The Rising Influence of Rising Affluence

[DewDiligence]

Iron Mine Is Key for Gabon's Next Leader

[VALE lurks as a potential savior for this project, which never got underway despite its immense prospects.]

http://online.wsj.com/article/SB125141201851765021.html

›Candidates in Sunday's Election Promise to Develop Nation's Rich Resources After 41 Years of Previous President's Rule

AUGUST 28, 2009
By DAVID GAUTHIER-VILLARS

Gabon is preparing to elect its first new leader in 41 years on Sunday, and one of the biggest issues for the 23 candidates is how to do what President Omar Bongo Ondimba had pledged until his death in June: use one of the world's last big untapped iron-ore deposits to transform the country into one of Africa's most prosperous economies.

The Belinga mine, nestled deep in a tropical forest, drew interest from top global mining companies, including Brazil's Vale SA. In 2006, Gabon awarded the project to a consortium led by China National Machinery & Equipment Import & Export Corp., known as CMEC, which was allowed to mine the iron without paying taxes related to production there for 25 years.

In exchange for the mine's entire iron-ore output, Chinese investors would build a 300-mile railroad, hydropower stations and a deepwater harbor to help develop the mine, Mr. Bongo Ondimba said. But work hasn't gone beyond the stage of feasibility studies.

"Belinga is a symbol of what must change in Gabon," said presidential candidate André Mba Obame during a recent visit to Paris. "We need to do away with incompetent ministers and rampant corruption; we need less talk and more action."

Much of the reason Gabon never got anywhere with Belinga -- touted as a national priority as far back as 1967, when Mr. Bongo Ondimba came to office -- has to do with the late president himself. During four decades in power, Mr. Bongo Ondimba was credited with keeping the former French colony at peace, far from the ethnic conflicts and civil wars that have ravaged many other African nations. But he has been widely criticized for not taking advantage of Gabon's substantial revenue from oil, timber and manganese exports to improve the economy.

Gabon, the size of Arizona, has a population of 1.5 million. Last year, the country reaped an estimated $9 billion from oil and other raw-material exports, enough to be as prosperous as some Middle Eastern oil states, economists say. But only 10% of its roads are paved, and Gabonese hit the streets last year to protest rising food prices. Gabon ranks 107th out of 179 countries in the 2008 United Nations human development index, which combines measures such as gross domestic product, life expectancy and literacy.

Critics say Mr. Bongo Ondimba regularly doled out contracts to friends for everything from building roads to setting up a health-care system, squandering the wealth.

"Some Gabonese may have appreciation for the stability that [Mr. Bongo Ondimba] brought to their country," said Monique Theron, a lecturer in history at the University of South Africa and a researcher with Consultancy Africa Intelligence. "But Gabon was not able to manage its wealth."

The leading presidential candidates all have said they want to revisit the Belinga mining agreement and speed up the iron project. Some said they would like to renegotiate the tax exemption.

CMEC didn't respond to messages seeking comment. A lawyer for CMEC declined to comment.

It is unclear whether a new generation of Gabonese leaders will succeed where Mr. Bongo Ondimba failed. All the leading presidential candidates occupied senior positions in the previous administration. Mr. Mba Obame was interior minister in Mr. Bongo Ondimba's last government.

"The idea that people who didn't change anything while they were in power will suddenly change Gabon is a joke," said Pierre Mamboundou, a candidate and a rare longtime opponent of Mr. Bongo Ondimba.

Mr. Mba Obame said experience gained with Mr. Bongo Ondimba was an asset.

The front-runner in the vote is Mr. Bongo Ondimba's son, Ali Bongo Ondimba, who has served as defense minister for the past decade. If he is elected Sunday, the younger Mr. Bongo Ondimba will break with his father's legacy, spokeswoman Clémence Mezui Me Mboulo said.

She said the Belinga project is decades behind schedule, in part because Gabon has been bogged down by a culture of "squandering and preferential treatments." The younger Mr. Bongo Ondimba plans to revisit terms of the project, Ms. Mezui Me Mboulo said. She cautioned that talks with CMEC would be difficult because Gabon lacks the financial resources to develop Belinga alone.

Vale, which lost out to CMEC in the competition to develop Belinga, said it would be willing to resume talks if the government reviews the contract.

In Gabon, the president must collect more votes than rivals in a single-round ballot. Even if some of the 23 candidates withdraw, the late Mr. Bongo Ondimba's successor could be elected with a small fraction of the vote. "There is a risk that Gabon's next president won't have a strong mandate," because he would likely be elected by a minority of voters, said Mr. Mba Obame.‹