The State of Play - September 2, 2023
In this edition: Gabon's coup, record fossil fuel subsidies, this week in carbon credits, the political win for climate in Ecuador, and my favorite chart of the week.
The coup in Gabon
Earlier this week there was another coup in a former French-colony in west Africa.
30 August 2023 - Military leaders seize power in oil-rich Gabon (Aanu Adeoye et al, FT):
Military officers in Gabon said they had seized power and placed its president Ali Bongo under house arrest, as the oil-rich country became the latest in west and central Africa to fall victim to a coup.
“In the name of the Gabonese people . . . we’ve decided to defend the peace by putting an end to the current regime,” a group of officers said in a statement read out on television, hours after Bongo had been declared the winner of Saturday’s election.
With 64% of the vote, Bongo had been declared the winner of Gabon’s election held on the 26th of August. He has been in power since 2009 when his father died in office after running the nation for more than four decades. However, there are questions over the validity of the election, which took place during a media blackout, without international observers present, an imposed curfew and with the government shutting down the internet at the last moment to fight the “dangers of false information and manipulation”.
Albert Ondo Ossa, an economics professor who heads the opposition coalition, claimed victory before results were announced and called the process a “fraud orchestrated by Ali Bongo and his supporters”. Ondo Ossa, who served as a minister under the elder Bongo, received 30.77 per cent of the vote, the electoral commission said.
This coup marks the eighth in west/central Africa since 2020 (Chad, Guinea, Niger and two each in Mali and Burkina Faso).
Unlike the recent coup in Niger Gabon is a member of OPEC (albeit one of the smallest). The nation is responsible for ~200,000 barrels of oil / day (0.2% of global supply)and has one of Africa’s highest per capita incomes (around $8,800), though this it is highly unequal with around a third of the population living below the poverty line.
This economic inequality coupled with the Bongo family’s long reign (and the questionable circumstances by which Ali Bongo was elected president in 2016) made the conditions ripe for an overthrow.
“The frustration in Libreville [Gabon’s capital] at the domination of the Bongo dynasty was very palpable, especially among the young,” [Alex Vines, head of the Africa Programme at Chatham House think-tank in London] said. “There was a desire for change and you can kind of see why a coup has happened.”
2 September 2023 - Not all coups in Africa are the same (Chidi Anselm Odinkalu, FT):
On August 31 2016, Gabon’s electoral commission awarded the election to Ali Bongo, giving him a margin of 5,594 votes over [opposition candidate and former chair of the African Union, Jean Ping], who won in six of the country’s nine provinces as well as the overseas votes. Bongo’s winning margin came from his native Haut-Ogooué region, which recorded an impossible 99 per cent turnout, 95 per cent of which was allocated to him. While the EU questioned the deep flaws in the election, the African Union ignored them, directing its attention instead to the violence that followed the declaration of results. Ping reluctantly took the matter to the constitutional court, which issued its decision affirming Bongo’s victory in the middle of the night. When the soldiers struck this week, the most they could do was oust a dynasty; there was no democracy left to overthrow.
Debt-for-nature swap
One added wrinkle to this evolving situation is Gabon’s recent debt deal.
30 August 2023 - Gabon dollar-denominated bonds slide after army says it seized power (Libby George and Rachel Savage, Reuters):
Gabon completed its $436 million "debt for nature" swap earlier this month, where it bought back parts of its 2025 and 2031 bonds and issued a new "blue bond" - so called because some of the proceeds go towards ocean conservation - that runs until 2038.
The blue bond, which has special political risk insurance from the U.S. Development Finance Corporation (DFC) and therefore carries a higher credit rating that Gabon's other debt, fell 1.5 cents on the dollar to 98.34 cents.
The insurance could cover a full repayment in the event of a future default, subject to an arbitration, but the precise terms of the insurance were not made public at the time of the deal.
"What this does is highlight the risks of debt-for-nature swaps in countries with weak economic or political fundamentals or a history of instability," said Sebastian Espinosa at White Oak Advisory who has worked on debt-for-nature swaps in other countries.
While Gabon’s next coupon payment is not due until November, how creditors react to this situation, and what happens over the next month or so, could be telling for future debt-for-nature swap considerations.
Fossil fuel subsidies
One way we are not going to make renewable energy more attractive is by providing subsidies for fossil fuels. Unfortunately, 2022 seemed to set a new record in this respect.
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