Gabon Trying to get past oil

Digging for diversity

One African country´s struggle to diversify

GABON,in west-central Africa, is among Africa’s least densely populated countries. Fly south from the capital, Libreville, in a helicopter and you will mostly see rainforest, stretching endlessly into the distance, interrupted only by rivers cutting through to the Atlantic Ocean. Yet suddenly, near a town called Mouila, the dense forest gives way to orderly rows of palms, separated by roads of red earth. A processing factory sits in the middle, its metal roof sticking out from the expanse of green.

This is Africa’s newest palm-oil plantation. Built by Olam, a vast Singapore-based agricultural trading house, it should eventually cover 50,000 hectares (120,000 acres) and employ some 15,000 workers. It is the main evidence of President Ali Bongo Ondimba’s plan to reduce Gabon’s dependence on the other sort of oil—which in 2014 made up four-fifths of the country’s export revenues. Mr Bongo (pictured), who faces an election at the end of this month, seems determined to make his country diversify. Yet it is harder than he lets on. Gabon shows how oil can twist the fate of a nation—and how difficult moving away from the black stuff is.

With just 1.8m people, Gabon is a minnow. But it is spacious—twice the size of England—and resource rich. Gross national income per head was around $9,000 in 2015, among the highest in Africa. Gabon has long punched above its weight in Francophone west Africa, largely thanks to Mr Bongo’s father Omar, who served as president from 1967 until his death in 2009. The elder Bongo had a gift for politics as outsized as his personality (among other foibles, he liked to show off his pet tiger to guests). He became close friends with François Mitterrand, France’s president in the 1980s, as well as mentor to a generation of politicians in neighbouring Congo-Brazzaville and Equatorial Guinea.

This ensured stability, and made Gabon a perennial obsession of the French press. What it didn’t do, however, was create prosperity. When Bongo died, he left his country with a political system built mostly on sharing oil spoils among a fat class of fonctionnaires. Around a quarter of the population still live on less than $3 a day. The Bongos themselves live in spectacular fashion: the family is said to own 39 properties in France alone. Their assets are still under investigation by the French authorities. In four decades under the elder Bongo, little was built in Gabon bar a lot of grandiose offices and an extraordinarily expensive railway, running from Libreville to the Bongos’ hometown of Franceville.

It is this mess that his son—one of 52 officially recognised children—inherited in 2009 and now promises to fix. Speaking to The Economist from the presidential palace in Mouila (one of many), he is careful to defend his father. “I found the country at peace,” he says of what he inherited. But he admits he has his work cut out. “Basically we’re a country based on the sales of raw materials,” he says. Now, he believes, Gabon needs manufacturing and agriculture.

The Olam investment is the biggest evidence of this effort. The company is not only planting trees, it is also building a new port to ship out the palm oil. It is involved in opening a special economic zone on the outskirts of Libreville, which the president hopes to turn into a manufacturing cluster. Olam was persuaded to come to Gabon by the combination of fertile soil, political stability and a flexible government, says Gagan Gupta, the local boss.

Yet Gabon remains a difficult place to do business for anyone who is not extracting oil (of either variety). At a Malaysian-owned factory in the special economic zone, huge piles of sawn wood are being turned into doors and tables. The idea, which originated with the president, is to use more Gabonese wood in the country. The export of logs has been banned, though that of sawn planks continues. But business is struggling. “We can’t make a profit,” laments Cheah You Wok, the factory’s manager. His boss says that he hopes that the government will introduce tariffs on imported furniture.

The risk now is that growth goes into reverse as lower oil prices—and the need to pay salaries before an election—put a brake on infrastructure building. Only 20% of the government’s infrastructure plan has been implemented, says Sylvie Dossou, the World Bank representative in the country. Funding has been cut for almost everything. Almost the only projects that continue are related to the African Cup of Nations football tournament, which Gabon is hosting next year. Some 162 billion CFA Franc ($270m) of bills to government suppliers are in arrears. Yet Mr Bongo still proudly talks of giving civil servants a 30% pay rise.

After the election binge, expect a hangover. By the end of the year Gabon is likely to need a bail-out, probably from the IMF. This will surely come with uncomfortable conditions. Another oil-rich state, Angola, asked for a bail-out in April, but changed its mind last month, probably because it would have required its national oil company, Sonangol, to be opened up to scrutiny. If Mr Bongo stays in power, which seems likely, he faces a turbulent 2017.

Source: http://www.economist.com