The continued work to stimulate agricultural investment in Gabon is seen as a critical component of an effort to diversify the economy and reduce dependence on food imports. Despite a fertile climate, abundant annual rainfall and vast expanses of untapped agricultural land, Gabon imports the vast majority of its food needs each year at a cost of around CFA150bn (€225m). The timber industry also contributes roughly 6% of non-hydrocarbons GDP. The government is currently pursuing a two-track investment programme: to encourage agro-industrial projects meant to increase the sector’s contribution to GDP and to support small-scale commercial farms that will boost production for local markets.
Agriculture, animal husbandry and fisheries contributed a combined 3.8% of GDP in 2010, a slight decrease from 4.4% in 2009. Gabon’s five-year food security and agricultural growth programme aims to reach 8% annual sector growth between 2011 and 2015 in an effort to ultimately increase agriculture’s contribution to GDP to 20%. A variety of current and upcoming projects stand to significantly increase sector activity, but growth will likely be slow as new projects take time to develop.
NEW VENTURES: Several new, private sector investment projects are Gabon’s best bet to increase revenue from agricultural production in the medium term. In November 2010, Gabon signed a joint venture with the Singapore-based agricultural supply chain company Olam to ultimately develop 100,000 ha of oil palm plantations in Estuaire Province and Ngouiné Province. The plantation will cover 50,000 ha in its first phase and will entail a total estimated investment of $788m.
In January 2012, Gabon and Olam signed a second agreement to create a rubber plantation and processing plant in the Bitam area in Woleu-Ntem, for a total investment of $183m. The plantation, which will cover a surface area of 28,000 ha, is set to begin in 2013. The first harvest is projected for 2020, and initial output estimates vary between 2 and 2.2 tonnes of natural latex per ha. At full capacity, the plantation is expected to produce 225 tonnes per day. Both operations will be run as joint ventures, a positive sign for the government’s commitment to fostering growth in the sector.
CASH CROPS: Gabon has great potential for cash crops, and a recent wave of foreign investment should significantly scale up production. Gabon’s primary cash crops are rubber, palm oil, coffee, cocoa and sugar. Much of sector revenue stems from lucrative palm and rubber plantations managed by Société d’Investissement pour l’Agriculture Tropicale (SIAT) Gabon, a local subsidiary of the Belgian SIAT group.
The market for palm oil and rubber products has been steadily expanding, and SIAT has invested roughly CFA54bn (€81m) since 2004 to boost its production. The company manages some 7500 ha of palm plantations in Makouké in the northern Moyen-Ogooué province and a palm oil refinery in Lambaréné. SIAT produces roughly 11,000 tonnes of palm oil per year, much of which is marketed locally under the brand Cuisin Or. Palm oil also has the potential to become a major contributor to GDP.
SIAT also manages 9500 ha of rubber plantations in the Woleu-Ntem and Estuaire provinces and produced 22,500 tonnes in 2011, including both natural latex and granulated rubber, which is processed at SIAT’s factory in Mitzic. The company is planning a major investment to increase its own rubber plantations to 30,000 ha in the next 20 years.
Given the country’s favourable climate and high global demand, the government has encouraged local rubber cultivation since the 1980s. Today, there are about 13,000 ha of small-scale plantations in the northern province of Woleu-Ntem. SIAT has been the traditional buyer of artisanal latex for processing and export. Despite a dip in global rubber prices related to the global economic climate and reduced demand from major export markets, rubber sales helped push SIAT’s turnover from CFA32bn (€48m) in 2010 to CFA47bn (€70.5m) in 2011.
COFFEE & COCOA: Gabon also plans to increase cocoa and coffee production. The climate in the north-east and south-east are ideal for the cultivation of cocoa and coffee beans, respectively. The government launched a major effort in 2009 to boost production by local farmers. “While 85% of Gabonese territory is covered by rainforests, the rich land surrounding the forest and its low population density looks promising for developing a stronger agriculture sector,” Jean-Paul Ngoulakia, the managing director of the government assistance agency Caistab, told OBG. “The available arable land and ideal climate in the north-east is perfect for producing cacao, as is the south-east region for coffee production.” Caistab announced 3000 tonnes of coffee and cocoa beans were harvested in 2011, and plans for production of 4000 tonnes in 2012-13.
Caistab is working to improve sector regulation and to provide assistance to farmers. However, given the loose market structure that has prevailed for decades, it will take time to scale up operations. “Even if Gabon develops its cacao and coffee production, it will take time to bridge the gap with countries that have traditional agriculture producers, such as Côte d’Ivoire and Kenya,” Ngoulakia told OBG. “Gabon has so far oriented its development toward the exploitation of natural resources, while these countries focused on industrialising their agricultural production.”
OVERCOMING OBSTACLES: The expansion of palm oil and rubber plantations will require a large trained workforce. Olam expects its rubber plantations will create 6000 direct jobs, while SIAT currently employs 4400 people and it will need to hire an additional 6000 employees as part of its expansion plans.
However, growth may be constricted in the short term by Gabon’s small population size, lack of trained agricultural workers and a reluctance by many with jobs located in the cities to return to the countryside for agricultural work. The sector is also limited by insufficient transport links between production zones and major urban centres. Only 13.7% of the road network is paved. Furthermore, many roads can become impassable during the rainy seasons, which sometimes last for up to eight months of the year.
Plans currently under discussion to create a Special Economic Zone for Agriculture (SEZA) at Franceville may help to respond to these two challenges. The National Agency for Public Works is overseeing plans to construct the 26,000-ha agriculture free zone, which will offer investors a 10-year exemption from income tax, freedom of financial transfers and relaxed restrictions on most foreign workers. Thanks to a favourable climate, the zone will be able to support the cultivation of cash crops as well as fruits, vegetables and staples to be processed locally. In time, the SEZAs will be extended to 65,000 ha, including an 840-ha commercial zone. The full project would entail an investment of €354.25m to be structured as a public-private partnership.
SELF-SUFFICIENCY: Gabon continues to import the majority its food needs (mainly from European producers), and these imports include nearly 100% of locally consumed meat and cereals. The Société Meunière et Avicole du Gabon (SMAG) is the sole importer of cereals and producer of flour on the local market. The government subsidises the price of bread, fixed at CFA125 (€0.19) a baguette, which is a staple of the local diet. SMAG expects to sell 70,000 tonnes of flour in 2012, up from 63,000 tonnes in 2010. Severe capacity bottlenecks at the Port of Owendo around the African Cup of Nations football tournament in early 2012 highlighted the country’s low food storage capacity, as delayed imports threatened to temporarily disrupt the flour supply. In response, SMAG increased its wheat storage capacity in 2012 from 10,800 tonnes to 13,800 tonnes.
SMAG also sells 1300-1400 tonnes of animal feed per month, with the capacity to produce 50,000 tonnes annually. The national market for animal feed is growing rapidly, at 15-20% per year according to SMAG, driven largely by demand from independent breeders. SMAG maintains a chicken farm that now supplies 40% of the egg market, down from 60% a few years ago as independent suppliers have increased the market supply. However, high production costs, including animal feed and manual labour, are an obstacle for independent operators.
SUPPORT FROM THE STATE: While there is significant market potential for fresh chicken and beef, it will be difficult for locally produced meat to be competitive without state support. Eric Chardin, SMAG’s commercial director, told OBG that “production costs are very high in Gabon compared to large chicken production facilities in elsewhere, which makes it more difficult to set up production in the country.”
SIAT Gabon, which is also involved in animal husbandry, manages a 100,000-ha ranch with 7000 head of cattle in Nyanga. The plan is to increase the herd to a self-sustaining level of 25,000 head of cattle and to begin commercialising beef by 2016.
The Gabonese Agricultural Development and Investment Project (Projet de Développement et d’Investissement Agricole au Gabon, PRODIAG), launched in March 2012 with CFA13.2bn (€19.8m) in financing, should also help to increase the share of locally grown food on the market. The programme, funded 80% by the French Development Agency and 20% by the Gabonese government, will be implemented by the Gabonese Development Support Institute (Institut Gabonais d’Appui au Développment, IGAD) and provide land, training and start-up funds for small-scale commercial agriculture nationwide. Through IGAD’s training and support programmes, a total of 1120 farmers have been trained between 2008 and 2011, and total production of fruit, vegetable and staples expanded from 5978 tonnes in 2008 to 8938 tonnes in 2011. While small-scale agriculture may not always be the most efficient choice, it does provide increased employment and increases the amount of local produce available, reducing costly food imports. Indeed, the government’s main goal is to encourage large-scale investments in agro-industry and in programmes targeting villages rather than individual businesses as with the PRODIAG. The former will likely be more efficient in reducing dependence on imported food.
Given the country’s 800 km of coastline, fisheries also have the potential to play a greater role in the sector, both for export and local consumption. However, Gabon’s six-year fisheries agreement with the European Union expired on December 31, 2011 and has not yet been renewed. A lack of progress on the agreement led to the suspension of fishing activity in 2012, with hopes of it beginning again in 2013.
TIMBER: Forestry is a key sector of the Gabonese economy, but it has the potential to play a much greater role in terms of production and trade.
The industry contributes roughly 6% of non-hydrocarbons GDP and is the second-largest employer after the public service, providing up to 20,000 direct and indirect jobs. The government has identified forestry as a key means of increasing value-added industry, which has become a national priority as the state works to reduce its current reliance on revenues derived from hydrocarbons.
In an effort to stimulate the country’s industrial development, the government introduced a nationwide ban on raw timber exports in January 2010, which entered into effect in May 2010, following a four-month grace period that allowed companies to export the remainder of their 2009 stocks. The sector is currently undergoing a complete transformation as companies work to adjust their operations in compliance with the ban. The government’s plan for the sector is ambitious. If successful, it should significantly benefit the country’s overall economy.
Timber is one of Gabon’s most abundant natural resources. Around 85% of the territory, or 22m ha, is covered by rainforest, and 400 different species of wood exist, of which 60 are currently exploited. The most dominant species, Okoumé, represents 25% of total resources. Roughly 17m ha of registered forest are available for exploitation, of which Gabon has licensed 14m ha. Licences fall under three areas: sustainable development forestry concessions ( concessions forestières sous aménagement aurable, CFAD) which account for 4.4m ha of forest, of which 2m ha are Forestry Stewardship Council (FSC) certified; temporary development, exploitation and processing licences (conventions provisoires d’amé- nagement, d’axploitation et de transformation, CPAET), with 8.4m ha; and non-managed forests.
The Ministry of Water and Forests estimates that Gabon has the potential for 4m cu metres of timber production annually. Prior to the export ban, annual production averaged 3m cubic metres, which was primarily exported to Asia and Europe as raw or sawn timber. Forestry sector GDP, excluding sales of timber products, reached CFA55.4bn (€83.1m) in 2010. However, the ministry estimates that the volume of wood exports decreased by 71.6% over the course of 2010, as the new regulations came into effect before local processing capacity could adjust.
SWITCHING GEARS: The sector saw high levels of public and private investment in 2010-11 as companies raced to increase their processing capacity. Approximately 1.6m cu metres of wood were processed for export in 2011, including 337,000 cu metres of sawn wood and 251,000 cu metres of veneer and plywood. However, while the majors were able to survive the export ban, many smaller operators were not. Before 2010, Gabon exported roughly 60% of its raw production, and the removal of this market was a fatal blow for many small producers.
This was compounded by a difficult year in 2009, as many companies saw decreased demand from key export markets in Asia due to the effects of the global economic downturn. Asian economies represented 82% of exports by volume in 2009 and China alone represented 73% of exports, whereas only 15% went to Europe. In 2009, log exports fell 1.1% year-on-year (y-o-y) to 1.63m cu metres, due primarily to reduced demand coming from China.
SMALL BUSINESS: The state has committed itself to supporting small permit holders through the transition period. In December 2010, the government put in place a CFA20bn (€30m) industrialisation support fund, although financing has been slow to arrive. The number of local processing centres is rising as raw timber can no longer be exported abroad for processing, which will expand and revigorate the timber market. The forestry sector’s professional union estimates the number of processing plants rose from 85 in 2010 to 115 in 2012.
Despite a difficult transition period, large-scale public and private investment presents significant opportunities for future growth. The main recent development is the Nkok Special Economic Zone (SEZ), a joint venture with Olam in which the government holds a 40% stake. The zone was created to provide a centre for industrial forestry operations, and 40% of the zone will be dedicated to timber. Nkok is expected to be able to process 1m cu metres of wood per year, and authorities estimate it will ultimately attract $1bn in investment. According to Gagan Gupta, the country head of Olam Gabon, some 85% of lots in the zone are already spoken for, and 62 companies have committed themselves to launching operations there.
The national forestry operator, Société Nationale des Bois du Gabon (SNBG), recently completed the construction of a new wood processing park in Owendo, which should boost the company’s capacity to 250,000 cu metres per year. SNBG began to invest heavily in its processing facilities in 2009 and saw turnover increase by 47% from CFA37.4bn (€56.1m) in 2009 to CFA54.9bn (€82.35m) in 2010. The new park includes new factories – a sawmill, a plant for creating plywood and panels, and a third for veneers and rotary cuts – all of which should be operational by the third quarter of 2012.
The transition to local value-added industry has also required an increase in participation from the private sector and foreign partners. “Since the ban on log exports, many have found it necessary to use knowledge from abroad to help develop sufficient processing capacity,” Serge Ruffin Okana, the director general of SNBG, told OBG. SNBG’s new plants were constructed in partnership with the Italian firm Cremona, which specialises in manufacturing wood-processing tools. SNBG made major purchases of new machinery, including training courses for operators, which should help bring the national workforce up to international standards.
Another key player in the forestry sector, Swiss Precious Woods, also pulled through the transition period by investing in its local processing capacities. The company now operates two sawmills and a moulding plant in Bambidie, as well as a rotary cut factory for Okoumé veneers in Owendo. Precious Woods produced 160,000 cu metres in 2011, down from an average of 200,000 cu metres per year prior to the export ban. The company invested $3.5m in its new hardwood sawmill, which began operating in July 2011 and is expected to reach a final capacity of 1800-2000 cu meters output per month by year-end 2012. In spite of the new processing facility, 2011 sales increased only slightly, rising by 1.7% y-o-y to reach $36.4m; certain exporting difficulties in the Owendo Harbour led to increasing stocks and market prices remained rather below expectations.
INDUSTRY BOTTLENECKS: Gabon is working to overcome persistent logistical obstacles to maximize sector growth. One challenge – a shortage of skilled forestry workers – is being addressed in part by private sector players, thanks to their investments in workforce training. For example, Ecowood, a partner of the Swiss group Haring, has set up the Ecole Supérieur de Bois, a specialised institute that will provide training for technical managers in the forestry sector. Some 200 students are expected to enrol at this training institution, which is slated to open in Booué in 2014 and will be governed by the Ministère d’Enseignement Technique.
The country is also working to improve its domestic and international transport linkages to support growth in the forestry sector. The government and international financial institutions are investing in major road network upgrades, which will substantially reduce travel time in the next two to four years. However, in March 2012 a barge damaged a support pylon of the Kango bridge, a key transport artery for moving timber to Libreville. Traffic will be severely restricted until late 2012, which will likely have a major impact on production.
Gabon also benefits from a strong track record in conservation. Yale University’s 2012 Environmental Performance Index ranked Gabon the 40th country worldwide for the protection of its environment, and the first in sub-Saharan Africa. Gabon was awarded a perfect score for its preservation of forest cover, placing it among the top 20 countries worldwide for forestry conservation.
A growing number of companies have obtained FSC certification, ensuring that forestry activities are performed in a sustainable manner. Gabon is also in negotiations with the European Union regarding Forest Law Enforcement, Governance and Trade (FLEGT) certification. Once negotiations are complete, expected by the end of 2012, a voluntary partnership agreement will require all Gabonese wood products entering the EU to have FLEGT certification, ensuring that the wood was harvested in a manner compliant with the new rules.
OUTLOOK: Companies are still working to recover from the initial impact of the timber export ban, but Gabon’s abundant resources and strong conservation record bode well for the future of the forestry sector. Private investment in both agriculture and forestry is helping to increase local capacity and sector production. An efficient transport network is also need in order to maximise benefits from Gabon’s natural resources. Continued public investment in transport infrastructure will help to accelerate growth in production and exports over the medium term.