New agriculture measures in Gabon put the sector in stronger position

One of Gabon’s greatest paradoxes is agriculture. Blessed with 5m ha of fertile arable land and a tropical climate with annual rainfall of 1800-4000 mm, it has all the ingredients to feed its growing population. And yet it is dependent on imports for some 90% of its food requirements, costing the country in excess of CFA300bn (€450m) per annum. Food imports rose to CFA349.2bn (€523.8m) in 2014, up from CFA333.8bn (€500.7m) in 2013, according to the former Ministry of Economy and Planning, with agriculture accounting for 2.64% of GDP, or CFA389.9bn (€584.9m), compared to an average of 4.7% between 2005 and 2010.

Background

The discovery of oil in 1956 saw Gabon catch the so-called Dutch Disease to the detriment of agriculture, resulting in a rural exodus. As oil production grew, agricultural output declined. How times have changed. Declining oil production over the last 20 years has eroded the government’s spending power, making the country’s food import bill a heavy burden. The drop in global oil prices since mid-2014, and budgetary constraints related to government investment in launching the Emerging Gabon Strategic Plan mean that achieving food self-sufficiency has become more urgent. “Land in Gabon is available and easy to cultivate, therefore it is important to enhance agriculture as part of the strategy of diversification, particularly given that the country boasts very favourable conditions for cropping a wide range of agricultural products,” Alexis Ndouna, managing director at Nao Group, told OBG.

The government, however, has limited funds to drive forward the sector to meet the targets it set in 2011, namely to raise agriculture’s contribution to GDP to 20% and achieve food self-sufficiency by 2020. Under the 2003 Maputo Declaration on Agriculture and Food Security, African states made a commitment to allot 10% of their national budgets to agriculture. However, in Gabon, only 0.8% of the budget has been allocated to agriculture. Moreover, the Ministry of Agriculture, Husbandry, Fisheries and Rural Development (Ministre de l’Agriculture, de l’É levage, de la Pêche et de la Sécurité Alimentaire, MAEPSA) saw its annual budget cut by some 40% in 2014, double that of other ministries.

Taking Charge

The government, with the assistance of the UN Food and Agriculture Organisation (FAO), World Bank, Economic Community of Central African States and the New Partnership for Africa’s Development, adopted a new roadmap in March 2015 for the development of the sector up until 2020.

The National Plan for Agricultural Investment and Food and Nutritional Security (Plan National d’Investissement Agricole et de Securité Alimentaire et Nutritionnelle, PNIASAN) foresees investment totalling CFA400bn (€600m) over 2015-20. Financing will come mostly from international financial institutions (IFIs) and the private sector, with the wider aim of reducing food imports and boosting food supply to the population by promoting sustainable production and sector productivity, as well as create jobs and reduce poverty.

These aims are progressing via seven programmes, including facilitating access to land and finance, developing the food chain from harvesting to transport, storage, processing and marketing to comply with international food safety norms, as well as improving the socioeconomic conditions of women and young people. Its quantifiable objectives by 2020 are for the contribution of agriculture to national GDP to reach a sustainable rate of 8.4% per annum, while reducing poverty from 33% to 16.7% and chronic malnutrition to less than 5%.

Jean René Mambo Okoin, country head of Gabon for Cote d’Ivoire’s National Office for Technical and Development Studies, told OBG, “Oil, timber and manganese export have been the primary drivers of growth for Gabon over the past few years, but as those networks are put in place, new sources of revenue like agriculture need to be developed to diversify income, reduce the import bill, create jobs in rural areas, slow the rural exodus and improve food security,” he said.

Entrepreneurship

The government hopes that the Gabonese Initiative for Achieving Agricultural Outcomes with Engaged Citizenry (Gabonaise des Réalisations Agricoles et des Initiatives des Nationaux Engagés, GRAINE) will help to deliver these objectives. Launched in December 2014, the five-year project, which is being developed as a public-private partnership with Singapore-based Olam International, is designed to promote entrepreneurship in agriculture by assisting smallholder farmers to form cooperatives for the production of cash and long-cycle crops by providing land titles, start-up financing, equipment and training (see analysis). The project aims to have 200,000 ha of land under cultivation by 2020 and create 20,000 positions.

Joining Forces

While this project is the first involving a private investor, other initiatives financed by IFIs and global agencies such as the FAO and the International Fund for Agricultural Development (IFAD) are ongoing. These include the Agricultural Development and Investment Project (Projet de Développement et d’Investissement Agricole au Gabon, PRODIAG), which was launched by the Gabonese Institute for Development Support (Institut Gabonais d’Appui au Développement, IGAD) in 2011, with financing from the French Development Agency (Agence Française de Développement, AFD), and is a follow-up to the 2004 Peri-Urban Agriculture Development Support Project in Gabon. The projects have focused on promoting the commercialisation of farming in peri-urban areas via technical advice and training, as well as supporting larger-scale production through cooperatives, transformation of staple crops such as cassava and plantain, and developing pig and poultry farming. The state-sponsored Agricultural and Rural Development Project, launched in 2009 with financing from IFAD to promote the development of staple crops, has been extended by a further three years to end-2017.

Cereals

The three main cereals of wheat, rice and maize are all imported. Wheat imports have almost doubled to around 113,000 tonnes in 2014 from an annual average of 60,000 tonnes between 2003 and 2005, according to FAO statistics. Rice imports over the period 2009-11 averaged roughly 61,000 tonnes.

Wheat is the country’s most important cereal and its supply and price are critical for consumers. “Wheat flour prices in Gabon have been frozen for 15 years in a bid to maintain the affordability of this staple for the local population, who remain the biggest consumer of bread per capita in the region,” said Jacques Collignon, managing director of Société Meunière et Avicole du Gabon (SMAG), the country’s sole importer of wheat and only producer of wheat flour. SMAG imports 110,000 tonnes of wheat per year, or 97% of the country’s total imports, with the other 3% imported as wheat flour. The company produces around 75,000 tonnes per annum of flour, meeting in full domestic demand, which is sold either through wholesalers or direct to supermarket chains. SMAG, which is 66% owned by Société d’Organisation de Management et de Développement des Industries Alimentaires et Agricoles (SOMDIAA) and 34% by the state, has been protected since 2007 from global price volatility, in the context of frozen domestic flour prices, by a subsidy system, which takes effect when import prices exceed CFA130,000 (€195) per tonne.

At present wheat import prices stand at CFA182,000 (€273) per tonne. To ensure a uniform price nation-wide, transport costs are also subsidised. In 2016, SMAG will face competition from Foberd Gabon, a subsidiary of Cameroon’s Fokou Group, which is expected to commission a new flour mill in Libreville at the end of 2015, with a production capacity equivalent to that of SMAG of 410 tonnes per hour. SMAG expects to lose 30% of its market share and turnover from flour sales, which represent 55% of its total group turnover, once its rival is operational.

SMAG will look to export its surplus production and to offset lower turnover from flour sales by importing cheaper, lower quality wheat for its animal feed, explained Collignon. Wheat that is not transformed into flour is mixed with imported soja to produce animal feed, with the bran exported to Morocco. SMAG produces 30,000 tonnes of animal feed per annum, of which 35-40% is supplied to egg-laying hens at its own N’Koltang farm, with the balance sold locally to small poultry and pig farmers, as well as fish farms.

Livestock

Domestic demand for fresh meat, estimated at around 20,000 tonnes per year, is met almost exclusively by imports. The consensus is that this will continue to be the case until there is political will to back up the government’s aim of promoting livestock rearing. SIAT Gabon, the local subsidiary of Belgium-based Société d’Investissement pour l’ Agriculture Tropicale, is the sole commercial producer of beef, producing approximately 200 tonnes per year at the country’s only abattoir. It operates a 100,000-ha ranch with 6000 head of cattle in the southern province of Nyanga. Small-scale production of chicken and pork is mostly for personal consumption or for sale on local markets, but is well below production costs.

Local fiscal and global market conditions, as well as the absence of the requisite marketing and logistical structure, mean that large-scale domestic meat production faces significant challenges. In this context, smallholder poultry and pig farming cannot compete against imports, most notably from the US and Brazil, which are exempted from import taxes, essentially to ensure their affordability for urban consumers. Moreover, the costs of accessing buyer-driven food chains, where uniformity, food quality assurances and traceability are necessary for further processing, branding and large-scale buying by food service and supermarket chains, remain prohibitive.

Although the state wants to promote local meat production, it has also lifted taxes on imports. This has undermined local producers however, as evidenced by broiler chickens, where the government set a production target of 25,000 tonnes by 2016, but without measures to assist domestic producers, said Collignon. “As long as chicken importers continue to be exempt from Customs duties, the domestic production of broiler chickens is unlikely to take off as chicken breeders will not be able to produce at the same costs as the Brazilians or Americans,” he added.

SMAG devised a plan to develop a poultry farming hub in the country, combined with a training centre, with the joint aim of job creation and reducing chicken imports but this project has been suspended, said Collignon, until the state pays debts outstanding since 2013 of CFA12bn (€18m). However, Alice Leroy, project officer at the AFD, said one of the problems hindering more widespread breeding of broiler chickens is the monopoly on animal feed and the price charged for it. The other is the lack of breeder animals. PRODIAG is trying to tackle this issue by supporting the rearing of breeder pigs for the development of a wider pig farming industry, as well as growing cereals such as maize and soya exclusively as feedstock.

According to Pascal Pommarel, director-general of IGAD, the operating arm of the MAEPSA, the other challenge for domestic meat production is the absence of a coordinated marketing structure at the national level. Other challenges involve limited storage and processing infrastructure to allow local producers to meet international standards.

“Investments are needed in storage, cold rooms and abattoirs to allow local producers to comply with international food safety norms. Without these facilities, local producers cannot sell to supermarkets,” Pommarel explained.

SIAT Gabon is planning to build a new abattoir, with an annual capacity of 1000 tonnes, as part of a CFA314bn (€471m) investment programme up until 2025, Gert Vandersmissen, COO of SIAT Gabon, told OBG. Three sites have been identified in Owendo, at the Nkok Special Economic Zone or at a 100,000-ha cattle ranch in the province of Nyanga, with a final decision to be made depending on development of the road network. SIAT Gabon is also quadrupling its head of cattle to 20,000 by importing 2000 heifers per year from Brazil to ensure long-term cattle rearing.

Chicken & Eggs

Domestic egg demand is growing at around 5% per annum as consumers’ reduced purchasing power has seen an increase in consumption of eggs at the expense of meat and fish, according to Collignon. SMAG is the country’s main producer with an annual output of 40m eggs, representing a market share of 30%. This total has declined from a peak of 70% as a result of increased demand and competition.

Significant growth in the domestic production of eggs by small producers and local cooperatives has seen SMAG expand into the production of day-old chicks since 2011 to meet demand for egg-laying hens both at its own N’Koltang farm and for the domestic market as a whole. It can currently breed up to 400,000 day-old chicks per day, offering the possibility for the development of a large-scale poultry sector. SMAG also produces 40m eggs per year, but the sharp rise in domestic production has seen its market share fall from a peak of 70% to 30% at present.

Sugar

Domestic demand is met by local production, owing to the monopoly of Sucrerie Africaine du Gabon (SUCAF Gabon). Household and industrial demand averages 32,000-33,000 tonnes per annum, while the wholly-owned subsidiary of SOMDIAA produces on average 25,000 tonnes of white and brown sugar per annum from its 5000-ha plantation and refining complex in Ouéllé near Franceville, with the balance imported. In 2014, it produced 23,880 tonnes and registered for the first time a harvest of 300,000 tonnes of sugar cane, with sales of 33,000 tonnes. For 2015, it has set a target of producing 27,000 tonnes from a harvest of 312,000 tonnes of sugar cane, which would see it beat 2011’s record 26,850 tonnes.

SUCAF Gabon is aiming to meet domestic demand in full by 2020 via a CFA20bn (€471m), five-year investment programme, which would see production rise to 35,000 tonnes per annum from an additional 1000 ha of plantation, implying a doubling of production per hectare. To achieve this it will introduce new higher-performing strains as well as enhance the cultivation and fertilisation techniques to increase yields. Higher levels of extraction will also be achieved under the full automation of the refinery’s production processes and by improvements to sugar cane harvesting through the use of GPS.

Long-Cycle Crops

The development of palm oil and rubber is viewed by the government as a key element of its drive to expand the agricultural sector. Belgium-based SIAT is for now the country’s sole large-scale producer of rubber and palm oil. SIAT Gabon produces 20,000 tonnes per annum of crumb rubber from its 13,000 ha of plantations in Bitam, Mitzic and Kango, and 16,000-17,000 tonnes per annum of crude palm oil from 10,000 ha of plantations around Makouké, of which only 7500 are mature. Its refinery in Lambaréné produces 30,000 tonnes of olein per year, which accounts for 40% of local demand for cooking oils, as well as stearin for soap.

The group is prioritising the expansion of rubber production over palm oil and has set a target of boosting its rubber plantations to 30,000 ha at a rate of 2000 ha per year, though it has no plans to expand its palm oil plantations, said Vandersmissen. This is driven by the belief that the rubber market presents more opportunities for growth in the coming years as global rubber prices rising from $1500 per tonne currently towards their historic peak of $5000 per tonne.

Labour costs and yield also favour rubber over palm oil said Vandersmissen. Rubber is less labour-intensive, requiring 10-times fewer workers, while yields at its rubber plantations average 2.2 tonnes/ha compared to 1.6-1.7 tonnes/ha (measured in fresh fruit bunches per ha) in Asia. In contrast, its palm oil yields average 22 tonnes/ha, which, while standing up well by regional standards, is low compared to Asia, where yields average 40 tonnes/ha.

By 2022, SIAT will be overtaken by joint ventures between Olam International and the state as the country’s largest palm oil and rubber producers. Olam Palm Gabon plans to produce 410,000 tonnes per annum by 2022, at an average yield of 4.1 tonnes/ ha, from 100,000 ha of palm oil plantations by 2022, making Gabon the second-largest producer in Africa.

Olam Rubber Gabon expects rubber output on its 28,000-ha plantation to peak at 36,500 tonnes per annum at an average yield of 2.2 tonnes/ha. In a first phase, 78,000 ha are to be planted, 50,000 ha of palm oil by 2017 in an investment estimated at CFA287bn (€430.5m) and 28,000 ha of rubber by 2019-20 in a total investment outlay of CFA210bn (€315m).

As of April 2015, 23,000 ha of palm oil had been planted at its two plantations in Kango (Awala) and Mouila, and 5000 ha of rubber, or 1.7m plants, had been planted in Bitam. As long-cycle crops, taking five years to mature for palm oil and seven years for rubber, the results of its first plantations are still awaited. The first commercial harvest of palm oil will be in the third quarter of 2015 at Kango (Awala), which was planted in 2011. Planting began at Mouila in 2012, with its first commercial harvests expected in 2016.

Refined and crude palm oil is to be exported to Olam’s processing plants in Africa and to purchasers of crude palm oil, while all processed and unprocessed rubber is also to be exported. Processing plants are being built on the plantations. One crude palm oil processing plant is being built on both of its plantations, as well as a palm kernel oil processing plant, while a rubber processing plant is set to come on-line in Bitam ahead of production activity in 2018.

Fishing

As with agriculture, the fishing sector has massive potential but its development has been hindered by insufficient financial support, resources and infrastructure, as well as high taxes. The main player is Société d’exploitation du Parc de la Lékédi, which produces 120 tonnes of fish per year at its farm in Lékédi. The country’s waters could provide 200,000 to 300,000 tonnes of fish per annum, but in 2012 production was 32,160 tonnes – 32,000 tonnes from fishing and 160 tonnes aquaculture. Based on government numbers, the total stood at 42,000 tonnes, down from peak average annual production between 1998 and 2000 of 66,000 tonnes.

Artisanal sea and coastal fishing account for 50-75% of production. Gabon is one of the biggest consumers of fish in Central Africa, with an average consumption of 40 kg per capita, almost double the global average. National demand is estimated at 45,000 tonnes per annum. Lower production is attributed to a reduced shipping fleet, according to the PNIASAN roadmap of March 2015, and limited processing and cold storage capacity. The development of the industry is also heavily taxed in the form of Custom duties and a value-added tax, which range from 20% to 30%.

Under the PNIASAN, a total of CFA45bn (€67.5m) is to be allocated to the development of artisanal sea and coastal fishing, with the aim of raising annual production from 15,000 to 26,600 tonnes by 2020 as well as increasing sector revenues from an estimated CFA111.8bn (€167.7m) in 2014 to CFA290bn (€435m). The aim is to strengthen sector capacity, including the introduction of financial measures to reduce the tax burden, support for the acquisition and maintenance of fishing vessels, training and efforts to improve product processing and marketing. The Green Gabon Strategy of 2011 set targets of doubling industrial and non-industrial fishing, including aquaculture, to 80,000 tonnes, and tripling revenues to CFA150bn (€225m) by 2025, including a quadrupling of industrial and inland non-commercial fishing output to 15,000 tonnes and 40,000 tonnes, respectively, as well as six-fold rises in revenues to CFA50bn (€75m) and CFA60bn (€90m). The strategy also requires that all industrial fishing in Gabonese waters must be unloaded in its ports. Investments to support industrial fishing have not, however, been forthcoming to date. Four fishing ports are planned to be built, but as of mid-2015, construction had yet to begin.

Meanwhile, Gabon underlined its determination to preserve its natural habitat with the announcement by the president in May 2015 of a ban on commercial fishing in an area of more than 120,690 sq km, representing 23% of Gabon’s ocean waters, to protect marine species at risk from overfishing. The move is designed to control illegal fishing, which accounts for an estimated 60% of all fishing in Gabon’s waters.

Outlook

The launch of the GRAINE programme, with the involvement of Olam International, as well as the approval in March 2015 of a sector roadmap to 2020 with clear achievable targets and expected financial support from IFIs, international agencies and the private sector, represent positive steps on the long road to recovery for the sector. Time and investment will be required to change mindsets and create a new generation of farmers as well as a critical mass of production, but both are in short supply. Success will depend as much on providing the requisite transport, storage, processing and marketing infrastructure so that producers can deliver their produce to market, and access buyer-driven food chains, where uniformity, food quality assurances and traceability are required for processing, branding and large-scale buying by food service and supermarket chains. The involvement and expertise of Gabon’s key agro-industry investors such as Olam, SIAT and Castel Group, will be critical to achieving the government’s aims of food self-sufficiency, poverty reduction and job creation.