Africa’s Troubled Petro-States (Weekly Post 5/4/16)

As we have been regularly reporting, commodity-based economies have been facing some very stiff headwinds over the past 12 months, none more so than the African petro-states. Few countries boomed faster than these states last decade, though sadly too much of the money was siphoned off by the ruling elites, meaning that Nigeria and Angola- the continent’s two petro-giants- have less to show for the boom years than you would hope. The same pattern is to be seen in Gabon, a small oil-rich Central African nation.

Gabon is not a country which receives much outside attention. Indeed, it is rarely even mentioned outside the French-language press. President Ali Bongo Ondimba succeeded his father to the presidency in a contested poll in 2009; his father had ruled the oil-rich country since independence from France in 1967. Under Ondimba, the economy has not diversified at all. It remains heavily oil-dependent, just as it did during his father’s reign, with timber extraction ranking a distant second as a source of export dollars. Gabon is Africa’s fourth biggest oil exporter, and oil dividends make up 60% of the national budget. When oil prices were over $100 a barrel in 2013, the country was growing at over 8% per annum, but growth has now slowed to around 3%, which is little higher than the rate of population growth. If too little of the country’s resources trickled down to the poor during the boom years, poverty is getting even worse now.

As usual, the Gabonese government has been slow to respond. They have axed a high-prestige project called the Champ Triomphal, which was going to include a marina for luxury yachts, top-end condos and sports facilities. Critics have pointed out thaat this scheme as a classic example of waste and excess by African elites, insisting that the health, education and infrastructure budgets should have been the priority instead. There have been some belated attempts to try and industrialize the timber industry, but, of course, this has been criticized by environmentalists who note that Gabon’s jungles are home to lowland gorillas and mandrills, two of the world’s endangered primate species. Other development experts have suggested the country try and focus on agriculture, which has been a very underdeveloped industry until now. Still, these diversification projects will take many years to come to fruition, and Gabon’s finances are already on the ropes now. The latest IMF Report on the country stated the problem very succinctly:

The recent collapse in oil prices is a major test to Gabon’s macroeconomic resilience. With oil production accounting for roughly one-third of GDP, contributing 60 percent of government revenues, and about 85 percent of exports in 2014, the 40 percent decline in international oil prices since 2014 (in CFA franc terms) has been a serious shock to the Gabonese economy.”

The IMF then went on to issue its standard list of policy recommendations: Gabon should diversify its economy; it should expand its tax base; it should strengthen education, infrastructure and institutional capacity; and it should improve the business climate. In truth, you will find the exact same policy prescriptions being made for Nigeria and Angola, showing that IMF still has a cookie-cutter approach to dealing with African economies. Perhaps it will not matter all that much anyway. There is precious little sign that any of these countries are enthusiastically adopting these policies. For Ali Bongo Ondimba and his cronies, it may seem easier to employ the same old methods of repression and hope that the oil price will rise soon.

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