Gabon broadens international ties to further diversify away from hydrocarbons

Unlike many of its regional neighbours, Gabon’s independence from its colonial European government did not result in years of civil conflict. Today, the country stands as one of the most wealthy nations in sub-Saharan Africa, which it largely owes to its robust hydrocarbons reserves. President Ali Bongo Ondimba has served as head of state for the past seven years – following the death in 2009 of his father and former leader Omar Bongo Ondimba – and won re-election in August 27, 2016 in the midst of a challenging economic environment. Depressed global oil markets have had a negative impact on growth in Gabon, making the government’s diversification efforts even more urgent.

While oil still provides the bulk of government and export revenues, the country is likely to benefit from increased investment in agricultural processing and mining in the coming years, helping it to reduce its dependence on energy exports and setting the stage for more inclusive growth in the coming years.

Political Structure

Today, Gabon’s president is elected by universal suffrage to a term of seven years. The position of president entails ensuring the observation of the constitution, defining national policy in cooperation with the government and sharing executive power with the prime minister.

The Constitutional Court is the country’s highest court, ruling on the constitutional validity of potential laws and serving to guarantee basic public freedoms and human rights. One of its primary duties is to oversee and guarantee the lawfulness of local, parliamentary and presidential elections. In addition, the court rules on any dispute over the validity of an election, as it did following an appeal from opposition leader Jean Ping after his narrow loss to President Bongo Ondimba in the most recent polls. After violent protests and allegations of fraud, the court announced that Bongo Ondimba had taken over 50% of the popular vote against Ping’s 47%.

Parliament is split into two bodies: the National Assembly and the Senate. The National Assembly consists of 120 deputies who serve five-year terms, 111 of whom are elected via universal suffrage, while the remaining nine are chosen by the president. Senators are elected by indirect suffrage to six-year terms.

Elections

The recent presidential election was the first faced by Bongo Ondimba since coming to power in 2009. The Gabonese Democratic Party (Parti Dé mocratique Gabonais, PDG) currently maintains a firm hold on the legislature, having triumphed at the last election for the National Assembly in 2011. A boycott by opposition parties during the election – prompted by allegations of voter fraud – paved the way for the PDG to win 118 of the 120 seats available in the assembly, with the next vote due to be conducted in December 2016.

In the subsequent regional and municipal elections in 2013, the PDG was able to win 1517 of the 2404 council seats, though the party did face increased competition from independent candidates in Libreville, securing 61 out of 151 seats, as opposed to the 48 garnered by independents. An additional 41 seats went to the Circle of Liberal Reformers.

Governance

Despite considerable earnings from oil exports over the years, the battle against social inequality in the country has faced obstacles, some of which have been related to structural weaknesses in the public sector. To address this problem, several key reforms have been implemented to enable the government to improve the effectiveness of public spending programmes. Part of the process involved a major audit of public expenditure practices launched by the government in January 2014.

The audit had the unfortunate effect of delaying a considerable number of government payments to suppliers, leading to an accumulation of arrears for 2013 and 2014, although authorities have started to pay back debts to private companies. While the government announced in late 2014 that $700m in arrears had been settled, the investigation also found several irregularities in government payment procedures, including irregular invoicing of products and services for the state, payment of contracts to non-existent entities and the general misuse of government funds – in line with similar results following an overhaul of the government’s compensation system in 2010, when a number of phantom employees and duplicated salaries were identified and eliminated.

Labour

Among the more salient political forces at play in the country is a long-established labour movement. A legacy of industrial organisation under the French administration, Gabon’s trade unions are particularly active, aided by a large membership of employees from the public sector, which is the largest employer in the country, and the oil industry – the largest export earner. The clout of Gabon’s labour unions is significant and visible, with industrial action a not-unusual occurrence.

Early 2015 saw a strike over the minimum wage, which public workers demanded be tripled to CFA300,000 (€450). The government responded by increasing pay to CFA150,000 (€225) in July that year, stating that meeting the demands of strikers would have made the smooth running of the state impossible.

On July 9, 2016, during the build-up to the recent presidential election, a number of trade union members were arrested at a rally held in Libreville in protest of Bongo Odimba filing his candidacy for presidency. Local media reported in September 2016 that in response to the continued imprisonment of the union members, the National Convention for Education Trade Unions had proposed strike action on October 17, while also announcing their opposition to starting the school year with many of their colleagues still incarcerated.

Despite the economic disturbances caused by strikes, labour unions have generally been able to secure both employment and compensation benefits for their organisation’s members, and the state’s attention to labour demands tends to be high.

Regional Links

With the recent slowdown in the growth of the EU, Chinese and US economies, Gabon has increasingly looked within Africa to bolster trade. Although Gabon’s African trade volumes are easily outweighed by those with the US, Asia and Europe, a number of African companies have started to pursue investments in Gabon in recent years. Moreover, Gabon has benefitted from new strategic partnerships with other African nations, most recently Rwanda.

Rwanda

Gabon has been working to improve integration in the digital sphere, and in July 2016 Gabon and Rwanda announced they had signed an agreement to launch a one-area network (ONA), which will boost both business and connectivity between the two countries. The announcement, which came after 11 African countries signed the Smart Africa Initiative in April 2016, was made by the Rwandan president, Paul Kagame, and will see the harmonisation of tariffs on mobile voice calls, SMS and data transmission between the two countries. The ONA agreement stipulates that signatories remove any additional roaming charges on subscribers, and international traffic between the two countries will also be tax exempt.

The deal is the latest in a string of moves indicating growing trade ties between Rwanda and Gabon, following a trade agreement signed between the two in Kigali in 2012. Since then, Rwandan national carrier Rwandair has launched direct flights to the Gabonese capital of Libreville, while the Rwandan Eye reports that the Gabonese Investment Agency and Rwanda’s development board have been in talks on how to improve business practices between the two nations.

African Ties

Elsewhere in Africa a number of investors have made major inroads in Gabon in recent years, including Morocco, which has signed an agricultural cooperation agreement with the Gabonese government, in addition to serving as the primary destination for Gabonese students studying abroad. Trade ties have also been bolstered by the signing of five new agreements to improve Customs clearance procedures, establish reciprocal recognition of driver’s licences and waive visa requirements for visitors with ordinary passports. An additional 24 agreements were signed in 2014, many emphasising joint ventures, including agreements to develop two fertiliser plants. In April 2015 the two countries approved a joint steering committee tasked with creating a framework for cooperation in the areas of investment and human development.

CEMAC Challenges

As evidenced by its participation in CEMAC, Gabon has long sought to cultivate strong business and trade ties with its immediate neighbours. CEMAC has enjoyed a certain degree of success in terms of economic integration, with a shared currency, a joint banking regulator and a number of countries listing bonds on the joint stock exchange. Members have established the free movement of capital, a unified tariff policy to regulate goods entering from outside the bloc and a common value-added tax rate for the six economies in the community.

The regional organisation has its own central bank, the Bank of Central African States, which is in charge of financing social development programmes and regulates the shared currency – the African Financial Community (Communauté Financière Africaine, CFA) franc. Despite the potential of the currency to help develop regional trade, the CFA franc’s link to the euro has restricted the bank’s ability to implement independent monetary policies. Other key financial institutions exist in the bloc, such as the Central African Stock Exchange, which serves as CEMAC’s stock exchange.

According to an August 2015 IMF report on the common policies of the bloc, developing more robust trade ties between CEMAC member states will require “the reduction of non-trade barriers and the harmonisation of Customs procedures, taxes on goods and services, and technical standards”. A “Financial System Stability Assessment” of CEMEC published by the IMF in April 2016 reported that “a number of tariff and non-tariff barriers hinder the flow of goods, services and persons”, while “intraregional trade accounts for only 2% of all trade”. Delegates at the World Trade Organisation’s first CEMAC Joint Trade Policy Review in 2013 encouraged the bloc’s members to reform the community’s tax regimes in order to boost intraregional trade.

Traditional Partners

As the former colonial power and a continuing important source of investment, France remains Gabon’s most high-profile partner. Officials from both countries regularly meet to discuss various issues, ranging from trade and business to security concerns throughout the African continent.

Calls from French Prime Minister Manuel Valls after the August 2016 presidential election for a “clear electoral process” and the reticence of the French government to publicly endorse Bongo Odimba as the clear winner would suggest the trading partners have encountered a rough patch in their relations.

Trade volumes have also been subject to cyclical changes, although France is still Gabon’s largest European export market. In 2015 the value of Gabonese exports to France – predominantly oil, timber and minerals – hit €156.1m, having decreased by 63% in 2014 to €144.8m. French exports to Gabon, meanwhile, hit €1.3bn in 2015, up 60% from €813.4m the year before.

EU

Diplomatic links with France have also opened the door to other EU states, both as a source of new business opportunities and support programmes. Currently under negotiation is an EU Economic Partnership Agreement, which may become critical for Gabon as it seeks to access new export markets in line with the country’s efforts to diversify the economy. The EU as a whole has also become a strong source of development support for the country. Between 2008 and 2014, it granted Gabon a total of €49m to be devoted to education and professional training, as well as improving governance in several sectors of the economy.

An additional €39.2m was put aside by the European Development Fund for the 2007-13 period, to be directed towards infrastructure development, education and professional training programmes.

China

China has risen to become a leading investor and lender to the country over the past decade, investing in major projects such as the construction of the Senate in 2005; the Grand Poubara hydroelectric dam, worth an estimated €292m; and the €46m Stadium of Sino-Gabonese Friendship, which was built for the 2012 Africa Cup of Nations. The €2.2bn Belinga mining project was another big initiative in the pipeline; however, in 2012, following years of delays and wrangling between Chinese and Gabonese authorities, the China Material Engineering Company lost its Belinga concession, with BHP Billiton taking over the project in its place. However, in 2013 the Anglo-Australian company froze its operations in Gabon and closed its Libreville office.

Similarly, in early 2014 Addax Petroleum, a subsidiary of China’s Sinopec, settled a $1bn legal dispute with the Gabonese government over oil exploration rights.

US

The US has also become an increasingly important commercial partner and in 2013 imported $1.1bn (€959.7m) in goods – these were mainly primary commodities – from Gabon. However, according to UN Conference on Trade and Development statistics, this figure has since dropped to $760.6m (€684.5m) in 2014 and $297.8m (€267.7) in 2015, suggesting that demand has eased, at least in the immediate term.