Making an effort to support SMEs while carrying out national priority projects in infrastructure

Launched in June 2012, the National Infrastructure Master Plan (Schéma Directeur National d’ Infrastructure, SDNI) has 21 priority projects to be carried out until 2025 in key sectors such as energy, transport, special economic zones, tourism, telecoms and urban development. Funding for these major projects would ideally come from multiple sources, including public and private investment. The government’s own contribution has been on the rise in recent years, with a year-on-year increase of 74% in the 2013 national budget for development and equipment, to CFA1.11trn (€1.7bn) and CFA108bn (€162m), respectively, reflecting in part a growing commitment to developing national infrastructure through major public works.

Drawbacks

However, in July 2014, due to increased fiscal constraints, in the course of its annual mid-year budget review, the Council of Ministers adopted a draft Amended Finance Act that revised capital expenditures downwards by 52.6% from CFA1.32trn (€1.98bn) to CFA627.1bn (€940.65m).

As a result, funding will need to be sourced from elsewhere. Using the capital markets for funding has also been an option in recent years. The government issued both a regional bond and a Eurobond in 2007 of CFA100bn (€150m) and $1bn respectively, and, most recently, issued a $1.5bn Eurobond and with a maturity period of 10 years and a coupon of 6.375% in December 2013. These funds have helped to finance projects laid out under the SDNI in such areas as trans-port, energy and telecommunications.

Foreign Funding

Other sources of funding, critical to the implementation of infrastructure development projects, have so far comprised lending and official development aid from such international actors as the African Development Bank, the Islamic Development Bank, the World Bank, the French Development Agency, the EU, and additional financial institutions, including the China Exim Bank and the Spanish arm of Deutsche Bank, as well as Ecobank and BGFIB ank. However, the National Public Works Agency (Agence Nationale des Grands Travaux, ANGT) and the government are open to public-private partnerships and build-operate-transfer concessions too.

Local Firms & SMEs

Gabon’s market for small and medium-sized enterprises (SMEs) is relatively underdeveloped at present. Smaller companies have limited access to long-term credit, and many local SMEs have difficulties making professional and cost-effective bids when it comes to larger public works projects. However, smaller construction and maintenance projects are contributing in some measure to the development of SMEs.

Several local companies are active on the market, including Socoba-EDTPL and Soco-BTP. Contracts for large-scale infrastructure builds usually go to international firms with wider scope and capabilities. The presence of international contractors is expected to strengthen the industry by raising standards and increasing skill levels in Gabon. For example, Socoba-EDTPL was hired as a subcontractor under the Serbian firm Amiga for the construction of the 20,000-seat Franceville stadium.

Preferential Procurement

To help support local SMEs, the Ministry of Transport often makes an effort to grant smaller road maintenance contracts, especially those concentrated in and around Libreville, to SMEs. However, according to the General Directorate of Road Maintenance, of the seven road maintenance projects currently under way in Libreville, only two were awarded to local SMEs, which is a lower percentage than usual given the pressing nature of road improvement projects in the capital. Of the annual budget for nationwide road network maintenance projects, upwards of three-quarters of contracts go to SMEs. To help SMEs gain greater access to the subcontracting market, the World Bank has established a scholarship programme that pairs smaller companies with larger, direct subcontractors in order to facilitate capacity building.

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The Report: Gabon 2014

Construction & Real Estate chapter from The Report: Gabon 2014

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