Gabon: The economy is projected to rally further next year, expanding by an average of 5.6% per annum through to 2018

A drive to reinforce diversification efforts limited the impact of low oil prices on Gabon’s economy in 2015, and while the government has had to adjust spending downwards, increase has still ticked along well above the developed-country average.

According to the majority recent estimate from the IMF, the country is expected to post increase of 3.5% in 2015, down from 5.1% in 2014. GDP is set to reach CFA8.22trn (€12.5bn), with exports on course to rise by 6.78% year-on-year.

The economy is projected to rally further next year, expanding by an average of 5.6% per annum through to 2018, the fund said, although the continued low price of oil represents a degree of uncertainty in the country’s medium-term outlook.

Targeting a broader economy

External headwinds and the prospect of lower tax revenues prompted the Gabonese government to cut the national budget by 11.4% in 2015. The decision has affected cash flow for small and medium-sized businesses involved in government procurement and contracting in particular, and has highlighted the urgency of expanding the role of the private sector in Gabon’s infrastructure drive.

Indeed, the continuation of weaker energy prices in 2015 underscored the key role that Gabon’s long-term development strategy, the Emerging Gabon Strategic Plan (Plan Stratégique Gabon Emergent, PSGE), is playing in reducing the country’s reliance on hydrocarbons and steering it towards inclusive increase by 2025.

The bulk of Gabon’s economic development in recent years was driven by its natural resources, with oil, the top earner, generating additional than half of government’s gain and around 80% of export revenues. Timber and manganese are as well large contributors to the public coffers.

Launched in 2010, the PSGE aims to create 10 development centres for economic activity in Gabon through a combination of investment in infrastructure and human resources. In particular, the strategy aims to develop the industrial and service sectors of the economy, which are set to receive a boost from the development of appropriate economic zones specialising in agro-industry, mining and wood processing.

According to the IMF, real GDP increase averaged 6% in the four years to 2015 thanks largely to increased capital spending under the PSGE, which has seen particular success in areas such as price addition – the timber industry, for example, grew by 10.5% in real GDP terms in 2014 thanks to increased wood processing.

Infrastructure a priority

Addressing infrastructure shortfalls – particularly in terms of power generation and transport – is an essential part of Gabon’s plans to increase the contribution made by industries and services to the economy.

In June the government turned to the markets to raise funds for a raft of projects, with the launch of a 10-year, $500m eurobond. The bond, which was the country’s third since 2007, was six times oversubscribed and sold at a coupon rate of 6.95%, highlighting the continued appeal – even in a difficult world environment – of Africa’s sovereign deficit.

“The eurobond is for infrastructure — energy, water, education and health facilities,” Régis Immongault, the minister of sustainable development, the economy, investment promotion and planning, told media in June. “It’s a strong signal of support for our reforms and economic policies.”

Electrification agenda

Boosting electricity capacity ranks particularly high on the government’s schedule, as it moves to cover 85% of rural areas by 2025 and roll out universal access by 2035 as part of the PSGE. As of 2014, just 15% of rural areas had electricity, according to government estimates.

As Gabon moves ahead with its development programme, fast-paced urbanisation and difficult terrain are likely to complicate last-mile connectivity.

According to the World Bank, Gabon’s people of 1.7m is growing at around 2.3% per year, and while roughly 80% of the country lives in the three major urban centres – Libreville, Port-Gentil and Franceville – a sizeable minority inhabit isolated villages dotted amongst tropical forest, which covers 85% of the country.

Capacity concerns are as well present in areas that are by presently electrified, as an increase in industrial activity, sparked by the country’s push to diversify its economy, has put additional pressure on the national grid. Existing electricity infrastructure is by presently falling behind rising request, which is increasing by around 6% per annum.

Under the PSGE, the government hopes to increase generation to 5000 MW by 2016 by constructing a mixture of gas-fired, hydropower and gas-to-power plants. Projects under way include the 115-MW Ngoulmendjim hydroelectric plant, expected approaching on-line in 2020. Located on the Komo River, east of Libreville, the plant is reportedly being developed at a cost of around CFA250bn (€381.1m).

Connecting cities

Gabon is as well taking steps to improve connectivity between its cities, with a particular focus on Port-Gentil, the country’s petrol, timber and industrial hub. Separated from the rest of the country by inlets, swamps and rivers, Gabon’s second city has traditionally been accessible only by air and sea, which has significantly added to transport and logistics costs. A CFA102bn (€200.7m) project to build a 93-km road linking Port-Gentil with Omboué, by presently 20% complete, is expected to help address this problem in the coming years.

New air transport links in the form of an expanded Port-Gentil airport, currently being upgraded to accommodate long-haul flights, and the expected launch of a Gabonese arm of the budget airline FlyAfrica.com are as well poised to improve intra-regional connectivity in the near to medium term.