Previous Quarterly Editions
Expropriation Risk: 53 58 56 56 Political Violence Risk: 62 64 58 64 Terrorism Risk: 35 35 35 34 Exchange Transfer and Trade Sanction Risk: 35 36 36 35 Sovereign Default Risk: 44 46 45 47
TREND ▲ OUTLOOK ►
In October, shortly after arriving in Riyadh for an investment conference, President Ali Bongo suffered a stroke. Since then, Gabon’s politics have been dominated by speculation about whether or not he will be able to resume an active leadership role. On January 7, a small group of soldiers briefly seized the national radio station to call for an uprising but there was no response from the public or other members of the security forces, and they were overcome within hours. Although the plotters referred to opposition leader Jean Ping, who has asked for clarity on the President’s condition in December, he has denied any involvement or support. Since then, the situation in Libreville has remained calm but the state of the president’s health remains the overriding concern. He has spent most of the time since November convalescing in Morocco, although he made a short New Year’s Eve television address and visited Libreville briefly to swear in a new prime minister, Julien Nkoghe Bekalé, on January 15 before returning to Morocco. The opposition has remained sceptical about his condition, however. Until the stroke, Bongo, who turns 60 this year, was a hands-on president and the key architect of Gabon’s political and economic development strategy, with no obvious replacement in that role. In the short term, the regime elite has handled the situation calmly, entrusting interim leadership to a triumvirate of Frédéric Bongo, the president’s half-brother and head of special services at the Republican Guard, Supreme Court president Madeleine Mborantsuo, and Brice Laccruche Alihanga, who heads the president’s office. They have been careful to present Bongo’s illness as temporary, thus avoiding any risk of the presidency being declared constitutionally vacant. However, it remains to be seen whether Bongo can resume his former role and, if so, to what extent he will have to entrust more policy decisions to other regime actors. The government expects growth to be above 3% in 2019 but this may be difficult if prolonged concerns about the president’s health affect investment sentiment.
TREND ► OUTLOOK ▼
A conciliation hearing at the International Centre for the Settlement of Investment Disputes (ICSID) has failed to produce a settlement following the government’s expropriation of the operations of SEEG, the power and water utility that is 51% owned by French group Veolia. Although the case is being closely watched by current and potential investors, companies in the extractive sector appear more likely to regard it as an exception rather than a trend, as the country has a long history of successful mining and energy operations. At the end of November, the government unveiled a new offshore licensing round covering 23 deep water and 12 shallow water blocks. The response will be in part a test of the sector’s confidence in the government, but the central factors for the major oil companies are likely to remain the technical and seismic indications, projected operating costs, and the expected outlook for oil and gas demand and prices rather than concerns about government policy. Gabon overhauled its hydrocarbons code in 2014 to make the sector more attractive to investors.
TREND ▲ OUTLOOK ▲
The evidence available so far suggests that January’s abortive coup was a small affair with little support among the armed forces. However, the government’s tight control of information means that the situation remains opaque, and its handling of the president’s health crisis was clearly the motivating factor. The apparent determination to exclude wider circles of Gabonese society from discussion of the way forward may yet have more substantial repercussions. Gabon has a longstanding culture of street protests over political and social issues, and the president’s extended absence could encourage demonstrations against the government’s austerity programme if it is not accompanied by signs that the economic situation is improving. However, the Gabonese also appreciate the stability of their country, having witnessed numerous conflicts in neighbouring countries. The legislative elections in October 2018, which were easily won by the ruling PDG, passed off calmly.
TREND ▼ OUTLOOK ►
Gabon is home to a large French community and a French military base, and these could make it a target for the type of anti-Western jihadist attack that has been seen elsewhere in the region. At present, however, the country does not appear to face any specific terrorist threat.
With support from the IMF, the six-member Central African Economic and Monetary Union (CEMAC), to which Gabon belongs, is pursuing a painstaking programme of reform and economic consolidation. Progress is cautious, and not helped by the heavy dependence of several member states on oil exports. But the members appear determined to maintain the current fixed peg that ties their common currency, the CFA franc, to the euro. This is guaranteed by the French treasury and the IMF, but the Fund has stressed the need to sustain tough economic reforms and financial discipline if the current fixed parity is to remain viable. Within Gabon, the government needs to reinforce banking sector stability and tackle the serious issue of non-performing loans.
Gabon’s debt-to-GDP ratio increased from 21% to 66.5% between 2012 and 2017, largely as a result of falling oil prices, and it is now coming close to breaching the CEMAC limit of 70%. However, there was some encouragement for the government in the IMF’s latest review of Gabon’s performance under the three-year Extended Fund Facility programme worth 640 million dollars that was agreed in mid-2017 to help the country adjust to the impact of lower oil prices. Completed in December 2018, the report indicated that financial discipline is improving and praised the government for resisting the temptation to boost spending prior to the October legislative elections. Both the IMF and the African Development Bank are continuing their support, but the government is unlikely to strengthen austerity measures and cut the public sector wage bill by 10% from 2016 levels, as required, if uncertainty over the president’s health continues.
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