Branching out: Efforts are under way to diversify industrial output

The domestic industrial base is small, but with a concerted government strategy intended to leverage the country's sizeable natural endowments towards higher-value-added processing, there is growth potential. Existing capacity is focused in the areas of building materials, food, beverages and limited timber and manganese processing. Currently, domestic consumption remains overwhelmingly dependent on imports.

HIGH PRIORITY: Industrial Gabon – one of the three pillars of the Emerging Gabon national development plan – encourages investments in downstream processing for mining, hydrocarbons, timber and agro-industry. The government also plans to quintuple industry’s share of GDP, currently estimated at 8.2%, by 2025. The Nkok special economic zone (SEZ) being constructed near Libreville plays a key role in this strategy, and is due to be followed by a second heavy-industry zone on Mandji Island near Port-Gentil.

Industrial activity accounted for 7.7% of GDP in 2012 and employed roughly 4% of the labour force – 3% for agribusiness and 1% for other industries – according to the IMF. Overcoming the constraints of a small domestic market by leveraging regional exports and improving the skills base of its labour force will be key to attracting the necessary investment.

INDUSTRIAL GABON: The government’s plan is to leverage growth drivers in key sectors such as building materials, natural resource processing, agro-industry and fisheries over the next seven years, with the goal of establishing thriving economic clusters by 2025. Facilitated by the National Infrastructure Plan that will see total investment of CFA17trn (€25.5bn) over 12 years, the industrial sector is expected to generate 325,000 new jobs, of which two-thirds will be for skilled labour. The development initiative is also expected to support the creation of 13,000 new small and medium-sized enterprises.

While the infrastructure investments in transport, power and communications will be key, the government also intends to expand regional trade agreements to improve access to export markets; strengthen the business climate by streamlining regulations (and establishing one-stop-investment offices); and expand training of its human resources to meet the needs of the new labour market. Sectoral codes, such as the upcoming Mining Law expected by late 2013 and the 2010 ban on unprocessed log exports, will also play a role in mandating local downstream processing in Gabon’s extractive industries.

BUILDING MATERIALS: Following strong demand related to building for the Africa Cup of Nations football tournament in January 2012, demand for materials plateaued in 2012 and 2013 with delays on state infrastructure works. Cement and building material demand usually grows by an annual 3-5%, according to Gabonese cement producer CimGabon.

The Yeshi Group, founded in Côte d’Ivoire, is a major player in Gabon’s building materials industry, as in many francophone markets. Ali Fakih Oboungou, managing director of Yeshi Group’s subsidiary Sotralga, told OBG, “Metal prices in Gabon, especially aluminium, have been stable but still high.” Despite the high costs, Sotralga, a 90:10 joint venture with the government, is the main second-stage aluminium processor in Gabon, importing its raw materials from Cameroon. Yeshi Group also dominates the building materials trade through its Bernabé subsidiary, which also has a 90:10 ownership structure with the government.

In cement, total deregulation of imports in 2006 unleashed cheap imports from China and Vietnam on the only local cement producer CimGabon, a 25:75 joint venture between the government and Germany’s HeidelbergCement through it’s African subsidiary Scancem International. Privatised in 2000, the firm operates a quarry in N’toum and two grinding plants in Franceville and Owendo, selling to large local builders like Acciona and the National Agency for Public Works. Cameroon’s Foberd and China’s Sogex BTP are the primary importers that helped reduce CimGabon’s market share from 50.35% in 2011 to 35% in 2013.

Despite these difficulties, CimGabon agreed on a 900,000 tonnes per year expansion in January 2013, which should allow the firm to export, although regulations protecting local production may be needed. In spite of the new capacity, Morocco’s Ciments d’Afrique announced in June 2013 its intention to invest €30m to build a new 500,000-tonne-per-year cement plant, with the capacity to double production.

FOOD & BEVERAGE: With the country’s food import bill worth some CFA250bn (€375m) in 2012, Gabon’s food producers are investing in more capacity to try to win new customers. France’s Castel Group, which merged in 2011 with l’Société d’Organisation de Management et de Développement des Industries Alimentaires et Agricoles, is one of the largest investors through its sugar subsidiary Sucrerie Africaine du Gabon (SUCAF), flour and egg producer Société Meunière et Avicole du Gabon (SMAG) and brewery Société des Brasseries du Gabon (SOBRAGA).

SUCAF produced 28,650 tonnes of sugar in 2011 from its 4400 ha of sugar cane plantations near Franceville. Meanwhile SMAG meets roughly 70% of local egg consumption with its production of over 40m eggs per year, while it invested CFA2bn (€3m) over the past two years to expand its wheat storage capacity to 13,800 tonnes and to increase its animal feed mill’s capacity to 3 tonnes per hour, to meet growing demand from local cattle-herders. SUCAF has also started selling chicks since 2011 to expand small-scale poultry-raising. SOBRAGA, meanwhile, invested CFA8.7bn (€13.1m) in 2012 to expand the capacity of its Owendo brewery to 9m litres per month.

Société d’Investissement pour l’Agriculture Tropicale (SIAT) Gabon, a subsidiary of the eponymous Belgian firm, meets roughly half of the domestic demand for palm products. The company provides roughly 40% of the 30,000-tonnes-per-year demand for cooking oil and 60% of the 5000-tonnes-per-year demand for detergent soap. Processing a mix of its own palm oil, grown locally, and imports from Ghana and Southeast Asia (pending the ongoing replanting of trees), SIAT Gabon will be able to meet most domestic needs once its new plantations come on-line. The Belgian firm also expects to grow its share of the local beef market from the current 5% to 20% by 2016.

New investments by SFM Africa should also expand local beef supply, while enactment of the government’s Blue Gabon policy aims to develop Gabon’s fisheries industry. In 2013 Morocco’s ANK Investments, in partnership with the government, completed a 500-tonne-per-day cassava starch processing plant in Haut-Ogooué. However, although the company is planting some 20,000 ha of cassava on their adjacent concession, availability of raw cassava has constrained production (see Agriculture chapter).

CLUSTERS: Beyond expanding the locally produced share of its consumption of food and building materials, the Industrial Gabon policy aims to establish 10 economic clusters nationwide by 2025. Three of these will be dedicated to the extractive industries: a manganese cluster in south-eastern Moanda-Franceville, an iron-ore centre adjacent to the planned northeastern Belinga mine, and a hydrocarbons cluster in the traditional oil and gas hub of Port-Gentil.

An additional four clusters will focus on agro-processing: in northern Oyem, central Mouila-Ndendé, Mayumba and south-eastern Lastourville-Koulamoutou. Finally, three diversified clusters will emerge: in Nkok, near Libreville; in Booué; and in Lambaréné, close to the Port-Gentil cluster. By creating synergies in terms of logistics, utilities and the supply chain, these clusters are meant to attract private investment either directly or in partnership with the state.

NKOK: The Nkok cluster will be centred on the Nkok SEZ currently under development. The zone, a 60:40 joint venture between Singapore agricultural conglomerate Olam – which has a large Africa portfolio – and the government, covers a total surface of 1126 ha, split into a first phase of 450 ha and a second of 675 ha. With work launched in August 2010, phase one involves investment of CFA120bn (€180m) for construction of 17 km of roads; 11 km of water pipes and two reservoirs; and an electricity grid receiving power from the new 90-MW Alenakiri plant northeast of Libreville, operational since August 2013.

The zone also includes all necessary soft infrastructure including a one-stop-shop (grouping 14 public administrations), a health clinic, two training centres, and a police and fire station. All infrastructure should be completed by end-2013, while work on a small extension of the adjacent Trans-Gabon Railway to the zone will start in 2014. The zone has 225.56 ha of industrial property, sold at CFA45,000 (€67.50) per sq metre, 17.85 ha of commercial space at CFA55,000 (€82.50) per sq metre and 45.12 ha of residential real estate at CFA60,000 (€90) sq metre. All Nkok investors are meanwhile exempt from corporate tax for 10 years (and benefit from a reduced 10% rate five years thereafter) and are permanently exempt from import duties and value-added tax. Furthermore, the zone offers subsidised rates for water and electricity. Olam also provides unconventional incentives, including 2m ha of forest concessions granted by the state, which can be parcelled out to timber investors.

While the government’s upgrade of the dual carriageway from Libreville is roughly two years behind schedule, Olam has developed alternative means to transport goods to the Owendo industrial port. “Given the delays on the government’s project of building the road to link the Nkok SEZ to Libreville, we built a $15m quay in the zone to allow tenants to transport goods to Libreville seaborne,” Gagan Gupta, Gabon country head of Olam, told OBG.

By June 2013 Olam claims to have sold 80% of the industrial zone, 52% of the commercial and 17% of the residential zone. Investors must pay 25% to secure a space (losing 10% should they pull out), with the remaining 75% in instalments required as factories are built. The zone claims to have sold 62 of the 80 industrial plots available, for total planned investments of $1.7bn. By 2015 Olam expects the current workforce of 2000 will swell to 7000 as factories come on-line.

Roughly 40% of confirmed investors are timber companies, reflecting one of the SEZ’s key focus industries. Eight companies had started construction on their factories in mid-2013, with a further 10 expected to start in the second half of the year. These include timber processor Resurgent Gabon, which has already started production; Compagnie des Bois du Gabon; Timberwolf Tropical Hardwoods; and Malaysian group BSG, which will dry wood and manufacture doors within a 25,000-sq-metre hangar.

The largest committed investment comes from India’s Abhijeet Group, a power and steel firm, which has secured 60,000 sq metres to build an $800m iron-alloy processing facility with annual capacity of 360,000 tonnes of ferro-manganese, 40,000 tonnes of silicomanganese and an associated $400m 300-MW power station. The government has extended a 30-year guarantee for the domestic supply of manganese for the project, presumably leveraging its interests through the Société Equatoriale des Mines (SEM) in ongoing manganese mines. The Indian company had planned to conclude these investments by 2015, although work had yet to start by mid-2013.

FURTHER SEZS: Another SEZ has been planned, starting with a greenfield development for the Port-Gentil cluster, on Mandji Island. Olam will again be the anchor investor, alongside the state and Gabonese private investors. An environmental impact assessment is currently under way, expected by mid-2014. Two key projects will be central to this goal. The first is a $1.3bn ammonium urea fertiliser plant complex. Drawing on a gas gathering facility to be developed by Israel’s Telemania, the government has hopes of productive finds in ongoing exploration for phosphates and potash in southern Gabon. “Gabon is quite unique in that we possess all three ingredients for complex fertiliser production: potash, phosphates and natural gas,” Fabrice Nze-Bekale, CEO of SEM, told OBG.

The Gabon Fertiliser Company’s Project will include a 1.3m-tonne-year granular urea facility, with option to expand to 1.4m tonnes. Development finance institutions like the African Development Bank (AfDB) and the World Bank’s International Finance Corporation have offered to provide funding for the project. With Gabonese fertiliser consumption at a mere 500 tonnes per year according to SIAT, most of the production would be exported to the Gulf of Guinea region (which could absorb between 100,000 and 500,000 tonnes of urea annually in coming years according to Olam) and to key target markets like Brazil.

Olam was expected to fund 62.9% of the plant, alongside Indian firm Tata Chemicals’ 25.1% stake and the government’s 12%. However, in 2013, Olam announced its intention to split part of its stake to a third-party investor, in time for financial close in 2014.

“We are seeking to re-dimension our stake in the Mandji-based fertiliser plant, from 62.9% to below 50% although we still want to be the largest investor,” Olam’s Gupta told OBG.

REFINING: The second project is for a greenfield refinery to replace the aging Société Gabonaise de Raffinage facility, which would triple the current 16,000-barrel-per-day capacity. In July 2012 the government partnered with South Korea’s Samsung Heavy Industries to develop the CFA700bn (€1.05bn) project. In June 2013, the state signed a deal with Swiss-based Gunvor Group to establish a 55%-state-owned joint venture with $500m in financing from the oil trader. The firm will market products from the refinery along the West African coast, one of the fastest-growing fuel markets. With similar tax breaks as in Nkok, the zone is also expected to attract offshore oil and gas contractors and potentially fabrication yards, currently established in Port-Gentil.

Recent delays, however, mean that movement on the Mandji zone is only expected from 2014. The government has also tabled a third SEZ in Franceville for crop farming and processing, and it is seeking anchor investors for the zone as well.

TIMBER: The May 2010 ban on unprocessed log exports has prompted concession-holders to invest in downstream capacity; the number of processing factories rose from 81 in 2009 to 138 in 2013 while employment grew from 4000 to 7000, according to figures from the Office of the President. Availability of logs domestically has been tighter as small loggers reduced production; however, leading investors in the sector including Olam, Société Nationale des Bois du Gabon, Precious Woods, Rougier and Société de Mise en Valeur du Bois have continued to expand their processing capacity (see Forestry chapter).

The Industrial Gabon plan aims to increase yields from 4.5 cu metres per ha to 7.4 cu metres per ha in order to reach production of 1.5m cu metres per year, of which 40% is to be processed locally. The goal is for Gabon to specialise in tropical plywood, with a production aim of 917,000 cu metres per year and third-stage processing of 340,000 cu metres.

The government hopes to support processors through infrastructure upgrades and SEZs like Nkok. Support has also come from donors like the AfDB, which extended €1.5m in funding for a new Wood Industry Bureau to support industrialisation efforts and good governance. While France, China, Malaysia and Lebanon dominated foreign direct investment in Gabon’s timber industry in 2009, according to government data, Gabon’s timber processing is drawing a more diverse crowd. Olam, Gabon’s largest processed wood exporter, reported production of 50,000 cu metres from its two Makokou sawmills in 2012, with an additional 60,000 cu metres processed through contract sawmills. As Gabon develops its local processing capacity, rather than competing purely on unprocessed forestry reserves, the industry will have to keep cost structures competitive with Asian counterparts, while it continues to specialise in niche markets like tropical plywood and third-stage processing.

MINERALS: Gabon is also seeking to leverage its significant mining industry to add value locally, starting with manganese processing. The Ministry of Industry and Mines is also aiming to establish four key mining and metallurgical clusters by 2025, with the first one near Franceville coming on-line in 2013. Local manganese producer Compagnie Minière de l'Ogooué (COMILOG) expects to commercialise the CFA135bn (€202.5m) Moanda Metallurgical Complex by the end of 2013, following minor delays.

The facility, adjacent to the company’s existing manganese mine, consists of a hydro-metallurgical plant and a pyro-metallurgical factory, with annual production capacity of 20,000 tonnes of manganese metal (supplying the steel, aluminium and specialist industries) and 65,000 tonnes of silicomanganese metal (for steel-making). The complex is creating 400 new jobs, while COMILOG has established the Moanda Mining School, with separate mining and metallurgical curricula, in partnership with the Ministry of Education to train some 150 staff per year.

Over the longer run the government expects the cluster to generate some 4300 new jobs once additional investors establish facilities. The Grand Pubara hydroelectric plant, developed by Sinohydro and due on-line in the second half of 2013, is set to power the complex with 160 MW in phase one and 280 MW in phase two. The ministry is encouraging more such projects, aiming to boost manganese production from 3.1m tonnes per year in 2012 to 6.5m tonnes by 2025, with the goal of processing 35% locally. It expects new metallurgical centres to be established in Ndjolé, near Compagnie Industrielle et Commerciale des Mines de Huazhou’s current producing mine, and in Mabounié, alongside Abhijeet’s investment in Nkok.

Gabon also anticipates significant processing associated with the development of the Belinga mine in north-east Gabon. The plan is to develop an “iron-ore city” adjacent to the planned mine, which would process some 50-55% of the expected annual 35mtonne-per-year production into iron-ore pellets for use in oxido-reduction steel-making. The state has also raised the potential for a small steel mill in Port-Gentil, expecting interest from Gulf investors. However the first step will be to attract private investment in the Belinga mine in 2015. Another hopeful project is the Maboumine exploration for rare earths currently under way, 70%-backed by COMILOG, while the processing of gold from four proposed mines, which could produce up to 50 tonnes per year by 2020, is also planned (see Mining overview).

OUTLOOK: The strategy Gabon is employing to attract more value-added processing onshore and increase industrialisation – both to meet domestic needs and expand non-oil exports – has generated significant interest from foreign investors. Close coordination and timely completion of state-run infrastructure projects will be critical to the policy’s success.

Initiatives to improve the availability of skilled labour are already under way, although Gabon may need to revise its immigration policy for unskilled workers in the long run. Developing a set of industries based on timber, minerals and agriculture will ensure a diverse set of exports and insulate Gabon from the volatilities of relying on a single commodity’s price cycle.

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The Report: Gabon 2013

Mining & Industry chapter from The Report: Gabon 2013

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