The focus shifts from sporting facilities to infrastructure and future development

For two years after the spate of frenzied construction in the run-up to the Africa Cup of Nations (Coupe d’Afrique des Nations, CAN), Gabon’s contractors and developers saw a comparative slowdown in activity, as focus shifted away from stadiums and tourism infrastructure to housing, roads and mixed-use developments. The construction sector – supported by the Infrastructure Master Plan, which includes 114 projects in education, housing and transport – is thus expected to see annual growth of 4.7% from 2013-16, providing for a better long-term outlook.

Post-Can 

The post-CAN period was characterised by a design and conception phase, after which a string of public calls for bids were issued and contracts signed. However, the lull since the CAN is now over, and large construction companies are ramping up for a wide range of projects. The state continues to play a central role, predominantly through the National Public Works Agency (Agence Nationale des Grands Travaux, ANGT), and publicly funded developments account for a large percentage of the ongoing activity. There are certainly challenges – timely payment, maintenance costs, input prices, and access to land and credit – not unlike those found in most African emerging markets, but it hardly seems to have slowed the sector down: scaffolding and building sites litter the streets of Libreville.

Funding

Gabon, which has one of the highest per capita GDP levels in Africa and a very liquid banking sector (see Banking chapter), has concentrated funding on infrastructure in recent years, not only in advance of the CAN – which saw upgrades to motorways, hotels and utility networks – but also as part of the government’s broader push to diversify the economy through its primary development strategy, Emerging Gabon (see Economy chapter). The state also seeks to channel inbound capital into the sector: according to the African Development Bank (AfDB), 40% of foreign investment is aimed at developing infrastructure, including railways and airports.

International organisations have a vital role to play as well. For example, ANGT is currently working closely with the US engineering firm Bechtel to develop its Infrastructure Master Plan. Bechtel and Gabon agreed in 2012 to collaborate on this plan, set up the ANGT, and help manage various projects in transport, education and housing. The French Agency for Development (Agence Française de Développement, AFD) helps, alongside the EU, with water conveyance and city planning in both Libreville and Port-Gentil, while the AfDB has granted a $106.1m loan for the Ndende-Dolisie road project.

Meanwhile, Gabon signed a $500m deal with Swiss-operated Gunvor to distribute refined oil products across West Africa. In education, the government will work closely with China’s Aviation Industry Corporation (AVIC) to build three vocational institutions in Libreville, Franceville and Port-Gentil for $34m each. China’s Eximbank will finance the project.

ANGT

The ANGT is perhaps the single most crucial actor in Gabon’s construction and public works sector. The scope of Bechtel’s role spans overseeing the ANGT, planning infrastructure projects, and managing construction and staffing. The ANGT, which has grappled with timely payments in recent years (a challenge across the public sector), has since its establishment in 2010 carried out an impressive number of tenders and projects, ranging from motorways to mixed-use developments.

The contracting process has also become more rigorous since 2012. The general manager of Acciona Infraestructuras Gabon, Eduardo Cejuela Antero, told OBG that call for bids standards had improved in recent years and that many aspects of the firm’s work are much more organised and normalised, for instance risk prevention on construction sites.

“Every public contract is prepared and issued by the ANGT, although they are subsequently signed by a number of other public agencies,” Thierry Boussillon, the deputy director-general of the ANGT, told OBG. “During the tender process, a technical and financial evaluation is undertaken. The selection criteria are given in the tender document to ensure the transparency of evaluation methodology. The technical scoring is key to ensure Gabon gets the best quality and product.”

The extensive sign-off process has led to delays for tenders in some cases, however. To facilitate the process, there was a need to improve relations between the ministries and the ANGT. There has been a refocusing to consider the ANGT as more of a technical operator, a construction supervisor rather than a central, all-powerful institution.

The establishment of the Public Procurement Regulatory Agency (Agence de Régulation des Marchés Publics, ARMP) illustrates a broader effort to bring clarity and rigour to the construction sector. There was a need for a coherent and comprehensive approach, and the ARMP is expected to help in this regard by streamlining the procurement process and alleviating some of the difficulties private sector players have experienced with the awarding of public contracts and payment schedules.

It is important that the government’s construction programmes are efficiently managed to minimise waste and maximise benefits to the economy, especially considering the contribution of the construction sector to Gabon’s overall GDP.

Land Access

The ANGT is far from the only agency involved in the sector, however. In a bid to improve the construction process and facilitate development, the government has sought to streamline bureaucracy in the sector, particularly in terms of acquiring land and permitting – two major challenges that hinder activity in other African emerging markets.

The creation in 2011 of the National Agency for Urban Planning, Topographical Works and Land Registry (Agence Nationale de l’Urbanisme des Travaux Topographiques et du Cadastre, ANUTTC) and the National Housing Council (Conseil National de l’ Habitat, CNH) played a significant role in this regard. The two institutions also received a three-year, CFA100bn (€152.4m) loan from local banks to finance building projects nationwide. The ANUTTC is tasked with supervising all real estate projects, transferring land titles, facilitating purchases and maintaining the national land registry. Meanwhile, the CNH includes both public and private sector representatives to design and implement Gabon’s housing policies.

Room for Improvement

The new agencies have helped to reduce turnaround times and simplify procedures. In 2014 Gabon jumped nearly 40 places in the construction permits category of the World Bank’s “Doing Business” ranking to 71st. There is still room for improvement, however.

Philippe Chandezon, director-general of real estate agency BICP, said, “There is a project for land titles to be acquired in three months, although this seems ambitious given that the current process takes at least three years, with red tape including a residence permit, partitioning, official norms and so on.”

Illegal land use and squatting, as in many countries in the region, is a challenge and can slow development, although the reorganisation of the Special Brigades for Urbanism and Construction (Brigades Speciales d’Urbanisme et de la Construction, BSUC), a government agency that should make it easier to handle squatters, but the ambiguity of illegal occupation of space makes this task challenging.

Payments

Given the state’s role in commissioning and financing a number of large-scale projects, bureaucratic slowdowns in the public sector can have repercussions throughout the entire industry. This can be seen in the extended timelines that are sometimes required for project preparation and execution for public sector investments – a feature found in most markets – but also in terms of payment turnaround.

The risk of non-payment is low, however – a rarity in Central Africa. Overall about 70% of the contracts depend on the government. Although most state contracts mandate payment in full at the completion of every step of the construction process, with a 90-day maximum delay, payments usually take far longer. In the first quarter of 2014, for example, only a handful of payments were made, due to a state-imposed freeze caused primarily by a Treasury audit. Because these payment delays are not due to underlying structural problems, companies acknowledge that they will eventually receive their money, as indeed was the case in 2014. The ANGT received a CFA50bn (€76m) allocation in April 2014 to be distributed to contractors. The delays have had an impact on contractors’ balance sheets, and in some cases have stalled projects, although larger companies have been able to source funds to continue work while awaiting payment.

The government is aware of the issue and has been working to address it. “The ANGT regularly conducts both internal and external audits,” Boussillon told OBG. He added, “To reduce the delays in payment, the ANGT works in cooperation with Bechtel to prioritise approval and execute the transfers.”

Workforce

While Gabon’s small population can sometimes be an advantage, giving the country higher per capita income levels than neighbouring states and ensuring that public spending is more focused, for example, it also has its drawbacks. For labour-intensive sectors like construction, employment costs are a challenge, in part because of the limited supply of qualified workers. Antero of Acciona told OBG, “It is very difficult to find qualified labour, which makes it hard to meet local content requirements under the Gabonisation policy.” There are not enough skilled workers to cater to all of the current projects, resulting in limited competition and fuelling wage inflation. According to industry experts, a bricklayer or a carpenter who was paid CFA8000 (€12) per day two or three years ago can now earn CFA12,000 (€18). In addition, the state sets a comparatively high minimum monthly wage in relation to the rest of the region, at CFA150,000 (€225). The cost of labour is also affected by the state’s Gabonisation policy. Since 2012, a minimum of three-quarters of a company’s workforce has had to be Gabonese. The quota has now been raised to 90%, which has exacerbated the situation, tightening the shortage of workers and increasing salary costs.

Construction Materials

Gabon’s construction boom requires many inputs, most notably cement. Local cement production is dominated by Cimgabon, which operates an integrated cement plant in Ntoum near the main quarry and has grinding plants in both Owendo and Franceville. Since 2000 it had been jointly owned by Germany’s Heidelberg (70%) and the Gabonese state (30%), although Heidelberg’s stake has since been sold to Moroccan-based Ciments de l’Afrique (CIMAF).

Cimgabon used to have a monopoly on sales in the local cement market, but in recent years Chinese imports have taken a growing share to meet demand in the lead-up to the CAN. A slowdown in global demand and overcapacity in China has helped to bring down the prices of Chinese imports, although Customs duties that are equivalent to some 40% of the price mitigates some of the cost differential.

New domestic production will likely help lower costs further with a Moroccan-backed investment of €30m in the long-scheduled Owendo cement plant. The project is expected to be completed within 18 months, and will also be run by CIMAF. The entry of the new competitor was one reason for Heidelberg’s decision to sell its shares in Cimgabon to CIMAF in May 2014, and CIMAF will operate Cimgabon’s facilities in Ntoum, Owendo and Franceville.

Supplies of sand have become more limited as the state enhances environmental regulations, with new rules related to the Green Gabon plan dramatically reducing the extraction area. Sablières d’Owendo lost its extraction permit and many other smaller sand quarries have shut down.

Roads

Roads are the main means of transit and transport and can have a major impact on productivity and output. As a result, the sector is receiving much attention, with new developments extending the network between population centres and more remote outposts, including mining and logging areas. Supervised by the ANGT, these works include the 28-km PK12-Ntoum section, stretching from 12 km after Libreville to Ntoum; the Ntoum-Nsile road (65 km); and a road from Koumameyong to Booué (40 km).

Among the most prominent projects is the PortGentil to Omboue connection, which is being financed by the Road Fund, the institution responsible for road maintenance and development. When completed, the project will provide the first leg of a ground link between Libreville and Port-Gentil, the centre of the country’s hydrocarbons industry and until now linked only by sea and by air.

Gabon’s coastal terrain makes the project challenging – the road is designed to cross the swamps of the Ogooué River estuary and area around Nkomi Lake, requiring the construction of two bridges totalling 12.5 km and 141 culverts.

China Road and Bridge Corporation (CRBC) has signed an engineering, procurement and construction (EPC) contract with the Gabonese government for a 93-km segment and bridges worth a total of some $663m. It is the country’s largest non-rail capital construction project and will eventually connect Port-Gentil to the inland highway network.

Rural Connectivity

Additional projects focus on improving rural connectivity and using departmental roads to link the country’s provincial capitals, such as the 142-km Mikouyi-Carrefour Leroy road segment. This will link the Route Nationale 3, the only connection to the provincial capital HautOgooué and the country’s third-largest city, Franceville, to Libreville.

Another challenge is the lack of maintenance after completion. In four years, 768 km of roads have been paved, but many are already showing signs of deterioration. The government estimates that only 20% of surfaced roads are in good condition, partly due to overloaded trucks and poor-quality construction.

Transport Projects

As part of Gabon’s diversification drive, capital is being allocated to other transport projects to help reduce shipping costs and improve domestic and cross-border circulation. The deep-sea port of Mayumba, intended to supplement Port-Gentil’s existing deep-sea terminal, is one such project. While a planned Lambaréné river port was cancelled, other initiatives include expansion of the Port of Owendo, which entails the construction of a new terminal and quay extension, an investment totalling $138.6m that will be carried out under the supervision of Gabon Port Management.

The aviation sector is also receiving something of a boost. The $60m expansion of Port-Gentil airport – intended to increase the frequency of direct international flights – is currently ongoing. The runway has been extended and improvements to the terminal buildings are also planned. In addition, a new airport in Cap Esterias is also under consideration.

Urban Development

Smaller projects are affecting urban mobility and zoning in Libreville, which has traditionally been reliant on a handful of primary transit corridors, prone to congestion during peak hours, and has been subject to unlicensed building, straining infrastructure. The southern part of the capital city attracts most of its population, but further development is made difficult and expensive because of swamps, while the north of the city is made up of forests and national parks and requires a balance between urban development and the preservation of the environment.

The existing urban plan was formulated in 1977 and is overdue for reform. As a result, the city has compiled a plan to channel development to secondary cities, including initially the three cities of Booué, Mayumba and Mimongo, to be followed later on by similar master-plan developments in Ndédé, Bitam, Gamba and Lastourville. As soon as approval has been given, extensive efforts in terms of urban development and planning are expected to take place.

Ongoing Projects

The capital city seems to be one big construction site at present: India-based Entraco is working on the Omar Bongo Stadium, while Eiffage is about to start work on the annex of the National Assembly, a $100m project. China Harbour Engineering Company and the ANGT are collaborating on a project that includes the transformation, expansion and development of the Port-Mole area in Libreville, dredging land from the sea by building massive embankments. The CFA59bn (€88.5m) mixed-use project expands over 44 ha and includes leisure facilities as well as residences and commercial offices. A second phase, including the redevelopment of Triumphal Boulevard, is yet to be launched.

Utility Works

Construction is also slated for the utility networks. The power sector is seeing a wave of investment, including the roughly $400m, 160-MW Grand Poubara Dam and the $160m, 46-MW Chutes de l’Impératrice hydroelectric plant (see Energy chapter). The country’s water systems are also due for an overhaul. A general technical audit of the water network – owned by the state but operated by Veolia subsidiary Société d’Energie et Eau du Gabon, – is under way with the aim of detecting and fixing leakages and improving overall distribution. Demand on the network has exceeded initial expectations, necessitating the improvements.

A third water pipeline between Libreville and Ntoum is also under way, managed by Sobea Gabon, a subsidiary of French conglomerate Vinci Construction. Additional initiatives, funded in part by the AFD and the EU, are researching options for improving water conveyance in Libreville and Port-Gentil, but settlement issues may be a hurdle: for instance, in the Bassin du Gué Gué 2500 people need to be rehoused as the region is prone to flooding.

Special Economic Zones

New special economic zones (SEZs) are also driving construction on industrial land. Singapore’s Olam and the government are developing the Nkok SEZ, a zone outside of Libreville for timber processing and manufacturing. Roughly 60 companies have announced plans for tenancy (see Industry & Agriculture chapter).

Also present in the Port-Gentil SEZ, Olam is part of a project to construct an ammonia-based fertiliser plant that is being carried out by the Gabon Fertiliser Company (GFC), a joint venture between Olam and the state. India’s Abhijeet Group acquired 40 ha in the Nkok SEZ to develop a manganese plant and an associated gas power plant. The facility will transform manganese from Okondja, supplied by Australian group BHP Billiton.

Outlook

Looking ahead, Gabon’s construction sector has plenty of work to carry out. Following the initial slowdown after the CAN, the sector’s focus has shifted towards infrastructure projects in transport, industry and housing. Foreign partnerships will be key, arguably the most important of which is the one between the ANGT and Bechtel, which provides oversight of the public works agency and helps supervise large infrastructure projects. International partnerships to build roads and other basic needs will also be crucial to the sector’s growth going forward.

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The Report: Gabon 2014

Construction & Real Estate chapter from The Report: Gabon 2014

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