Gabon will face a number of security, investment and trading challenges in the coming months. In this article we provide a detailed forward-looking assessment of developments in the country.
Uncertainty over President Ali Bongo’s health is likely to raise succession risks in Gabon in the next 12 months. The Gabonese economy will face a near-term boost from increased oil production in 2019, but production remains on a downward trend. Reforms in the mining and hydrocarbons sectors are likely to improve the operating environment for foreign investors.
Civil war risks are moderately elevated, given persistent speculation over President Ali Bongo’s health and ability to lead the country.
Bongo suffered a stroke in Saudi Arabia in October 2018, and has made only limited media appearances since then. Bongo’s apparent incapacity indicates a growing risk of a leadership vacuum, which may result in a coup attempt.
However, the ruling Gabonese Democratic Party (PDG) is politically dominant, and would likely maintain power even if Bongo were unable to continue in his position.
The public sector's response to government austerity measures is likely to drive the risk of civil commotion in the medium term. In June 2018, measures were announced that included salary cuts for higher earners in the civil service and recruitment freezes.
With 70,000 employees, any protests by the civil service would likely attract sizeable numbers of people to major urban areas.
Protests would likely draw a robust response by the security services, particularly in Libreville, generating an elevated risk of property damage.
Gabon’s political opposition has lacked effective leadership since the 2016 election, and has failed to take advantage of Bongo’s prolonged period of absence.
As a result, the risk of a sustained protest movement organized by the opposition is limited in the medium term.
Gabon’s oil sector will benefit from an uptick in production in 2019, following the start of production at the Tortue oil field in September 2018.
This is expected to contribute to a 3% increase in crude oil output in 2019. However, the sector’s longer-term outlook is more challenging.
Oil output has been declining for a number of years, falling to 198,000 barrels per day from 370,000 barrels per day in 1997.
Gabon’s oil fields are relatively mature and, with limited investment planned for the coming years, output is likely to remain on a downward trend. This could affect Gabon’s overall economic performance, as reduced revenues limit the government’s ability to fund growth-supportive capital investment.
The government has worked to boost activity in non-oil sectors, with timber rising as a share of total exports from 8.8% in 2015, to 11.6% in 2017. Real GDP growth is forecast at 2.7% in 2019, slowing to 2.1% in 2020.
Gabon’s 1998 investment code affords the same rights to foreign firms operating in the country as to domestic companies.
In general, these obligations are upheld, and foreign investors are treated equally to Gabonese firms when purchasing land or entering commercial contracts.
The government has also taken several steps to encourage foreign investment in the country, which would suggest an unwillingness to selectively apply laws or regulations against foreign firms that would prevent them from carrying out business in the country.
For example, in April 2014, with World Bank assistance, Gabon launched an agency to promote investment, manage public-private partnerships, and reduce bureaucratic procedures.
The Gabonese government has a track record of targeting foreign firms with expropriation at times of economic pressure.
For example, following the collapse in global oil prices in 2014, the government sought to protect revenues by expanding the role of the state-owned Gabon Oil Company (GOC) through the introduction of a new petroleum code.
Auditing of oil companies resulted in arbitrary back-dated tax demands, which were invoked as justification for contract cancelations or expropriation. In January 2013, the government took control of the Obangue oil field from Chinese firm Addax, claiming a breach of contract.
Since then, risks in the oil sector have decreased, as it has become apparent that GOC lacked the resources to effectively operate oil fields.
As a result, the National Assembly passed a new petroleum code in February 2019, the terms of which indicate easing government intervention in the sector.
A new mining code, effective from July 2019, also improves the regulatory environment for firms. The code extends operating licenses from 10 to 20 years and reduces taxation on mineral exports.
5 Key Takeaways
- Uncertainty over President Ali Bongo’s health is likely to raise succession risks in Gabon in the next 12 months. Bongo suffered a stroke in October 2018 and has made only limited appearances since.
- Gabon’s political opposition lacks effective leadership and has failed to take advantage of Bongo’s recent low profile. As a result, the risk of a sustained protest movement is limited in the medium term.
- Gabon’s oil sector will benefit from an uptick in production in 2019, following the start of production at the Tortue oil field in September 2018.
- The National Assembly passed a new petroleum code in February 2019, the terms of which indicate easing government intervention in the sector.
- A new mining code, effective from July 2019, also improves the regulatory environment for firms. The code extends operating licenses from 10 to 20 years and reduces taxation on mineral exports.
The monthly Risk Outlook is supported by our proprietary country risk rating tool, World Risk Review (WRR) which provides risk ratings across nine insurable perils for 197 countries. The country risk ratings are generated by a proprietary, algorithm-based modelling system incorporating over 200 international sources of data.