The African Energy Chamber (AEC) (www.EnergyChamber.org), on Monday 17 May held a meeting with the Central Bank of Central African States (BEAC) to discuss the effects of BEAC’s in December 2018 adopted FX regulations, which are due to come into effect on the 1 January 2022.
The meeting was in response to concerns by energy companies operating in the CEMAC region, that the new FOREX regulations will stifle investment, lead to a loss of jobs, increase operational cost, lead to additional and unnecessary bureaucracy and eventually render the regions energy industry uncompetitive compared to other regions globally.
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.
The Chamber delegation, which was led by Mr. Leoncio Amada Nze, CEMAC Region President for the African Energy Chamber, thanked BEAC’s Management, under the leadership of its Governor, Abbas Mahamat Tolli for their consistent efforts 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. ” Stated Leoncio Amada Nze. “This region needs attract investors and keep investors, our job at the Energy Chamber is to work with BEAC towards market friendly pro-growth policies and an enabling environment for local and foreign investors” Mr. Amada Nze concluded.
Key tenets and concerns about the new forex regulation include;
- Any transaction over FCFA 1 million (approximately USD 1,700) per month and per entity or person now attracts significantly more bureaucracy and consequently delays of multiple weeks.
- Companies and individuals must now also receive an authorisation from the BEAC before opening an account outside of the region. There are many viable reasons for companies to own foreign accounts, including for ease of business, ease of payments, tax efficiency and reduction of transaction costs.
- Similar to demanding an authorisation before foreign accounts can be opened, foreign currency accounts domiciled in the region are now also only possible with express authorisation from the BEAC. Local businesses operating in the oil and gas sector for example, which is dollar-dominated, will be unnecessarily exposed to currency fluctuations, eating up margins and leading to poor competitiveness vis-à-vis foreign competitors.
- Finally, the regulation requests that proceeds from exports of FCFA 5 million and above be repatriated within 150 days from the exportation date. 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 coming into place on January 1st, 2022.
The Central bank representatives elaborated the reasons for the regulations. At the centre of it, was the desire to shore up the region’s hard currency reserves. The Chamber understands this desire and acknowledges its importance. It will therefore continue to work together with the central bank in industry to find constructive ways to address the legitimate concerns of the industry.