The African Energy Chamber (AEC) (www.EnergyChamber.org), on Monday, May 17, held a meeting with the Central Bank of Central African States (BEAC) to discuss the effects of the adoption by the BEAC in December 2018 of foreign exchange regulations, which are due to enter into force on January 1, 2022.
The meeting responded to concerns from energy companies operating in the CEMAC region that the new FOREX regulations will stifle investment, lead to job losses, increase operational costs, lead to additional and unnecessary bureaucracy, and ultimately render the company energy industry of the region uncompetitive. compared to other regions of the world.
These concerns are even more relevant today, given the increased pressures and competition facing the industry in the CEMEC region in light of the global transition to energy transition.
The House delegation, led by Mr. Leoncio Amada Nze, President of the CEMAC region of the African Energy Chamber, thanked the leadership of the BEAC, under the leadership of its Governor, Abbas Mahamat Tolli, for their efforts. constant since the adoption of the regulation for concerns and to facilitate its implementation. “The BEAC has been constantly engaged with the oil and gas industry to address all of our concerns. We believe in being pragmatic and finding common sense solutions to an industry concern. ”Said Leoncio Amada Nze. “This region needs to attract investors and retain investors, our job at the Energy Chamber is to work with the BEAC towards market-friendly growth policies and a favorable environment for local and foreign investors” , concluded Mr. Amada Nze.
Key principles and concerns regarding the new forex regulation include:
- Any transaction exceeding 1 million FCFA (approximately USD 1,700) per month per entity or person now attracts much more bureaucracy and consequently delays of several weeks.
- Businesses and individuals must now also receive authorization from the BEAC before opening an account outside the region. There are many valid reasons for businesses to have offshore accounts, including ease of doing business, ease of payments, tax efficiency, and lower transaction costs.
- Similar to requesting an authorization before opening foreign accounts, foreign currency accounts domiciled in the region are now also possible only with the express authorization of the BEAC. Local companies operating in the oil and gas sector for example, which is dominated by the dollar, will be unnecessarily exposed to currency fluctuations, eating into margins and leading to low competitiveness vis-à-vis foreign competitors.
- Finally, the regulations require that the product of exports of 5 million FCFA and more be repatriated within 150 days from the date of export. While the African Energy Chamber understands the desire to repatriate these export products, we expect that many companies will seek to avoid placing the proceeds of their exports under the very restrictive exchange rate regime that will come into place. January 1, 2022.
Representatives of the central bank explained the reasons for the regulation. At the center of it was the desire to consolidate the region’s hard currency reserves. The House understands this desire and recognizes its importance. It will therefore continue to work with the industry’s central bank to find constructive ways to address the industry’s legitimate concerns.
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