Efforts by the Bank of Central African States (BEAC) to tackle money laundering and restock woefully thin foreign exchange reserves are causing dire currency shortages and delays to transactions across the six-nation currency union, businesses say.
New BEAC rules introduced in June are aimed at bringing order to a monetary bloc awash with petrodollars which, owing to lax controls, often end up in offshore bank accounts after bypassing local economies completely.
The central African CFA union comprises former French colonies Chad, Congo Republic, Equatorial Guinea, Gabon, Cameroon and Central African Republic – all but the last of them among sub-Saharan Africa’s top oil producers, whose financial dealings are among the world’s most opaque.
The rules include: that all forex transfers over a 1 million CFA francs ($1,680) be vetted for approval by the bank, and that all export proceeds above 5 million CFA ($8,400) be repatriated in 150 days to a local bank account.
The bank has also ordered onshore foreign currency accounts shut – some of which may be re-opened with its approval – and prohibited the use of offshore accounts by firms with a presence in the region without prior approval, two banking sources and Paris-based Gabonese banking analyst Mays Mouissi told Reuters.
Businesses have complained of waiting months to get hold of hard currency and of being unable to import materials or pay suppliers.
“Slow money transfers mean there is a reticence, a climate of mistrust between operators and their foreign partners,” Celestin Tawamba, President of the Cameroon Employers Group, told Reuters in a phone interview.
“Some payments are months in arrears.”
Big mining and oil companies with the most clout are lobbying against the changes, oil industry lobbyist NJ Ayuk, whose Centurion Law Group is representing some energy companies in their dispute with the bank, told Reuters.
“The new foreign exchange regulations do not sufficiently take into account the specific needs of mining activity, which is very export-oriented in markets denominated in U.S. dollars and euros,” French mining company Eramet, a major producer of manganese from mines in Gabon, said in an emailed statement.
“Eramet … is engaged in discussions with the BEAC.”
Responding to complaints, BEAC in a directive seen by Reuters extended the deadline for companies to fully comply to Dec. 1 from the original Sept. 1.
Oil majors themselves declined to comment while negotiations were ongoing, as did other multinationals such as telecoms firms.
The IMF has urged the central bank to boost its foreign reserves, which it estimated at 2.7 months of import cover at the end of last year – extremely low for a region with so much oil. The bank agreed to boost this to five months by 2022, an IMF paper shows, and the new rules aim to do that by forcing banks to keep their foreign exchange with the BEAC.
“The revised regulations do not introduce new … exchange controls nor any restriction on capital movements. Rather, they aim at clarifying certain requirements,” an IMF spokeswoman said in an emailed statement, adding that it was expected they would help the region adhere to the “rules of anti-money laundering and combating financing of terrorism.”
A spokeswoman for BEAC, headquartered in Cameroon’s capital Yaounde, declined to comment but referred to a statement by the bank’s president Cesar Abogo in July in which he said requests for forex that had been cleared were being met.
But a letter from the bank’s branch in Congo Republic in May, seen by Reuters, said that it could no longer process requests for foreign currency while they implement the rules.
The following month, a letter from Congo’s Finance Minister Calixte Ganongoto to all diplomats warned of a “shortage of forex that is seriously affecting the dynamic of our economy,” and said he had authorised banks to import hard currency so the diplomatic community could function.
Michel Dzombala, BEAC country director for Congo Republic, told Reuters that “all transfers whose files are complete and meet the requirements are executed after 48 hours.”
Yet several business leaders — from plastics manufacturers in Congo to clothes retailers in Central African Republic — told Reuters in reality transfers were taking 2-3 months.
Oil companies are gearing up to challenge the rules.
“The policy will affect local companies abilities to execute contracts because they need quick and constant access to hard currency … for machinery and expertise not available in the oil producing counties themselves,” the lobbyist Ayuk said.
“We are looking forward to having dialogue to roll back aspects that affect growth in the region,” he added. ($1 = 595 CFA francs)