JOHANNESBURG,
South Africa, October 21, 2020/ -- International energy companies and
local services companies spend a lot of time serving people, solving
problems, and saving lives with the energy and service they provide. The
African Energy Chamber’s (www.EnergyChamber.org)
members create jobs, expand economic opportunity for many local
communities across Africa and support a prosperous future for all
Africans. Despite the Covid-19 pandemic, they never stopped working for
our continent, and continue to inspire us by getting up every day and
working harder because they believe in the power of free market as a
force for good in our communities, and in our fight against poverty. At
the African Energy Chamber, we get up every day to help them do it. We
must fight for the ability of our energy industry to hire, invest, grow,
and succeed in Africa.
As 2020 comes to an end, Africans are
living in a remarkable moment of uncertainty due to the ongoing Covid-19
pandemic. Millions have lost their jobs, and hopes of an economic
recovery remains non-existent for a majority of African families. As if
that is not enough, bureaucrats at the Bank of Central African States
(BEAC) have decided to push through job-killing and investment-killing
regulations that are already increasing unemployment, and will
ultimately kill any hopes of seeing future investment in Central Africa.
The
aspirations of governments and local companies across the CEMAC region
to build a vibrant and jobs-creating energy sector have indeed been
dramatically affected by the foreign exchange regulations imposed by the
BEAC. Such regulations are putting extremely deterring barriers of
entry for investors in Gabon, the Republic of Congo, Cameroon, CAR,
Equatorial Guinea and Chad, and a bitter halt to any kind of local
content development for companies and entrepreneurs in these countries.
While
the end goal of the BEAC to fight corruption is noble and must be
supported, in essence its regulations prevent the free flow of capital
and the repatriation of profits, and deny local companies the ability to
compete on equal terms with their foreign counterparts.
Because
of the region’s reliance on imports of equipment and material for oil
& gas operations, the ability of local companies to establish strong
business relationships with foreign partners is central to their
competitiveness and ability to secure contracts. However, CEMAC’s
forex rules mean its local services companies are now unable to quickly
and efficiently pay their foreign suppliers. Concretely, it would take a
local services company from CEMAC several months to honour its
contractual engagements with an operator, compared to only a few days or
weeks for any other competitor not constrained by the same forex
regulations.
As a result, companies in Central Africa are
condemned to inexorably lose the contracts they have worked so hard to
secure from foreign operators and contractors. In a region where oil
& gas represents 80% of revenues, the consequences for economic
growth and jobs creation could be catastrophic. To make things even
worse, BEAC’s Instruction No. 002/GR/2020 of September 2020 on currency
transfers outside of the CEMAC region has set up additional taxes of
0.75% on all transfers made outside of CEMAC starting January 1st 2021, on top of existing fees and taxes.
On
behalf of the fight against corruption, the African Energy Chamber can
only observe a gradual killing of investment in Central Africa, made
through the punishment of local entrepreneurs. A big difference needs to
urgently be made between fighting corruption and punishing hard working
entrepreneurs, and it needs to be done before it is too late. The BEAC
cannot love and support jobs while it hates or punishes those who create
jobs.
Combined, the CEMAC members produce about 700,000 barrels
of oil per day (bopd). They also produce increasing quantities of
natural gas, and the region houses up to 5 million tonnes per annum of
LNG export capacity, shared between Equatorial Guinea and Cameroon. But
as it tries to recover from the Covid-19 crisis and the historic crash
in oil prices, we can only expect operators to be forced to contract
international companies at the detriment of local ones. In Equatorial
Guinea, where the Ministry of Mines and Hydrocarbons has pushed for
increasing local content compliance, all such efforts are now
jeopardized by the BEAC’s monetary policies. Similarly, the latest local
content regulations within the new Hydrocarbons Code of Congo (2016)
and Gabon (2019) and the new Petroleum Code of Cameroon (2019) are now
all made pointless unless the region’s monetary authority takes a
drastic policy turn.
The African Energy Chamber, its partners and
members urgently call on the BEAC to act in the CEMAC Zone’s own
interest, in the interest of its workers and its companies. The need to
have a monetary policy that takes into account the concerns and voice of
the region’s biggest revenue-generating industry is dire. At a time
when Africa gets ready to roll out the African Continental Free Trade
Area (AfCFTA), CEMAC and its business communities risk being further
left behind.
If CEMAC energy markets are to recover from the
historic crises of 2020 and improve the standard of living of their
population through economic growth and jobs creation, the investment
climate and business environment must be supported by market-driven
policies and the right financial regulations.
Excessive
regulation has become a threat to individual freedom and prosperity, and
must be curbed as local companies stand to suffer the most. In an era
where capital investment in the energy sector is drying out, especially
for African oil and gas projects, CEMAC’s heavy-handed approach is not
helpful and is counter-productive.
A policy turn is required to
properly fight energy poverty, and a relaxation of foreign exchange
regulations must be accompanied with lower taxation on local companies,
better fiscal terms for exploration companies, particularly corporate
taxes, and the promotion of greater prosperity, individual freedom and
investment.
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