Economic growth in 2012 was robust, supported externally by improving world prices for oil, manganese and timber, and internally by massive investments undertaken for football's Africa Cup of Nations 2012. The economy should continue expanding over 2013 and 2014, despite a structural fall in oil production.
The country must meet three major challenges: poverty, which affects one citizen in three, the high unemployment rate, standing at 27% of the working population, and the continuing very unequal distribution of income.
Local processing of raw materials will increase sharply in the special economic zones currently being set up.
Gabon’s per capita gross domestic product (GDP) is among the highest in sub-Saharan Africa, at almost USD 15 000 at current value, a performance due in large part to the availability of natural resources, especially the exploitation of hydrocarbons. Through the Strategic Plan for Emerging Gabon (PSGE), the authorities have promoted the idea of turning the country into an emerging economy by 2025. This rests on three pillars: “Green Gabon”, “Industrial Gabon” and “Service-Industry Gabon”. The PSGE hopes to bring about an ambitious programme of structural change in the national economy, based on improved governance of the state, the recovery in public and private investment, the development of infrastructure and human resources and a more equitable distribution of national wealth.
Recent trends show the real economy has weathered the financial crisis and its implications rather well. Growth is still above average for the region. After a recession of about 1.5% in 2009, the economy was able to continue growing at about 6% for the last three years. Indeed in 2010 Gabon was the only country in the Economic and Monetary Community of Central Africa (CEMAC) to respect all the region’s macroeconomic convergence criteria: primary budget in surplus, inflation under 3%, public debt below 70% of GDP and no backlog of late payments.
For 2012, real GDP growth is put at 5.7%, down from 2011 (7.0%), but above forecasts, which were for 4.4%. Increasing public investment and an upturn in mining – stimulated by demand from big emerging markets – were in part responsible for the change in internal demand. In terms of structure, 2012’s GDP shows three things: the low contribution of the primary sector (5%), the preponderance of the secondary sector (64%), whose contribution fluctuates widely according to world oil prices, and the importance of the tertiary sector, which represents 32% of internal activity. The primary budget balance was consolidated. The current account surplus is considerable in a climate of rising inflation, which, however, remains within CEMAC convergence criteria.
Overall, economic activity was moderate in 2012. This was due to two things: the end of large-scale stadium-building works for the Africa Cup of Nations (ACN) 2012 and cut-backs in road improvement schemes. In 2013 economic activity should grow by around 6.2%, supported in large part by the non-oil sector. This growth will undoubtedly not be sufficient to absorb a population of relatively young people unable to find jobs. The authorities are attempting to solve this problem in several ways: they are setting aside special funds to support reforms undertaken by the National Employment Office and encouraging the foreign direct investment (FDI) currently under way in three special economic zones, among other initiatives.
Recent Developments & Prospects
Gabon’s economy benefited from the high price of oil: between USD 90 and USD 110 per barrel for Brent in 2012, compared to USD 79 in 2010. In this way it was able to keep its GDP growth at 5.7% in 2012, even if this was lower than in 2011 (7.0%). One of the targets of the Strategic Plan (PSGE) is to gradually reduce dependence on oil and, more generally, primary resources. Oil accounts for nearly all exports (over 90%) and has a significant share in GDP (48%). Oil resources are slowly dwindling, however, because marginal fields are running dry, while no new commercially exploitable fields are being discovered.
Forestry is the second main economic resource after oil, as well as the country’s main employer. It will only be 0.4% of GDP over 2012 and 2013, slightly up from 2011 (0.3%) thanks to increased production and transformation capacity at Rougier Gabon, Olam and the Société nationale des bois du Gabon (SNBG). The exploitation of minerals, especially manganese, is the third area of production with a big impact on foreign trade. Generally speaking, mining’s share in GDP remained at 6.3% in 2011 and 2012. It should show a slight improvement for 2013 (6.5%) when mining of the manganese deposit at Ndjolé begins and production at the Compagnie minière de l’Ogooué (COMILOG) is stepped up.
Farming is still limited, with cash crops, food crops and market gardens around towns developed with the assistance of the Gabonese Development Support Institute. Its contribution in 2012 was at the same level as 2011 (3.8%), with cocoa and coffee production still hardly above their 2002 level (500 tonnes and 200 tonnes each). Similarly, prices received by planters have not changed since 2007, at XAF 650 (CFA francs BEAC) per kilogram of cocoa and XAF 450 per kilogram of coffee, despite rising world prices. The share of the secondary sector in the GDP rose to 8.5% in 2012, compared to 8.3% in 2011. This trend should carry over into 2013, reaching 9.1%, and 9.3% in 2014. Industry, building and public works, electricity and water generate the greatest part of this sector’s contribution (respectively 4.6%, 2.7% and 1.7%). Finally, the tertiary sector, representing 32% of internal activity, is still the second contributor to GDP growth, 27.7% in 2012, up from 2011 (27.0%). This sector was driven by the upgrading of hotels ready to welcome fans to the 2012 ACN and by the spread of mobile phones. There should be an upward trend in 2013, 2014 and 2015, at 29.7%, 30.8% and 31.7% respectively.
In terms of demand, growth, estimated at 5.7% in 2012 and 6.2% in 2013, should be supported by two factors: rising public investment and FDI investment in special economic zones (SEZs) and the bounce back of mining under the impetus of increased demand from big emerging markets. The public-sector contribution to GDP growth could well show a fall, from 3.1% in 2011 to 0.9% in 2012 as a result of the ending of the stadium building programme and cutbacks in the road-improvement programme. The public-sector contribution to GDP growth in 2012 rose (0.7%) compared to 2011 (-0.1%). It should grow in 2013 to 1.2% and in 2014 to 1.7%, as a result of the three-year recruitment of defence and security personnel, which has been taking place since 2009. Contrary to forecasts, private consumption grew in 2012 (5.3%) compared to 2011 (2.9%), under the redistributive effect of income from works undertaken for the ACN. But it will fall in 2013 (3.4%) as the first phase of these works is completed.
Exports fell slightly in 2012 for several reasons. Marginal oil fields became depleted, production at the new Ndjolé mine belonging to the Compagnie industrielle et commerciale des mines de Huazhou (CICMHZ) fell, the bringing into production of ore from Franceville by BHP Billiton was delayed (initially forecast at 250 000 tonnes in 2012), while COMILOG kept to its initial forecast (3.75 million tonnes for 2012). In general terms, the trade balance has a structural surplus, with an import-cover ratio above 150%. The current value of exports easily made up for the purchase of equipment following the dynamic public and private investments in recent years. Thanks to the high price of oil on the world market, Gabon enjoyed exceptional oil income. In 2012 it represented over 80% of export income, 48% of GDP and 50% of fiscal income.
The 2013 budget seeks to further the transformation of the economy by creating basic infrastructures and hubs of economic development. The aim is to consolidate growth and diversify its sources. Public finance management shows a budget surplus, which has regularly contracted since 2007, coming close to balance in 2011 and 2012. Specifically, budgetary policy aims to diversify the economy and get the state’s overall expenditure under control. The primary budget surplus was 2.1% of GDP in 2012, as opposed to 1.8% in 2011. It is expected to worsen in 2013 reaching 0.1%, as a result of dependence on variations in the price of oil. Hydrocarbons accounted for over 50% of total state income in 2012.
Budgetary policy shows a squeezing of overall state expenditure as a percentage of GDP. It went from 25.0% of GDP in 2011 to 24.4% in 2012. However it should rise to 26.2% in 2013 with an increase in current expenditure on salaries and wages and higher capital expenditure.
State revenue dropped from 25.7% of nominal GDP in 2011 to 25.3% in 2012. This was due to a fall in oil income, which decreased from 14.8% in 2011 to 14.0% in 2012. This downward trend should be maintained in 2013 (13.5%) and 2014 (12.4%). A drop in public expenditure is the probable cause for 2012’s increased overall balance, estimated at 0.9% of GDP, compared to 0.7% in 2011. This balance will worsen in 2013 to -1.3%, and in 2014 to -1.8%, due mainly to falling oil income.
In terms of monetary policy, inflation is structurally low thanks to the control mechanisms of the Bank of Central African States (BEAC). Over recent years, it has remained on average within the limits set by the stability and growth pact of the Economic and Monetary Community of Central Africa (CEMAC), similar to world inflation rates. However, in 2012 consumer prices rose by 3%, in line with the community’s norm (3%). This rise is due to several causes: pressure on food prices, internal demand buoyed by public investment, and increased consumption due to the ACN. In agreement with the agri-food industry and consumer associations, the government took steps to bring down prices of several food staples. These included the suspension, from September to December 2012, of customs duties and value added tax (VAT) on certain consumer products. Monetary policy, under the overall lead of the BEAC, has several aims: keeping the refinancing of banks at XAF 2 billion; reducing main base rates, especially the interest rate on tenders, which now stands at 4%; and maintaining the policy of holding obligatory reserves. Inter-bank activity was characterised by a near-total absence of exchanges between banks. In general terms, the development of the major monetary aggregates is favourable. In particular, foreign reserves have been built up, credit to the economy has grown, and government debt to the banking sector has fallen.
Economic Cooperation, Regional Integration & Trade
Gabon is a member of the main regional organisations for economic co-operation: the Economic Community of Central African States (CEEAC), the Economic and Monetary Community of Central Africa (CEMAC), Organisation for the Harmonisation of Business Law in Africa (OHADA) and the New Partnership for Africa's Development (NEPAD). Within CEMAC, non-tariff barriers are gradually being lifted. Customs duties on imported goods from outside CEMAC range from 5% to 30%. But regional integration is still held back by inadequate diversification and communications within the sub-region. Gabon suffers from the low density of its industrial base and relatively high labour costs. These affect its position within the region.
Since September 2010, Gabon has been in negotiations to conclude a voluntary partnership agreement (VPA) with the European Union. Discussions required the creation of three colleges: administration, business and civil society. Their members, designated by each college, work with representatives of the European Commission based in Libreville and Brussels. Negotiations deal with the legality of timber exported to the European Union (EU). The EU formulated new rules in October 2010 – due to come into force in March 2013 – forcing European importers to show that the timber they want to sell is legally sourced. The rules clearly state that timber from a VPA signatory meets the requirement and has automatic entry into the EU.
In 2012, Gabon’s balance worsened because of a fall in the surplus in current transactions, despite the improvement in the capital and services account.
The downward trend in the current transactions balance, from 8.9% of GDP in 2011 to 7.5% of GDP in 2012, is linked to the falling trade balance. The trade balance is forecast to weaken, reaching 35.1% of GDP in 2012, because of the downturn in export income in 2012 to 50.9% as compared to 2011 when it was 53.7%. According to forecasts, this trend will continue in 2013 with falling export income, expected to be 48.8%, and the services account will weaken.
Imports as a percentage of GDP are rising slightly, to 15.9% in 2012 compared to 15.8% in 2011, because of the import of goods and services for the ACN. The deficit in the services balance is tending to reduce: from -10.2% in 2011 to -9.9% in 2012. This positive trend is mainly due to an improvement in the “other services to business, freight and insurance”. The income balance had a deficit, which improved in 2012 over 2011 (respectively -16.5% and -17.5%), resulting from a fall in dividend payments to private foreign investors. The trend is expected to continue in 2013 (-16.4%) and 2014 (-15.1%).
Since 2005, Gabon has not carried much debt. Over a fairly long period, public debt has been standing at a little over 21% of GDP – including 18% foreign debt – which is a relatively low level of indebtedness. The cost of servicing the public debt is forecast, however, to rise. Servicing the debt cost slightly more in 2012 (1.2%) as compared to 2011 (1.1%). This trend is expected to carry over into 2013 (1.4%), because of the slowness of implementing budgets – and of financial management in general – which causes internal late payments. The government has set up a directorate of foreign debt tasked with shaping debt policy and taking active control of a debt whose rate has been brought down to readily sustainable levels. It has also fixed a ceiling for debt which can be sustained while maintaining balanced public accounts. In 2012, the Directorate of Foreign Debt undertook to reconcile debt data with the state’s different creditors, including the World Bank Group.
Economic & Political Governance
The World Bank report Doing Business 2013 puts Gabon in 170th place in the world out of 185 economies for ease of doing business. Having ranked 165th in the 2012 edition, Gabon fell by five places. The report picks up two good points: connection to the electricity supply and the resolution of insolvency, which improved by three and two points respectively. The situation is unchanged with regard to setting up a business and the execution of contracts. Further effort is required in the transfer of property, granting of building permits, getting loans, payment of taxes, protection of investments and cross-border trade in a region recognised as poorly integrated.
Gabon’s private sector is still dominated by big multinationals and does not offer many openings to small- and medium-sized enterprises (SMEs). This situation does not favour the emergence of small businesses drawing on local resources. Dialogue between the state and the private sector can be difficult. The same holds true for dialogue between the state and civil society organisations.
Some progress has been made in the area of good governance but practices remain unsatisfactory. According to Transparency International’s 2012 report on corruption in the world, Gabon comes 102nd out of 176 countries considered. This is disappointing, especially as there has been a national anti-profiteering commission since 2010. The authorities, who wish to attract substantial foreign investment to develop the country, ought to be concerned by this situation.
A new oil code is about to be adopted. Its aim is to raise the state’s share of income from the oil industry, which is currently about 20% of profits. This share should rise to 30% over the next five years according to the new code. Gabon wishes to promote prospecting in the so-called “marginal” zones and thus reduce the fall in production of crude oil. To bring its deep reserves on stream, it intends to create a more attractive, more competitive and safer institutional, legal, and tax environment. The new code, replacing that of 1962, will reduce the period for prospecting which should henceforth not exceed 12 years, while extraction can last for a maximum of 20 years.
The authorities wish to monitor state participation in oil companies and to become active partners in drilling, extraction and distribution. The new code provides for a new national oil company, the Gabon Oil Company (GOC), whose role in production should enhance income and investment in the sector.
In July 2012, the government finalised an agreement with the South Korean giant Samsung to build a new refinery. This is intended to replace the old Société gabonaise de raffinerie (SOGARA) refinery, now out of date, whose refinement capacity no longer corresponds to the policy of adding value to primary resources as desired by the authorities. The new refinery should double the treatment capacity for Gabonese crude, rising from the present 21 000 barrels a day to 50 000 barrels. Half this output will be exported. By 2015-16, the new plant should be producing liquefied petroleum gas (LPG), diesel, aviation fuel, heating oil and refined petrol.
Currently the financial sector comprises nine banks, three of which hold 65% of deposits and customer loans: the Banque gabonaise et française internationale (BGFI), the Banque internationale pour le commerce et l’industrie au Gabon (BICIG) and the Union gabonaise de banque (UGB). Outstanding receivables, as a proportion of total loans, have risen slightly in 2012, from 9.9% in 2011 to 10.1%. Loans to the private sector are under the average for sub-Saharan oil exporting countries: 17.6% of GDP excluding oil in 2012, compared to 18.3% in 2011. It is hard for SMEs to raise loans, given the restricted role of microfinance. The microfinance network in Gabon is among the weakest in Central Africa, with just five bodies, of which three are operational: Finam, Loxia and Gamifi. These microfinance institutions are unable to meet the substantial credit needs of the private sector.
However, microfinance institutions could play a big role in poverty reduction and financing very small enterprises1. Their presence in manufacturing, and not merely in services, could be facilitated by the setting up of a microfinance institutions refinancing fund. This would enable them to make commitments that correspond to the financing of the exploitation and investment cycles of very small enterprises.
The weakness of the financial sector constrains credit for small and very small enterprises, despite the high potential demand. These enterprises are not always able to find solutions to their funding problems. Long-term funding of investments continues to fall outside the scope of commercial banks, which prefer to invest their surplus liquidity. Several obstacles explain why the banks are unable to support the development of the private sector, including inadequate security, the high cost of credit and substantial risks.
Nominal interest rates vary between 7.5% and 8.5% for the safest loans. The few businesses which obtained a loan from the Fonds d’aide et de garantie (Assistance and Guarantee Fund) are paying around 12%, with overdraft facilities costing more than 20%.
Public Sector Management, Institutions & Reform
Structural reform must be accelerated to strengthen good governance and support the diversification of the economy. The business environment needs to be improved, and infrastructure upgraded, while actions of international relevance are pursued, such as taking advantage of, or instituting good practice in, the natural-resources sector. However, as the World Bank report Doing Business 2013 points out, the public service suffers from shortcomings in the management of administrative human resources. Moreover, businesses and citizens bear a substantial tax burden. This state of affairs encourages the informal economy, with many organisations failing to declare all of their turnover to the tax authorities.
Natural Resource Management & Environment
Gabon’s economic development strategy rests on sustainable management of forest ecosystems and enhancement of biodiversity. At the end of 2012 the country signed a convention to create three protected areas on the northern outskirts of Libreville: the Raponda Walker arboretum, formerly Mondah forest, the Akanda national park, important for bird life, and the Pongara national park, considered one of the most important sea-turtle reserves on the Atlantic coast. The convention includes a plan to improve roads, tracks and bridges in the forest to facilitate eco-tourism and forest protection. It also provides for the establishment of an environmental education centre for young people.
The Agence d’exécution des activités de la filière forêt-bois (AEAFB: Agency for Activity in the Forestry/Timber Sector) was set up in 2012. Its main aims are, on the one hand, the promotion of activity in the forestry/timber sector, and on the other, provision of technical support and advice to the ministry in charge of water and forests. Its tasks include inventory, forestry management, sorting, certification and product traceability, as well as being alert to economic, political and strategic questions. The AEAFB is a major stakeholder in forestry/timber-related activities, from which the ministry of water and forests hopes to achieve a great deal: an increase in the contribution to GDP, job creation, reduction of rural poverty and the development of the nation’s industrial fabric.
Apart from ensuring the sector is better known, the AEAFB also has to estimate the quantity and quality of national forestry holdings by 2014. This is an important undertaking: 85% of Gabon is covered by a dense evergreen rain forest of 22 million hectares, home to 400 different species, of which 60 have commercial value. Before the banning of raw log exports in May 2010, forestry made up 4.6% of GDP. This has since risen to 8%, according to water and forestry ministry figures.
There was a change in the political landscape in 2012 following the death in October 2011 of Pierre Mamboundou, regarded as the main opposition leader. His death occurred after the dissolution in January 2011 of the Union nationale, an opposition party whose leader, André Mba Obame, had declared himself president of the republic. His return to Libreville in August 2012, after 14 months in exile, gave rise to some violence during unauthorised demonstrations. Thirty-three people were arrested and sentenced for public-order offences and vandalism.
Another important political event in 2012 was February’s cabinet reshuffle. A new prime minister was appointed at the head of a government with a “mission”. Its objective: to speed up the implementation of reforms and investments to elevate Gabon to the status of an emerging country. The new majority, after the legislative elections of 17 December 2011, is still dominated by the Parti démocratique gabonais (PDG), which had 114 out of 120 deputies returned. By-elections were held in the five seats in which the results were invalidated by the Constitutional Court following irregularities. The forthcoming local elections, currently being organised, may take place in a tense atmosphere, in particular through lack of trust in the electoral rolls. The biometric electoral register was to be ready by 31 December 2012 at the latest, but the national personal data protection commission, set up in November 2012, handed its preliminary conclusions concerning the right way to set up a official biometric identity project to the government in February 2013.
Thematic analysis: Structural transformation and natural resources
Sustainable management of forest ecosystems and the development of biodiversity are major components of Gabon’s economic development strategy. The authorities have promoted the idea of turning Gabon into an emerging economy based on three development pillars: “Green Gabon” , “Industrial Gabon” and “Service-Industry Gabon”. These sectors are seen as ways of diversifying and offering sustainable potential economic alternatives to oil.
Oil is the main resource of the economy. It has enabled Gabon, as the fifth largest producer in Africa, to become a middle-income country, with a per capita income among the highest south of the Sahara. However, this resource is beginning to run out. Yearly production, of the order of 12 million tonnes (235 000 barrels a day), has been slowing since 1998 and some experts even think the country’s fields will have run dry in 30 years or so. Doubts remain, however, over the size of identified reserves. Whatever the truth, efforts to escape from the stranglehold of oil are necessary, taking into account the desire to establish a balance in the future, whether in terms of employment, of public finances or of international trade. Even taking the most optimistic view of the future for oil, the need to diversify is real, even if only to satisfy the expectations of the public at large, many of whom are in search of work. Oil does not provide many jobs.
According to figures from the Direction générale de l’économie (general directorate of the economy), 123 000 people worked in the modern sector in 2010. This figure rose to 149 000 in 2012, as a result of rising numbers in the public sector. The oil industry employs a little over 2 400 Gabonese, which is less than 2% of the total workforce. Its contribution is mainly indirect, generating jobs in services, in retail and elsewhere. Oil also provides a regular income for social purposes, especially by creating jobs in public administration. However, none of that is enough to meet the expectations of the country's people, roughly 50% of whom are under 20 years of age. The national work and unemployment survey undertaken by the government in 2012, with funding from the AfDB, puts the unemployment rate for those under 25 at 46% in the broad sense. That is to say that it takes into account people who are out of work but who have not actively sought employment in the month of the survey. The overall unemployment rate is 20% according to the International Labour Organization (ILO) definition, and 27% in the broader sense. Employment is a major challenge in Gabon. To meet it the authorities want to create a diversified economic fabric based on the processing of natural resources to bring a relatively young population into the workforce.
This transformation requires the removal of obstacles that businesses find prohibitive. The state has already taken steps along this road: it has created a genuine industrial policy that involves the setting up of special economic zones (SEZs), and it has taken a share in local subsidiaries of big multinationals. Gabon has also engaged in a process to optimise oil resources, with explorations of deep offshore fields. It has done the same for natural gas, by launching a project to build a petrochemical and metallurgical complex in partnership with the Singaporean company Olam. In this context the AfDB is supporting the Gabon Fertilizer Company SA (GFC) project, which aims to finance the construction and operation of a modern and efficient industrial complex to produce ammonia and urea. This complex is expected to produce 1.3 million tonnes of granular urea a year at the SEZ of Île de Mandji, at Port-Gentil. The authorities also mean to continue the exploitation of other mining resources. Over 900 sites have been listed, the most high-profile being at Belinga, where more than 1 billion tonnes of iron ore have been identified.
After oil and gas, forestry is the second most important industry, as well as the country’s main employer. The ban on trade in unfinished timber since May 2010 ought to increase local added value by giving Gabon a role in timber processing. The “Green Gabon” of the PSGE relies on this target of adding value to forestry, which presupposes building plants for secondary and tertiary processing. It is still hard to assess the effectiveness of the ban on the export of lumber. Businesses complain this measure was not thought through and that they incur extra costs from delays in adding value to a significant proportion of exported timber. The export restrictions do indeed give rise to transitional costs, but do not prejudice the ability subsequently to become more competitive, subject to investment. The SEZs, which are very attractive, could provide a framework from within which processing industries could take off. An example is the Nkok zone opened in September 2011, 40% of which is used for timber processing.
As of 2012, 90% of workers in most timber processing plants in Gabon were unskilled or partially skilled. The plants are in urgent need of skilled workers to maintain production machinery, and this is confirmed by ministry of water and forests officials, who assessed the need for high-quality human resources. Some plants have no skilled workers at all and this lack makes itself felt in productivity and management of resources. In 2012 the government therefore initiated a project to re-examine and harmonise the technical training of skilled workers and engineers specialised in the timber industry. It fits into the broader framework of training and natural resource management programmes in the Congo basin, financed by the Congo Basin Forest Partnership and managed by the Network of Environmental and Forest Training Institutions of Central Africa. Canada’s Centre d’enseignement et de recherche en foresterie (Centre for Forestry Teaching and Research) is responsible for the technical component.
Ore extraction, especially manganese, is the third industry where output has a strong impact on foreign trade. Manganese is the only mineral really exploited, and Gabon is one of the main world exporters. It is mined by COMILOG, a company 66% owned by the French group Eramet. It intends to set up plants for the production of silicomanganese and manganese metal close to its Moanda site. But the city authorities, fearing the pollution this might cause, have banned the consumption of water and fish from the river downstream from the manganese mine. The health risks in the short, medium and long term, the authorities claim, concern cardiovascular disease for the most at-risk groups – the young and the elderly. They intend to adopt a proper natural resources management policy.
In conclusion, the PSGE must orchestrate structural processing in the long term to achieve a precise goal: to stop selling primary resources in their raw state, but rather to add value, so as to diversify economic activity and create jobs. Over time, the authorities expect the supply of jobs to meet demand. The success of this development strategy depends in large part on the dynamics of investment, especially in the local and foreign private sector. The opportunities Gabon offers are considerable: they include mining, forestry, tourism, agri-food, and new information and communication technologies. To attract investors, reduce risks to entrepreneurs and create conditions for profitability, the authorities must improve the economic and institutional environment still further.