Gabon Economic Update TRADING AGRICULTURAL COMMODITIES: Reducing Petty Harassment Macroeconomics, Trade and Investment June 2022 Gabon Economic Update TRADING AGRICULTURAL COMMODITIES: Reducing Petty Harassment June 2022 Macroeconomics, Trade and Investment Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment i Table of Contents OVERVIEW................................................................................................................................................................. 1 RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK FOR GABON................................................................ 6 1. Global and Regional Trends............................................................................................................6 2. Gabon’s Economic Recovery.........................................................................................................7 3. Growing Inflationary Pressures and Tightened Monetary Policy......................................................8 4. Exacerbated Poverty Levels.........................................................................................................10 5. Higher Oil Prices Boosted Gabon’s Trade Balance.......................................................................11 6. Improvements in the Fiscal Balance and Lower Debt Ratio..........................................................12 7. Economic Outlook.......................................................................................................................16 SPECIAL TOPIC: AGRICULTURAL TRADE AND PETTY HARASSMENT IN GABON........................................ 19 1. Introduction .................................................................................................................................19 2. Gabon’s Dependency on Agricultural Imports...............................................................................20 3. Trade in Agricultural Commodities in CEMAC and Gabon: The Effect of Informality and Structural Barriers............................................................................................................................................. 24 4. Barriers to Regional Trade: Findings from a Survey on Petty Harassment.....................................28 5. Macroeconomic Costs of Petty Harassment................................................................................30 6. A Roadmap for a Reduction in Petty Harassment.........................................................................31 References...............................................................................................................................................................34 Appendix..................................................................................................................................................................35 A. Assessing the Monetary Costs of Unofficial Checkpoints and Petty Harassment for Truckers.......35 B. Survey of Agricultural traders on Administrative Burden and Petty Harassment ...........................36 Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment ii LIST OF FIGURES Figure 1. Real GDP growth (in %), 2015-2021.............................................................................................7 Figure 2. CEMAC: Real GDP Growth, 2015-2021.......................................................................................7 Figure 3. Gabon: Contribution to Real GDP Growth, 2015-2021.................................................................8 Figure 4. Gabon: Oil production and Oil price, 2015Q1-2021Q4.................................................................8 Figure 5. Inflation (monthly, y-o-y), January 2020-April 2022.......................................................................9 Figure 6. Gabon: Trade Balance, 2015-2021.............................................................................................11 Figure 7. Gabon: Current Account Balance (in % of GDP), 2015-2021......................................................11 Figure 8. Current Account Balance (in % of GDP), 2015-2011..................................................................12 Figure 9. Gabon: Revenue, Expenditure, and Fiscal Balance (in % of GDP), 2015-2021............................13 Figure 10. Gabon: Oil and Non-oil Revenues, 2015-2021...........................................................................13 Figure 11. Gabon: Public Debt, 2015-2021.................................................................................................15 Figure 12. Public Debt (in % of GDP), 2015-2021.......................................................................................15 Figure 13. Average value of agricultural products traded, 2010-2020..........................................................21 Figure 14. Gross value of agricultural production (crop, animal, aquaculture; base 100 = 2010)..................22 Figure 15. Gross value production (USD1 million purchasing-power-parity dollars)......................................22 Figure 16. Composition of crops production................................................................................................23 Figure 17. Share of top 20 main agricultural providers, 2010-2020 (all agricultural products).......................25 Figure 18. Overall LPI score (2007-2018)....................................................................................................27 Figure 19. Price buildup for selected commodities along the Cameroon-Gabon corridor (in % of final consumer price)......................................................................................................31 Figure 20. ENVISAGE Results: Impact on Exports (% increase over the baseline)........................................32 Figure 21. ENVISAGE Results: Impact on Growth (percentage point increase over the baseline).................32 LIST OF TABLES Table 1. Roadmap for reducing petty harassment and lowering prices of agricultural products......................5 Table 2. Gabon: Fiscal table.........................................................................................................................13 LIST OF BOXES Box 1. Natural resources revenue management...........................................................................................14 Box 2. Impact of the war in Ukraine on the Gabonese economy..................................................................17 Box 3. GRAINE program.............................................................................................................................23 Box 4. Informal agricultural trade in the CEMAC region................................................................................25 Box 5. Reducing trading costs and promoting regional integration in East Africa: the case of Rwanda.........26 Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment iii Acknowledgments This edition of the Gabon Economic Update was prepared by a World Bank team led by Cindy Audiguier (Economist, EAWM2) and consisting of Sonia Barbara Ondo Ndong (Economist, EAWM2), Pierre Mandon (Economist, EAWM2), and Joana Monteiro Da Mota (ET Consultant, EAWM2), under the supervision of Raju Singh (Lead Economist, EAWM2). The report benefited from the insights of peer reviewers Calvin Djiofack (Senior Economist, EAEM1) and Joanne Catherine Gaskell (Senior Agriculture Economist, SLCAG). The team received guidance from Francisco Carneiro (Practice Manager, EAWM2), Clelia Rontoyanni (Program Leader, EAWDR), Alice Ouedraogo (Country Manager), and Abdoulaye Seck (Country Director, AWCC1). Irene Sitienei (Program Assistant, EAWM2), and Astrid Greta Gotalowya Ossouka (Team Assistant, AWMGA) supported the team during the preparation of the report. The team gratefully acknowledges the collaboration of the Government of Gabon throughout the preparation of this report. The report greatly benefited from discussions with staff from the Directorate General of Trade. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment iv Abbreviations & Acronyms AFC Africa Finance Corporation AfDB African Development Bank (Banque Africaine de Développement) BEAC Bank of Central African States (Banque des États de l’Afrique Centrale) CAR Central African Republic CEMAC Economic and Monetary Community of Central Africa (Communauté Economique et Monétaire de l’Afrique Centrale) CFAF African Financial Community Franc (Franc CFA) CGE Computable General Equilibrium EITI Extractive Industries Transparency Initiative ENVISAGE Environmental Impact and Sustainability Applied General Equilibrium model FDI Foreign Direct Investment FIES Food Insecurity Experience Scale GDP Gross Domestic Product GEF Economically Weak Gabonese (Gabonais Economiquement Faible) GRAINE Gabonese Initiative for Achieving Agricultural Outcomes with Engaged Citizenry (Gabonaise des réalisations Agricoles et des Initiatives des Nationaux Engagés) ID Identity document IMF International Monetary Fund LFR Revised Budget Law (Loi des Finances Rectificative) LPI Logistics Performance Index MPC Monetary Policy Committee MPO Macro Poverty Outlook NPLs Non-Performing Loans OPEC Organization of the Petroleum Exporting Countries PAT Transformation Acceleration Plan (Plan d’Accélération de la Transformation) PREF Economic and Financial Reform Program (Programme des Réformes Economiques et Financières) PSGE Plan for an Emerging Gabon SDR Special Drawing Rights SEZ Special Economic Zone SPS Sanitary and Phytosanitary SSA Sub-Saharan Africa TIAO Policy Bid Interest Rate (Taux d'intérêt des appels d'offres) USD United States dollar WB World Bank WDI World Development Indicators WEO World Economic Outlook WTO World Trade Organization ZAP Productive Agricultural Zones (Zones Agricoles Productives) Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 1 OVERVIEW Gabon’s economic recovery has been intensifying, lower domestic revenues than anticipated. Conversely, with oil and other commodities projected to drive government efforts to reduce tax expenditure started GDP growth to 2.7 percent in 2022, up from 1.5 to bear fruit and contained the decline in tax revenue, percent in 2021. Mining and forestry output have been with total revenue for 2021 estimated at 14.7 percent increasing, while oil production was on the rise in early of GDP (compared to 17.6 percent in 2020). Total ex- 2022 with the easing of OPEC+ quota requirements. penditure as a percent of GDP significantly declined The lifting of COVID-19 movement restrictions support- to 16.6 percent in 2021 (from 19.8 percent in 2020), ed the uptick in the service sector, the country’s largest reflecting the Government’s continued efforts to keep economic sector. Higher global food and energy prices spending under control, including investment spending. are projected to push inflation to 3.5 percent in 2022, Among expenditure categories, only transfers and sub- against 1.1 percent in 2020 and above the CEMAC 3.0 sidies were above budget target levels (at 2.4 percent percent target rate. Food prices are on the rise, large- of GDP), reflecting the higher cost of oil subsidies linked ly due to the war in Ukraine but also to disruptions at to rising oil prices in 2021. The fiscal balance in the re- the country’s borders due to a customs officers’ strike. vised budget law is projected to stand at 1.7 percent of Food price increases stood at 2.2 percent in 2021 and GDP in 2022 against a projected deficit of 0.6 percent more recently at 3.9 percent (y-o-y at end-May 2022). of GDP in the initial 2022 budget law. While Gabon’s 2022 budget has been benefiting from the surge in oil The fiscal stance improved in 2021 amid contained prices, some of the commodity-driven revenue windfall spending and is expected to turn into a surplus in is being directed toward energy and food subsidies to 2022. The fiscal deficit slightly shrunk to an estimated cushion the impact of rising prices caused by global 1.9 percent of GDP in 2021 (from 2.1 percent of GDP trade disruptions and the ongoing war in Ukraine. Fiscal in 2020) even though the improvement was lower than consolidation efforts are expected to keep spending the 1.3 percent anticipated in the budget law. Despite on most areas, including the wage bill, under control. higher oil prices, government revenues were nega- Nevertheless, risks of spending slippages remain, in tively impacted by lower oil production in 2021. At the view of the upcoming 2023 elections and of the pres- same time, challenges in revenue administration led to sures brought by subsidies. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 2 While debt-to-GDP remains sustainable amidst The 2020 economic recession led to an increase gradual economic recovery and high oil prices, in extreme poverty. The COVID-19 pandemic has debt arrears remain high. According to the latest exacerbated poverty, with a national poverty rate esti- IMF/WB Debt Sustainability Analysis performed in July mated at 34.1 percent in 2021, up from 32.4 percent in 2021, despite reaching historic highs in 2020 and re- 2019. Employment suffered in 2021 from the restrictive maining close to the CEMAC target of 70 percent of measures imposed by the Government to prevent new GDP in 2021, public debt remains sustainable. In 2021, waves of infection, resulting in falling household in- the public debt stock declined to 65.8 percent of GDP comes, especially for self-employed and informal work- in 2021, down from 78.3 percent in 2020, reflecting ers, who experienced major income losses. Although stronger nominal GDP growth (but an increase in nom- gradual economic recovery started in 2021, the pop- inal debt). Rising financing needs in 2021 were mostly ulation’s living conditions have not yet returned to their met by domestic financing. Liquidity pressures are also pre-crisis level. Food insecurity among children in the considerable, with debt servicing representing a signifi- most vulnerable segments of the population and lower cant share of revenues. In 2022, the public debt stock is schooling rates during COVID-19 lockdowns are likely projected to further decline to 52.6 percent of GDP, con- to have a long-term impact on the country’s human tinuing on a downward trajectory over the medium term. capital development. Recent actions have been taken to tackle the issue of arrears accumulation. External arrears were cleared in While Gabon’s economic outlook is favorable over June 2022 and a five-year plan was adopted to clear the medium term, growth drivers are fragile and existing domestic arrears. Improving debt management downside risks remain high. Gabon’s economy is and implementing the arrears clearance plan according projected to gain momentum, growing by an average to the established calendar would considerably reduce of 2.8 percent over 2023-2024 amidst recovery in the debt sustainability risks. service sector thanks to the lifting of all COVID-19 re- strictive measures and booming wood and manganese The uptick in oil prices compensated for the decline industries. Fiscal balances are expected to improve in production and led to a trade surplus in 2021, gradually over the medium term as the authorities ac- which is expected to remain high in 2022. Despite celerate fiscal consolidation, while debt is projected to lower oil production in 2021, higher oil prices led to a decline in the medium term. However, downside risks large nominal increase in export revenues (41 percent remain high. Strong economic diversification efforts are y-o-y). Exports of manganese and timber also record- needed to reduce the country’s overreliance on volatile ed a strong increase in volume, with Gabon’s terms of commodity prices. In addition, the emergence of new trade improving by 36 percent in 2021, and are expected COVID-19 variants may harm domestic activity should to further increase in 2022. While global and domestic the Government impose new restrictions. Accumulation economic recovery also led to an increase in imports, of arrears remains an issue, with a potential negative Gabon’s overall trade balance increased significantly to impact on financing costs. Uncertainty surrounding 11.5 percent of GDP in 2021 (from 3 percent in 2020). the 2023 presidential elections and weak institutional High-frequency data show that Gabon’s trade surplus capacity could slow the Government’s implementation should remain high in 2022 as the trade balance already of structural reforms toward economic diversification registered a threefold increase in the first quarter of 2022 and thereby jeopardize future growth. Finally, the war (y-o-y). Oil production increased by 2.8 percent in the first in Ukraine also presents some downside risks through quarter of 2022 and is expected to reach a 7.1 percent global inflationary pressures. On the other hand, global increase by year-end, with the easing of OPEC+ quotas. oil prices may remain high in the medium term, with a The current account deficit seen in 2021 is estimated to positive impact on Gabon’s fiscal and external positions. have declined to 4.2 percent of GDP, compared to 6.9 In a context of high global oil prices, Gabon faces a percent of GDP in 2020. In 2022 it is expected to turn to balancing act going forward and should increase fis- a surplus of 0.8 percent of GDP, pushed by the strong cal space to rebuild buffers while protecting the most performance in exports of oil and other commodities. vulnerable. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 3 Food insecurity could be exacerbated by the on- Central African Republic (CAR). This is due to a mix of going war in Ukraine as Gabon is highly vulnerable large infrastructure gaps and administrative inefficien- to shocks in the agricultural sector. Gabon is a net cies. For example, large urban markets suffer from poor food importer, with the country’s food imports repre- market infrastructure, which seems to be captured by senting close to a quarter of its total imports of goods local elites and intermediaries (especially storage facil- over the period from 2010 to 2020. Global supply chain ities). The marketing process of agricultural goods in disruptions relating to the COVID-19 pandemic have Gabon has in total more than 16 steps (from production been contributing to soaring commodity prices, result- to final consumption) and thus creates further inefficien- ing in higher food insecurity. The share of households cies in the trading of agricultural commodities. In ad- in situations of food insecurity increased from 82.6 per- dition, market participants are negatively impacted by cent in November 2020 to 84.3 percent in April 2021 price uncertainty, which often results from mismatches before declining to 73.3 percent with the lifting of the between supply and demand for goods as well as the second lockdown in November 2021. This situation presence of foreign buyers and is exacerbated by the could be aggravated by the impacts of the ongoing war lack of a market information system for disseminating in Ukraine on food prices and supply chains. prices. The Government has adopted plans to increase Informal payments and obstacles for imports agricultural production. The Gabonese Initiative for into Gabon, including petty harassment,1 add to Achieving Agricultural Outcomes with Engaged Citizenry already high import duties and can contribute to (GRAINE), a smallholder farming program launched by informality, unpredictability, and delays in border the Government in 2014, helped to increase food crops, crossing and transport network. Trade in agricultural albeit with mixed results. However, the Government’s commodities in CEMAC faces limited consistency and current plan is more ambitious and sets a goal of ulti- transparency in border clearance requirements, which mately reducing food imports by 50 percent through a act as a vector for petty harassment, resulting in a mul- strategy of import substitution. Specific ongoing mea- titude of both formal and informal border costs. Petty sures include the establishment of an agricultural high harassment is a generalized form of corruption often school to train skilled agricultural engineers (expected seen in Gabon and consisting of many small payments to be operational in 2022), the creation of Productive made without a receipt to customs and other authorities Agricultural Zones (ZAP), and a project co-financed throughout the trade marketing process. A World Bank by the African Development Bank (AfDB) in rural areas survey of CEMAC countries and a survey of Gabonese targeting women and the young. A law requiring super- market participants conducted for this report found that markets and the agro-business sector to purchase from actual trading costs at surveyed locations were con- local agricultural producers has also been passed. sistently higher than official listed tariffs and frequently included many unofficial costs, both at borders and Despite the Government’s efforts to increase ag- along roads leading to the main consumption areas. ricultural production, Gabon’s agricultural trade On average, a 20-ton truck moving goods from the remains hampered by structural bottlenecks re- Cameroon border to Libreville expects to be stopped lated to weak supporting infrastructure, the high at multiple checkpoints—more specifically, at 44 stops, number of intermediaries, and price uncertainty. once every 10.8 kilometers. Together, they create a The Logistics Performance Index (LPI) highlights a delay of more than fifteen hours and a cost of CFAF degradation of Gabon’s overall logistics since 2010, 1,980,000 (USD 3,736). Three out of four stops are including customs and the quality of logistics service. reported to occur due to petty harassment. Based on Over the past decade, Gabon’s trade logistics lagged data collected, petty harassment increases the cost of other CEMAC countries, with the 2018 overall Logistics transporting agricultural commodities in Gabon by USD Performance Index (LPI) at the same level as in the 0.30 per ton per kilometer. Obstacles and delays faced 1 Administrative obstructions of this type are generally referred to locally as “tracasseries”. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 4 by traders can also result in waste and degradation of perishable agricultural products, decreasing profits and disincentivizing business activities. A worrying trend has been observed since the COVID-19 pandemic, which is reported to have led to longer times for dealing with administrative documents and to the imposition of new checkpoints along trade routes. Reducing petty harassment would support trade in agriculture, reduce the overall cost of living for the population, and foster economic growth in Gabon. It was estimated that petty harassment accounts for 14 percent of final consumer prices for selected commodities on the Cameroon-Gabon cor- ridor, representing altogether about one-third of final consumer prices. A simulation of the removal of such harassment in CEMAC through the use of ENVISAGE, a dynamic global Computable General Equilibrium (CGE) model developed by the World Bank, found that in- tra-regional exports into Gabon could increase by about 25 percent by 2030 and GDP growth could increase by more than 0.7 percentage points compared to the baseline. Given the potential importance of unrecorded or informal trade, the actual growth impact may be even larger. Reducing petty harassment would therefore be highly beneficial for Gabon, especially given the context of rising inflationary pressures brought by the war in Ukraine and global trade disruptions. By contributing to bringing down prices, it could also provide a relief to fis- cal pressures derived from increased spending on food subsidies and from tax exemptions aimed at containing living costs. In addition to contributing to the country’s fiscal stance, in the short and medium term, reducing petty harassment is crucial to: (i) facilitating regional ag- ricultural trade; and (ii) reducing the cost of living for the population. The policy agenda is summarized in Table 1. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 5 Table 1. Roadmap for reducing petty harassment and lowering prices of agricultural products Objectives Policy Recommendations Time frame 1. Finalization of Sydonia World software deployment in Short term customs on the Northern border 2. Streamlining the number of administrative documents Short to needed for import and export activities in line with medium term WTO recommendations on trade facilitation I. IMPROVING BORDER OPERATIONS 3. Implementing a single window approach to external Medium term agricultural trade 4. Fostering dialogue through CEMAC’s Economic and Short term Financial Reform Program (PREF) on the negative impact and shared cost of border closures 5. Reducing the number of checkpoints along trade Short to corridors medium term II. PROFESSIONALIZING 6. Reinforcing dissemination materials and user-friendly Short term BEHAVIOR ALONG TRADE information on trade procedures and official fees CORRIDORS 7. Upgrading legitimate checkpoints by building capacity Medium to to implement functions (such as SPS monitoring) and long term improving oversight 8. Promoting competitiveness through inclusive market Medium to management and oversight by involving trader long term associations and other private users in developing and managing market spaces III. IMPROVING EFFICIENCY IN AGRICULTURAL MARKETS 9. Rationalizing the marketing process by reducing the Medium term number of steps (currently 16) between the various actors involved with agricultural trade (producers, importers, traders) Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 6 RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK FOR GABON 1. Global and Regional Trends down from 4.2 in the previous year. The recovery path has been supported by increased global trade, high Impacted by destabilizing shocks brought by commodity prices, and the lifting of COVID-19 restric- the COVID-19 pandemic and the war in Ukraine, tions that had been imposed to contain the spread of global economic growth is expected to slow to 2.9 successive waves of the pandemic. Private consump- percent in 2022. The previous year had seen a relax- tion and—to a lesser extent—gross fixed investment ation of pandemic-related lockdowns and a 5.7 percent contributed to the recovery from the expenditure side, growth, its strongest post-recession pace in 80 years. while net exports held back the recovery. The upturn Growth has been supported by recovery in global trade, was also buoyed by the service sector, while weather reflecting the rise in global demand for highly trade-in- conditions favored agriculture from the production side. tensive manufactured goods. This recovery of demand However, higher food, fertilizer, and fuel prices are lead- and supply also contributed to the surge in global com- ing to shortages and intensified risks for regional growth, modity prices, including energy, such as natural gas especially as much of the region’s wheat imports rely on and coal, in the second half of 2021. However, with Russia and Ukraine. disruptions in supply chains and rising demand, inflation is on the rise. Since the start of the war in Ukraine in Economic recovery in the Economic and Monetary early 2022, inflationary pressures and have been ex- Community of Central Africa (CEMAC) has been acerbating global stagflation risks and increased food weaker than in SSA. Economic recovery in the region insecurity, especially in developing economies.2 was weak in 2021 amid modest hydrocarbon produc- tion in most CEMAC countries. The region’s economic Meanwhile, Sub-Saharan Africa’s recovery from growth is estimated to have reached 3.4 percent in 2022 the COVID-19 pandemic has been weaker amid and 1.0 percent in 2021, compared to a recession in high volatility and uncertainty. Economic growth in 2020 (-1.7 percent) (Figure 1). The CEMAC performance the region is expected to reach 3.7 percent in 2022, seen in 2021 reflects positive growth in three CEMAC 2 World Bank 2022b. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 7 economies (Cameroon, CAR, and Gabon), while others Meanwhile, the region’s fiscal and external positions (Chad, Congo, and Equatorial Guinea) experienced deteriorated due to the drop in oil production in 2021, recession; all countries in the region are expected which was not fully compensated by higher oil prices. to grow in 2022, driven by hydrocarbon production and a decreasing impact of the pandemic (Figure 2). 2. Gabon’s Economic Recovery Despite global inflationary pressures, the region’s head- line inflation remained fairly low at 2.2 percent in 2021 Gabon’s economic recovery started timidly in 2021 (below the regional convergence criterion of 3 percent), and has been picking up in 2022, owing to the lift- a development partly explained by the region’s broad ing of the movement restrictions that had been use of energy and food subsidies and price controls.3 imposed to contain the spread of COVID-19 and the continuous rise in global oil prices. Gabon’s Figure 1. Real GDP growth (in %), 2015-2022 economy expanded by an estimated 1.5 percent in 2021, with a projected further increase of 2.8 percent 5.0 in 2022. The country has been recovering from a reces- 4.0 sion of 1.8 percent in 2020, which was caused by the 3.0 dual shock of the COVID-19 pandemic and the drop in 2.0 global oil prices. 1.0 0.0 From the production side, the upturn was initially -1.0 buoyed by the service sector and the booming -2.0 mining and forestry sectors, to which oil produc- -3.0 tion added in 2022 (Figure 3 and Figure 4). Oil pro- 2015 2016 2017 2018 2019 2020 2021 2022 duction is projected to increase by 7.1 percent in 2022, Gabon SSA CEMAC up from a 5.5 percent decline (y-o-y) in 2021.4 Despite significant investments by oil companies in 2018 and Source: WDI, WEO, Global Economic Prospects 2019 with the aim of increasing the capacity of mature Note: Preliminary data for 2021; projection for 2022 oil fields, Gabon was forced to cut its production both in 2020 and 2021 in order to comply with OPEC+ require- Figure 2. CEMAC: Real GDP Growth, 2021-2022 ments. However, the country’s oil production, which was below capacity in 2021, is projected to increase in 5.0 2022 as OPEC+ oil production cuts are lifted. In 2021, 4.0 production of manganese and logs increased by 12.8 3.0 and 25.7 percent (y-o-y), respectively, thus boosting 2.0 1.0 non-oil activity. The increase in manganese production 0.0 was driven by the strong performance of the two main -1.0 operators in the mining sector in Gabon, CICMHZ (a -2.0 32 percent increase) and Comilog (a 21.2 percent in- -3.0 crease). Meanwhile, wood-related industries grew by -4.0 34.5 percent, driven by improvements in the output of Cameroon Congo Gabon EQG Chad CAR production units, the ramping-up of newly installed units, 2021 2022 and strong supply of logs to plants, particularly in the Nkok area. Production in the Nkok Special Economic Source: World Bank staff calculations, MPO April 2022, Global Zone (SEZ) represented 50 percent of national produc- Economic Prospects 3 Singh, R. et al. 2022. 4 The drop in oil production was more significant in 2021 than in 2020 (at 1.3 percent) as Gabon only partially implemented OPEC+ quotas in 2020 and had to cut its production further in 2021. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 8 Figure 3. Gabon: Contribution to Real GDP Figure 4. Gabon: Oil production and Oil price, Growth, 2015-2021 2015Q1-2021Q4 5.0 3500 90 4.0 3000 80 70 3.0 2500 Thousand metric tons 60 2.0 2000 50 USD/bbl 1.0 1500 40 0.0 30 1000 20 -1.0 500 10 -2.0 0 0 -3.0 20 -Q1 20 -Q3 20 -Q1 20 -Q3 20 -Q1 20 -Q3 20 -Q1 20 -Q3 20 -Q1 20 -Q3 20 -Q1 20 -Q3 20 -Q1 3 -Q 15 15 16 16 17 17 18 18 19 19 20 20 21 21 2015 2016 2017 2018 2019 2020 2021 20 Agriculture Industry Services Oil production (lhs) Crude oil, average (rhs) Source: Government authorities and WB staff calculations Note: Preliminary data for 2021 Source: Government authorities, World Bank Commodity Price Data tion in 2021, against 40 percent a year earlier. Services, launched in 2017 and consists in exemptions to select- the largest sector of the economy, also substantially ed imported basic items, which helped to protect the contributed to the recovery despite the emergence of most vulnerable from high food prices and shortages. new COVID-19 variants (such as Delta and Omicron). More recently, actions have been taken to gradually Overall, the lifting of most COVID-19 movement restric- reduce the list of exempted goods, in order to ratio- tions supported the uptick in service activities. nalize tax expenditures and improve the fiscal balance. However, inflationary pressures have so far prevented 3. Growing Inflationary the Government from further reducing the exemptions granted in the program. Pressures and Tightened Monetary Policy The war in Ukraine added to Gabon’s inflationary pressures. Within two months of the war, food pric- Higher global food and energy prices have been es had risen considerably, from 2.4 percent (y-o-y) in causing a rise in consumer prices in Gabon in January 2022 to 3.4 percent by March of the same year. 2022, whereas inflation remained contained in Overall, compared to many economies, Gabon’s annual 2021. The overall annual inflation rate, which stood at inflation rate has remained relatively contained so far 1.6 percent in 2021, is projected to reach 3.5 in 2022, (3.3 percent y-o-y at end-May 2022), but prices of food above the CEMAC 3.0 percent target (Figure 5). Food products recorded a significant rise of 3.9 percent (y-o- prices rose by 2.2 percent in 2021. Prices of import- y). The exemptions granted under “La Lutte Contre la Vie ed products were also on the rise (2.4 percent), fueled Chère” program, which was already in place before the by disruptions in global supply chains as well as at the onset of the war in Ukraine, are contributing to avoiding country’s borders due to a customs officers’ strike. In an even more substantial surge in food prices. Except response, the Government took specific measures to for wheat, there are no direct government subsidies for limit disruptions in the supply of imported stapled foods, food products. As regards energy prices, in April 2021, which may have helped to limit the increase of the cost the Government introduced a price freeze on petroleum of living.5 “La Lutte Contre la Vie Chère” program was products at the pump in addition to existing subsidies 5 Keeping food inflation under control and avoiding food shortages remained the Government’s priorities in 2021. Initiatives taken by the Government included a campaign to control prices and the availability of basic consumption items throughout the country. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 9 Figure 5. Inflation (monthly, y-o-y), January 2020-May 2022 4.0 3.0 2.0 1.0 0.0 -1.0 -2.0 -3.0 -4.0 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Consumer Price Index (growth) Food Price Index (growth) CEMAC Target Rate Source: Government authorities to lamp oil and butane gas. This explains how Gabon’s SDR allocation granted to Gabon in July 2021 (equiv- energy prices have remained somewhat low in recent alent to CFAF 168 billion) remained unused and its months, increasing by only 0.9 percent (y-o-y) in April purpose is determined in the 2022 revised budget law.6 2022. While these exemptions and subsidies have been The 2021 SDR allocation is being partially directed at useful in containing living costs, they have been adding the repayment of domestic debt (CFAF 26.2 billion), and important spending pressures to the fiscal position. the remaining part is being used to support regional re- serves. Toward end-2021, the BEAC began to gradually Since the second half of 2021 and throughout early reduce its weekly liquidity injection operations (initiated 2022, the Bank of Central African States (BEAC) in September at CFAF 250 billion and at CFAF 70 billion has been tightening its monetary policy. Concerns as of June 2022). about the direction of foreign exchange reserves and associated risks to the region’s external stability The decline in non-performing loans (NPL) is a prompted the BEAC to tighten its monetary policy in late positive sign for the stability of the financial sec- November 2021 and again in March 2022. Following an tor. The volume of non-performing loans (NPLs) con- extraordinary Monetary Policy Committee (MPC) meet- tinued to decline at end-2021 (y-o-y). The volume of ing on November 25, 2021, the BEAC increased the NPLs on the balance sheets of Gabonese banks fell, policy bid interest rate (TIAO) by 25 basis points to 3.50 reaching 8.5 percent of total loans in 2021 as against percent and again by 50 basis points to 4.0 percent in 9.8 percent a year earlier. The decline in NPLs is mostly March 2022. Despite higher oil prices in 2021 and the explained by the gradual clearance of some domestic International Monetary Fund’s (IMF) allocation of Special arrears currently being executed in accordance with the Drawing Rights (SDR) to the region equivalent to CFAF authorities’ clearance plan (implemented since October 797 billion, the stock of foreign exchange reserves at 2020). BEAC decreased in 2021, with reserves representing just below 3 months’ worth of imports of goods and To satisfy the country’s higher financing needs, services by end-December 2021. However, the IMF’s commercial banks accelerated their participa- 6 Gabon’s 2022 revised budget law was adopted by the National Assembly in June 2022. The draft 2022 revised budget law was pending publication as of July 2022. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 10 tion in the purchase of Government securities share of households experiencing job losses due to the from 2020. However, despite significant government pandemic was 14.0 percent in July 2021, compared financing needs from banks, financing available for the to 25.9 percent in May 2020 after the onset of the private sector was on the rise in 2021 and supported pandemic. The negative effect of the second wave on the country’s economic recovery. Credit to the private employment reduced household incomes across the sector increased by 15.8 percent in December 2021 board, with incomes from domestic transfers, property, (y-o-y), while credit to the Government increased by investments and savings, and agriculture, livestock, and 24.4 percent (y-o-y) over the same period, with this fishing being the most affected. trend continuing in 2022. In March 2022, total credit increased by 19.0 percent (y-o-y) in nominal terms. The ability to afford staple foods and medicines Monetary data show that credit to the economy rose by was hampered by the COVID-19 pandemic and re- 13.9 percent (y-o-y) over the same period while lending sulted in an increase in food insecurity. Through its to the Government increased by 28.4 percent (y-o-y). effects on employment and income, the COVID-19 pan- Purchases of Government securities by commercial demic reduced households’ ability to afford nutritious banks increased in order to absorb the increased food (such as fish) and basic health services in 2021, issuance of bonds and Treasury bills based on the just as it did in 2020. The second wave of the pandemic Government’s financing strategy, which relies heavily led to an increase in food insecurity,9 which was more on the regional financing market. A notable point is that pronounced in urban areas. The share of food insecu- Gabonese banks have accumulated almost one fifth rity among households increased from 82.6 percent in (19.8 percent) of their assets in sovereign exposure.7 November 2020 to 84.3 percent in April 2021 before starting to decline with the lifting of the second lock- 4. Exacerbated Poverty Levels down to 73.3 percent in November 2021. Moreover, throughout 2021, over 40 percent of households were The COVID-19 pandemic has exacerbated poverty, experiencing severe food insecurity. There was also a with a national poverty rate estimated at 34.1 per- sharp reduction in households’ ability to afford medi- cent at end-2021 up from 32.4 percent in 2019. The cines during the second wave and lockdowns, followed emergence of new variants of the COVID-19 virus com- by gradual recovery. In April 2021, access to medicines bined with a low vaccination rate (with only 11.7 percent dropped to 72 percent from 83 percent in November of the population fully jabbed as of July 2022)8 consti- 2020. tuted a threat to living conditions. Although gradual eco- nomic recovery started in 2021 and has been increasing The pandemic also had a significant impact on its pace in 2022, the population’s living conditions have human capital that could potentially shape future not yet returned to their pre-crisis level. Employment generations. Higher levels of food insecurity are likely suffered in 2021 from the restrictive measures imposed to affect children in vulnerable households, with under- by the government to prevent new waves of infection, nourishment having a long-term impact on the country’s resulting in falling household incomes, especially for human capital development. In addition, one of the first self-employed and informal workers, who experienced measures taken to prevent the spread of the virus in major income losses. Although the second wave of Gabon was to close all schools and universities across the pandemic (from February to June 2021) negatively the country. As a result, half of all children nationwide re- affected economic activities in Gabon, the impact was ported not having any learning activities during lockdown less severe than that of the first wave. The peak in the and subsequent months until the reopening of schools. 7 In January 2022, the yield curve ranged between 7.77 percent for 3-month bills and 9.61 percent for 10-year bonds, compared to 7.58 percent and 8.71 percent, respectively, in December 2021 8 An additional 13.8 percent of the population received one dose of vaccine as of July 2022. 9 Food insecurity is measured by the composite indicator based on Food Insecurity Experience Scale (FIES) questions that record self-experience episodes of food shortages by at least one household member over the past 30 days prior to the survey. Households that are experiencing at least 4 dimensions out of 8 are considered severely food insecure. Source: World Bank 2022a. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 11 5. Higher Oil Prices Boosted threefold increase in the first quarter of 2022 (y-o-y). Gabon’s Trade Balance This improvement in the trade balance was driven by a significant rise in exports that more than compensated The increase in export receipts resulting from for higher imports. Exports significantly increased by higher oil prices favorably impacted the trade 113.7 percent in 2022-Q1 (y-o-y), while imports in- balance in 2021. Despite lower oil production in 2021, creased by only 20.4 percent over the same period. The higher oil prices led to a large nominal increase in export volume of oil exports increased by 44.7 percent (y-o-y) revenues (41 percent y-o-y). Gabon also benefited from due to the easing in OPEC+’s production quotas, and favorable prices for timber. Overall, Gabon’s terms of while still representing a small share of total exports, oil trade registered a large increase (36 percent) in 2021. palm and sawn wood export volume also recorded sig- Exports of manganese and timber also recorded strong nificant rises in 2022-Q1 (57.6 percent and 23.2 percent increases in volume. Regarding imports, the increase y-o-y, respectively). Regarding imports, their increase (3.6 percent y-o-y) was driven by the rise in imports was driven by the rise in imports of capital goods (36.2 of intermediate and consumer goods, reflecting both percent y-o-y), intermediate goods (19.4 percent y-o- the global and domestic economic recovery. Gabon’s y), and consumer goods (19.2 percent y-o-y), reflecting trade balance thus increased from 3.0 percent of GDP recovery in both Gabon’s and the global economies. in 2021 to 11.5 percent in 2021 (Figure 6). As a result, the current account deficit is estimated to have declined Despite recent positive developments, Gabon’s to 5.2 percent of GDP in 2021 compared to 6.9 per- external position remains highly vulnerable to cent of GDP in 2020, driven by improvements in the volatile prices of oil and other commodities. In the trade balance, even though it remained wider compared first quarter of 2022, nominal oil exports represented to CEMAC or SSA countries (Figure 7 and Figure 8). more than 75 percent of total exports. Risks include an Foreign Direct Investment (FDI) continued to drive exter- increasing trading partner concentration and a continu- nal financing flows in 2021, along with portfolio invest- ous reliance on oil and commodity exports, showcasing ment, that financed the deficit. the need for strong diversification efforts to attenuate the dependency on unstable growth drivers and build In 2022, higher oil prices are expected to drive the a solid economic base. Without structural reforms, the trade balance to a larger surplus. High-frequency country’s growth is likely to remain supported by a frag- data show that Gabon’s trade balance surplus saw a ile base. Figure 6. Gabon: Trade Balance, 2015-2021 Figure 7. Gabon: Current Account Balance (in % of GDP), 2015-2021 8000 14,0 15.0 7000 12,0 10.0 6000 10,0 5000 5.0 in % of GDP 8,0 USD 4000 0.0 6,0 3000 -5.0 4,0 2000 10.0 1000 2,0 -15.0 0 0,0 2015 2016 2017 2018 2019 2020 2021 -20.0 2015 2016 2017 2018 2019 2020 2021 Exports (lhs) Imports (lhs) Oil Exports (lhs) Trade Balance (rhs) Trade Balance Primary and Secondary Incomes Current Account Balance Source: Government authorities and WB staff calculations Source: Government authorities and WB staff calculations Note: Preliminary data for 2021 Note: Preliminary data for 2021 Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 12 Figure 8. Current Account Balance (in % of GDP), uted to revenue underperformance. This resulted from a 2015-2011 major strike in the Tax and Customs administrations and the non-implementation of a new tax on in-kind- bene- 2015 2016 2017 2018 2019 2020 2021 0.0 fits to employees introduced in the 2021 budget law. Challenges in oil revenue management further impact -2.0 the country’s fiscal balance (Box 1). Moreover, despite -4.0 the gradual lifting of restrictive measures linked to the -6.0 COVID-19 pandemic, the financial situation of compa- -8.0 nies and households remained fragile due to significant -10.0 income losses, thereby limiting tax collection. -12.0 -14.0 Efforts currently implemented by the Government to reduce tax expenditures started to bear fruit Gabon SSA CEMAC and contributed to limiting the magnitude of the Source: Government authorities and WB staff calculations, WEO decline in tax revenues. Customs duty exemptions Note: Preliminary data for 2021 declined by 21.1 percent in 2021. This decrease mainly came from continuous efforts by the Government to 6. Improvements in the Fiscal reduce the amount of exemptions granted to private Balance and Lower Debt Ratio companies. As a result, tax expenditures resulting from tax exemptions on basic food imports as part of the “La Lutte Contre la Vie Chère’’, which has targeted the high Fiscal Developments cost of living since 2017, fell by 27.4 percent thanks to The fiscal balance improved slightly in 2021. The further reduction in the list of exempted products from fiscal deficit slightly shrunk to an estimated 1.9 percent 50 to 23 tariff lines. At the same time, attempts at further of GDP in 2021 from 2.1 percent of GDP in 2020 (Figure cuts in tax exemptions may be compromised in view 9 and Table 2). While this trend is in line with revised of ongoing inflationary pressures caused by the war in 2021 budget law forecasts, the magnitude of the re- Ukraine and the upcoming 2023 elections. duction in the deficit is nevertheless less significant than anticipated in the initial budget law (with a forecast Overall spending decreased in 2021 amid lower deficit of 1.3 percent of GDP). Despite contained public current and capital expenditures. Overall, total expenditures, disappointing fiscal revenues limited the expenditures as a percentage of GDP significantly extent of fiscal improvement. declined, to 16.6 percent in 2021 from 19.8 percent in 2020, reflecting the government’s continued efforts Government revenues suffered from lower oil to keep spending under control, including investment production and challenges to domestic resource spending. Current expenditures strongly decreased, mobilization in 2021. Overall, total revenues as a per- by 2.9 percentage points to 13.3 percent of GDP in centage of GDP significantly declined to 14.7 percent of 2021 in line with the Government’s commitment to GDP in 2021 from 17.6 percent of GDP in 2020 (Figure contain non-priority public expenditures. As for budget 10). Total revenues stood below the 19.2 percent of execution, current expenditure items are below the GDP government target (set in the revised 2021 bud- 2021 budget target except for transfers and subsidies, get law)10 as high oil prices only partially compensated which are estimated to stand at 2.4 percent of GDP, for lower oil production resulting from the imposition of above the 2021 annual target of 2.2 percent of GDP. OPEC+ quotas on oil production. In addition, domestic Despite the reduction in social assistance provided revenue mobilization was negatively impacted by chal- since 2020 to protect the most vulnerable against lenges affecting revenue administration, which contrib- the negative impact of the COVID-19 pandemic, 10 Average oil price is estimated at USD 70 for 2021 as against an assumption of USD 55 in the revised budget law. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 13 Figure 9. Gabon: Revenue, Expenditure, and Fiscal Figure 10. Gabon: Oil and Non-oil Revenues, Balance (in % of GDP), 2015-2022 2015-2022 25 2 100% 1 20 80% 0 15 -1 60% -2 10 -3 40% -4 5 20% -5 0 -6 0% 2015 2016 2017 2018 2019 2020 2021 2022 2015 2016 2017 2018 2019 2020 2021 2022 Total Revenues Total Expenditures Overall Balance (rhs) Oil Revenues Non-Oil Revenues (including grants) Source: Government authorities and WB staff calculations Source: Government authorities and WB staff calculations Note: Preliminary data for 2021; projection for 2022. Note: Preliminary data for 2021; projection for 2022. Table 2. Gabon: Fiscal table 2020 2021 2021 2022 % of GDP (unless otherwise stated) Outcome (LFR) Outcome Projection Total Revenue and Grants 17.6 18.1 14.7 16.2 Revenues 17.6 17.6 14.6 15.8 Oil revenues 6.8 5.3 7.1 Non-oil revenues 10.8 9.3 8.8 Tax revenues 9.9 12.1 8.7 8.2 Non-tax revenues 0.9 5.4 0.7 0.6 Grants 0.0 0.5 0.1 0.4 Total Expenditures 19.8 18.7 16.6 14.9 Current Expenditures 16.2 14.9 13.3 11.2 Wages and Compensation 7.7 6.4 6.1 4.9 Good and Services 2.3 2.8 2.1 1.5 Interest Payments 3.4 3.0 2.7 2.4 Transfers and Subsidies 2.8 2.7 2.4 2.4 Other expenditures 0.8 0.3 0.9 1.4 Investment 2.7 3.5 2.4 2.3 Overall Balance (commitment basis) -2.1 -0.6 -1.9 1.3 Primary Balance 1.2 2.3 0.9 3.7 Memo Nominal GDP (CFAF billions) 8,816 10,658 11,219 13,905 Sources: Government, IMF, and World Bank Note: Preliminary data for 2021; IMF projection for 2022 (differing in some cases from the 2022 revised budget law). Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 14 Box 1. Natural resources revenue management The opacity of natural resource revenue management is preventing the country from taking full advantage of episodes of rising oil prices. In light of the sharp rise in global oil prices observed in 2021, the level of oil revenues collected by the Government (5.3 percent of GDP) appears relatively low. In a context marked by a structural decline in oil production (in the absence of any new major discovery), it is crucial for Gabon to improve the management of its public finances and to strengthen the transparency and governance of revenues and expen- ditures from its natural resources. In 2020, the extractive sector still represented 14 percent of GDP and 38.4 percent of total revenues despite ongoing efforts by the Government to diversify the economy. Hence, the reintegration of Gabon into the Extractive Industries Transparency Initiative (EITI) initiative on October 19, 2021, eight years after its exclusion in 2013 for non-compliance with the commitment to regularly publish information on revenues from oil and mining activities, is an important step forward for the country given the persistent lack of transparency affecting Gabon’s extractive sector. Looking ahead, Gabon’s concrete progress in implementing EITI requirements, though crucial, remains to be seen. higher than anticipated transfers and subsidies were to Gabon’s newly-issued securities remained high as all due mainly to the higher cost of oil subsidies paid by maturities increased in the last quarter of 2021 despite the Government thanks to rising oil prices in 2021. Fitch Ratings’ increase of Gabon’s sovereign rating in Spending on transfers and subsidies is expected to August 2021 (from CCC to B-), higher global oil prices, remain substantial in 2022, in view of rising food and and the approval of a new program by the IMF (July fuel subsidies. In the meantime, capital expenditures 2021). In December 2021, the yield curve ranged be- slightly decreased, by 0.3 percentage points to 2.4 tween 7.58 percent for 3-month bills and 9.08 percent percent of GDP in 2021, illustrating the Government’s for 5-year bonds compared to 3.04 percent and 9.61 objective to be more selective in investment projects percent, respectively, in January 2021. to be introduced in the budget law. The Government dedicated its 2021 resources to the completion of According to the revised budget law, the overall ongoing projects in priority sectors (energy and water, fiscal deficit is expected to turn into a surplus in health, and education) while supporting post COVID- 2022. The fiscal balance is projected to stand at 1.7 19 economic recovery with new investments. percent of GDP in 2022 as against a projected deficit of 0.6 percent of GDP in the 2022 initial budget law. In the Rising financing needs were met by higher do- revised budget law (LFR), which was pending publica- mestic financing in 2021. In 2021, about 40 percent tion as of July 2022, the authorities forecast real GDP to of all budget financing came from domestic sources and grow by 2.8 percent in 2022, compared to 3.0 percent in particular from the regional financial market. This is in anticipated in the 2022 initial budget law. Moreover, line with the Government’s financing strategy attached the assumption of oil prices at USD 80 per barrel in the to the 2021 revised budget, which significantly relied on 2022 revised budget law is much higher than the initial financing from the regional market owing to a hardening forecast of USD 60 per barrel. Total revenues for 2022 of international market access conditions for Gabon. are projected to increase by 16.4 percent (equivalent Meanwhile, relatively lower than expected levels of ex- to 16.1 percent of GDP) compared to the initial budget ternal borrowing reflected the slow pace of project exe- law. As non-oil revenues are unchanged from the initial cution. The purchase of Government securities by com- budget law, this increase is driven by the rise in oil rev- mercial banks continued to increase and absorbed a enues on the back of oil prices that turned out to be large share of issued bonds and Treasury bills. However, much higher than initially anticipated. The Government the risk premium requested by investors to subscribe remains committed to rationalizing tax expenditures Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 15 and plans to carry out an assessment of the impact of Figure 11. Gabon: Public Debt, 2015-2022 exemptions granted in the past to private companies and to remove exemptions for companies that have not 100% 100 achieved the objectives (for example in terms of jobs 80% 80 creation) for which these exemptions were granted to them. 60% 60 Despite the Government’s commitment to contain 40% 40 public expenditures, spending is projected to in- 20% 20 crease in 2022. Overall spending in the 2022 revised budget law is set to increase by 5.5 percent (represent- 0% 0 2015 2016 2017 2018 2019 2020 2021 2022 ing 15.1 percent of GDP) compared to the initial budget law. Current expenditures are expected to be higher Domestic Public Debt (in % ot total public debt, lhs) External Public Debt (in % ot total public debt, lhs) than initially anticipated (+6.6 percent), including a Total Public Debt (in % of GDP, rhs) slight cut in capital expenditures (-0.2 percent). Current expenditures are planned to rise to take into account Source: Government authorities and WB staff calculations the expected increase in health insurance coverage for Note: Preliminary data for 2021; projection for 2022. economically weak Gabonese (GEF), additional support for fuel and flour prices introduced to limit the negative Figure 12. Public Debt (in % of GDP), 2015-2021 impact of the war in Ukraine on the most vulnerable 90 populations, and additional costs related to the delayed 80 restructuring of public companies. The small reduction 70 in capital expenditure illustrates the continued govern- 60 ment desire to be more selective over investment proj- 50 ects included in the budget law. To be able to include 40 the continuation of the Trans-Gabon highway project, 30 which is due to cross the country from north to south 20 and is considered a major project for the implemen- 10 tation of the Transformation Acceleration Plan (PAT), 0 2015 2016 2017 2018 2019 2020 2021 other investment projects considered less of a priority Gabon SSA CEMAC were removed from the budget law. Additional public expenditures should therefore be amply covered by the Source: Government authorities and WB staff calculations significant rise in total revenues. Note: Preliminary data for 2021; projection for 2022. Evolution of Debt persistent COVID-19 pandemic and rigid expenditures, Gabon’s financing needs increased in 2021, leading to Debt-to-GDP ratio declined in 2021, standing greater mobilization of financing and resulting in a high- below the CEMAC target of 70 percent of GDP. er public debt stock (in nominal value). Meanwhile, the However, the stock of public debt remained high but composition of Gabon’s public debt remained relatively declined to 65.8 percent of GDP in 2021, down from stable, with external debt representing about two-thirds 78.3 percent in 2020 (Figure 11 and Figure 12). This of total public debt. downward trend in the public debt stock was driven by a decrease in both external and domestic debt (by While public debt remains sustainable amidst 8.2 percentage points and 4.3 percentage points, re- gradual economic recovery and high oil prices, spectively). The decrease in the public debt ratio reflects risks are high. Despite reaching historic highs in 2020 stronger nominal GDP growth compared to the rise in and remaining close to the CEMAC target of 70 per- nominal debt. With lower revenues resulting from the cent of GDP in 2021, public debt remains sustainable Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 16 according to the latest IMF/WB Debt Sustainability COVID-19 restrictive measures and booming wood and Analysis (DSA), performed in July 2021. Financing manganese industries. Yet, future price shocks affecting needs will remain high in the medium term, limiting fiscal oil, manganese, and wood products could drastically space and highlighting rollover risks. Liquidity pressures impact growth prospects. Government commitments are also considerable, with debt servicing representing to diversifying the economy could contribute to altering a significant share of revenues. However, in the ab- Gabon’s historically volatile growth path and to reduc- sence of adverse shocks or slippages, the envisaged ing exposure to fluctuations in international commodity fiscal consolidation will be sufficient to put debt on a markets, as shown by the recent impacts of the war in firm downward path. Stress tests indicate that public Ukraine (Box 2). debt levels remain sustainable against standard shock scenarios. Exposure to interest rate risk is high as 29.5 The gradual projected reduction in the public percent of the debt portfolio at end-2021 and will need deficit should reduce the Government’s financing to be refinanced within a year, and 21.6 percent of total needs and lead to a gradual decrease in public debt carries variable interest rates. This risk is particular- debt. Looking ahead, fiscal balances are expected to ly important in a context where the main central banks improve gradually over the medium term as the authori- are expected to adopt a tighter monetary stance. The ties accelerate the fiscal consolidation process. Gabon’s large share of debt held by non-residents and foreign debt is projected to decline in the medium term, driven currency debt also represent a significant risk. by consolidation efforts and gradual economic recov- ery. However, without concrete efforts to improve public In June 2022, Gabon cleared its external arrears, debt management and budget execution, Gabon can which had been accumulating in 2021. Previously continue accumulating domestic and external arrears. to clearing external arrears, and despite efforts over the Moreover, while the banking sector remains sound, past three years to improve debt service management,11 banks’ soundness indicators may deteriorate due to Gabon had accumulated external arrears in 2021, in- their large and increasing sovereign exposure. cluding toward multilateral creditors. While cash flow constraints related to the COVID-19 pandemic arose The current account deficit should gradually im- in 2021, operational difficulties continued to weigh on prove over the medium term. The current account the proper execution of debt servicing in 2021. Even if deficit should gradually narrow in the medium term sup- external arrears were cleared by mid-2022 and Gabon’s ported by higher oil and manganese prices, the continued public debt was considered sustainable in the latest easing of OPEC+ oil production cuts, and a resumption DSA, the recurrent accumulation of external arrears of investments in wood and agri-business thanks to the in recent years still could represent a high risk for the expected gradual global economic recovery. country’s outlook, with potential negative impacts on the country’s cost of financing. There are multiple downside risks to the outlook. The emergence of new COVID-19 variants may harm 7. Economic Outlook domestic activity should the Government impose new restrictions. Uncertainty surrounding the 2023 presiden- Gabon’s outlook is favorable over the medium tial elections and weak institutional capacity could slow term despite rising uncertainty linked to the in- the Government’s implementation of structural reforms ternational context and a continuous dependen- toward economic diversification and thereby jeopardize cy on fragile growth drivers. Gabon’s economy is future growth. Regarding exogenous risks, Gabon’s fiscal projected to gain momentum, growing by an average sustainability could deteriorate if global financing condi- of 2.8 percent over the period 2023-2024 amidst re- tions tighten substantially. The war in Ukraine also rep- covery in the service sector thanks to the lifting of all resents downside risks through global inflationary pres- 11 Over the last three years, the Government has taken a number of steps to prevent the accumulation of arrears, including addressing coordina- tion issues between Treasury and Debt units, improvements in cash management and systems for monitoring debt payments, and the implemen- tation of the Treasury Single Account (TSA). Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 17 Box 2. Impact of the war in Ukraine on the Gabonese economy Gabon’s economic outlook is subject to adverse effects of the war in Ukraine. The eco- nomic impact of the Russian invasion of Ukraine will be felt primarily through higher global oil prices, which will benefit Gabon’s oil revenues and boost its export earnings. Investment flows into Gabon from both countries are insignificant. Hence the tightening of global financial conditions, which have an impact on foreign financing flows, is not expected to have a signif- icant impact on Gabon. What can be expected is that a sustained rise in oil prices may boost oil-related FDI while non-oil related FDI may be postponed as global uncertainty looms. Trade disruptions: The invasion adds to existing headwinds facing global recovery by further disrupting supply chains, especially those between both Russia and Ukraine and the rest of the world. However, direct trade exposure is limited as Gabon’s imports from Ukraine and Russia account for 0.44 and 0.24 percent of its imports, respectively. High global oil prices: Higher global oil prices will benefit Gabon’s oil revenues and boost its ex- port earnings through a significant increase in its terms of trade. Tax revenues will also be boost- ed by improvements in oil companies’ performance. Higher global oil prices will positively impact Gabon’s trade balance as oil exports represent over 64 percent of total exports of goods, which will more than offset the impact of higher agricultural commodity prices on Gabon’s imports. Increasing inflationary pressures due to higher commodity prices: The high cost of living is of growing concern in Gabon due to expected increases in food prices as a result of the war between Ukraine and Russia. Higher agricultural commodity prices such as wheat will feed inflationary pressures as Gabon is a net food importer. Some pass-through effect from higher global energy prices is also expected. Food insecurity, which has been on the rise in the past two years, with 73.3 percent of households facing food insecurity in November 2021, may in- crease further. To contain the rise in food prices, the Head of State instructed the Government to monitor the mechanisms put in place to stabilize oil prices, bread prices, and the price of several other staple foods. While these mechanisms should contain the rise in inflation, they are also expected to increasingly weigh on the country’s budget. There is thus a risk that the Government may introduce additional subsidies to contain these prices, that will also weigh on the budget. Stabilizing prices may also be needed to avoid social tensions before the next presidential election, scheduled for the first part of 2023. sures, with an impact on domestic food prices (especially step toward commodity revenue transparency, and the wheat since Gabon is a net food importer). Consequently, effective implementation of all obligations that member- food insecurity, which has been on the rise over the past ship entails will be crucial. Increasing human capital is a two years, may rise further. On the other hand, continu- priority in meeting the challenge of economic diversifica- ously high global oil prices would have a positive impact tion and reducing the risk of social unrest in a context of on Gabon’s fiscal and external positions. However, higher high unemployment. global oil prices could delay the implementation of mea- sures aiming at diversifying exports, strengthening social An opportunity to lower food prices: safety nets, and promoting competition. Reducing informal barriers to trade Improving transparency in oil revenues and human High food prices largely impact the most vulner- capital are key for Gabon’s development. The rein- able. Higher costs from supply chain disruptions and tegration into EITI at end-October 2021 is an important persistently high commodity prices could add to already Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 18 high inflationary pressures. During the COVID-19 pan- demic in 2020, the generalized rise in prices increas- ingly weighed on the purchasing power of households despite the ceilings introduced by the authorities on the price of basic goods in order to limit increases in the cost of living in Gabon. As discussed above, the pandemic led to an increase in food insecurity. The ongoing war in Ukraine may be amplifying food insecurity as a result of rising food prices, which may also cause fiscal balances to deteriorate, particularly in the presence of subsidies, which can crowd-out other, much-needed spending such as social spending or capital expenditures. Gabon, a net food importer, is highly dependent on agricultural imports. Despite its potential for agri- cultural production, Gabon’s food imports represented close to a quarter of its total imports of goods over the period 2010-2020. This creates vulnerability over food security, especially in the context of supply chain disrup- tions post COVID-19 lockdowns and the war in Ukraine. High trade costs and trade obstacles impede trade in agricultural products in the region and impact food prices for consumers. Disproportionately high trade costs arising from poor connectivity, an abun- dance of formal and informal barriers, and transport markets where competition is limited and productivity is very low, are factors that hamper trade in the region. Informal payments on imports into Gabon, including petty harassment, further increase customs costs on imports on top of already high import duties. Reducing petty harassment will be highly beneficial for Gabon. In the short and medium terms, this is crucial in order to: (i) facilitate regional agricultural trade; and (ii) reduce the overall cost of living for the population. By reducing trade costs and thus lowering food prices, reducing petty harassment could help ease spending pressures that are on the rise, caused by subsidies implemented to counter the effects of the ongoing war and keep in- flation under control. In fact, tackling the issue of petty harassment and other obstacles to trade in agricultural goods could be combined with a wider range of policy instruments, including targeted safety nets, forming a broad strategy to support trade and protect the poor from high food prices. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 19 SPECIAL TOPIC: AGRICULTURAL TRADE AND PETTY HARASSMENT IN GABON 1. Introduction an abundance of formal and informal barriers hamper trade within Gabon as well as with its regional peers. Gabon remains dependent on food imports de- Informal payments on imports into Gabon, including spite the high potential of its agriculture sector. petty harassment, a generalized form of corruption often Agricultural activity in Gabon is underdeveloped and used in Gabon and consisting of many small payments faces many constraints, with most of the food con- without receipt or cause to public officials, particularly sumed in the country being imported. In 2020, agri- the police, the army, weigh bridge officials, road traffic cultural imports represented over one fifth of the total officers, town council officials, and other authorities, import bill12 and more than twenty times the value of further increase customs costs on top of already high agricultural exports.13 High dependency on imports for import duties.14 food consumption raises the country’s vulnerability to food insecurity, which is already high. Current supply Reducing petty harassment would facilitate trade chain disruptions linked to COVID-19 lockdowns and, in agricultural commodities and increase accessi- more recently, the war in Ukraine further exacerbate bility to food products. The practice has a detrimental food insecurity in Gabon, thus highlighting the urgent impact on agricultural trade and, more generally, on need to increase resilience to shocks in the agriculture regional integration and increases consumer prices for sector. commodities and agricultural products, disproportion- ately affecting the poor. Promoting regional integration Obstacles to trade, including high trade costs and reducing trade barriers would make food products exacerbated by petty harassment, are an imped- more affordable for the population and contribute to iment to trade in agriculture. Disproportionately high tackling food insecurity. It could also contribute to re- trade costs arising from poor transport connectivity and ducing spending pressures caused by food subsidies. 12 In 2020, agricultural imports reached USD 466.3 million, about 21.1 percent of the total import bill. 13 In 2020, agricultural exports accounted for USD 19.8 million, or 4.2 percent of agricultural imports. 14 World Bank 2018b. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 20 PK8 Market, Libreville This chapter analyzes issues relating to agricul- exports represented a mere USD 20 million. Gabon tural trade in Gabon, presenting findings of a sur- imports mostly animal and cereal products, which rep- vey developed to investigate the impacts of petty resented about 61 percent of agricultural imports over harassment on regional integration. The chapter: 2010-2020. Among animal and cereal imports, frozen (i) provides an assessment of Gabon’s dependency on chicken and semi- or wholly milled rice represented agricultural imports; (ii) analyzes regional and domestic 21.3 percent of agricultural imports during 2010-2020. agricultural trade and barriers; (iii) identifies the specific detrimental impact of petty harassment on regional in- Gabon’s food insecurity has increased following tegration; (iv) identifies the direct macroeconomic costs the onset of the COVID-19 pandemic and the war of petty harassment; and (v) proposes a roadmap for in Ukraine, highlighting the urgency of actions to ameliorating trade conditions. The chapter benefited reduce barriers and informal costs to trade in agri- from a survey conducted in May 2022 with retailers and cultural goods.15 The drop in household incomes due wholesalers in agricultural commodities operating in to COVID-19 lockdowns worsened food insecurity in three large markets in Libreville (see Annex B). the country. The share of households experiencing food insecurity increased from 82.6 percent in November 2. Gabon’s Dependency on 2020 to 84.3 percent in April 2021 before declining to 73.3 percent with the lifting of the second lockdown Agricultural Imports in November 2021. Food insecurity is likely to affect Gabon is a net importer of agricultural products children in vulnerable households, for whom undernour- (Figure 13). Over the period from 2010 to 2020, Gabon’s ishment may have a long-term negative impact on the food imports represented between one fifth and a quar- country’s human capital development.16 Global supply ter of its total imports of goods. Imports of agricultural chain disruptions and the war in Ukraine are actively products stood at an average of USD 348 million, while contributing to soaring energy and food prices, resulting 15 Food insecurity is measured through a composite indicator based on Food Insecurity Experience Scale (FIES) questions that record self- experience episodes of food shortages by at least one household member over the past 30 days prior to the survey. 16 The food-health issue aggravated the education crisis due to school closures during COVID lockdowns. Globally, 70 percent of 10-year-olds (up from 50 percent during the pre-pandemic period) are now unable to comply with basic reading tests. Source: World Bank 2022. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 21 Figure 13. Average value of agricultural products traded, 2010-2020 Total value of agricultural products exported over 2010-2020: USD 19.7 million Crude palm kernel or Brans, sharps and babassu oil, 15% other residues, 10% Industrial A monocarboxylic fatty acid, 2% D E B F H I J K L C G Crude palm oil, 58% Palm oil (excl. crude), 10% M N O A. Cardamoms, 1%; B. Industrial monocarboxylic fatty acids, 1%; C. Cocoa beans, whole or broken, 1%; D. Frozen cuts and offal of chicken, 0.4%; E. Beans, fresh or chilled, 0.3%; F. Milk and cream in solid forms, 0.2%; G. Soya-bean oil (excluding crude), 0.2%; H. Wine (not sparkling), 0.2%; I. Other preparations, 0.2%; J. Sugar confectionery, 0.1%; K. Pig and poultry fat, fresh, chilled, 0.1%; L. Spice mixtures, 0.1%; M. Crude soya-bean oil, 0.1%; N. Chemical products and residual products, 0.1%; O. Other plants or parts, 0.1%. Total value of agricultural products imported over 2010-2020: USD 347.6 million Frozen cuts Preparations for and offal of Frozen edible Palm oil infant use, 3% turkey, 3% bovine , 2% (excl. crude), 4% Frozen boneless Chemical bovine meat, 5% products and Beer made Frozen cuts and offal of chicken, 11% Wine (not residual from malt, 2% sparkling), 2% products, 2% Milk and cream in solid forms, 4% Cigarettes Tobacco, Other food containing partly or wholly preparations tobacco, 2% stemmed, 2% of flour, 2% Sweet biscuits; Sauces and waffles Malt Spelt, common sauce and not wheat and Other food Frozen swine preparations, wafers, roasted, Semi-milled or wholly milled rice, 10% meslin, 5% preparations, 4% meat, 2% 1% 1% 1% Source: UN Comtrade (mirror data) H6 classification of products. The upper tree map refers to Gabon’s formal agricultural exports (USD 19.7 million on average over 2010-2020) of the top 20 products, while the lower tree map refers to Gabon’s formal agricultural imports (USD 347.6 million on average between 2010-2020) of the top 20 products. Beyond an agricultural trade deficit, Gabon’s agricultural exports are much less diverse and less complex than agricultural imports, affecting about 20 different products versus more than 400) (e.g., imports of frozen meat and processed food). Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 22 in heightened food insecurity risks through shortages The results could benefit both producers and consum- as well as price barriers, both of which could raise the ers in the region.18 risk of social unrest. A recent IMF paper using ma- chine-learning techniques found that food price inflation The Government has been taking steps to in- is associated with higher risks of social unrest, especial- crease Gabon’s agricultural production, yet stron- ly in the context of war in Ukraine, high debt levels, and ger reform efforts are needed to achieve produc- limited economic policy leeway in most of Africa.17 tion goals. Over the past decade and in line with the 2010 Strategic Plan for an Emerging Gabon (PSGE), Improvements in sustainable regional and na- the Government launched the GRAINE program (Box tional agricultural production as an alternative 3), with the objective of boosting national agricultural to imports—mostly from France, other European production on both export and food crops.19 Along with partners, and South-east Asia—could contribute other complementary programs, including an agricul- to dampening imported inflation and improve food tural project financed by the African Development Bank provision. Agricultural production has the potential of (AfDB), Gabon managed to increase its production of meeting the demand for staple food in the CEMAC zone, agricultural commodities, including relatively to neigh- in addition to contributing to poverty reduction through boring countries (Figure 14 and Figure 15). As of 2021, more affordable food prices and increased revenues de- plantains represented 35.1 percent of crop production rived by farmers. Improving production within CEMAC value in 2021, fresh vegetables 30.7 percent, cassava would require coordinated actions to help producers 15.3 percent, and taro 13.2 percent (Figure 16). At the form associations and establish commercial links with same time, the results of the GRAINE program have large buyers and carry out grouped sales; build capacity been mixed; the country remains far from its goal of of producer associations; invest in warehouses, trans- substantially expanding agricultural output to 20 per- port infrastructure and market facilities; facilitate access cent of GDP. The Government estimates that agriculture to finance for local producers; and provide training and will contribute to 4.3 percent of GDP in 2022, up from awareness campaigns on market and price dynamics. 4.2 percent in the previous year. Figure 14. Gross value of agricultural production Figure 15. Gross value production (USD1 million (crop, animal, aquaculture; base 100 = 2010) purchasing-power-parity dollars) 140 600 600 514 130 122 500 500 420 112 112 113 108 110 110 120 400 102 102 107 400 101 110 300 300 100 100 200 200 318 340 338 353 365 368 377 387 394 400 90 100 100 80 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Cameroon Central African Republic Chad Gross value of crop production Gross value of animal production Republic of Congo Equatorial Guinea Gabon CEMAC Gross value of aquaculture production Gross value of total production Source: US Department of Agriculture Source: US Department of Agriculture 17 Redl and Hlatshwayo 2021. 18 World Bank 2018b. 19 Development partners also supported other agricultural projects, including the French Development Agency (Agence Française de Développement, AFD) and AfDB. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 23 Figure 16. Composition of crops production The Government recognizes that the agricultural sector has the potential to become a major driv- 100.0% er of growth and job creation.20The Government’s 90.0% development strategy, the Transformation Acceleration 13.1% 13.2% 80.0% Plan (PAT) developed in January 2021 sets a goal of 15.7% 15.3% ultimately reducing food imports by 50 percent through 70.0% a strategy of import substitution. Gabon’s strategy cur- 60.0% rently focuses on three projects designed to structurally 50.0% 30.7% 30.7% boost agricultural production. First, the newly-estab- 40.0% lished agricultural high school based in Lebamba is 30.0% expected to be completed and operational in 2022 20.0% 34.5% 35.1% and will train skilled agricultural engineers. Second, 10.0% the Government plans to designate areas with high 0.0% potential for agricultural production labeled Productive 2020 2021 Agricultural Zones (ZAP). Third, the Government’s agri- Plantain Fresh vegetables Cassava Taro cultural and rural development programs (PDAR2-FIDA Maize Other fruits Yam Tuber 2018-2026) co-financed by the AfDB will be implement- Peanuts Plants and flowers ed in line with the existing GRAINE program and sets the goal of increasing the incomes as well as the food Source: National data based on local production (in CFAF millions) and nutritional security of women and the young. A law Box 3. GRAINE program The GRAINE program was set up at end-2014 by the Government in partnership with OLAM International to foster agricultural production in Gabon.20 The program was set up in a context of unfavorable agricultural development, including: (i) a small rural population (less than 15 percent of the total population); (ii) an obsolete and insecure land tenure system; (iii) the high cost of labor and lack of attractiveness of agricultural jobs for young people; and (iv) lack of infrastructure networks for marketing and processing agricultural products. The objective of GRAINE is to increase the contribution of the agriculture sector from 5 to 20 percent of GDP, a goal that remains unattained due to difficulties faced by the program. GRAINE also aims to reduce imports of agricultural commodities by 50 percent, reduce national food insecurity, improve the trade balance, and promote job opportunities for Gabonese citizens. This program is primarily based on: (i) support for the creation of indus- trial agricultural cooperatives through the distribution of land plots to farmers; and (ii) the establishment of specific pre-financing methods to facilitate access to equipment. In its first phase (2014-2018), the program faced difficulties including issues relating to land manage- ment, and low uptake and human-wildlife conflicts in certain areas. Given the mixed results obtained near the conclusion of its first phase, the authorities decided to redesign GRAINE, and AfDB agreed to support the second phase of the program. In April 2018, AfDB launched the Technical Support Project for the Agricultural Transformation Strategy (Projet d’Appui Technique à la Stratégie de Transformation de 20 GRAINE was formed by a partnership between the Gabonese Government (51 percent) and the Singaporean group Olam International (49 percent) and is supervised by local agricultural processing and development company SOTRADER Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 24 Box 3. GRAINE program (continued) l’Agriculture), amounting to CFAF 800 million, with two objectives: (i) the structuring of agricultural entrepreneurship among young people; and (ii) the effective dissemination of the GRAINE program to all provinces of Gabon. A CFAF 1.2 billion loan granted by the World Bank to SOTRADER, the Gabonese company for agricultural transformation, in 2017 also aimed to strengthen the productive capacities of cooperatives and planters engaged in the cultivation of palm oil, bananas, tomatoes, cassava, and pepper and to facilitate access by these stakeholders to financial services. In February 2019, the Government created the GRAINE Program Steering Committee, a coordinating body tasked with guiding and facilitating the implementation of the program. In the coming years, enhanced efforts to foster agricultural production will remain central to the Government’s economic diversification agenda. requiring supermarkets and the agro-business sector 3. Trade in Agricultural to purchase from local agricultural producers has also been passed.21 Commodities in CEMAC and Gabon: The Effect of A strategy aiming to strengthen national food Informality and Structural security might also encompass diversification of Barriers agricultural trade partners. In terms of trade in ag- ricultural products, Gabon has relatively low exposure CEMAC regional trade in agricultural commodities to the direct impact of the war in Ukraine as trade links remains largely informal, and opportunities re- with both countries are fairly weak, with Russian wheat main for fostering formal regional trade. Based on and meslin representing 10.8 percent of total wheat and UN Comtrade mirror data, the main sources of imported meslin imports and Ukrainian maize representing 5 per- formal agricultural products for Gabon over 2010-2020 cent of total groats and maize meal. Yet, the ongoing war were France (28.1 percent), Netherlands (8.8 percent), has been contributing to added inflationary pressures Thailand (6.1 percent), United States (4.8 percent), and through heightened international prices for wheat and Brazil and Cameroon (4.4 percent each) (Figure 17). indirect disruptions in global supply chains. Meanwhile, While Cameroon is the fifth country of origin for agricul- Western Europe remains the main provider of strategic ture imports, other CEMAC countries do not reach the cereals (including wheat). However, unforeseen circum- top 20 countries of origin. CEMAC partners (consisting stances, such as the rainfall deficiencies and heat waves exclusively of Cameroon and Congo) represented only taking place in France in 2022, could have a detrimental 5.5 percent of formal agricultural imports over 2010- impact on production and thus on the export capacity 2020 (USD 31.1 million versus USD 534.6 million for of agricultural products. Accordingly, diversifying trade other partners). However, this registered volume of trade partners would contribute to improving resilience in key underestimates the real volume of trade with regional imports provision. partners as UN Comtrade data do not record informal agricultural trade flows, which are significant in the re- gion, especially for specific products such as bananas, cassava, plantains, and taro (Box 4). With the lowest regional integration levels in the Continent, CEMAC countries have a (largely untapped) potential for building stronger trade 21 The French retailer group Carrefour announced on April 5, 2022 that it will market nearly 700 locally processed products in its stores. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 25 Figure 17. Share of top 20 main agricultural providers, 2010-2020 (all agricultural products) United States, 4.9% Brazil, 4.6% Cameroon, 3.9% Cambodia, 3.2% Malaysia, 2.6% Italy, 2.2% Spain, 2.2% Netherlands, 9.1% Poland, Vietnam, 1.6% 1.5% United Kingdom, India, 3.0% 2.1% Ukraine, 1.4% South Africa, Paraguay, Germany, Tunisia, France, 29.1% Thailand, 6.3% Belgium, 2.7% 2.1% 1.5% 1.3% 1.3% Source: UN Comtrade (mirror data) H6 classification of products Box 4. Informal agricultural trade in the CEMAC region Unrecorded and informal trade in agricultural commodities is widespread in CEMAC. Trade statistics in the region are mostly inaccurate and miss a large portion of unrecorded and informal flows. Even though most border crossings between Gabon, Cameroon, and Equatorial Guinea take place through formal checkpoints rather than uncharted routes, official records widely underestimate total trade flows. Overall, official statistics miss both types of agricultural commodities traded as well as correct volumes, which are often larger than those officially recorded. Accordingly, Nkendah (2013) estimated that informal or unrecorded trade between Cameroon and its CEMAC neighbors represented about 96 percent of official statistics in 2008 and mainly concerned agricultural products. links, which could greatly contribute to economic crossings could be minimized with initiatives such as development. Stronger efforts could be made in de- the digitalization of customs procedures along all bor- veloping the common market, by harmonizing customs ders and the establishment of single windows for trade exemptions, removing non-tariff barriers and investing procedures, merging processes and clearance steps in infrastructure to facilitate trade along regional trade for imports and exports. CEMAC authorities could also corridors. Border clearances could be streamlined with strengthen their cooperation with a view of minimizing joint efforts to reduce the number of administrative doc- border closures, which have high costs to regional uments required for imports and exports in the region. trade.22 As an example for their regional integration Furthermore, the time and costs spent with border agenda, Gabon and its Central African neighbors could 22 World Bank 2018b. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 26 look for inspiration at cases such as Rwanda and its countries, and the overall LPI (in 2018, the last year Eastern African partners, which have adopted a strong available) was at the same level of that of the Central agenda promoting trade facilitation and regional integra- African Republic (Figure 18). This trend is due to a mix tion (Box 5). of large infrastructure gaps and administrative inefficien- cies. However, the operationalization of new port infra- Gabon’s agricultural trade is hampered by struc- structures as well as transport networks, including roads tural bottlenecks related to weak transport infra- and railroads, are expected to support trade facilitation structure, the high number of intermediaries, price in the future.23 These include the international port of uncertainty, and poor market management. The Owendo, a large infrastructure project realized in 2019 Logistics Performance Index (LPI) highlights a degra- and 2020 as part of the Gabon Special Economic Zone dation of Gabon’s overall logistics after 2010, including (GSEZ), a public-private partnership between OLAM customs and the quality of logistics services. Over the International, the Republic of Gabon, and the Africa past decade, Gabon’s trade logistics lagged CEMAC Finance Corporation (AFC). Additionally, the dry port of Box 5. Reducing trading costs and promoting regional integration in East Africa: the case of Rwanda Trade integration is one of the pillars of the regional reform policies adopted by CEMAC member states, but the region’s performance has been lackluster. CEMAC’s Economic and Financial Reform Program (Programme des Réformes Économiques et Financières, PREF) aims at increasing regional trade, a goal that is largely yet to be attained. In this context, it could be useful for Gabon and other countries in the region to consider the experience of countries such as Rwanda. Rwanda achieved significant improvements in trade facilitation thanks to a series of trade promotion efforts, including a strong cooperation with regional partners in the Eastern Africa Community. Between 2007 and 2016, Rwanda’s ranking on the Logistics Performance Index (LPI) sharply rose from 148th to 62nd. The country benefited enormously from regional cooperation to reduce delays and costs involved with border crossings. In cooperation with neighboring countries, one-stop border posts (OSBPs) were introduced, with initiatives to start clearance before goods arrive and relocate final clearance from the border to points of destination. Electronic cargo tracking systems (eCTS) were also implemented in the region, to keep track of goods and trucks in transit across international boundaries. These actions contributed to a strong decrease in clearance times of goods traded in East Africa and at the same time helped improve the reliability and predictability of supply chains. For example, at the Malaba border post between Kenya and Uganda—one of the main transit points for Rwandese trade—, clearance times dropped from 24 to 6 hours within one month, as of January 2013. As a result of these initiatives, transport costs also fell throughout East Africa. The cost of transporting a container from the port of Dar es Salaam in Tanzania to the Rwandese capital of Kigali fell from $2.81 per container per kilometer in 2013 to $1.87 in 2020. Actions to reduce logistical costs and facilitate regional trade could unlock an important driver for growth in Gabon and other Central African countries.. C. Djiofack, I. Osorio-Rodarte, and P. Niyibizi 2022. 23 Current infrastructure projects promoted by the Government include: (i) road extensions, including the Port-Gentil/Omboué axis co-financed by China’s Exim Bank and the Gabonese Government to promote agricultural potential of Ogooué-Maritime Province, and the Libreville-Akanda highway built by the China Road and Bridge Corporation to reduce systemic traffic bottlenecks; (ii) the modernization of road infrastructure in Libreville; and (iii) renovation of the Trans-Gabon merchant railroad between Libreville (Owendo port) and Franceville (close to the Rep. of Congo) with support from French and European financing. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 27 Figure 18. Overall LPI score (2007-2018) further than 25 km from the farm. In these immediate markets, producers have the option to sell their goods 2.70 directly (i.e., retail for localized consumption) or sell to 2.60 an intermediary. Border markets are often used as an 2.50 intermediary point to fragment large consignments of 2.40 agricultural goods for medium-sized buyers, who cross 2.30 the border as intermediaries between the wholesale and 2.20 2.10 retail phases. For goods that do not go through border 2.00 markets, the endpoint is the wholesale-to-retail urban 1.90 markets in the capitals and large cities of neighboring 1.80 CEMAC countries. 2007 2010 2012 2014 2016 2018 Cameroon Central African Republic Higher than expected price volatility leads to un- Chad Republic of Congo Equatorial Guinea predictable returns for traders and producers. A Gabon survey conducted among market participants in agricul- Source: LPI, WDI (2018) tural trade in CEMAC identified price volatility as a major impediment to agricultural production and trade.25 In Eboro in Woleu-Ntem Province will provide sanitation addition, 85 percent of traders interviewed in May 2022 control and disinfection infrastructure for imported food believed that the prices they received for their agricul- products from Cameroon. tural products were neither fair nor predictable. On the supply side, one major determinant of price volatility is CEMAC’s agricultural trade corridor hosts a high over-production, which is due to producers’ reactions number of intermediaries, which increases trans- to past price peaks in a given month and relatively high action costs. In Gabon, no fewer than 16 steps must demand in recent years, including from other CEMAC be taken to complete the entire trade marketing pro- countries. On the demand side, prices fluctuate signifi- cess of agricultural products from production to final cantly depending on the presence of foreign buyers. consumption. Insufficient commercial linkages and Price uncertainty is exacerbated by the lack of a market marketing bottlenecks lead to many intermediaries op- information system for disseminating prices, coupled erating along the main trade channels. According to the with insufficient awareness. most recent CEMAC Country Economic Memorandum (CEM), there are six major selling blocks in a typical re- Poor market management and market infrastruc- gional agricultural trade corridor (farm/field, immediate ture hamper commercial linkages. Large urban mar- market, collection market, urban markets, border mar- kets have poor infrastructure and management. Scarce kets, and foreign markets) as well as various degrees market infrastructure, especially storage facilities, are of intermediation depending on available commercial often captured by local elites and intermediaries. In ad- linkages and information, market infrastructure, size of dition, market fee collection does not seem to be sys- actors, negotiating power, and availability of buyers.24 At tematic, and the collected funds are not earmarked for the production stage, farmers have the option of directly market maintenance or development. Actions could be selling their output to large urban or foreign buyers, use taken to improve the efficiency of agricultural markets: local intermediaries, or transport the goods themselves investments in infrastructure could be made to estab- to a larger market (urban or at a border). Otherwise, lish markets in strategic points along trade corridors, immediate outlets for agricultural products are rural with adequate stalls, storage facilities, and sanitation. markets, mostly organized weekly, at the intersection Inclusive management and oversight could be promot- of multiple villages and production basins, usually no ed by involving trader associations and market users, 24 World Bank 2018a. 25 World Bank 2018a. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 28 reducing opportunities for abusive behavior. Finally, co- Libreville can expect to be stopped 44 times, with ordination with associations and market players could a delay of 15 hours and 34 minutes and a total cost be promoted to identify opportunities for reducing the of CFAF 1,980,000 (USD 3,736) (Table A.2, Appendix number of intermediaries in agricultural trade chains.26 A). As it covers the 478 kilometers between the border at Abang Minko and the Gabonese capital, a truck can 4. Barriers to Regional Trade: expect to be stopped once in every 10.8 kilometers. The truck driver would be stopped 25 times by the po- Findings from a Survey on lice and gendarmerie, plus around four times each by Petty Harassment municipalities, customs, and phytosanitary police, and seven times by other entities. On top of the official and CEMAC countries, including Gabon, face another unofficial payments demanded along the way, the multi- structural bottleneck hindering agricultural trade, ple stops increase logistical costs and can compromise namely petty harassment.27 Trade in agricultural the quality or even lead to the degradation of certain commodities in CEMAC faces limited consistency perishable goods. Furthermore, of the total of 44 stops, and transparency in border clearance requirements, 33 could qualify as petty harassment given a delay of a vector for petty harassment resulting in a multitude 11 hours 7 minutes and a cost of CFAF 1,510,000 (USD of formal and informal border costs. A World Bank 2,850), or about 76 percent of total costs at check- survey of CEMAC countries reveals a universal recog- points. While each payment may seem small, petty nition among agricultural traders and transporters that harassment is a major cost to the national economy. regardless of whether or not all paperwork and cargo Based on data collected, petty harassment increases are in order, extra payments are often demanded by the cost of transporting agricultural commodities in customs or other authorities operating along trade net- Gabon by USD 0.30 per ton per kilometer (USD 135 per works.28 Without these extra payments, public agents ton from the Cameroon border to Libreville). will simply hold the truck until payment is made. The most often cited example, which was also highlighted in Traders’ efforts to circumvent petty harassment the March 2018 transporters’ strike, is that weigh sta- lead to a vicious circle of further informal practic- tions are uncalibrated and therefore produce different es. As payments (both formal and informal) are often results at each stop, requiring a “corrective” payment determined by the size of the consignment, which in without a receipt. Accordingly, actual trading costs at turn is estimated by number of bags, traders often over- the surveyed locations are consistently higher than of- load bags. In addition, truck loads are often hidden, with ficial listed tariffs. Real costs are often not aligned with more highly taxed commodities hidden at the center official tariff lists, and frequently include many unofficial and surrounded by lower-value commodities. In addi- cost items such as mandatory informal payments ex- tion, as smaller consignments transported in cars or by torted by certain authorities, both at borders and along motorcycle are rarely checked and or taxed (formally roads leading to the main consumption areas. Notably, or informally) proportionally less harshly, it is common the actual cost for border clearance for a mid-size truck practice at various border posts to disaggregate a large between Cameroon and Gabon is reported to be CFAF truck’s load into small batches of 2-3 bags per motor- 234,000 (USD 442) for a 10-ton truck, nearly twice as cycle, which then crosses the border with fewer hassles much as the cost of official fees (CFAF 111,500 or USD only to reassemble the cargo onto a different truck on 210.78) (see Table A.1, Appendix A). the other side. Overall, informal practices cause higher risk-taking for border users. On its turn, higher levels of In particular, an average 20-ton truck trip from informality negatively impact domestic revenue mobili- the Cameroon border to the urban markets in zation efforts. 26 World Bank 2018a. 27 World Bank 2018a. 28 Field discussions initiated for the 2018 Regional Agricultural Trade Report (World Bank 2018b). Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 29 In addition to undermining regional agriculture ricultural trade in Gabon; it revealed widespread competitiveness, petty harassment imposes other practices that are detrimental to trade, including negative spillovers. Given the failure to adequately petty harassment and cash extortion by economic control vehicle weight limits, for instance, roads de- agents managing markets. Fifty agricultural traders teriorate more quickly, leading to higher maintenance in three private markets in Libreville were interviewed costs for roads and vehicles alike. In fact, the present by the team during May 2022.29 Traders were asked system arguably encourages overloading since trans- to provide information, based on their experience, on porters know they must pay a bribe regardless of actual areas such as the costs and difficulty of documentary vehicle weight. Inadequate application of sanitary and compliance as well as the fees and payments made at phytosanitary (SPS) measures is also a major economic border crossings and along trade routes. A high number concern. Genuine threats to animal and plant health and of traders informed that they did not know the answer food safety arising as part of agricultural trade that can to certain questions on the cost of documents and on have devastating effects on entire populations and ag- the existence of discretionary fees, which might indi- ricultural ecosystems. Managing these risks effectively cate a fear of reprisal among some of the respondents. requires well-functioning, professional systems and However, among those who provided an answer when cannot be achieved simply through the collection of asked about their experience with petty harassment, fees or selling SPS permits. 71 percent of respondents reported dealing with dis- cretionary and variable fees at various checkpoints. A survey was conducted for this Economic Update Moreover, a worrying trend has been observed in regard to investigate the cost of petty harassment to ag- to the COVID-19 pandemic. Around one in four traders PK8 Market, Libreville 29 We conducted the survey of agricultural traders in the B2, Pk8, and Venez-voir private markets in Libreville. The participants in the survey were self-employed traders who transport and sell agricultural products. Among the traders surveyed, two thirds were retailers and one third wholesalers. They sell bananas (98 percent), taro (54 percent), potatoes or tubers (50 percent), chili peppers (22 percent), onions (20 percent), cassava (14 percent), and cabbage, tomato, yam (10 percent or less). Results are presented in Annex B. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 30 reported to have experienced longer times for dealing CEMAC Commission and the Foundation for Studies with administrative documents since the pandemic, and and Research on International Development (FERDI), one third of respondents informed that new checkpoints the Gabonese Ministry of Trade announced the elimi- were created along trade routes.30 nation of the Ntoum checkpoint, which is expected to be followed by the removal of the Mebo checkpoint. The survey undertaken found that agricultural Further reductions in the number of checkpoints could traders consider that petty harassment is much facilitate trading activities within Gabon and with neigh- more of a problem than formal administrative re- boring countries. Remaining checkpoints could be quests. Only 6 percent of traders surveyed find it hard upgraded with investments in capacity building, training to obtain all mandatory administrative documents and (including in phytosanitary inspections), digitalization, 10 percent consider these documents too expensive performance-based management, and increased over- (for more detailed survey responses, see Appendix B).31 sight, to ensure the professionalism of officers enforcing Petty harassment appears to be a persistent burden control at checkpoints. To better identify and distinguish and a comparatively much more onerous one than petty harassment from legitimate checks, a hotline ser- formal obligations, as highlighted in private discussions vice could be established to allow for reports of abusive with traders as irrespective of having all mandatory behavior. In addition to communicating on inspections formal documents, paying a discretionary fee to public done in local markets, awareness campaigns could be officials at checkpoints is normally enough to be cleared carried out to reinforce the public information on official at checkpoints. In addition, 36 percent of traders sur- checkpoints along trade routes, as well as on trade pro- veyed openly declare they do not obtain receipts at cedures and official fees applicable to trading activities.32 checkpoints, and about one quarter (24 percent) openly cite evidence of occasionally (12 percent) or systemi- 5. Macroeconomic Costs of cally (12 percent) varying fees at different checkpoints. The survey also identified widespread levels of extortion Petty Harassment suffered by traders in agricultural products in Gabonese Petty harassment results in higher trade costs and markets. 88 percent of respondents stated that they has a detrimental impact on the overall cost of liv- face occasional (64 percent) or systematic (24 percent) ing for the population. It was estimated that the prac- money extortion to ensure their safety in private mar- tice accounts for 14 percent of final consumer prices kets. In brief, petty harassment is harmful for traders for selected commodities along the Cameroon-Gabon and households, resulting in higher prices for agricultur- corridor, representing about one-third of final consumer al commodities. prices (Figure 19). The culture of petty harassment is widespread, leading market actors to internalize these The negative impacts of excessive checkpoints payments in the transport costs. are recognized by the Government, which has been taking initial measures to reduce check- The elimination of petty harassment is estimated points - yet, stronger efforts would be needed to have significant effects on exports and growth. to substantially reduce petty harassment along Simulating such elimination in CEMAC using ENVISAGE, trade corridors. Ongoing initiatives include an online a dynamic global CGE model developed by the World mapping of official checkpoints. Also, during a confer- Bank, yields evidence of significant effects on exports ence co-organized at end-April 2022 in Libreville by the and growth.33 When simulating a 14 percent removal of 30 Two thirds of respondents did not know the answers to the questions on the impact of COVID-19 to document delivery times and on the creation of new checkpoints since COVID-19. 31 The list of mandatory documents includes an ID card or resident permit, a transit authorization, a phytosanitary form, a trader card (for market activities), and a COVID-19 test when COVID-19 restrictions apply. In fact, COVID-19 slightly worsened the overall situation: about one quarter (24 percent) of respondents highlight longer delays in obtaining all the necessary administrative papers, about one third (34 percent) noted additional checkpoints, and 98 percent cite greater difficulties in selling their products due to supply chains disruption and lockdowns. 32 World Bank 2018b. 33 Djiofack 2018. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 31 Figure 19. Price buildup for selected commodities along the Cameroon-Gabon corridor (in % of final consumer price) Transport, 16% Production costs, 18% Producer's margin, 3% Intermediaries at final Intermediaries along destination, 23% the corridor, 16% Market fees, 3% Petty harassment, 14% Border crossing, 7% Production Transport Intermediation Border Source: World Bank Group (2018b) petty harassment on all agricultural and manufacturing goods. Coordinated action to address trade bottle- product trade among all CEMAC countries, the gains necks would have substantial economic impact and in intra-regional trade for all countries is significant. benefit both producers and consumers. It would also Relative to the baseline (2015), intra-regional exports for be important to improve the efficiency of the legitimate Gabon could increase by about 25 percent by 2030, controls of cross-border trade, in order to facilitate and GDP growth could increase by more than 0.7 per- trade and reduce the risks posed by traded products centage points (Figure 20 and Figure 21).34 Given the for human, animal and plant health. However, mean- potential importance of unrecorded and informal trade, ingful improvement requires cross-sector collaboration the impact on growth may be even larger. and strong political leadership at both the national and regional levels as foreseen by the WTO Trade Facilitation 6. A Roadmap for a Reduction Agreement. Accordingly, reducing petty harassment would help: (i) improve and facilitate regional integration in Petty Harassment thanks to a significant direct reduction in transport costs Reducing petty harassment is critical to reinforc- for commodities and other products as well as in petty ing regional integration and agricultural import harassment for traders (as highlighted by our survey); substitution strategies as promoted by CEMAC. and (ii) reduce the cost of living for the population, es- As identified by the survey conducted for this report, pecially the most vulnerable. It would also benefit the a substantial number of traders reported dealing with fiscal balance by reducing spending pressures brought discretionary and variable fees and frequent lack of by food subsidies. receipts along checkpoints. Administrative documents required for trading activities were reported to be costly, In line with the current Government’s development adding to the obstacles faced by traders in agricultural plan (PAT) and previous analysis conducted by 34 For methodological details see World Bank 2018a, p. 90. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 32 Figure 20. ENVISAGE Results: Impact on Exports Figure 21. ENVISAGE Results: Impact on Growth (% increase over the baseline) (percentage point increase over the baseline) 0.98 30 1 26 0.9 23.9 24.6 23.7 25 0.8 0.72 20.5 0.7 20 0.6 0.54 0.48 15 0.5 0.4 0.34 10 0.3 5 0.2 0.1 0 0 Cameroon CAR Chad Gabon RC Cameroon CAR Chad Gabon RC Source: Djiofack 2018 Source: Djiofack 2018 the World Bank,35 a policy roadmap for reducing 2. Professionalizing behavior along trade corridors petty harassment rests on three pillars: (i) improving border operations; (ii) professionalizing behavior along a. Continue reducing the number of checkpoints trade corridors; and (iii) improving the efficiency of agri- along trade corridors linking Gabon with neigh- cultural markets. boring countries. 1. Improving border operations b. Continue implementing an online mapping of official checkpoints and promote the use of the a. Accelerate the digitalization of customs through anti-corruption hotline to allow corridor users to the deployment of Sydonia World software at report abuse and corruption. The platform would customs along the northern border. also benefit from distinguishing between petty harassment at checkpoints and in markets or b. Streamline the number of administrative doc- production sites. uments needed for import and export activities in line with WTO recommendations on trade c. Reinforce publicity materials and user-friendly facilitation. information on trade procedures and official fees. c. Implement a single window approach to external d. Upgrade legitimate checkpoints by building agricultural trade, including regional trade, to capacity to implement functions (such as SPS improve efficiency and transparency and reduce monitoring) and improving oversight. In particu- opportunities for bribes and petty harassment. lar, there is an urgent need to make legitimate The creation of a single window would reduce functions (such as vehicle weight limits and SPS trade information processing times and shorten measures) more effective and efficient. the customs clearance process. 3. Improving the efficiency of agricultural markets d. Foster dialogue through CEMAC’s Economic and Financial Reform Program (PREF-CEMAC) a. Promote competitiveness through inclusive over the negative impact and shared cost of bor- market management and oversight by involving der closures. trader associations and other private users in 35 World Bank 2018b. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 33 the development and management of market spaces. b. Reduce the number of steps (currently 16) be- tween the various actors involved with agricul- tural trade (producers, importers, and traders) to improve efficiency and transparency and reduce opportunities for bribes and petty harassment. PK8 Market, Libreville Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 34 References Djiofack, C. 2018. “Using a Dynamic Global CGE Model (ENVISAGE) to Model the Impact of Removing Petty Harassment Costs (tracasseries) on Intra-regional Trade and Growth in CEMAC.” Country Economic Memorandum (CEM) Background Paper. World Bank. Djiofack, C., Osorio-Rodarte, I., and Niyibizi, P. 2022. “Fostering Rwanda Competitiveness and Resilience in the Post-COVID-19 Era.” Trade Report. World Bank. Nkendah, R. 2003. “Estimating the Informal Cross-border Trade of Agricultural and Horticultural Commodities between Cameroon and its CEMAC Neighbors.” Food Policy, vol. 41, No. 4, pp. 133-144. Redl, C. and Hlatshwayo, S. 2021. “Forecasting Social Unrest: A Machine Learning Approach.” Working Paper 2021/263. International Monetary Fund. Singh, R., Tchana Tchana, F., Coulibaly, A., de Paul Tsoungui Belinga, V., Diaz Sánchez, J. L.; Mafoboue Youbi, M., Anicet Kouakou Kouame, W., Sandjong, T., d’Estaing Diderot, G., Audiguier, C., Ndong Ondo, S. B., and Monteiro da Mota, J. 2022. CEMAC Quarterly Economic Barometer, Vol 3, Q4 (English). World Bank. World Bank. 2018a. CEMAC: Deepening Regional Integration to Advance Growth and Prosperity. World Bank Country Economic Memorandum (CEM). World Bank. 2018b. Breaking Down the Barriers to Regional Agricultural Trade in Central Africa. International Bank for Reconstruction and Development (IBRD). World Bank. 2022a. COVID-19 Impact Monitoring at the Household Level. March. World Bank. 2022b. Global Economic Prospects, June 2022. Washington, DC. Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 35 Appendix A. Assessing the Monetary Costs of Unofficial Checkpoints and Petty Harassment for Truckers Table A.1: Official and actual cost of clearing a truck at Abang-Minko/Eboro border between Cameroon and Gabon Minibus (1 ton) Small truck (4 ton) Mid-size truck (10 ton) Responsible Official Actual Official Actual Official Actual Variation Variation Variation Fee name agency cost cost cost cost cost cost Cost to Exit Cameroon Entry fee Police - 5,000 5,000 - 5,000 5,000 - 5,000 5,000 Paid to enter the market Army - 2,000 2,000 - 2,000 2,000 - 2,000 2,000 for loading purposes Immigration - 2,000 2,000 - 2,000 2,000 - 2,000 2,000 Town Hall ? 2,000 2,000 ? 2,000 2,000 ? 2,000 2,000 Assemblée ? 1,000 1,000 ? 1,000 1,000 ? 1,000 1,000 Loading fee Town Hall ? 1,000 1,000 ? 2,000 2,000 ? 5,000 5,000 Customs Exit fee Customs 2% 10,000 N/A 2% 15,000 N/A 2% 15,000 N/A Phytosanitary Phyto Police 5,100 5,000 (100) 8,500 10,000 1,500 8,500 10,000 1,500 LVO fee BGFT 5,000 5,000 - 10,000 10,000 - 15,000 10,000 (5,000) Exit fee Police ? ? ? ? ? ? - 2,000 2,000 Paid at the Post avancé. Information only available for mid-size trucks. Army ? ? ? ? ? ? - 2,000 2,000 Costs to Enter Gabon Overtime fee Customs ? 5,000 5,000 ? 5,000 5,000 ? 15,000 15,000 Phyto Inspection AGASA 10,000 5,000 (5,000) 20,000 25,000 5,000 30,000 50,000 20,000 Identification note fee CGC 10,000 5,000 (5,000) 10,000 10,000 - 10,000 25,000 15,000 Certificate of authorization for DGCC ? 5,000 5,000 16,800 25,000 8,200 48,000 48,000 - consumption (issue fee) Unspecified fees Town Hall ? 2,500 2,500 ? 5,000 5,000 ? 10,000 10,000 Assemblée ? 5,000 5,000 ? 5,000 5,000 ? 15,000 15,000 Army - 5,000 5,000 - 5,000 5,000 - 5,000 5,000 Police - 5,000 5,000 - 5,000 5,000 - 10,000 10,000 Total Costs at Border Total per vehicle (CFAF) 30,100 70,500 30,400 65,300 134,000 53,700 111,500 234,000 107,500 Cost per ton (CFAF) 30,100 70,500 30,400 16,325 33,500 13,425 11,150 23,400 10,750 Total per vehicle (USD) 56.90 133.27 57.47 123.44 253.31 101.51 210.78 442.34 203.21 Cost per ton (CFAF) 56.90 133.27 57.47 30.86 63.33 25.38 21.08 44.23 20.32 ? = Information on official costs not available from responsible agency. Source: World Bank 2018a Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 36 Table A.2: Checkpoints between Abang Minko and Libreville (20-ton truck) Total average Tracasserie (yes/no, Average cost for the Total delays depending on level cost one-way trip Type of checkpoint Number caused for formality) (CFAF) (CFAF) Police 7 2 hours 27 min Yes 47,143 330,000 Phytosanitary police 4 1 hour 44 min Yes 45,000 180,000 Gendarmerie 18 6 hours 18 min Yes 45,000 810,000 Municipality 4 1 hour 10 min Yes 47,500 190,000 Customs 4 1 hour 38 min No 42,500 170,000 Others 7 2 hours 27 min No 42,857 300,000 Total 44 15 hours 34 min 1,980,000 Source: World Bank 2018b B. Survey of Agricultural traders on Administrative Burden and Petty Harassment We conducted an original survey on 50 agricultural traders during May 2022 in the B2, Pk8, and Venez-voir private markets of Libreville and elicited feedback on regular administrative processes, petty harassment, and the conse- quences of COVID-19 lockdowns. The respondents were self-employed traders who transport and sell agricultural products in Libreville. Of the traders surveyed, two thirds were retailers, and one third, wholesalers. To transport their goods, two thirds of traders declared that they lease a vehicle with a formal contract, while others employ different informal arrangements and other means to secure transportation. The traders sell bananas (98 percent), taro (54 percent), potatoes or tubers (50 percent), chili peppers (22 percent), onions (20 percent), cassava (14 percent), and cabbage, tomatoes, and yam (10 percent or less). Survey participants were asked about petty harassment, admin- istrative burdens, and the impact of COVID-19 on their activities. Figure B.1: Characteristics of traders Percentage of surveyed traders 34% 66% Retailers Wholesalers Source: Authors’ own survey Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 37 Figure B.2: Petty harassment and cash extortion in agricultural trade chains Discretionary and variable fees at various checkpoints No receipts provided in check points Totally agree 12% Totally agree 0% Agree 12% Agree 14% Neutral 2% Neutral 4% Disagree 8% Disagree 36% Totally disagree 0% Totally disagree 0% Don't know/N.A. 66% Don't know/N.A. 46% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Additional fees to pay to ensure safety on markets Totally agree 24% Agree 64% Neutral 0% Disagree 4% Totally disagree 0% Don't know/N.A. 8% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: Authors’ own survey Figure B.3: Administrative burdens Administrative documents are easy to obtain Administrative documents are too expensive Totally agree 4% Totally agree 8% Agree 18% Agree 16% Neutral 4% Neutral 2% Disagree 6% Disagree 10% Totally disagree 0% Totally disagree 0% Don't know/N.A. 68% Don't know/N.A. 64% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: Authors’ own survey Gabon Economic Update Trading Agricultural Commodities: Reducing Petty Harassment 38 Figure B.4: Impacts of the COVID-19 pandemic to trading activities Longer delivery time for administrative documents New checkpoints post-COVID-19 24% 34% 64% 66% 12% Yes No Don't know/N.A. Yes No Don't know/N.A. Source: Authors’ own survey Macroeconomics, Trade and Investment