Financial flow regulations adopted by the Central Bank of Central African States (BEAC) are likely to slow down business in the economic bloc, oil companies operating in the bank’s jurisdiction warn.
Fears of imminent economic and business setbacks were expressed at a May 17 meeting between BEAC and African Energy Chamber that was convened to evaluate potential effects of the bank’s forex regulations that were adopted in December 2018 and which come into effect on the January 1, next year.
According to oil companies, the meeting was necessitated by concerns in the CEMAC region that the new forex regulations will stifle investment, lead to a loss of jobs, increase operational costs, lead to additional and unnecessary bureaucracy and eventually render the regions energy industry uncompetitive compared with other regions globally.
In a statement, the African Energy Chamber said, “These concerns are even more pertinent today, given the added pressures and competition that the industry in the CEMEC region is facing in light of the global move towards energy transition.”
AEC delegation led by CEMAC President Leoncio Amada Nze thanked BEAC’s management under the leadership of Governor Abbas Mahamat Tolli for consistency since the adoption of the regulations to address any concerns and facilitate its implementation.
“BEAC has consistently engaged with the oil and gas industry to address any concerns that we have. We believe it is important to be pragmatic and find common sense solutions to a concern of the industry,” Leoncio Amada Nze said. “This region needs attract investors and keep investors, our job at the African Energy Chamber is to work with BEAC towards market-friendly pro-growth policies and an enabling environment for local and foreign investors.”
Among the concerns about the new forex regulation were the requirement that any transaction of over FCFA 1 million (approximately $1,700) per month and per entity or person will from next year be subjected to more bureaucracy, which will in turn result in delays that will run into weeks or months.
The regulations require that companies and individuals will have to receive an authorisation from the BEAC before opening an account outside the economic bloc. Investors in the oil and gas industry point out that there are “many viable reasons for companies to own foreign accounts, among them ease of doing business, ease of payment, tax efficiency and reduction of transaction costs.”
Further, foreign currency accounts domiciled in the region will only be allowed with express authorisation of BEAC.
Local businesses operating in the oil and gas sector that, for example, are dollar-dominated, will be unnecessarily be exposed to currency fluctuations, eating up margins and leading to low competitiveness vis-à-vis foreign entities.
The regulations require that proceeds from exports of FCFA 5 million and above be repatriated within 150 days from the date of transaction.
“Whilst the African Energy Chamber understands the desire to repatriate such export proceeds, we expect many businesses to seek to avoid putting the proceeds of their exports under the very restrictive foreign exchange regime that will come into place on January 1, 2022,” observed Nze.
The central bank representatives used the occasion to shed light on the regulations the business community deems restrictive. At the centre of it is the desire to shore up the region’s hard currency reserves.
- A Tell report