Previous Quarterly Editions
Expropriation Risk: 54 51 48 48 Political Violence Risk: 59 55 52 50 Terrorism Risk: 34 34 34 34 Exchange Transfer and Trade Sanction Risk: 36 36 36 39 Sovereign Default Risk: 46 45 45 48
TREND ▲ OUTLOOK ▲
As Gabon is heavily reliant on the export of commodities, particularly oil, manganese and timber, it is heavily exposed to the impact of the COVID-19 virus on levels of demand in the world economy. It will be particularly affected by the slowdown in China and Europe. One consequence will be a significant squeeze on government revenues, which were looking promising at the start of 2020 following growth of 3% last year and a pre-pandemic forecast from the IMF of 3.4% for 2020. However, Gabon is now better equipped to cope with these pressures than would have been the case six months ago as political stability improves. The full details of President Ali Bongo Ondimba’s health and the pace of his recovery from the stroke that he suffered 18 months ago have not been revealed. As a result, it remains unclear how far he has returned to full involvement in government decisions and policy formation. However, his 15-minute address to the nation on New Year’s Eve was evidence of a marked improvement. Moreover, the lines of political authority were clarified by the dismissal and arrest in December 2019 of the head of the president’s office, Brice Laccruche Alihanga, who had taken a prominent role during the months of Bongo’s incapacity and early convalescence. He and his former ministerial allies have been replaced by a new core team. Nourredine Bongo Valentin, the president’s 27-year-old son, is now general coordinator of presidential affairs with responsibility for carrying out the president’s instructions, while the new head of the president’s office is Théophile Ogandaga. Nourredine’s appointment has been widely viewed as a reassertion of presidential power and the concentration of political authority within the Bongo family. In the longer term, the prospect of a “dynastic” succession may become controversial but, for now, the recent developments have helped to foster a more settled political situation as Gabon faces the severe health and economic challenges posed by the virus. The government has combined social distancing and a curfew for the general public with treatment and contact tracing for confirmed cases. The country’s first cases were travellers from France and other areas where the virus had taken hold, and arrivals were quickly quarantined. But the risk to the wider population is greater in Gabon than most sub-Saharan countries because heavy forestation means that its rural population is relatively small compared to the urban concentration. Over half of the population lives in the Libreville conurbation, with the proximity related to crowded living conditions and the informal economy making transmission of the virus easy. While the health service has a good database, which has enabled it to distribute masks to older people, pregnant women and others who are vulnerable, the risk that the virus will spread quickly is high.
TREND ► OUTLOOK ▼
The government is keen that recent reforms to the national oil code should attract more foreign investment into exploration and development of its hydrocarbon resources. It is also anxious to retain the confidence of the IMF and foreign creditors at a time when national finances face additional and unforeseen pressures. The amicable resolution of the case resulting from the state’s 2018 takeover of the 51% stake held by French company Veolia in national power and water utility SEEG has helped to restore investor confidence. The government has stressed that the case was exceptional and Veolia has since agreed to manage the national waste collection and management service while the French company Suez has taken on management of the national water supply. Waste and water are top priorities for Gabon’s mayors, who are under pressure from their electors to clean up urban areas. These latest agreements with Veolia and Suez were hard won, and the government is unlikely to take any capricious actions that would jeopardise them or discourage further foreign investment.
TREND ▼ OUTLOOK ▲
Overt conflict is unlikely in Gabon, although a strong labour movement and a tradition of student activism means that protests over specific issues are common. Some unions called a four-day strike in January 2020 over labour law reforms and hospital staff staged a brief strike in early March 2020 over delayed bonuses and poor working conditions. There could well be further labour unrest, especially if economic pressures force the government into imposing unpopular austerity measures or if it is considered to be mismanaging the country’s response to COVID-19. Although expression is relatively free in Gabon, media controls have been tightened. The Bongo family appeared to have regained sufficient control to prevent any challenge to their leadership under the guise of concern about the state of the health system, and the army has stayed loyal despite last year’s rumours of a coup attempt.
TREND ► OUTLOOK ►
Gabon has a large western expatriate population and a deep-rooted relationship with France that includes a military dimension, suggesting that it could be a target for external terrorism at some stage. However, there is no publicly known evidence of local jihadist groups having formed.
Gabon is a member of the six-country Central African Economic and Monetary Union (CEMAC), whose common currency, the CFA franc, has a fixed rate against the euro that is guaranteed by the French treasury. UEMOA, its counterpart in West Africa, has agreed to adopt a new currency, the Eco, as a step towards the planned eventual creation of a single, floating currency for all West Africa. In central Africa, a major currency reform of this kind was not being considered but after seeing UEMOA take the lead, CEMAC member governments have decided to look at the reform options that might work in their own region. It seems almost certain that under any reform, the French treasury guarantee of the exchange rate against the euro will be maintained for a significant period of time.
The fact that Gabon already has an IMF support programme in place and has been showing good fiscal discipline by tightening its spending plans, should make it relatively quick and easy to secure extra emergency support from the Fund if required. In light of the virus, the Fund is also likely to play down its earlier requirement that the government cut the public sector wage bill by 10%. Gabon has also worked hard to maintain its capacity to borrow on international bond markets and the prospect of a default remains remote as the government is fully aware of the damage this would do to Gabon’s long-term credibility.
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