Gabon calls on international financing for infrastructure development

Africa’s economies have posted impressive growth rates in recent years, giving rise to the narrative of “Africa Rising”. The continent’s GDP growth of roughly 5% annually comes in spite of its lack of infrastructure, but the deficit cuts growth by an estimated two percentage points and productivity by 40%, according to the World Bank. According to an assessment by the African Development Bank, there is an infrastructure deficit of $90bn annually; only around $45bn is financed currently (66% by governments, while 10% is official development assistance and 21% is private sector), leaving $45bn to be filled.

While Gabon has traditionally benefitted from a comparative level of prosperity and high per capita income thanks to its small population and hydrocarbons wealth, it has nonetheless faced similar issues in funding its capital projects. This has become more pronounced in recent months as oil prices have fallen, given that oil has accounted for around 80% of exports in recent years, according to the World Bank. As a result, efforts are under way to address the funding gap in transport infrastructure.

Financing

“The main challenge to developing the transport sector in Gabon is financing. The state’s funds are limited and major infrastructure projects are costly. With the low price of oil, it is very difficult to carry out public investments,” Serge Pamphile Moumbogou Ditengou, the director-general of infrastructure studies, told OBG.

With a limited capacity to fund infrastructure projects through state funds and a budget for investment spending that has been reduced by CFA47.1bn (€70.7m) in 2015, the country is increasingly looking to the private sector to support the development of transport infrastructure. Gabon’s budget for 2015 includes CFA596.7bn (€895.1m) earmarked for investment spending, much of which will be used to support the development of transport infrastructure, according to the government.

However, nearly half of these funds, CFA278.2bn (€417.3m), will support projects that also depend on external financing in addition to state funds. Gabon’s Road Fund (Fonds Routier, FR), the national fund responsible for road maintenance and development, also saw its investment budget for 2014 reduced by 39% year-on-year (y-o-y) to CFA147bn (€220.5m). The decline in available public funds for transport infrastructure development means that authorities are increasingly seeking external funds to pursue their goals of expanding and improving the country’s transport network.

Partnering with Private Sector

To help alleviate the financial strain of implementing costly infrastructure projects in the sector, the government is increasingly looking to public-private partnerships (PPPs) to develop major projects in Gabon. The government is currently in the process of developing a regulatory framework for PPPs. A PPP with China Road and Bridge Corporation (CRBC) has enabled a project to build the country’s first inland link between Libreville and Port-Gentil, which is currently accessible only by sea and air. The two-phase project will first connect Port-Gentil and Omboué over a 93-km stretch of new road, and will be followed by a second 270-km segment stretching from Omboué to Yombi, linking the new road to the country’s main road network and connecting the two largest cities. At an anticipated cost of CFA585bn (€877.5m), the FR will cover 5% of the cost, with the remainder financed by China’s Export-Import Bank (Exim Bank).

Another PPP in road development was formed in 2012 between the state and multinational oil firm Shell to build a 53-km section of road between Loubomo and Mougagara and a 55-metre bridge at Boume-Boume. This project is managed and implemented by Deutsche Gesellschaft für Internationale Zusammenarbeit, and will allow to connect Gamba to Libreville via the Road N6, Tchibanga-Mayumba. The project, which is ongoing, represents a shared investment of CFA52bn (€78m).

While the government will provide a subsidy to finance the rehabilitation of rail platforms and bridges, the railway operator Société d’Exploitation du Transgabonais (Setrag) has also applied for a loan from the International Finance Corporation (IFC) to help fund infrastructure upgrades, with an estimated total investment of CFA205bn (€307.5m). The IFC is considering financing 50% of the programme, which is expected to run from 2015 to 2022 and aims to both double the railway’s capacity and reduce delays. In an effort to cover the costs of needed upgrades and ensure financial sustainability of the railway, a revised pricing structure is being considered, which would see mining companies and the state share the costs of efforts to increase capacity.

Donor Support

Several projects are benefitting from multilateral and development finance institution funding, with the African Development Bank, the Islamic Development Bank (IDB), the French Agency for Development (Agence Française de Développement, AFD) and the EU supporting infrastructure projects. For instance, the AFD is financing the rehabilitation and widening of a 46-km stretch of the N2 road between Ndjolé and Médoumane. The CFA78bn (€117m) project is due to be completed in 2015. For its part, the IDB financed the new 55-km section of road connecting Ovan and Koumameyong, improving connections with Cameroon and providing a potential boost to the economy in the northern part of the country. Completed in 2014 at a cost of CFA42bn (€63m), the road was built by Chinese state-owned hydropower engineering and construction company Sinohydro.

Meanwhile, a 97-km section of the N4, connecting Franceville in the south-east with the main road network between Laleyou and Lastourville, was upgraded and tarmacked during 2014, with the project cost of CFA68bn (€102m) financed by the AfDB.