Equatorial Guinea is facing a lot of challenges, particularly with the drop in global oil prices, but also a lot of opportunities as the government aims to boost the private sector as part of its targets for social and economic development across the country. Miguel Engonga Obiang Eyang, Minister of Finance and Budget, provides an insight.
Foreign Affairs Minister Agapito Mba Mokuy has pointed out: “A lot of people are saying that the progress of the country is being generated by oil. I believe that Equatorial Guinea’s progress is possible thanks to the President’s commitment to make it happen. There are countries with oil and no development. We do have it.” Could you share with us your opinion about what this reelection of the President symbolizes for Equatorial Guinea’s future?
I believe that. To add to this quote, I would say if there is no will, no matter the means, goals cannot be reached. To this date, you couldn’t hope for anything but the consolidation of peace; development progress we already have. The moment we started this development program there was a global stability that helped this situation. But today with the entire world’s crisis, its problems and the price of oil dropping, we were only waiting our people’s confirmation of everything we had been doing to preserve the political line of growth. We congratulate ourselves for this. The people have been united like a person.
What are the projects and contributions do you think make the country and the President most proud?
Only in numbers, in barely 20 years of oil exports, we went from 20MW of energy production to 600MW today. Furthermore, if the power stations that are being constructed right now are finished, we will reach 1,000W.
In the health sector, our capacity before was from 100 to 200 beds in the hospitals; 20 years after exports and development, we’re talking about a hospital capacity of 2,000 to 4,000 beds, amongst public and private health clinics. In the transport sector, we went from an archaic road infrastructure of 200 kilometers in the entire national territory, to almost 4,000 kilometers of paved roads. In education, nowadays our college graduates number in the thousands.
In all of these aspects, there has been a firm and confirmed authority towards the growth of the country. These are just a few examples; we have built social housing too for instance. Everything has come from a will to take the country out of its extreme poverty situation. We can’t say we’re high up above, but at least we’re no longer in that position.
In the last few years several countries with major economic growth worldwide have been located in sub-Saharan Africa. What elements do you think have determined this very promising moment for some of the countries on the African continent, especially for Equatorial Guinea?
All governments in the world and Africa in particular are aware that the people are important. To be able to have a population with dignity one must provide the right conditions: habitat, health, electricity, water, education. A person who lives like that can contribute more to the growth of the country. These are the main areas in which governments have focused their attentions to improve human quality life standards, so that afterwards they would be able to count on these people to develop the states. When people are socially well positioned, they can have time to reflect upon things, bring solutions and work hard for their country.
What is Equatorial Guinea’s role in the region?
Equatorial Guinea can play an important role, with its geographic position to begin with, which makes this island a meeting and business point that can facilitate transactions in almost all Africa. It is an excellent option because we have transportation on coastal and continental levels. We have ready connections with Cameroon, Gabon, Central Africa, and so on.
Our role is fundamental also in regard to the sociopolitical environment, since peace is a key element to any human activity. The moment companies find political stability in their operation centers, in a country like ours, the development of their activities is improved. That is where we must maximize our positive elements to attract investment. Even though we weren’t in this context when the Americans came to work out their oil exploitation activities, 20 years later they’re still there without having registered any incident. The political instability we used to be associated with is no longer what it was, or else the activities that took place couldn’t have been performed.
Personally I think what we need is the population, because investors calculate the profitability of their investments. If within a period of time they can’t reach their goals, even with the consumer population obtained, they can lose their investments. So investors make their decisions based on consumption not allowing them to get their investments back, and not based on the country risk. The oil sector has been special in the sense that consumption is destined to exports and isn’t local. But if we, today, have a pharmaceutical industry that requires selling 4 million Paracetamols a day to be profitable, we must think how, when and where we’re going to find that kind of consumption locally before thinking about exports. These are the obstacles that today put our country’s investments at risk.
Investment is safe, there is political stability; what else do investors need to bring their industries to the state? We are part of the CEMAC community, where taxes on partnerships are between 30% and 35%. That is a tax incentive for investors to pick Equatorial Guinea as investment center. We have developed infrastructure to help anyone who wants to set up their activities here and have no problems in establishing their markets.
Could you highlight the advantages of investing in Equatorial Guinea?
Within the globalization context, there’s nothing to prevent a businessman to come and install his company in Guinea with the market channels already set in foreign territories. This gives room for reduced expense, because here, the value of €1,000 is two or three times bigger than in Europe.
Demand is also an attraction. If local consumption can’t result in short-term profitability, a solid company wouldn’t have any problems in exporting its products. It would have a double advantage, since it would have low-cost production and tax incentives. We are working to attract investors with this vision of delocalized investment.
Which private sector players have better contributed to the financial sector and GE’s economy?
I believe that we can say the oil and financial sectors work extraordinarily. Big businesses also work perfectly. Construction and forestry export companies that operate at a national level also do very well. We’re in much need of corporate culture, which hasn’t been a positive aspect the past years. It’s barely 10 years ago that Guinean people started fostering a proper private sector. The government is working on implementing better ways for companies to be created. We’ll have to see if with those we’ll be able to satisfy an important part of the difficulties that face the private sector.
Financially speaking, what would be the banking entities responsible for the strengthening of the financial sector, both nationally and internationally?
The first bank we ever had here since the 90s was Meridien BIAO, the first promoter. Then CCEI Bank came, from an African promoter. Afterwards, we saw the creation of BGFI Bank, also from African promoters. From there on, we started following a national initiative for the creation of BANGE. This collaboration has been developing competition to improve the quality of services provided between them, without there being governmental intervention.
In order to make whole the financial sector we need to further develop the securities market, but we must align with what the community dictates; so far this hasn’t happened. Its functioning is still premature and it doesn’t work as it should.
Securities companies are also a part of the picture, and they have also assumed their own importance marketwise. When all of those aspects work normally, we will have an important financial market. We also want to create a financial center here in Equatorial Guinea, but taking into consideration the current context crisis, we have put this as a second priority, to wait and see if the industrialization and diversification stage can take fly.
What actions are being taken from the Finance and Budget Ministry to make investment opportunities known to the international market in all different sectors of the country’s economy, in Spain for example?
I believe that the subject of the Spain-Equatorial Guinea relationship is far more political than cultural or economic. It’s Spain who came and did the oil explorations first, because we couldn’t think of another country before. In the place of the first drilling, and after coming to the conclusion that there was nothing there, an American company later found oil, some meters further down.
We have returned to Spain to participate in other fields, and it’s also been the first country to install oil wells. I have on schedule a non-double-taxation agreement between our countries, but we must determine the investors and investments. However, we’re always open to any investments investors want to carry out, to succeed.
What message would you send to Spanish readers to encourage them to come and invest, in a way that both parts can benefit?
This audience must be proud that in the whole African continent, within these 28,000 square kilometers, Cervantes’ language is spoken. Spain must take pride in Equatorial Guinea. This is their gateway and the key was given a long time ago. They have it to enter any time they want to develop their activities. They can expand towards any point in Africa, and the Spanish economic activities will benefit from this too. Much of Spain’s capacity is probably not fully known in the continent, but from here they can introduce their technologies in the whole of Africa. The gateway is to a continent of possibilities.
We have heard many times here in Equatorial Guinea: “It’s best to have an educated population than a rich population.” Big investments have been made in the education sector, and training is one of the main objectives of the Horizon 2020 Plan’s second stage. How significant are the investments being made in education for the country’s economic future?
Benefits are being seen nowadays, because the administration, since Spain left us, used to have only high school degree graduates. Currently, we count thousands of engineers, economists, medical doctors, etc. Furthermore, our university has, education and health wise, up to college degree levels, and then with the cooperation from the United States and Cuba, the students train for two or three more years for a postgraduate degree.
Infrastructure is being organized to be able to receive a large number of graduates, both high school and college, allowing it to grow 20 or 50 times bigger. This is what we want to promote. Universities have been created, colleges, specialized professionals, etc.
We’re trying to move forward at this pace in both health and education sectors. There must be a cohabitation system. If they’re doctors, the moment we receive a foreign brigade, the national one starts to learn with them at the same time, to be able to adapt and take in the logistics of the services provided, because these areas are very sensitive and need profound learning.
Education, as the core of any human being, must be solid. That’s why this training is consistent and permanent. Health and educational programs are ready to function this way.
What’s the outlook for 2016, and what are your goals as Minister?
I’ve been in the Ministry as Budget Director since 2003. In 2012 I was made Head of State, and promoted to Minister in 2015. Therefore, my know-how in the Ministry’s fields is covered.
Regarding 2016, our main target is to reschedule our tax agenda, initiated in 2015, in the sense that we had a program to cover, and it has been covered by some 70% or 80% of its whole. In the meantime, there are some projects still under execution that were due to be finished last year, but the oil crisis situation changed these forecasts drastically. We do not wish to cancel any of them already under way, but we must modify deadlines. So we must plan again with the companies that lead them. This will allow us to reduce public expenditure, and to ease the tax deficit and keep our policies on a sustainable path.
At the same time we must launch and implement the second phase projects that are part of the diversification program. Even when we found ourselves in this difficult stage, we will materialize at least 20% of it.
Recently, the industrial fishing project has been granted to two companies, the project of increasing numbers and conservation of tuna is also about to be awarded, and the agricultural industrialization project is currently under bidding. These are at least the main three that we want to implement to begin with, within the next few years.
These are the main targets in the diversification stage, but above all we are interested because we want to create employment. It is an important challenge, because since the construction works have been delayed, companies have let go of a lot of personnel. Working industrially, it’s not going to be the same as working by contracts. That’s why these three projects are very important for the government, and this is what makes our tax schedule difficult.
Resources are diminished by the oil crisis but we must reach those economic and social targets we have set out for ourselves. The moment a developing economy is replaced by a diversified industrialized economy, with relevant technologies, a lot of profits are generated.
The growth rate has decreased. We have invested large amounts in material consumption to ease growth. Production goals for hydrocarbons regarding prices also influence the growth rate going low. However
With the structural reforms we’re internally developing, we hope to get to a sustainable tax path within a short period of time, where other sectors could take the place of the oil sector, which has been representing between 90% and 95% of the GDP, through maximizing our resources and exports.