OBG talks to Régis Immongault, Minister of Economy: Interview

Interview: Régis Immongault

What have been the ministry’s main budget guidelines after the drop in oil prices?

RÉGIS IMMONGAULT: Oil has seen a sharp drop in prices, falling by about 56% since mid-June 2014. As an oil-exporting country, Gabon has been particularly affected by this, even though the contribution of oil to its wealth generation has shrunk in recent years. Today oil accounts for 20% of GDP, compared to 50% some years ago, but it still accounts for 80% of export earnings and 50% of budgetary revenues. In this context, it is clear that our budgetary capacities have been substantially reduced.

We are taking this change into account so as to prevent the current financial crisis from turning into an economic one, and from disrupting the momentum of the real sector in Gabon – the non-oil sector has been the main driver of growth since 2010. We have therefore cut our budgetary framework to assume a price of $44-45 a barrel for Brent crude. Even though we expect oil prices to rise to $60, we chose to adopt a cautious approach, with a prudent euro-dollar exchange rate of €1:$1.24. It is worth highlighting that when the dollar goes up, so do our oil revenues. Although the current exchange rate is about $1.14, we keep our assumed rate at $1.24 as a safety cushion. Any improvement in this regard will directly benefit Gabon’s public finances.

For fiscal year 2015, state revenues have decreased by CFA450bn (€675m), obliging us to cut spending drastically. We have cut public spending by about four percentage points of GDP, all while preserving structural investments so as to maintain the momentum of the private sector. Our economic forecasts point to growth of about 5% in 2015. The main expense items to be scaled down are those related to the functioning of goods and services, and transfers – specifically the subsidies for the state refinery, Société Gabonaise de Rafinage, aimed at stabilising petrol prices. Today, only the subsidy for gas has been left unchanged.

What strategies can be rolled out to help Gabon’s economy move up market?

IMMONGAULT: Gabon has strong ambitions for its industrial development and is keen to work its way up the value chain. With this in mind, we banned raw log exports in 2010 in a bid to encourage wood-processing and exports with greater added value, and we now aim to develop second- and third-level processes that will have a multiplier effect on wealth generation. Nor is the mining sector exempt from industrial transformation – a manganese processing plant was inaugurated in 2014 in Haut-Ogooué Province. The agro-industrial sector is likewise developing, notably through reinforcement of capacities at Olam’s industrial plants. We are now aiming to develop economic clusters in several areas according to their potential. There are also opportunities to develop the fertiliser sector, as we have gas, and in a plethora of activities from refineries to fisheries.

In services, Gabon has always had a comparative advantage over neighbouring countries, and this must be further reinforced. We have had many successes in this regard, including implementation of a 4G network. We also have a stable and prosperous banking sector. However, we have to multiply our efforts in telecoms, training and data processing to build a successful and competitive third sector.

How can the government help attract private investment, both local and foreign?

IMMONGAULT: We are about to create a new entity, the National Investment Promotion Agency, which will help raise Gabon’s profile among international investors through creation of a one-stop shop. We must improve our “Doing Business” ranking to enhance our tradition of openness and the economic model we have developed around the private sector through bold fiscal reforms. The state also needs to improve its coordination with the domestic private sector.