Emerging Gabon Hinges on Services, Industry and the EnvironmentPublished: June 06, 2012 in Knowledge@Wharton
Gabon, on the western coast of Africa, is one of the stable regimes in the continent, and leaders there have a vision of progress based on being both business- and environment-friendly. Liban Soleman is the president's chief of staff of the government of Gabon.
In this interview with Knowledge@Wharton, Soleman says there is enormous opportunity for investors in Gabon, and in Africa as a whole. Those who are interested only in exploiting natural resources, however, will meet with an unresponsive government and administration, he adds.
An edited transcript of the conversation follows.
Knowledge@Wharton: I'd like to start by chatting a little bit about the banking situation in Gabon. I've heard that in Africa, only 20% of the families have bank accounts. What's the situation in Gabon?
Liban Soleman: Particularly for Gabon, the situation is exactly as you stated. The banking system is regulated within a regional regulatory framework that's linked with COBAC [La Commission Bancaire de l'Afrique Centrale]. This is the banking commission that has very rigid regulation, which is why some countries in Africa survived the economic recession. We have a huge challenge with what they call "numerization planning" -- registration of people. This has not been adequately done. Therefore, the link between databases of the people and families and the banking system is not directly correlated.
Mobile banking is not quite developed in Gabon because of the regulatory framework and the fact that telecom operators have not been granted a 3G license. But the government is preparing a strategy to utilize this to bring services closer to the people. And mobile banking is one option, even though it has its challenges.
Knowledge@Wharton: Right. Let's explore that in a little more detail, because I know that in places like Kenya, mobile banking has taken off in quite a big way. They have services like M-Pesa and M-Kesho. When do you think mobile banking will be ready for prime time in Gabon?
Soleman: Kenya is one example of mobile banking in Africa. The example is so strong that nobody mentions the Somali experience. Somalia has absolutely no government and 100% of the banking is done through mobile banking. So you have a whole economy that is structured on people sending money from overseas and delivering it via the cell phone. There are a lot of problems with mobile banking. Kenya had a competitive advantage. It had a high penetration in wireless technology -- mobile phones.
If you look at Gabon, [people know only] simple dialing; they haven't mastered everything that goes with value-added services with cell phones. Within the next two years, there will be an explosion. Gabon is actually a pilot model because we have a very small population. And we're looking for solutions. That's why we are exploring mobile banking; because you have a country the size of Colorado, with 1.6 million people who are highly dispersed. Sometimes the problem is: "Is it justifiable or economically viable for a company to bring wireless technology to a village with 1,000 people?"
Knowledge@Wharton: Let's talk a little about the overall economic strategy for development that President Bongo Ondimba has put together for Gabon and your role. Can you comment about how new, innovative services like mobile banking might fit into the overall strategy?
Soleman: Yes, absolutely. His Excellency President Ali Bongo Ondimba was elected upon a [platform] that [says], "See the future with trust, with hope." In this program, he metaphorically described what Gabon's social and economic strategy would be, as well as the cultural and other components that go with it. The metaphor is a house, where you have the foundation, which is based on competition, a business environment, human capital and infrastructure. And then on these you have three pillars -- the Gabon of services, the industrial Gabon and green Gabon. The third pillar is green, which is based on the fact that the country is part of the Congo Basin, which is the second-largest contiguous forest in the world and the most bio-diverse one. This is the general strategy of President Ali Bongo.
When you go into the details of the pillars, mobile banking is in the Gabon of services. The government of Gabon has realized that you need to cut down on government staffing, which is exaggerated in Africa because it's one way of creating employment. The only way to [cut down on staffing] is to develop a service industry where even government services to citizens are delivered via private mechanisms.
This is what the general strategy is in Gabon. The objective is to reach double-digit growth by 2020. The way to do that is to optimize the Gabon of services. You have industrial Gabon, which is based on the fact that Gabon has natural resources that it doesn't transform locally. It's entirely exported. You have manganese oil, timber and so many different mines. And then you have Gabon Vert, which is the environmental component.
Knowledge@Wharton: What role do you think south-south cooperation (the exchange of resources and expertise between developing countries) will play in not just Gabon, but all of Africa?
Soleman: I think that the future of the world is based on the new concepts of partnerships and the complexity of public-private or country-to-country partnership. In Gabon, we have had a very positive experience that happened in the past two years with our aggressive foreign direct investment (FDI) strategy. When you have a government-to-government relationship, it's based on economic interests beyond political interests. We strongly believe that south-south partnership is the future. It is a relationship where there's no teacher and student. It's a peer-to-peer relationship where nobody is schooling anybody because the circumstances are different.
Knowledge@Wharton: Give me an example of such partnerships and how they might differ from other kinds of partnerships.
Soleman: Look at what we did in Gabon. We have a very strong partnership with Singapore where our president met the prime minister and President of Singapore S.R. Nathan. The whole concept was to transfer know-how and how to make a business environment that will attract FDI. We had a strategic partnership with a company called Olam. There were government-to-government bilateral relationships that then got down to a lower level between the government of Gabon and Olam International. We looked for an economically viable model that would work. It concluded in two huge contracts, a total of US$5.2 billion in FDI, which is more than what Gabon has received in FDI outside the oil sector in the past 42 years.
We've beaten the record in Sub-Saharan Africa due to that strategy of south-south partnership. And the whole concept, beyond the fact that it's south-south, is that you look at where growth is. Emerging countries that have emerged now that are looking for ways to use their skills and synergies to deploy in new grounds like Africa.
Knowledge@Wharton: Let's talk a little bit about China's strategy in Africa and perhaps in Gabon.
Soleman: China's model is to develop competitive infrastructure. It was an alternative for governments to meet their mission of developing infrastructure. But there is no economic model behind it. When you look at FDI and public-private partnerships, investors will go where there is economic viability.... And they're looking for sustainability and competitive advantages.
Knowledge@Wharton: You were involved in developing a partnership with the Indian Tata group. Could you tell us a little bit about that? And how India's approach differs from China's?
Soleman: India's approach is based on strong international companies that are based in India, that reach their maturity in India and that are now exploring the world. You look at a company like the Tatas, it's a global player based on Indian resources.
We looked at [the Singapore deal] from the view that Olam is developing palm. Why did we choose to do palm in Gabon? It's because we know that we're on the equator. That gives us a competitive advantage even though we don't have the human resource component. The rainy season mechanism in Gabon allows you to have six crops of palm oil, which makes 25 tons per hectare compared to 16 or 17 in neighboring Cameroon and 19 in Southeast Asia.
But in order to develop an agricultural sector, you need to have fertilizer. A urea plant is actually linked to the Olam project. This will have economies of scale; it will export to the sub-region. We know that agriculture is the next big step for Africa. We created a special economic zone because the main problem in Africa is the slow administration, and people who are not too open-minded because they have the colonial approach to administration. Making the business environment friendly also makes people feel comfortable.
Knowledge@Wharton: Interesting. Now, what are some of the principal misconceptions you think international investors have about investing in Africa? And what would be a response to them?
Soleman: It's a complex question because it has a complex answer. People look at Africa as one place.
Knowledge@Wharton: One unit.
Soleman: Yeah, it is the monolithic approach. But the reality is that Africa is as complex as the world. There's a world in Africa. You have more than 50 countries. Just in Gabon we have 57 ethnic groups. We have 56 dialects, languages. That means the people are only connected by the language that was brought by the French. You have countries speaking English. You have different regions, different currencies, different cultures and different education systems. In Gabon, most of the people are educated in France. You go to Kenya or East Africa, people are educated in the U.K.
A second thing is the business environment in Africa can be easy just as it can be complex. I have a simple way of looking at it. When an investor comes, I say, "Africa is a continent where if you want to do complex things, they are simple to do because of the ambition of the Africans. But if you want to do simple things, they become complex to do. So you have to gauge your approach."
If I were to give advice, I would say that when you come to a country, first identify who the key decision-maker is. Don't go and talk to some random person who is going to take you to [another] random person because you're actually facilitating the environment for corruption. Use your embassy. Secondly, when you go to decision-makers, don't school, don't tell them. [Don't] give them a lesson on how things are done in the Western world, because they're developing their own model. They've seen where the Western world failed and where it succeeded.
Knowledge@Wharton: What do you think are the principal opportunities for international investors who may be interested in investing in Gabon and other parts of Africa?
Soleman: There is a lot of investment possible in Africa, if you come with the right approach and you go into sectors that are not already mature. If you come to Gabon and talk about oil or mining, the government is very protective. But if you propose business projects that don't exist in the country but are needed in the country, the administration will assist you and nurture you.
There's a lot of opportunity in small and medium businesses in Africa, in non-traditional [sectors], in agriculture, tourism, service industries, telecommunication and telecommunication-based services. There's a lot of opportunity in industrial processing.
Knowledge@Wharton: That's very interesting. You described a lot of opportunities. What are some of the principal risks that international investors should be aware of? And what is being done to address those risks?
Soleman: There are a lot of countries -- Rwanda, Ghana, Gabon, Morocco -- that have stable political regimes. I would suggest you look for stability in the regime of the country where you're going. The second thing you should look into is the executive, the ones that hold the executive component of the power structure in the country. Since Africa is a new market, governments are very receptive to innovation. So if you bring in a project or a business opportunity that meets the criteria that we have described before, you will have a government that will help you. The risks [come if] you don't deal with the right person, the right decision-maker. You have a lot of intermediaries. Then you end up being lost somewhere and frustrated. So a lot of people criticize Africa. But they have never met the real Africa. They dealt through a whole army of intermediaries.
Knowledge@Wharton: How did you become the president's chief of staff in Gabon?
Soleman: The president's grace. I cannot take credit for it. I know that people tell me I work really hard. I'm motivated. I'm positive. I look, you know, with an open mind on things. I'm always open to innovation. And I think the president needed that. It's a balance between the wisdom in Africa. We talk about the wisdom of our parents and our ancestors as well as the dynamic component of youth. I think it's that equilibrium that will make Africa what it expects to be.