We now have the foundation to begin diversification

Interview: CESAR AUGUSTO MBA ABOGO, Minister of Finance, economy and planning, Equatorial Guinea.

For the last five years, Cesar Augusto Mba Abogo was Equatorial Guinea’s Secretary of State for Planning and Development, responsible for overseeing the second phase of the National Development Plan, Horizon 2020.

The Plan was organised in two phases: the first (2008-2012) focusing on a complete overhaul and upgrade of the country’s infrastructure, the second (2013-2020) on the need to diversify the economy, in essence using the country’s hydrocarbon riches to catalyse economic growth.

In April, Mba Abogo was promoted to his new post as Minister of Finance, Economy and Planning. He is the epitome of the new breed of young, dynamic ministers we are seeing across the continent, impatient to move things forward and assert Africa’s position in the world as a continent where it’s possible to do great things and make great returns.

Mba Abogo’s main responsibilities within the Horizon 2020 team included mobilising national and international investors to deliver on the plan’s objectives. He is equally at ease whether talking to Wall Street investment bankers and DFIs or speaking to the man on the street. He comes across as charming and humble, ​but with a clear idea of where he’s going and what he wants to achieve.

Even though he was always considered one of the rising stars in the country’s government, his new role brings with it increased responsibility, with structural reforms a key part of his mandate.

Despite massive capital expenditure, which has delivered impressive infrastructure throughout the country, the economy is still over-reliant on public investment expenditure to drive growth. The downturn in global commodities and oil prices in 2015 came as a much needed wake-up call, according to the minister. It also highlighted the imperative to accelerate economic diversification, as well as strengthen social safety nets.

Wet met the minister two weeks after Equatorial Guinea’s National Economic Conference, organised to review Horizon 2020 and set new targets for 2035, as well as ensure the national development plan is aligned to Agenda 2063 and the UN’s Sustainable Development Goals.

In terms of the economic situation of the country, how would you describe the past three years and what is the outlook for the next year and beyond?

After the oil price fall in 2014, we started to rethink our development model. Over the last three years, we’ve been making some serious readjustments. The decline in the oil price was very bad news for those countries that export commodities such as energy, and we were no exception.

That led us to do some serious thinking when it comes to fiscal consolidation – about how to increase non-oil revenues and also, we needed to think again how to boost the private sector. 

Our development plan over the last decade has been dependent on the hydrocarbon sector and we managed to achieve great things such as transforming the country’s infrastructure, but when the crisis hit we saw that we needed to find long-term solutions to diversify the economy. 

That meant reviewing the legal framework, looking at everything to do with the ease of doing business, as well as how to create local value chains and be better integrated into global supply chains.

We conducted a national dialogue bringing different stakeholders together – private sector actors, the government and development partners – for a frank discussion, looking at ways to increase our competitiveness, and also, how to encourage greater investment and remove any bottlenecks.

We brought in the World Bank to help us review our policies and remove the hurdles to improving the business climate and ensuring the private sector can thrive – and we also worked with the Singaporeans, who are leaders in this field, to enhance our competitiveness.

You could say that the last three years have been years of adjustment – to readjust the economy so that the private sector can take over. 

How would you describe the current price of oil, at around $70?

As the Minister of Finance, of course I want it to be higher than that. But we are being cautious and we are working to a budget that has a lower forecast.

Yes, it’s good news for the country that the price is now at $70+, but we don’t want to blind ourselves and we won’t deviate our energies from what we have focused on these last two years, which is adjusting our economy, to ensure that it is not over-reliant on the government or on oil revenues.

What are the growth forecasts for the country?

At the height of the crisis, we were down 8.9%. Last year we’ll be down 4.7% and this year we will see positive economic growth in the region of 1%, before it really picks up in 2020. But I have to say that we have built resilience in the economy, because the shock was severe and we managed to withstand it.

Will you be asking the IMF for a loan like the other countries in Central Africa have had to?

We are part of the CEMAC group of countries, with a common currency and monetary union. Following the fall in commodity prices, we decided collectively to undertake an IMF programme, which we did following our discussions with Christine Lagarde, the head of the IMF, when she came in 2016.

As a member of the monetary union, we have a responsibility to ensure stability. We have worked with the IMF to strengthen our fiscal position and to increase non-oil related revenues and are in preliminary discussions about financial programmes, but this is not something for the immediate future.

When you went through the recession, the Keynesian model of economics would encourage you to counterbalance a slowdown by increasing government spending. Do you think you should have increased spending to boost the economy?

Our priority was to make sure that those who are the most vulnerable do not fall into poverty. We kept our social programmes at the same level and even increased them [as a percentage of our budgets]. Our other priority was also to increase the efficiency of our public expenditure.

Part of the reform work, as well as transforming the economy to make it more dynamic, has been to strengthen our social protection system, a safety net that will respond to the needs of those people who are most vulnerable, and address the challenges they face.

So you reduced your capital expenditure but you’ve increased social spending?

We’ve reduced capital expenditures and we have focused hard on making sure the spending is efficient, assessing its impact and ensuring it is targeted. We hired the World Bank’s expertise to help us better programme, execute and monitor our capital expenditure plans.

Outside of oil and gas, how are the other sectors performing?

Diversification of the economy has been a challenge for us. It has been something that we have discussed a lot because now, we have the bedrock to really foster faster economic diversification. You don’t diversify the economy through a decree.

But we are making the necessary reforms to facilitate business and we need to make sure that those agents, those institutions that can really have a say in diversifying the economy are able to mobilise resources, are able to work and are able to interact.

We are strategically located geographically, we have the political stability and a peaceful society. We are looking at all the areas where we can do better. 

We have started a programme to restructure all public companies – in power, water, roads, ports, everything. That will open a new space to engage in public-private partnerships and also make space for the private sector to take over. There are clear areas for the public sector to operate in and others need to be run by the private sector.

For instance, the power company is being restructured, as is the company that runs the public real estate distribution. You have the national oil and gas companies, the port authority – all of these are being restructured. 

Will there be privatisations?

In some cases, yes. There are three categories and it will all depend on the context; in some sectors the private sector needs to take the lead, in other areas it will be PPPs, and in others there will be state-owned enterprises, but we will ensure they are run more efficiently.

So you think there has been too much public investment and not enough private investment in the economy?

Yes, that is true. That is obvious. I mean, beyond the oil and gas sector, where there has been substantial private sector investment, the government has done a lot but the model is not sustainable. We have to bring in the private sector and we have to create new dynamics of conversation between the private sector and government. This is the route we are taking.

What are the sector breakdowns in terms of the government budget?

We are actually working so that our budget allocations are clearer to understand. Everything is available online but in the past our references were not consistent with how the IMF or UN defined the different categories in terms of spending, which made our social spending lower than it actually was.

Spending on schools, hospitals and social housing was captured as infrastructure spend when it should really be social spending. We break our budget down into four categories.  We have social spending, infrastructure, governance and budgets towards the productive sector.  Social expenditure accounts for 25% of our budgets – which is actually the ceiling that we have set as part of our discussions with the IMF.

Governance means everything we do for the public sector, the rule of law, the functioning of institutions, etc. 

Would you consider going to the international capital markets to raise a Eurobond to shore up public finances?

We frankly believe we need to focus on better domestic resource mobilisation. For instance, when it comes to customs collection, the average in our country is barely 1% of GDP. I think worldwide and in countries similar to ours, it’s closer to 5%. The same applies to VAT and other metrics. So there’s tremendous work to do there. 

And you also have the issue of the informality of the economy. When it comes to the longer vision, we have to think about ways of mobilising resources. But our focus in the short term is to improve our domestic mobilisation and this is what we have also decided following our discussions with the IMF.

You have just held your country’s third national economic conference. How would you summarise the main message of that?

The main message is very simple. The UN’s SDG motto is: ‘No one should be left behind’; the AU’s 2063 Agenda is ‘The Africa we want’. And you know this African proverb – ‘If you want to go fast, go alone, if you want to go far, go with others’.

The main message of our national economic conference is that we are all going to move together. The new horizon we have set up is 2035 and we believe by 2035 we can achieve many of the SDGs and will have an inclusive, diversified and sustainable society. We have called it ‘Strategic Sustainable Development Plan – together with move’. (or is it together we move? – AV)

Next year will see the culmination of Horizon 2020; how much have you achieved?

We can say that we have exceeded all expectations.  When we put the plan together, critics thought we would be wasting money on infrastructure and not deliver on our objectives and our vision. What do we have today? We have built the entire country, and not just around urban zones, but really connected the whole country, with roads, power, fibre optic, water, sanitation…Society is stable and the 2015 MDG report proved that Equatorial Guinea has changed its social profile.

We made four promises – or had four fronts. We have exceeded expectations in three of them: infrastructure, social indicators and governance. We haven’t achieved sufficient diversification of the economy – but the good news is that today we have the foundations to do that and we can diversify the economy with sustainability in our minds, inclusiveness too, and in a way where we are fully aligned with what is going on in Africa and in the world. 

Part of the aim of our national economic conference was to ensure Agenda 2063 and the SDGs were integrated within our national development plans and to come up with a mechanism to mobilise resources, and that’s what we did.

And a final note?

Keep writing about Africa, about African countries, because one of the issues we face is that of negative stereotypying. There are inaccurate stereotypes, and they do not encourage investors to come here. 

Africa’s population is growing, its consumption of tech and ITC is growing, everything is growing and this is the place to come. So, by telling the truth about Africa, about our countries, you are doing a favour to Africa but you are also doing a favour to investors.