The Economy & History of Gabon
A formerly family-run petrostate in Central Africa that's running out of oil and trying to go green
Gabon is a Central African country with 2.3M people, 85% of the nation is forest. Its population comprises various tribes including the Fang, found in Cameroon and Equatorial Guinea as well, along with the Myene and Ogooue peoples. Notably, 80% of the country is urbanized, with a majority—60%—residing in the capital city of Libreville and Port-Gentil.
Gabon is a sparsely populated petrostate that has never had a successful coups until August 30th, 2023 due to French protection (many coups have been tried: 1964, 1990, 2016, 2019). While it calls itself a democracy, Gabon is really a “Lineage Autocracy” - the recently deposed president is the son of the previous president who ran the country for 42 years.
Gabon is a member of OPEC (Organization of Petroleum Exporting Countries) and is one of the few Sub-Saharan African countries (Besides Botswana, Namibia, South Africa, & Equatorial Guinea) that is deemed upper-middle income by the IMF & World Bank (World Bank’s definition is the average yearly income for a person is between $4256 to $13,205 USD. So Gabon’s ranking is in the same World Bank rank as like Turkey, Malaysia, Brazil, and China) and exceeds several non-EU, eastern European countries with similar population sizes like Belarus, Albania, and Moldova.
Moreover, Gabon boasts nearly universal access to electricity, surpassing South Africa and much of Sub-Saharan Africa in this vital aspect of development.
Gabon’s relative success comes from its massive crude oil reserves relative to its population. Gabon’s crude oil reserves per capita is larger than Angola, Nigeria, and Ghana’s combined simply because Gabon has a lot of oil (318M cubic feet) for 2.3M people while Angola and Ghana’s population is ~30M, and Nigeria has 220M. Interestingly, Libya has more oil reserves per capita than Gabon, Angola, Nigeria, and Ghana combined.
While Gabon has achieved notable progress within the context of Sub-Saharan Africa, the nation grapples with persistent challenges. Notably, a military coup on August 30th, 2023, cast a shadow on Gabon's journey, with underlying issues including:
1. Economic inequality: 33% of Gabon lives under Gabon’s national poverty line. In Gabon,10% of the population earns 43% of the national income, making Gabon between Canada and American inequality. Also, the nation’s wealth inequality reports the top 10% owns nearly 60% of the total wealth.
Here’s the Income distribution expressed in USD and CFA franc:
The significant income disparity is rooted in the Bongo regime, which governed Gabon for 56 years prior to the coup. This regime established a clientelist, kleptocratic system where multinational oil companies such as Perenco, Shell, and TotalEnergies and pay rents to the Gabon’s government owned oil corporation. This government owned firm is effectively controlled and siphoned by the Bongo family and his clique. In 2018, the Bongo family launched an anti-corruption campaign called “Operation Mamba” and “Operation Scorpion” which largely replaced bureaucrats and administrators with other Bongo family members.
Youth Unemployment: One of Gabon’s biggest issues, like South Africa and Botswana, is tackling Gabon’s massive youth unemployment issue. 37% of youth(ages 15-24) are unemployed as of 2022.
Gabon depends on oil and selling manganese to grow its economy.
The problem with depending on commodities is that their price is very volatile, take a look an oil prices below:
Gabon’s income per capita is dependent on oil prices. Gabon was growing from 1960-1981, during the oil nationalization wave when developing countries were nationalizing their oil wealth from Western Oil majors. Gabonese inflation adjusted incomes peaked in 1981. However, the early 1980s recession in the West & Japan, prompted by Western nations’ central banks raising interest rates, triggered an oil demand and priceplunge, African countries suffered capital flight, Gabon’s government budget fell & had debt issues, and Gabonese incomes suffered. Gabon took 6 IMF loans between 1980-2000 which came with austerity measures. The 2000-2014 China-fueled commodity boom raised oil prices and Gabonese incomes. But post 2014, with Chinese reorganization of their economy from the property price cooling, and the shale revolution, oil prices declined which caused a decline in Gabonese incomes again. Below you will see the chart for Gabonese incomes adjusted for inflation in December 2022 US dollars.
Pre Colonialist & Colonialist Era (1839-1960), Super quick
A long time ago, like most countries in Central Africa, it was populated by the dwarf pygmy people until the Bantu people from Nigeria/Cameroon migrated there around the 14th century. When the Portuguese landed in 1470, they called the place “Gabao” which means “cloak”, which is what the estuary of a river near Libreville looks like.
Mpongwe rulers unknowingly sign away their land to the French in 1839. When French colonized the whole territory, “Gabao” was named “Gabon”. By 1910, Gabon became part of French Equatorial Africa, and by 1945, it was part of the French Community, a neo-colonial program. It was during this time where the French created its currency for French West & Central Africa and expanded public investment in the infrastructure, healthcare, oil exploration, and education. By 1958, Gabon votes to be a free republic, Gabon and other Francophone countries (except Guinea) voluntarily stayed in the French Community. By 1960 Gabon received independence like many other African nations did. However, the first president Leon M’ba did not want independence. He actually lobbied to make Gabon an overseas territory, but he failed to remain a colony. Despite failing to stay a colony, President Leon made sure that Gabon would be a deep appendage of France.
Leon M’ba (1960-1967)
Leon M’ba, the 1st President of Gabon, initially wanted democracy, but quickly realized the Gabonese were too tribal for democracy to be effective. He quickly became authoritarian who arrested several ministers a few months in his tenure, banned press & political opposition, and was sycophantic to France.
The country was initially dependent on selling wood, but when it starting extracted oil, manganese, and uranium in the 1960s, Gabon has massively increased its living standards. French petro-firms like Total came pouring in, rapidly transforming Gabon to be the 4th biggest crude oil exporter on the continent and a major oil supplier to France. If you were ever curious how France became a leader in nuclear power, Gabon is a big contributor.
In 1964, the Gabonese military attempted to overthrow Leon for dissolving the lower house of parliament, but the French crushed the Gabonese military to keep Leon in power, solidifying a new relationship between the Gabonese President, French business, and the French government. This led to French military presence and exclusive economic privileges for French firms (e.g. exclusive rights to build major infrastructure in Gabon), all in exchange for protection from potential coups.
When oil prices soar, the country’s income from oil exports also increases. Oil companies in Gabon are mainly owned by the government firm, Gabon Oil Company (GOC). GOC holds a majority stake (>50% ownership) in most of the country’s oil production. GOC plays the “oil gatekeeper”, managing Gabon’s oil resources and serves as the nation’s oil ambassador. Foreign oil giants like French Perenco & TotalEnergies and British Shell were forced to establish subsidiaries in Gabon if they wanted to drill oil - Perenco Gabon, Total Energies Gabon, and Shell Gabon are all partially owned by Gabon. Who says Africans only know exploitation and can’t negotiate deals?
This means when oil prices soar and oil firms in Gabon rake in profits, Gabon also benefits. Oil export revenue is taxed and oil profits are paid to Gabon as dividends, providing more revenue for the Gabon’s family & inner clique and money to build schools, hospitals, roads, and pay teachers. Unfortunately, Gabon's heavy dependence on its oil industry could spell disaster, as some analysts predict the nation's oil could run dry by 2025. Gabon is trying to plan for a post oil scenario.
Nationalizing oil is a two-sided coin: oil revenues bring prosperity but also it’s super easy for state officials to steal the money for themselves. This had made Gabon a kleptocratic nation. In contrast, in U.S, it’s nearly impossible for state officials to steal profits from a private oil firm like Exxon Mobil. The only way the government can take revenue from it is through corporate taxes, but Exxon tries it’s best (very well in fact) to legally reduce its tax liability. In 2021, Exxon Mobil made $276B in revenue, paid $40B in all taxes & duties(only $7B to U.S. Government),and its earnings after taxes & expenses was $23B. In America, corruption is fueled by lobbying instead of siphoning funds from government owned enterprises.
In 1967, M’ba died, and then an even more autocratic and Francophile took office: his VP, Omar Bongo Ondimba.
Omar Bongo (1967-2009)
Bongo ruled for 42 years, the longest non-monarchial ruler of any country in world history until dying from a heart attack. He quickly made Gabon a one-party state since he noticed Gabonese democracy dissolved into regionalism & tribalism. He improved the lives of his people, mainly his clique, while being highly corrupt (he owns 33 luxury properties in Paris and Nice worth a market value of $190M). Many of French Total Energies executives in their subsidiary, Elf, have been jailed for sending millions of euros to Bongo’s secret bank accounts.
French President Charles De Gaulle and successive Presidents would provide Gabon foreign investment and the Bongo family military support, and in return, Gabon would remain a French ally against the Soviet Union. Gabon would also be a base for French espionage in Africa. Because Bongo made government owned enterprises that we largely under his control, Bongo, his family, and his clique would be the biggest beneficiaries. Bongo also allied himself with anti-western forces, like Muammar Gaddafi of Libya. Gaddafi persuaded Bongo to Islam and Albert-Bernard Bongo changed his name to Omar Bongo.
By 1973, Gabonese growth exploded due to oil prices rising from OPEC’s embargo on Western countries supporting Israel in the Yom Kippur war and cut production. As a result, oil prices doubled in a couple of months, and Gabon was selling oil to Singapore, Malaysia, South Korea, and other European countries. By 1974, Gabon graduated from low income to lower-middle income. By 1979, due to Iran a major oil producer stopped stopped producing during the Iranian Revolution, oil prices exploded again. Bongo tried to use this opportunity to use oil revenues to expand manufacturing through import substitution. He would use oil profits to subsidize lumber processing, cigarette factories, breweries and other businesses. Most of these businesses collapsed and were inefficient, due to the practice of employing relatives and political mismanagement.
In the mid 1980s, oil prices collapsed and stagnated, Gabon went into a recession and its debt payments became impossible to manage. Gabon earns money in CFA franc (it’s currency) but its debts are issued mainly in US dollars. If demand for oil decreases, then the CFA franc depreciates compared to the dollar, making debt payments seem unpayable. The oil prices declined even more in the 90s due to the Asian financial crisis plummeting Asian oil demand. Oil prices didn’t recover until 2000. Between 1978 to 2000, Gabon borrowed nearly ~$230M from the IMF, IMF borrowing forced Gabon to become a multiparty democracy, reduced government spending, and sell state-owned corporations so Gabon pay its huge debt. Gabon has been failing behind schedule for some privatization.
In 1990, there were riots in Libreville and Port-Gentil. People wanted higher wages since they weren’t rising fast anymore and political freedoms. The riots got so violent that the French brought their military in to protect French firms, French Nationals and Bongo. After the riots, Gabon made many political changes, including allowing elections. In 1994, France devalued the CFA franc which means importing food & goods become more expensive, causing skyrocketing inflation. Bongo maintained power by bribing political opposition. The opposition leader, Pierre Mamboundou was given $21.5 million in hush money.
In the 90s, Bongo closed uranium mines made a Sovereign Wealth Fund in 1998. As of today, it owns nearly $2B in assets under management, with 78% of the portfolio invested in Gabon. By 2000, oil prices soared again, strengthening the CFA franc and making debts more affordable. Also, Bongo changed the constitution so he can run for office indefinitely. By 2004, Bongo opened relations with Chinese firms to extract iron and manganese, giving Gabon another export to profit from.
Ali Bongo (2009-Present)
In 2009, Bongo’s son took over after Omar died. Ali is not the French ass-kisser that his dad and his dad’s predecessor was. He came up with a development plan called “Gabon Emergent”. A plan to diversify Gabon from oil revenue (Gabon still depends on oil). Ali allowed Singapore and India to also make infrastructure deals in Gabon, besides France and joined the British Commonwealth in 2022. To centralize power and remove government bloat & corruption, removed many ministerial positions and reorganized portfolios of bureaus. Unfortunately it was uncovered in 2022, that five of Bongo’s relatives have been charged by France for stealing public funds.
In 2016, he won his election with 49.8 to 48.2 of the vote, but the election was widely perceived as rigged. People rioted by burning the parliament building in Libreville. Failed coups were attempted, in 2016 and 2019.
Climate finance
Bongo was trying use climate finance to find alternative sources of income to finally become a high income nation since oil could wane by 2025 in Gabon.
One of is initiatives is a debt-for-nature swap, in which the Nature Conservancy will reorganize Gabon’s $700M Eurobond debt to fund marine conservation. Nature Conservancy will buy the $700M Eurobonds and then sell debt to Gabon at a lower interest rate with a longer maturity date. The differential between the original bond and the new bond (around $5M) will be used to fund marine conservation for 15 years. Gabon is also creating carbon credits and selling them in the offsets market, where firms get for emitting CO2 and then uses those funds to invest in a project that reduces emissions. Gabon extracts oil, identifies a land for reforestation, auctions off carbon credits to gain funds, and then uses the money to plant trees that will capture CO2 in the atmosphere. Bongo claims that the goal is to use the carbon credit money to develop an eco-tourism industry. Right now the offset market is $1B (as of 2021).
Coup
In August 30th, 2023, he was deposed right after winning re-election which was full of vote rigging.
Conclusion
In conclusion, Gabon's upper-middle income status is largely due to its large natural resources, particularly oil and manganese, relative to its population, and favorable contracts negotiated by its leaders. However, the country suffered from a coup due falling living standards, horrific inequality, lack of accountability of its leaders, and corruption. Despite the past boom in oil prices, Gabon has not reached high-income status yet. The nation must diversify its economy and has attempted to do so through debt-for-nature swaps, carbon credits, and eco-tourism. Hopefully Gabon will evolve from upper-middle income to high income status soon.
Sources are hyperlinked and here are other sources referenced:
https://www.nytimes.com/2022/11/03/climate/gabon-logging-oil-economy.html
https://www.worldbank.org/en/country/gabon/overview
https://www.oecd.org/countries/gabon/1825057.pdf
https://1997-2001.state.gov/issues/economic/trade_reports/africa95/GABON.html
https://www.jstor.org/stable/161015