Regis Immongault: Africa is getting a raw deal from rating agencies during Covid-19

The MP Regis Immongault has been at the forefront of Gabon’s policy making, as Minister for the Economy and then Minister of Foreign Affairs. He talks to Omar Ben Yedder about why African countries seem to be getting a raw deal from rating agencies during the pandemic, thus making essential borrowing more difficult and more expensive.

The pandemic is providing a stress test across many different issues – “revealing our weaknesses,” says Regis Immongault. “It obliges us to remedy them. Our countries need to be ready to face future challenges on all levels: economic, monetary and social.”

Gabon was caught off-guard during the last oil crisis in 2014, when the price of oil fell by over 50%. The country was in the middle of a massive public investment programme. It  had considerably increased public spending to upgrade the country’s infrastructure and set up a programme to wean itself off oil by transforming its wood and manganese into finished products as part of its industrial policy. The sharp and rapid fall in the price of oil required drastic cutbacks and the country underwent a reform programme tapping into IMF funding.

Oil still plays an important part in terms of what the government can spend. It represents 40% of public revenues and 68% of the country’s exports.

Gabon was lauded by Lionel Zinsou, a prominent economist and investor, as well as former Prime Minister of Benin, for its rapid response and the generous package to support livelihoods that the government announced at the start of the pandemic.

However, as Immongault admits, the country is caught between a rock and a hard place. Debt levels are manageable but African countries don’t have the ammunition at their disposal to do “whatever it takes”, as the Western central bankers have proclaimed.

“There need to be considerable ‘out-of-the-box’ measures for African economies to navigate the rough ride ahead,” he says. “Those, like Gabon, that are considered middle-income countries will be worse- hit as they are not included in the debt standstills that have been agreed.”

All this will ultimately limit the counter-cyclical measures they can apply, such as a fiscal stimulus, unlike Western nations that are raising record amounts of debt and pumping literally trillions of dollars into their economies.

It’s a frustrating situation, Immongault explains, as Gabon has relatively low debt. Public and private debt sit at 60% and 23% of GDP respectively. In China private debt is thought to be well above 200% of GDP whilst the OECD countries’ average debt-to-GDP ratio will hover at around 90% by the end of this year.

Black Swan event

He says credit rating agencies are being tough on Africa during what he calls this Black Swan event: “I do think that the rating agencies should thoroughly review their way of understanding the risk of African countries. It is fundamentally unfair. If we only take into account the ratio elements to GDP, it is clear that France, whose debt is approaching 120% of GDP, should see its rating drop sharply.

“The same is true of a number of European and Western countries. I know that the rule that is always emphasised is the future ability to support and repay these debts. But we must also be able, depending on the context, to see things differently, without calling into question the fundamentals.

“We must consider that these African countries have suffered a particular deviation, which is not due to mismanagement but to a particular event, against which they are trying to apply certain measures in order to get out of it.”

Gabon is continuing its efforts to repay its debt, he notes, despite the drop in resources. At the start of the pandemic Fitch downgraded Gabon’s rating very early as oil prices fell, but Moody’s recently raised Gabon’s outlook from stable to positive.

Immongault was at the heart of his government’s industrialisation policy and diversification programme. He feels progress has been made but the country has not yet reaped its full benefits.

Industrial policy cannot happen he says without greater infrastructure, and that’s why the country invested to upgrade railways and roads, ports and energy. Not to mention the soft infrastructure of skills development around strategic industries.

The country targeted three sectors to start off with – timber, one of the country’s major exports that had to undergo some beneficiation before being exported – manganese, and agriculture. What this pandemic has brought to light, he says, is the need for greater autonomy when it comes to food products.

The country still imports much of its foods and according to Immongault, we can expect Gabon to accelerate its programmes to grow more of what it consumes.

Silver lining to crisis

He is confident that there will be a silver lining from this crisis. Yes, there may be a deterioration in the balance of payments from lower global demand, but it has focused minds. He anticipates a greater emphasis on healthcare and also on accelerating digital infrastructure.

Immongault’s last ministerial role was as Foreign Minister. What’s his reading of the tense global geopolitical atmosphere, especially the rising friction between the West and China?

He calls for Africa to stay out of it and not become embroiled in any future cold war. Gabon’s relationship with China is a positive one and is based on an equal footing:

“Our relations with China are good. China is an essential economic partner. Of course, when we sign partnerships, what we seek [to advance] above all else are Gabon’s interests. We didn’t have to barter natural resources. We have always been careful and have never taken this approach. We absolutely want to have economic and commercial relations based on respect for mutual interests.”