Foreign investment in Equatorial Guinea resilient despite corruption

Foreign investment in Equatorial Guinea resilient despite corruption

Equatorial Guinea has rich energy reserves, and despite corruption and political instability foreign investment has continued. Proposed plans to diversify the economy could create new investment opportunities.

A recent indictment of the president’s eldest son on money laundering charges brings renewed focus to Equatorial Guinea. Despite political repression and a lack of judicial independence, investors still seem to be comfortable in one of Africa’s oil and gas giants.

Downtown Malabo, while lacking the European sophistication of Libreville and the down-to-Earth charm of Lomé, is a clean, very-well organized and even chic capital in some parts, especially in contrast to a number of other chaotic and poorly planned nearby urban areas nearby, such as Douala and Lagos.

However, just a few blocks away from the relatively high-quality infrastructure and swanky thoroughfares live the majority of the capital’s Equatoguinean population, in mildew-prone, corrugated iron-roofed tenements, often with no water or electricity.

Home to less than one million inhabitants, it is a country of glaring dichotomies in all aspects of life. Including its investment arena.

Mostly comprised of an island and a small, jungle-filled territory wedged between Cameroon, Gabon, and the Atlantic, Africa’s only Spanish-speaking state is mostly known for its huge oil and gas reserves, as well as its corrupt, authoritarian leadership.

When Equatorial Guinea makes the news, it is rarely positive. Teodorín Obiang Nguema, the nation’s current VP and former agriculture minister was indicted by a French court on money laundering charges, to complement his previous French arrest warrant and attempted seizure of assets by a US district court.

A history of political instability, including the now-infamous attempt by Simon Mann and a ragtag group of mercenaries, as well as a just-confirmed incident of polio, hardly endears the country to outside investors.

Yet they keep on coming.

Equatorial Guinea’s vast energy reserves, only discovered in the mid-1990s, are among the five largest in Africa. The US EIA estimates the country’s production at about 300,000 barrels per day of crude and 250,000 billion cubic feet per year of natural gas. Most of it comes from offshore deposits with heavy participation from mainly US oil and gas companies like ExxonMobil, Hess, Marathon, and Noble.

Equatorial Guinea is also in the process of upgrading much of its oil and gas infrastructure, including constructing a floating LNG storage facility and a sizable oil terminal, both of which should boost its resource exports. A refinery in Mbini, in partnership with China’s Sinopec, may also be in the works.

But it is not just oil and gas that has enticed large-scale FDI to Equatoguinean shores. With the help of foreign builders like Dalian, Arab Contractors, and Setraco, Malabo has quickly pushed through immense, grandiose infrastructure projects, from massive sports facilities for co-hosting the 2012 African Cup of Nations to a brand new future capital, Oyala, deep in the jungles of its continental terrain.

The latter has even attracted Kempinski, one of the world’s leading upmarket hotel chains. In an email, the company described their future site in Oyala as “one of the company’s most spectacular projects”, further noting that they “will be the first European luxury hotel group to be present in the future capital of Equatorial Guinea.”

Moreover, plans to diversify the economy have been in full blast, as evidenced by Malabo tempting investors in farming, fishing, petrochemicals, mining, tourism, and financial services with a $1 billion co-investment fund.

The country’s rulers have also shown off such lucrative opportunities during a recent well-attended investment symposium, although a previous summit with a US nonprofit resulted in much controversy.

Many investors do not seem worried that poor governance, endemic corruption, and shocking inequality despite the highest GDP per capita in Africa — and more than Portugal and South Korea — will affect Equatorial Guinea’s investment climate. $13.5 billion in foreign direct investment (FDI) in 2012, the fifth-most in sub-Saharan Africa, is a testament to this. But should they be?

A markedly unfree media and harassment of journalists make Equatorial Guinea less livable than other emerging investment draws, even in the same region, such as Ghana and Benin. It has similarly fared spectacularly poorly on a host of international economic indexes, from Transparency International’s Corruption Index to the World Bank’s Doing Business Report.

In addition, what may be more alarming for exporters of capital are the cases of South African Janse van Rensburg and Italian Roberto Berardi. Both were businessmen arrested on questionable grounds after investment disputes with high-level Equatoguinean partners. Both also demonstrate how little due process and rule of law actually exist in the West African nation.

Regardless, Malabo and Bata’s ubiquitous expat workers and the numerous opportunities for greenfield investment throughout the country, even in non-energy sectors, indicate that these concerns are blown out of proportion. The IMF has ranked Equatorial Guinea as the world’s top magnet for investment, in proportion to GDP suggesting the country must be doing something right.

And with Equatorial Guinea’s president, Teodoro Obiang, already the world’s longest-serving non-royal head of state, likely to stay in office indefinitely (despite current constitutional limits), this may be all the stability investors need.

About Author

Kevin Amirehsani

Kevin is a Denver-based policy and public engagement consultant. He was previously the head of operations for a solar energy startup in Lagos, researcher for the US Commercial Service in Cape Town and the Institute for Democratic Governance in Accra, and Peace Corps volunteer in Cameroon. He holds an MSc. in International Political Economy from LSE along with a B.S. and B.A. in Industrial Engineering and Political Science from UC Berkeley.