February 21, 2002

SUMMARY
Privatization of Gabonese state-owned enterprises continues to move ahead slowly. Since the privatization process was initiated in 1997, five companies have been completely privatized, one liquidated, and one partially sold. Seven other enterprises are currently in various stages of privatization, and an additional eight companies are scheduled to be privatized in the future.

BACKGROUND ON PRIVATIZATION
Like many petroleum-driven economies, Gabon used its oil revenue beginning in the late 1970s to try to create economic activity in various domestic sectors. As a result, since the early 1980's most of the large enterprises operating in Gabon have been either wholly or partially owned and controlled by the Government of Gabon (GOG). State-owned monopolies in Gabon have included utilities (water and electric company, mail and telephone service), transportation (national airline, railroad, port management), communications (television and radio stations, main daily newspaper), and agriculture (rubber farming, agribusiness). Most of the enterprises were created as parastatals or private-public partnerships, with the GOG maintaining a controlling interest in the company (51 percent) while allowing for private ownership.

The slump in world oil prices in the mid-1980's severely strained the government's ability to provide needed subsidies to public and parastatal enterprises. The devaluation of the central African franc (CFA) in 1994 took a further toll on the Gabonese economy, forcing the GOG to restructure or liquidate many public companies. In response to ongoing fiscal pressures, Gabon began working with the World Bank and the International Monetary Fund (IMF) in 1994 to put a privatization program in place. Legislation enacted in early 1996 laid the legal foundation for all subsequent privatization activities, defining the scope and setting out the parameters of the privatization process.

The 1996 law created two privatization oversight bodies. The Privatization Committee, located within the Ministry of Finance, is responsible for the technical implementation of all aspects of privatization. It selects the privatization process for each entity, evaluates companies and determines shares and assets, organizes and evaluates calls for tenders, selects purchasers and managers, and coordinates transfer operations. The Privatization Committee reports directly to the Interministerial Privatization Commission (IPC), which has authority over all questions relating to privatization. The IPC is composed of the Ministers of Finance, Planning, Justice, Labor, and Social Affairs, as well as other ministers with authority over specific companies to be privatized. The IPC rules on recommendations from the Privatization Committee. Resolutions approved by the IPC are submitted to the cabinet for approval and decision.

According to the 1996 privatization law, the decision to privatize a state-owned company rests with the government. An annual privatization program adopted by cabinet decree forms an appendix to the budget act. Every year the Privatization Committee is required to prepare a specific report concerning the operations provided for by the law. Since the privatization law was passed in 1996, five companies have been completely privatized, one liquidated, and one partially sold. Fifteen others remain in various stages of privatization, as outlined below.

COMPANIES ALREADY PRIVATIZED
The following companies have already completed the privatization process:

SEEG (Electric and Water Company)
After an 18-month privatization process, the Compagnie Generale des Eaux (now known as Vivendi) was awarded a 20-year concession to operate the electric and water utility in June 1997. Vivendi holds a 51 percent interest in SEEG, with private investors holding the remainder. The now profitable company is regarded by the GOG as a model for future privatization efforts.

OCTRA (Railroad)
In December 1999 the Transgabonais Railway Company, a consortium of SNBG (Gabonese Timber Company) and other timber companies, took over operations of OCTRA. The consortium holds 51 percent ownership, while other private investors (including the Belgian company, Transurb) hold 34 percent, state-owned companies 10 percent, and former OCTRA employees 5 percent. Transgabonais has undertaken steps to improve the cost-effectiveness of the railroad but continues to be financially strained.

SOSUHO (Haut Ogooue Sugar Company)
Privatized in 1998 and bought by SUCAF/GABON (Societe Sucriere Africaine du Gabon), a subsidiary of the Gibraltar-based SUCAF HOLDING, owner of the Castel beer group. CIMENT DU GABON (Gabon Cement Company) In January 1999 the Privatization Committee defined a privatization strategy for Ciment du Gabon and submitted it to the IPC. An international call for tenders to transfer 51-75 percent of the capital to a potential partner was launched in November 1999. Seven candidates bid (two from France and one each from Portugal, Spain, Mexico, South Africa and Norway). The Norwegian firm Scancem International (of the Heidelberger Zement group) was selected and, in April 2000, took over the management of the company. Scancem now maintains 75 percent of the assets with the remaining 25 percent sold to local investors and company employees. The privatized company, Cimgabon, has become profitable with the launch of the new range of cement products, some for export.

CFG (Gabon Forestry Company)
In September 1998 the CFG board of directors signed a lease-management contract with the Compagnie de Transformation du Bois (COTRAB), a branch of the Italian Basso Timber Group. Under the contract COTRAB was to have gained control of CFG for three years (1999-2002), at the end of which CFG would be sold to COTRAB. The Privatization Committee, which did not approve the original contract signed by the CFG board, agreed in November 2001 to sell the company to the Italian group Cora Wood which had acquired Basso in a previously deal.

GABON INFORMATIQUE (computer company)
Gabon Informatique's privatization was launched in October 1997. The evaluation report of the Privatization Committee declared the company valueless. The Privatization Committee liquidated Gabon Informatique in 1999.

CECA-Gadis (retail company)
CECA Gadis imports and sells food and housewares. The GOG controlled 29.4 percent of the company, with the other 61.5 percent held by a holding company, Societe Gabonaise de Gestion et de Participations (GAGEPAR). In December 1996 the GOG sold two-thirds of its shares to GAGEPAR, retaining 9 percent of the company's share capital. The GOG has no further plans to reduce its stake in the profitable company.

COMPANIES CURRENTLY BEING PRIVATIZED
Privatization is currently moving forward or planned on the following companies:

OPT (Office of Posts and Telecommunications)
Under discussion since the beginning of the program and a performance criterion of Gabon's October 2000 Stand-By Arrangement with the IMF, privatization of the Gabonese telecommunications monopoly has finally begun to move forward. Pursuant to a law promulgated in June 2001, OPT was split into two entities, Gabon Poste and Gabon Telecom. Two other June laws defined the operating structures of the new companies. The mail service and the postal saving bank (Caisse d'Epargne Postale) will be managed by Gabon Poste and continue to operate as a state-owned postal service. The more profitable telephone component of OPT (including Libertis, a cellular service provider) will be consolidated under Gabon Telecom and privatized.

The liquidation of OPT, expected to take at least several months, has already begun. The Privatization Committee hired the British investment bank HSBC as a consultant to carry out the privatization of Gabon Telecom. HSBC submitted a 16-month calendar for completion of the process. They are expecting an opening balance sheet for Gabon Telecom to be finalized by the end of February. The call for tenders is now scheduled to be announced in December 2002. The privatization process is planned to be completed by June 2003.

AGROGABON (Gabon Agricultural Development Co.)
The privatization process of the agribusiness parastatal Agrogabon was first launched in October 1996 with a diagnostic study to define an appropriate privatization strategy. After unsuccessful attempts at a recovery plan and continued financial problems, the GOG decided to hand over the management of Agrogabon to the Societe Industrielle du Gabon (SIG), a branch of the Malaysian company Winnerpac. SIG was expected to improve the cost effectiveness of Agrogabon and handle the management towards the privatization of Agrogabon. The company continues to suffer financial problems, however, and questions remain whether any approach other than liquidation will succeed.

HEVEGAB (Gabon Rubber Farming Development Co.)
An initial call for tenders in November 2000 drew interest from Michelin and Goodyear, but produced no official bidders for Hevegab. The GOG is restructuring the company and intends to launch a new tender call during the first quarter of 2002. Rumors suggest, however, that the assets of the company are now so deteriorated that it is unlikely to attract any more bidders than it did in 2000.

AIR GABON (national airline)
The GOG currently owns 80 percent of Air Gabon, with the remaining 20 percent held by Air France. The government has repeatedly told IMF and World Bank teams that it plans to privatize, but has not yet discussed a timetable. The GOG spent 18 billion FCFA (approximately $24 million) subsidizing the financially-strapped airline through 2001. Air Gabon contracted with Lufthansa in 2001 to take over management of the company's operations. Lufthansa has made significant improvements to operations, but Air Gabon will still likely require substantial cash infusions from the government to remain in service in 2002. A June 2001 contract to purchase four new Boeing aircraft was recently cancelled. The airline is now looking to augment its fleet by leasing additional Boeing airplanes.

AGRIPOG (Agriculture Company of Port Gentil)
The Privatization Committee launched unsuccessful tender calls to find a buyer for this agribusiness company in 1998 and 1999. Agripog was co-owned by the GOG (66.67 percent) and Elf Gabon (33.33 percent). Elf Gabon disposed of its shares in May 1999. The GOG has since decided to restructure Agripog and reduce its staff to secure the company's assets. According to the Privatization Committee, once the restructuring process is completed a new call for tenders will be launched.

SOGADEL(Gabonese Farming Development Co.); SIAEB (Boumango Industrial Agricultural and Farming Co.)
The GOG owns 33 percent of SIAEB and 98 percent of SOGADEL. A Privatization Committee official stated recently that the government is trying to liquidate both companies as all attempts to bring them to profitability have failed.

OPRAG (port management services provider)
GOG owns 100 percent of OPRAG, which operates the port facility at Owendo, 20 miles south of Libreville. The port, located at the terminus of the Transgabonais railroad, is the main distribution point for forestry and manganese products and a key element of the Gabonese economy. The GOG has yet to define a privatization strategy for the company but has listed it as a candidate. New construction at Owendo, begun in October, is intended to help restructure OPRAG and serve as a catalyst for privatization.

COMPANIES YET TO BE PRIVATIZED
The companies listed below are also slated for privatization but have no current arrangements in place. The Privatization Committee reports that the GOG would like to sell most of its shares to potential buyers and transfer the remaining shares to public sector mutual funds. The government failed, however, to meet its target timetable of year-end 2001.

NAME	GOG OWNERSHIP
SGEPP (Gabonese Oil Products Storage Co.)	25%
EAULECO (Lekoni Mineral Water Company)	53.8%
CNI (Domestic Shipping Company)	100%
SNI (National Housing Company)	70%
SNAT (National Transit Company)	51%
SMAG (Flour Milling and Poultry Farming Co.)	19.13%
PIZOLUB (Pizo Lubricant Co.)	48.75%
SOGAFUTS (Gabonese Barrel Co.) (in April 2000, PIZOLUB and SOGAFUTS merged)	39%

 

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