Insight: Gabon's Bongo struggles to transform African oil republic

TotalEnergies EP Gabon

19/06/2014 10:05

(Repeats June 18 story) 
    * President seeks inclusive growth through greater economic 
diversity 
    * Critics say oil wealth goes to the elite 
    * Investors worry public finances under strain, fear tax 
grabs 
    * Opponent Jean Ping urges constitutional change 
 
    By Emma Farge 
    LIBREVILLE, June 18 (Reuters) - Above the entrance to the 
towering oil ministry on a sleek boulevard in Gabon's 
ocean-front capital Libreville hangs a huge banner that reads 
like a warning: "Oil will run out but innovation is forever". 
    For nearly four decades, since the discovery of offshore 
fields in the early 1970s, oil has been the economic lifeblood 
of this small, central African country. It has brought billions 
of dollars in investment and accounts for 80 percent of exports. 
    But production from Gabon's ageing fields has steadily 
declined for years. President Ali Bongo, who won a contested 
election in 2009 to succeed his father Omar, has launched a 
drive to reform and diversify the $20 billion economy.  
    During his father's 41-year rule, Gabon was seen as a 
bastion of "Francafrique" - an opaque system by which French 
companies were handed plum contracts in exchange for security 
guarantees from the former colonial power.  
    "Bongo junior", as many Gabonese still call the 55-year-old 
president, has striven to overhaul his country's image and open 
it up to fresh sources of investment.  ID:nL6N0O950K  
    But five years into his term, there are signs that new 
industries are not growing quickly enough to compensate for 
falling oil revenues, placing a strain on public finances.  
    Elected with just over 40 percent of the vote, Bongo faces a 
stark choice as a fresh poll looms in two years. He cannot 
afford to push through a planned $12 billion public investment 
programme while also paying for the extensive patronage system 
that was key to his father's long rule. 
    "The fact that Ali Bongo has more financial commitments than 
his father puts him in a very difficult position," said Ben 
Payton, senior Africa analyst at risk advisory firm Maplecroft. 
"Omar Bongo would have made the maintenance of patronage 
networks his first priority in times of economic difficulty." 
    With around a third of the population of 1.6 million still 
living in poverty despite the country's "upper middle income" 
status, analysts say economic diversification is essential for 
Bongo's political survival. Wealth from oil revenues has long 
flowed mostly into the pockets of the elite. 
    The opposition is fragmented but would-be candidates for the 
2016 election are seeking to capitalise on Bongo's shortcomings. 
Jean Ping, a former head of the African Union and a one-time 
ally of Bongo's father, has emerged as a possible leader.  
    "The opposition will unite around a platform that we all 
need to accept," Ping told Reuters, urging a constitutional 
change to limit the number of presidential terms to two.  
    "Reforms will not be the work of one man but of a new system 
- a democratic, well-governed system with strong institutions."  
     
    TALE OF TWO CITIES 
    Many in Libreville are angry at the luxurious lifestyles of 
officials, including Bongo and his entourage. At an investment 
summit last month, traffic jams clogged city streets as 
presidential vehicles swept along the coastal road. VIPs drank 
champagne at a red-carpet gala at a seafront hotel, just blocks 
from the city's sprawling shanties. 
    Marc Ona Essangui, head of NGO Brainforest, said authorities 
should be spending money on honouring pledges to build schools 
and 5,000 new housing units a year instead of expensive forums.  
    Education is key to delivering on Bongo's pledge to create 
opportunities for a growing young population, more than one- 
third of whom are unemployed. Yet at the state-run Omar Bongo 
University, the campus is littered with rubber bullets and tear 
gas canisters after police clashed with students protesting over 
the lack of basics, such as text books and Internet access. 
    Exam results pinned to a classroom wall showed that just 19 
out of 176 students studying for an economy degree had passed. 
    Like much of the political elite, whose offspring are 
educated in Europe or the United States, Bongo's son was sent to 
exclusive British boarding school Eton.      
    "The authorities don't send their children here. They send 
them away," said 26-year-old student leader Anatole Nnang Mezui. 
  "They want to keep ruling us just like their fathers did. It's 
a small elite that's going to rule over the masses." 
    Gabon says it is providing for future generations by saving 
oil revenues in a wealth fund, the Gabonese Strategic Investment 
Fund (FGIS). Its head, Serge Mickoto, says it manages around 600 
billion CFA francs ($1.2 billion) for the state and will receive 
10 percent of oil revenues each year. 
    But while FGIS submits reports to parliament, accounts are 
not published. There is also no mechanism to prevent 
contributions dipping below 10 percent - a likely scenario given 
IMF projections for budget deficits to 2015.  
 
    OPEN FOR BUSINESS? 
    France looms large in the economic life of its former colony 
and has over 100 companies there. As part of his plan to make 
Gabon an emerging economy by 2025, Bongo is courting capital 
from other nations, particularly in the industrial sector.  
    "If we want a chance of reaching that goal, we have to go 
through manufacturing," he told Reuters in an interview.  
    A law was recently passed to stop raw timber exports and 
encourage local processing. Authorities also say companies ready 
to invest in refining manganese and iron ore locally will be 
given priority for new concessions.  ID:nL6N0OD4Y9  
    Gabon is promoting high-end ecotourism in its rainforests, 
home to elephants as well as chimpanzees and gorillas. 
    Richard Attias, head of the PR firm that organised May's 
investment forum, said Bongo needs more time: "You cannot 
transform a country in less than 10 years. There's no way." 
    Yet legal uncertainties have delayed investment in flagship 
projects, like the 1-billion-tonne Belinga iron ore mine. 
    One of the main complaints of investors is the slowness and 
inefficiency of bureaucracy. This year, the World Bank ranked 
Gabon at 163 from 189 countries for ease of doing business.  
    Several investors who asked to remain anonymous complained 
of delays of up to two years in refunds of the 18 percent 
value-added tax, supposed to be reimbursed monthly to exporters. 
    "My letters to the government have gone unanswered. I've 
told them I'll have to close," said one timber investor. One 
diplomat said total arrears for VAT reimbursements exceeded $400 
million. 
    Signs of state cashflow difficulties abound in Libreville. A 
notice next to a government building lot in the Bessieux 
district reads: "Construction stopped for non-payment of bills". 
    The Omar Bongo stadium intended for the 2012 African Cup is 
still unfinished. One contractor told Reuters that public works 
agency ANGT was behind on payment.  
    "We are indebted everywhere - ask the oil companies and 
private companies - international or national," said Ping. 
    Many say that government revenues are being drained by a 
bloated civil service, which pays hefty contracts to around 
70,000 people. "Bongo is at the mercy of oil because his father 
left him an unbearable legacy: the standard of living for the 
civil service," said another investor. 
     
    DEMOCRACY "NOT AN ISSUE" 
    Energy consultancy Wood Mackenzie expects oil output to edge 
up next year from the current 290,000 barrels per day of oil 
equivalent before falling to 260,000 bpd in 2017. Once an OPEC 
member, Gabon has slipped to sub-Saharan Africa's No.5 producer. 
    Investors are worried by a series of recent back-tax demands 
by the state and by Gabon's exit from the Extractive Industries 
Transparency Initiative (EITI) last year. 
   In February, the government asked French oil major Total 
 TOTF.PA  to pay $805 million in back taxes. "It's state 
banditry," said Ona Essangui, whose organisation campaigns for 
transparency in the resources sector.           
    Gabon's one-round electoral system - which hands the 
presidency to whoever wins the most votes even if it is not a 
majority - tends to favour the incumbent candidate, particularly 
if the opposition is divided.  
    The opposition may struggle to transform discontent into 
votes in a country where resources are concentrated in the hands 
of Bongo's family and his Gabonese Democratic Party (PDG).  
    Cohesion is strong within the PDG - a party associated with  
freemasons. Bongo himself is the grand master of Gabon's 
national lodge. 
    Albertine Maganga Moussavou of the Social Democratic Party, 
one of just two opposition MPs in the 120-seat parliament, said 
Gabon was becoming less democratic, with political debate 
stifled. The government strongly denies this.   
    "Democracy is not an issue here," said Bongo. "I haven't yet 
imprisoned one opposition leader for insulting me." 
($1 = 484.7800 Central African Cfa Franc Beacs) 
 
 (Additional reporting by Jean-Rovys Dabany; Editing by Daniel 
Flynn and Keiron Henderson) 
 ((emma.farge@thomsonreuters.com)(+221 33 864 5077)(Reuters 
Messaging: emma.farge.thomsonreuters.com@reuters.net)) 
 
Keywords: GABON POLITICS