Diversification is not an option anymore, it’s a need.

César Hinestrosa Gómez Directory of Industry Ministry of Mines, Industry and Energy

in figures

Diversification goals in Equatorial Guinea

May 30, 2016

César A. Hinestrosa Gomez, director of industry and EITI at the Ministry of Mines, Industry and Energy speaks to TOGY about the country’s efforts to diversify its downstream sector, as well as opportunities for improvement and attracting international investment, especially when it comes to legal security and special economic zones.

How has the drop in oil and gas prices impacted the country’s downstream diversification efforts?
It’s very simple. What was an option two years ago is now a required action. It’s needed. When we started looking towards diversification, we were looking at the eventuality of any negative impact lower prices would have on our economy, because our economy depends on oil at a rate of 90-95%.
We were always looking to make sure we would be okay if oil prices fell or there were any other impact on the oil industry, but in the end it happened. Nobody expected what is happening now, and worse than that, nobody knows exactly what is going to happen over the next two years. Things that worked before are not valid anymore. Diversification is not an option anymore, it’s a need.

What challenges are you facing in implementing diversification plans?
I think we have more challenges when we assume we are living in another era. We need to make some decisions and take some actions that could have a little bit of risk for the government. We were focusing all of this diversification on getting direct incomes from other industries, but we were probably a little bit mistaken in this.
We are looking to cover social needs now. The impact on the economy means that we are losing job positions, and one of the goals of the government, one of the actions required from the government, is to create more jobs. We need to do that, and to do that we need to open our market and give some advantages to investors.
What we were looking at before was a lot of investments. The reality is that we need to attract investors to the non-oil industries as well. Some of the big projects will need a public-private initiative, but we need to make these investors see our country as a place for their own interests.

What is your strategy to attract those investors?
We are trying to implement what is called a special economic zone regime. This project has already been submitted to the appropriate levels. Special economic zones are not locations, they are more like a status where you have tax advantages, human resources advantages and import-export advantages.
We were looking at Mbini as the only economic special zone but if an investor comes and wants to invest in cocoa and he cannot go to Mbini, what can I do? Am I going to send him to Mbini to produce cocoa? No. So we need to establish a special economic zone regime throughout. This means that we are going to implement small industrial zones in each district of the country.
We need to go step by step. We need to focus on what we have here as raw material to be used. We have culture, fishing and tourism. This is where we are focusing all of our efforts because that should be the first step. It makes no sense to invest in things that we will need to import. We also have the handicap of being a very small country, which means that our market is not attractive to everybody. We need to discover more ways to be attractive.

 

How do you see international investors, and especially pan-African investors, participating in downstream diversification?
I see it as a dream. African investors are here now to invest in the oil and gas industry. For us, it’s quite difficult because first we need to implement all of these advantages and then make sure that we have quality infrastructure.
It’s not just a matter of building a workshop or something to produce cocoa, for example. We need to make sure that this cocoa has a good quality and meets all the international standards, and that should be done before we start getting the investors here. We need to create laboratories and a standardisation agency, as well as certification agencies.

What is your timeline for getting those two goals accomplished?
Yesterday! We are running out of time, because the big challenge we are facing is that we are now doing everything together. For example, if we finalise Mbini before the others, it’s going to be chaos. We will have made a big investment with no result because we cannot attract anyone to come here.
The idea is that in three years we will have implemented the whole quality infrastructure policy. This year, I hope we will have the economic special zone decree approved. This year we will present the general law of industry of the country and from that the other things are all purely infrastructure works. That includes small industrial zones, such as the Mbini project and all the laboratory projects.
This could be done if everything is perfect in three years. But of course it will never, never, never be perfect. In our plan we say three years, but we need to have all the approvals so we are looking to a framework of five years.

Can you give an overview of what the new industry regulations are going to cover when they are adopted in 2016?
We don’t have a law of industry here, so the law we are proposing is going to cover all the aspects that are not covered now. We are covering the quality of infrastructure, security and all aspects related to installation, movement or extension of companies. All the other aspects such as local content are not included.
We want to guarantee that all private investors coming from overseas have legal security in the court system and security in their investments. It’s to make sure that they feel comfortable from the first day they invest money in the country.

How do you rate the local banking sector’s ability to finance these projects?
We have a lot of donors we are discussing things with, and at this moment we are in favour of implementing the Standardisation Agency of Equatorial Guinea. We are working with the United Nations for Industrial Development Organisation and the African Development Bank because they are the type of organisation that we want to fund some of the projects.
Unfortunately, for other things we will need to attract private investors from overseas because the funds are not here. Local banks are not helping too much, with the exception of BANGE probably.

What is your message for international investors? Why should they come to Equatorial Guinea?
The most important thing investors should know is that this country has a high level of peace and security. The geographical location gives you access to a potential market of 500 million people in Africa. We know that Africa is going to be the most powerful area of development for the next 30-50 years because there is everything here to develop, with markets from Senegal to Angola.
If you add this to all the advantages that you are going to have and the legal certainty we are aiming for, then this is the best country in Africa to invest in. Equatorial Guinea has some of the best infrastructure in Africa, and I think that when the oil and gas market is like this, it’s the best moment for investment.

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