it a goal of US$1.1bn of annual foreign investment. It was set up when the export of round logs was banned in 2010 in order to promote secondary and tertiary processings of wood products in the country. The same legislation being planned for other sectors, the special economic zones has three objectives: to attract industries that would be involved in secondary or tertiary transformation of products and would be cost competitive on international markets; to attract industries that can manufacture products and transform existing natural resources in a sustainable manner ; to encourage industries to cater for domestic and central African market and replace imported products. The zone, which includes all best practices of sustainability from its conception, is easy to reach by boat, rail and road and benefits from cheap energy and water supply.

To date, the ban on log exports has resulted in the creation of 33 wood processing companies over the period 2009-2011 and the rise in lumber sales has jumped from US$166mn in 2009 to US$340mn in 2011 with a reported creation of 3,173 direct jobs.

The introduction of the Business Development Centre (CDE) which opened its new headquarters in Okala District, north of Libreville, February 2012, in the presence of the Minister for Economy, Jean Pierre Boukila, has greatly improved the process for starting up business in Gabon. The CDE is a legal body under the dual supervision of the Ministry for Economy and Small and Medium Enterprises; its primary aim is to act as a one-stop-shop for the creation of a new business in 48 hours by housing all

Following the example of twinned towns throughout the world, large companies should have “sister company” programmes with a view to forging relations with SMEs and acting as their mentors

An African Cup of Nations for SMEs is needed to identify and reward the achievements of African SMEs

Training and mentoring programmes for SMEs should be introduced and promoted.

donorS

The World Bank’s Country Assistance programme in Gabon (CAS 2005-09) was initiated to make the Gabonese business environment more favourable to sustainable private sector growth and consisted of three major focus points, the second of which was “being able to provide technical assistance to SME/SMIs: capacity building seminars for local entrepreneurs”. In addition to the World Bank’s ongoing support several other international partners, such as the African Development Bank (AfDB), the Agence Française de Dévelopement (AFD) and the European Union (EU), support private sector development in Gabon.

the administrative components on site – compared to the previous 58 days shown in the table below. The centre also works to discourage traders from working in the informal sector.

neW york forum AfricA

There is considerable focus on SME’s and their importance to emerging and developing economies. In June 2012 Gabon was host to the first New York Forum AFRICA during which the importance of SME’s to the pan-African economy was discussed and a number of key pointers were established towards aiding the growth of SME’s across the continent; these included:

SMEs are the “missing middle sector” for financial institutions. Innovative approaches and methods are essential to assess credit risks

New major investment programmes must contain a component to predict investment in SMEs or to cooperate with them

A dedicated site for participative funding for African SMEs must be established

no. Procedure days to Complete

Associated Costs

1 Deposit the legally required capital in a bank and obtain the deposit evidence

2 no charge

2 Verify and reserve the company name 1 XAF 25,0003 Obtain extracts of criminal record of the company manager

7 XAF 3,000

4 Deposit and register the company’s articles of association with the public notary

14 XAF 375,000

5 Deposit documents with the Investment Promotion Agency (Agence de Promotion d’Investissement)

30 XAF 50,000 (APIP fee) +

*6 Pay fees and obtain receipt 1 (simultaneous with previous procedure

included in procedure 5

7 Publish the notice of company formation in a legal journal (Hebdo-informations)

2 XAF 60,000

8 Notify the Minister of Labor the commence of operation

1 no charge

9 Register the employees with the Social Security Authorities

1 no charge

DOING BUSINESS: SETTING UP A BUSINESS

Source: doing Business in gabon 2011

“it and commercial sectors have shown the largest increases with 23.5% rise in it related Smes and 21.3% in speciality retail and wholesale trade and imports.

SMEs


AgriculTure sTands as a real economic asset for Gabon. Although currently accounting

for 5.2% of GDP, this number is set to grow. The government has called for a diversification strategy, known as ‘Emerging Gabon’, to strengthen sectors – such as agriculture – outside of hydrocarbons.

The agricultural sector, which includes food crops, rubber and palm oil, already employs around 35% of the population. With continued focus on preserving ecosystems out of a longstanding concern for sustainable development, President Ali Bongo Ondimba, is committed to ensuring that this sector grows successfully, attracting a number of new private foreign ventures.

Despite Gabon’s abundance of fertile land, around 85% of the country’s food

is imported, resulting in a bill that costs the country an additional EUR381.12mn each year and also makes it prone to external shocks in food prices. With the aim of moving Gabon towards becoming more self-sufficient and reducing its dependence on imports, President Ali Bongo Ondimba has put food security at the centre of the ‘Green Gabon’ initiative, one of the major pillars of the ‘Emerging Gabon’ strategy. This agenda for social change focuses on boosting domestic food production and developing the agriculture sector over the long-term.

In 2010, the National Food Security Programme was launched, and over a five year period the government hopes to achieve food self-sufficiency, reducing imports by at least 5% a year, particularly for basic staples such as cereals and rice; as well as meat and vegetables.

The government has also set up an Agricultural Programme for Food Security and Growth (PASAC) that aims to create “a competitive agricultural sector through expanded local production, increased exports, improved access to financing and a focus on underdeveloped rural zones”.

In addition, in 2010, a EUR600.6mn contract was signed with Olam International, a Singapore-based enterprise, to develop large-scale oil palm plantations, with an initial phase of 50,000 hectares (ha) of palm groves.

AgricultureAgriculture

“president Ali Bongo ondimba has put food security at the centre of the Green Gabon initiative, one of the major pillars of the emerging Gabon strategy


In the longer run, the government aims to develop 300,000 ha of palm groves and plans to become the leading producer of sustainable palm oil in Africa by 2017.

Rubber tree projects are also under development in Gabon, as the country has approximately one million hectares of very scarcely populated wet savanna, which provides an ideal ecosystem for such of initiative. Another recently announced partnership with Olam International will create an initial plantation covering 28,000 ha, and will eventually be extended to 50,000 ha for a total investment of US$183mn. The first phase of the project is expected to begin in 2013, and is anticipated to create 6,000 direct and 5,000 indirect jobs. Furthermore, its close location to the border with Cameroon and Equatorial Guinea should also facilitate intra-regional trade. As a byproduct of its investment, Olam International plans on constructing 3,366 housing units, as well as health and education facilities for the neighboring populations.

The forestry sector was the driving force behind Gabon’s economic growth before the discovery of oil in the 1970s, and continues to play a strong economic role in Gabon. Currently the sector accounts for 2.5% of GDP and is the second largest employer in the country, providing employment for over 28% of the population. The sector also carries significant potential for further growth.

Forests cover 85% of the country’s territory, of which 12.5 million has logging potential. Constituting over 25% of the resources is Okoumé, an excellent quality timber that is renowned for the manufacture of plywood.

The government has made significant strides towards the development of the timber industry, including modernising wood processing in the country. Since the ban of log exports which began in January 2010, as part of the Green Gabon and Industrial Gabon strategies, processing has become mandatory in the country and has also created fresh job opportunities in the

sector. Gabon’s Special Economic Zone (SEZ), created as a joint venture with Olam International, is an integrated industrial park with a focus on the timber industry, and is strategically situated 27 kilometers north of Libreville in Nkok. The location offers several advantages for transporting and

shipping both raw materials and processed goods and is well connected with the rest of the country. The SEZ encourages the complete processing of timber at the local level which enables Gabon to benefit from the value added to the goods before they are exported. There are currently plans for one new SEZ at l’île Mandji close to Port Gentil.

At the beginning of the year the National Wood Company of Gabon (SNBG) secured a loan of EUR13.7mn from the Development Bank of Central African States to build a timber treatment plant at Libreville’s port, Owendo. This project

is funded in partnership with two regional banks, Banque Internationale pour le Commerce et l’Industrie du Gabon and Ecobank.

With the aim of making Gabon’s SEZ globally competitive as a target destination for the timber processing industry, the government has taken a number of strategic steps to encourage economic activities. Incentives include;

a 10-year income tax exemption followed by a concessional tax rate of 10% for five years

no custom duty on import of plant and machinery

reduced travel costs and labour restrictions providing incentives for attracting investors that are not already active in the country.

The government has shown a clear commitment towards the agricultural sector which has significant potential for further growth. With much attention increasing foreign investment as well as recent efforts to boost the sector’s productivity and competitiveness it is clear that this is a key sector that will soon reap positive results.

“The government has made significant strides towards the development of the timber industry, including modernising wood processing in the country

Agriculture


s iTuaTed on The equator, at the edge of the Congo Basin in western Central Africa, Gabon

boasts abundant and relatively untouched natural assets – ideal for attracting adventurous tourists. Around 70% of the country’s landmass is covered by rich forests, which are home to lowland gorillas, chimpanzees, forest elephants and a host of other wildlife. Furthermore, with its 800 kilometres of coastline, much of which is wild and unspoiled, its 13 National Parks, as well as its rich cultural history, Gabon has what it takes to become a first-class tourist destination in coming years.

Until recently, tourism had been underserved by government policies in favour of more high priority GDP contributors such as the industrial and extractive sectors. However, with Gabon facing declining oil production, diversification of the economy is crucial and the government has turned to tourism as a key sector for the country’s future development.

Tourism in Gabon is already fast growing and its growth prospects looks promising in the medium term. According to the World Travel & Tourism Council, in 2011, the direct contribution of tourism to GDP was 1.1%, however, the total contribution of tourism, including its indirect impact on the economy was 2.8%, CFA192.7bn (EUR389mn). This is forecast to grow by 5.4% per year to CFA349.2bn (3.6% of GDP) over the coming 11 years. Figures such as these are indicative of the enormous potential tourism has towards Gabon’s revenues and the emphasis the government is placing on its development.

Green GABon

Green Gabon (Gabon Vert) is one of the three pillars of President Ali Bongo’s Emerging Gabon strategy; and within the framework and development of a green Gabon the government is identifying and actively promoting key investment opportunities in geotourism / ecotourism.

Boasting a landscape that inspired the genius of Picasso and Matisse, hundreds of thousands of years of archaeological history, and unique wildlife spectacles, Gabon enjoys enviable natural advantages providing significant opportunities in for instance the development of safari lodges.

Through the Green Gabon policy, the stated aim is to develop high-end and

tourismTourism

“through the Green Gabon policy, the stated aim is to develop high-end and eco-friendly tourism –protect the country’s environment and ecosystems as well as the culture of its rural communities


eco-friendly tourism – protecting the country’s environment and ecosystems as well as the culture of its rural communities. In 2002, the late President Omar Bongo Ondimba nominated 11% of the country’s land, comprising more than 10,000 square miles, as National Parks, with the aim of opening it up to travellers and encouraging people to discover the wealth of Gabon’s natural resources. In a burgeoning sector, there are of course challenges, especially around infrastructure and promoting rural areas; as Gabon’s Director of National parks states: “Our job is to prepare the terrain. The Ministry will develop eco-tourism or geo-tourism. It has created an ecotourism development plan. Currently tourists in the county tend to focus on areas around Libreville. The parks are the last to benefit from tourist spending. By the time tourists arrive in resorts in the parks they have already spent money on flights and hotels in Libreville. We need to make sure tourists spending contributes to the development of the parks”.

developinG the Sector

The current contribution of the Travel and Tourism Economy to employment is expected to grow from 2.5% of total employment, 12,000 jobs in 2011, to 3.3% of total employment, 20,000 jobs in 2022. It is for this reason that the government has also pooled significant resources into the eco-tourism sector as it is seen as a potential source of employment for local people living in rural areas.

Gabon’s Agence Nationale des Parcs Nationaux was established in 2007 and together with the government it has committed to promoting environmentally sustainable ecotourism while boosting the number of related visitors. In 2011, over 90,000 foreign tourists visited Gabon for global expenditure of CFA214bn Francs (around US$411.5mn). However, it was mostly business visitors to the country’s urban centres of Libreville, Port-Gentil and Franceville that generated the majority revenue. By 2020, the Ministry of Economy, Commerce, Industry and Tourism aims to attract 100,000 tourists per year from the mid-range and high-end sectors.

AttrActinG inveStment

In order to create an environment conducive to attracting investment in the tourism sector, the government has established a number of pro-growth policies

and tourism infrastructure in Grande Mayumba, located in Southern Gabon.

Highlighting the need for continued promotion of the sector to potential investors and indeed tourists themselves, Gabontour’s Ebang Essono stated the following: “We already need a one-stop shop specifically for tourism investment”, he said, adding that more efforts are being made to promote the country internationally participating in road shows in Paris, Madrid, Berlin and London and with plans under way to open a tourism office in Johannesburg. “The government believes ecotourism will bring the maximum number of high-end tourists to the country. But we are still not very well known as a destination and must examine developing activities in the US, Asia, and across Europe”. It is clear that the further Gabon’s message is spread the more the international community will come to see what the country has to offer – both in terms of its natural charms and deeply preserved culture.

The tourism sector in Gabon is undergoing considerable growth. With such a wealth of preserved natural beauty, together with the determination of the government to support and invest in the tourism sector, and attract FDI, Gabon is shaping up to be one of Africa’s most sought after ecotourism destinations.

Tourism

and regulations to encourage business. In 2000, the Tourism Investment Code was adopted. It provides tax exemptions to foreign tourism investors during the first eight years of operation, tax-free imports, as well as other administrative incentives. In 2011, with the aim of professionalising the hotel sector as well as attracting tourists and investors, the Ministry of Tourism implemented a classification of hotels and restaurants across the country in preparation for the 2012 African Cup of Nations, where stars were allocated to hotels and restaurants based on the conditions of the establishment as well as the quality of their service.

Aman Resorts and Sustainable Forestry Management Africa (SFM Africa), two top-ranking international investors, have already committed themselves to building high-end ecotourism facilities in Gabon. Following two years of negotiation, in January 2012, Gabon signed a joint venture agreement with Aman Resorts, a Singapore-based company, to build high-end ecotourism hotels and lodges in Libreville as well as in five of the country’s national parks. Furthermore, according to the agreement, four additional projects have also already been identified for the future. SFM Africa, a Mauritius-based company, has also signed a CFA50bn (around US$97mn) financing agreement with the state to develop industrial

“it is clear that the further Gabon’s message is spread the more the international community will come to see what the country has to offer – both in terms of its natural charms and deeply preserved culture


L ike much of Africa’s west cost, what would become Gabon’s first European arrivals were

Portuguese traders, who landed on its shores in the fifteenth century. By the sixteenth century, their counterparts were arriving from Holland, France and Britain and establishing slave ports in the region as they shackled and shipped vast swathes of the indigenous population to their grim fates, primarily in the Americas. Over the next century or so it was colonial France who became the dominant force in the region, cementing its control over the country by signing treaties with Gabonese costal chiefs in 1839 and 1841; and in 1910 Gabon officially became part of French Equatorial Africa.

French occupation of Gabon brought the familiar hardships of the colonial era to the local population – such as control over trade, French monopolisation of industry, harsh head and labour taxes and widespread forced labour. The oppression of the regime provoked pockets of resistance in its early years but it was not until the years between the two world wars that a Gabonese intelligentsia began to emerge, demanding progress and reform.

The end of World War II saw France badly wounded and all but bankrupt and in keeping with a relatively forward-looking policy, for the times, towards its African territories, the once great power established Gabon as an Oversees Territory with its own Assembly and representation in the French Parliament. Whilst the country was still culpable to French demands with the real power remaining in Paris, the establishment of the Fourth French Republic did provide Gabon with some level of autonomy and its political representatives during this era were born of an educated elite from Libreville and Lambarene, who whilst

Political History

A Political History

Reflecting the story across much of Africa during the 1950s and 1960s when change came to Gabon, progress was quick


pro-French culturally and in outlook were vehemently anti-colonialist.

Reflecting the story across much of Africa during the1950s and early 1960s when change came to Gabon, progress was quick. In 1958 it became an autonomous republic within the French Community and in 1960, after signing cooperation agreements with France, it officially became an independent nation. Under the Fourth Republic the French had significantly increased public investment in healthcare, education and the economy as a whole and with a small population and abundant natural resources the newly independent nation was in a far healthier position than many of its neighbours; and now, having gained self determination, there was a firm desire to develop the country’s natural resources – such as oil and manganese – for its own benefit.

In the political arena two principal parties existed at independence; the Bloc Democratique Gabonais (BDG), led by Leon M’Ba, and the Union Democratique et Sociale Gabonaise (UDSG), led by J.H. Aubame. Neither won a clear majority in the country’s first election but M’Ba became its first Gabonese leader – as prime minister – through a legislative committee. Gabon, however, at this time was still finding its feet both constitutionally and politically and there was soon a consensus that the population was too small and the country’s development too pressing to support a two party system so in 1961 the country adopted a presidential system, effectively drawing from a one party list of candidates. M’Ba retained power, becoming president whilst his closest opponent Aubame became his prime minister.

This alliance lasted little more than two years with the larger BDG contingent of the government attempting to force its UDSG members into a merger of the two parties; when UDSG cabinet ministers chose to resign rather than cooperate the administration collapsed and M’Ba called another presidential election in 1964. Seen to be overly dictatorial and dependent on French government and business support, opposition to M’Ba within the country was growing, and it took swift military intervention by his French supporters to see him regain the presidency that same year, after a bloodless coup. In 1967 Gabon’s first era of independence came to an end when President M’ba died in office and was replaced by his vice president, Omar

Bongo, who would go on to rule for decades to come.

The following year, Omar Bongo established a single party regime under his Parti Démocratique Gabonais; PDG (or Gabonese Democratic Party). His belief was that a unified national movement would bolster the country’s development agenda and suppress regional and tribal differences that had undermined stability and progress in the past. After sweeping to electoral victory in 1975, Bongo abolished the position of vice president, replacing it with a prime ministerial role, and further cementing his power; he was again reelected in 1986. During the first two decades of his administration, improvements were made in healthcare and education (although the services were still inadequate) and the country’s per capita income was high by African standards – but there was also widespread discontent with the one party system, perceived government corruption, and the lack of wealth distribution in a country that was making billions of dollars from its oil revenues. Frustrations with Omar Bongo’s regime would soon come to a head.

A drop in world petroleum prices in the mid 1980’s had damaged Gabon’s oil based economy and the government had reacted by imposing a string of austerity measures. In 1990, these cuts coupled with a growing desire for political liberalisation triggered civil unrest in Libreville and Port-Gentil, as well as strikes by students and workers. Omar Bongo’s response was a conciliatory one; he made wage concessions with the workers on a sector-by-sector basis and announced a conference to discuss Gabon’s future political system and direction. In April 1990, the conference approved major political reforms and liberalisation – including the establishment of a National Senate, new freedoms of the assembly and the press, and the paving of the way towards a multi-party democracy. Problems persisted however; in that same year, two coup d’etat attempts were thwarted and there were further

anti-government protests. A momentous, if tumultuous year ended with Gabon’s first multi-party elections since the dawn of its independence, which produced a National Assembly with the PDG retaining a small majority. In 1993, following further constitutional reform, Omar Bongo was reelected to the presidency with 51% of the vote, sparking civil unrest, with opposition candidates refusing to accept the outcome. Over the coming years, Bongo retained power with a serious of initiatives designed to appease opposition factions and integrate them more into his government. In 1998 he was reelected with a landslide majority, benefiting from an increasingly divided and fractious opposition.

By the late 1990s Gabon was experiencing severe economic difficulties. For years members of a ruling and business elite had been diverting funds from both the public and private sectors into offshore accounts – draining the local economy of capital and forcing the government into a cycle of debt as it borrowed more and more from its one time ruler, France, and from international donors. After the turn of the century, gradually the situation began to improve both through debt relief and, under pressure from the IMF, better management of state funds, privatisation procedures and anti corruption measures.

In June 2009, following rumours of ill health and the recent death of his wife, President Omar Bongo, the man who had dominated Gabonese politics for over forty years, passed away. The subsequent presidential elections saw his son Ali Ben Bongo, the former defence minister, gain power with 41,7% of the vote.

Despite some virulent opposition to his election, President Ali Bongo now presides over a relatively stable country with good economic prospects. In recent years real growth has been at between 5% and 6% and per capita income remains exceptionally high for the region at US$8,600 (2010 est.) – although this remains uneven – and by African standards literacy levels are very high at 86%

Political History

“In 1967 Gabon’s first era of independence came to an end when president m’ba died in office and was replaced by his vice president, omar Bongo, who would go on to rule for decades to come


and for example, infant mortality rates low. But Gabon is overly dependent on its dwindling oil reserves and economic diversification is a necessity. After he came to power, Ali Bongo announced his vision for Gabon’s development in coming years: “Gabon Emergent” is a programme designed to modernise the country’s industries and infrastructure, diversify the economy away from the oil sector, and to stamp out corruption. Emerging Gabon should be set for a bright future with a broader distribution of wealth – foreign investment is growing as the government loosens the country’s traditional ties to and reliance on France and a young, well educated workforce is in place to benefit both investors and the local economy.

government type: Republic.Independence: August 17, 1960. Constitution: February 21, 1961 (revised

April 15, 1975; rewritten March 26, 1991; revised July 29, 2003). Branches: Executive--president (head of state); prime minister (head of government) and appointed Council of Ministers. Legislative--bicameral legislature (National Assembly and Senate). Judicial--Supreme Court and Constitutional Court. Administrative subdivisions: 9 provinces, 36 prefectures, and 8 subprefectures. Political parties: Parti Democratique Gabonais (PDG--Democratic Party of Gabon) holds the largest number of seats in the National Assembly; l’Union Nationale (UN--National Union); Union du Peuple Gabonais (UPG--Union of the Gabonese People); Rassemblement du Peuple Gabonais (RPG--Rally of the Gabonese People). suffrage: Universal, direct. Central government budget (2010 est.):

Receipts--$2.7 billion; expenses--$2.4 billion; defense (2007)--3.5% of government budget.

economy real gdP (2011 est.): $15,71 billion. Annual real growth rate (2010 est.): 5.4%. Per capita income (2010 est.): $8,600. Avg. inflation rate (2010 est.): 5%. natural resources: Petroleum, timber, manganese, uranium, gold. Agriculture and forestry (4% of gdP): Products--manioc, rubber, sugar, and pineapples. Cultivated land--approximately 1%. Industry (64% of GDP): Types--petroleum related, wood processing, food and beverage processing. services (32% of gdP): Types--government services, tourism. trade (2007): $8.499 billion. Exports--61% of GDP (f.o.b.): petroleum, wood, manganese. Major markets--U.S. 16.6%, China 15.9%, EU 13.7%, France 4.3%. Imports--30% of GDP (f.o.b.): construction equipment, machinery, food, automobiles, manufactured goods. Major suppliers--EU 56.9%, France 32.2%, U.S. 7.9%, China 7.0%, Belgium 5.0%. Current account balance with U.S. (2009)--$1.060 billion.

“Gabon emergent is a programme designed to modernise the country’s industries and infrastructure, diversify the economy away from the oil sector, and to stamp out corruption


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