Equatorial Guinea is endowed with abundant oil and gas resources and hosts billions of dollars in direct U.S. investment. The general investment climate in the country, however, is undermined by corruption and a burdensome, inefficient bureaucracy. International watchdog organizations give Equatorial Guinea one of the world’s lowest rankings in various global indices, including those for corruption, transparency, and ease of doing business. These poor ratings underscore the challenging and opaque environment in which both local and foreign businesses must operate.
The Government of Equatorial Guinea is seeking investment in several sectors: agribusiness; fishing; energy and mining; chemicals, petrochemicals, plastics and composites; travel and tourism; and finance. Currently, many of these sectors are undeveloped. The Equatoguinean domestic market is small, with a population of approximately one million, although the country is a member of the Central African Monetary and Economic Union (CEMAC) sub-region, which is home to over 50 million people. The zone has a central bank and a common currency – the CFA franc.
Following rapid economic growth in the early 2000’s spurred by the discovery of oil a decade earlier; growth has slowed in recent years as operational oil fields have matured. With the drop in oil prices in 2015, Equatorial Guinea has extended the timelines for completing infrastructure projects to balance its budget. The country is nearing completion of the first phase of the Horizon 2020 social development plan, which emphasized infrastructure construction. Now Equatorial Guinea boasts some of the region’s best roads and other essential infrastructure including development of its ports. The government has announced plans to improve the ease of doing business by creating a one-stop-shop for investors and entrepreneurs, and creating a body to solve business disputes and a government co-investment fund of $1 billion. The fund is said to be in place, but the other measures have not yet been fully implemented.
Although certain tax exemptions have been instituted to attract investment, with the decrease in the price of oil, those exemptions are strictly scrutinized. Recent commercial disputes have involved delayed payment, or non-payment, by the Equatoguinean government to foreign firms for goods and services already delivered. The government has recently been attempting to change the terms of long standing contracts with major foreign firms and this dispute is ongoing. December 2015 saw a marked exodus of foreign businesses from the country as the government grappled with its finances and this trend continued throughout 2016.
The Equatoguinean judicial system is not independent, as the President is the Chief Magistrate. Corruption exists throughout the government, including the judiciary, making it difficult for U.S. businesses to protect their investments, and raising the risk of doing business in Equatorial Guinea. Occasionally, the passports of foreign managers are confiscated when an underlying dispute is raised. In such cases, the government has stated that movements are being restricted because the individual’s statements may be needed to resolve the dispute. This has occurred more than three times in the last 18 months, with one foreign executive having his travel restricted for nearly nine months.
U.S. citizens do not require visas to enter Equatorial Guinea, but visas can be very difficult to obtain for third-country nationals, and generally require a letter of invitation from the Equatoguinean government, which can take months to obtain. Residency permits can be similarly difficult to obtain or renew, and are expensive. Even the U.S. Embassy regularly experiences delays for residency permits of six months or more, with the host government occasionally misplacing original documents or losing them entirely. The local customs system suffers from similar delays and is plagued by corruption.
Despite the many challenges, U.S. businesses, which strictly comply with Foreign Corrupt Practices Act (FCPA) requirements, have had success in the hydrocarbons sector, and some U.S. businesses have found rewards in other sectors. U.S. businesses will likely continue to invest in the country in light opportunities in the market, however potential investors should be wary of the accompanying risks to operating in Equatorial Guinea.