Gabon country risk assessment

04 November 2019

Gabon country risk assessmentGabon 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.

Security Environment

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.

Gabon country risk assessmentProtests 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.

Trading Environment

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.

Investment Environment

Pricing Outlook GabonGabon’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.

Signup WRR

In this month's Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for Indonesia, Sri Lanka, Saudi Arabia and Ecuador and all of which have been the subject of recent enquiries from our client base.

  • TALK TO AN EXPERT

  • DOWNLOAD AND SHARE

  • SIGN UP

  • Eleanor SmithEleanor Smith

    Eleanor Smith is a Senior Political Risk Analyst within Marsh JLT Specialty’s Credit Specialties team. At Marsh JLT Specialty, Eleanor analyses developments in political risks, and advises clients on their effect in a range of sectors. Eleanor is also responsible for delivery of World Risk Review, JLT’s country risk ratings platform, to clients and prospects.


    Eleanor has a first-class degree in History with Spanish from UCL, and a Masters in International Public Policy from the same institution. With experience in a range of sectors, including diplomatic missions and not-for-profit, Eleanor can help clients understand their risk exposure.

    If you would like to talk about any of the issues raised in this article, please contact Eleanor Smith, Senior Political Risk Analyst on +44 (0)20 8108 9544.

  • For more articles like this, download our Risk Outlook Newsletter

    Share this article

     
  • Get everything you need, delivered straight to your inbox.

    Sign up to receive our latest news and insights here.

DISCLAIMER

Services provided in the United Kingdom by Marsh JLT Specialty, a trading name of Marsh Ltd and JLT Specialty Limited (together “MMC”). Marsh Ltd is authorised and regulated by the Financial Conduct Authority for General Insurance Distribution and Credit Broking (Firm Reference No. 307511). JLT Specialty Ltd is a Lloyd’s Broker, authorised and regulated by the Financial Conduct Authority for General Insurance Distribution and Credit Broking (Firm Reference No. 310428).

This is not legal advice and is intended only to highlight general issues relating to its subject matter. Whilst every effort has been made to ensure the accuracy of the content of this document, no MMC entity accepts any responsibility for any error, or omission or deficiency. The information contained within this document may not be reproduced. If you are interested in utilising the services of MMC you may be required by/under your local regulatory regime to utilise the services of a local insurance intermediary in your territory to export insurance and (re)insurance to us unless you have an exemption and should take advice in this regard.