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Equatorial Guinea

Executive Summary

Equatorial Guinea’s rise to become a country with one of the highest GDPs per capita in sub-Saharan Africa has been driven almost entirely by U.S. companies’ foreign direct investment (FDI) in the oil and gas sector. In the mid-2010s, the decline in both oil prices and the country’s hydrocarbon reserves caused an economic recession that has continued for six years and has been exacerbated by the COVID-19 pandemic. While it still ranks among the top five richest sub-Saharan countries, the country’s gross national income (GNI) per capita plummeted from $14,030 in 2013 to $5,810 in 2021.

Despite its economy’s dependence on FDI, the country presents a complex, challenging environment for foreign investors. Equatorial Guinea ranks near the bottom of the list for various global indices, including those for corruption, transparency, and ease of doing business, and the government suffers from a lack of technical expertise and capacity to implement many of the reforms it proposes. Freedom of the press is limited, and public information on laws and regulations is not readily accessible, creating an opaque operating environment that many outside investors have difficulty navigating. Furthermore, both senior leaders of the ruling Democratic Party of Equatorial Guinea (PDGE) and members of the president’s extended family own a significant number of businesses in diverse industries, dominating the private sector and creating major conflicts of interest in a country known for pervasive corruption.

On January 1, 2022, the Central African Economic and Monetary Community (CEMAC), of which Equatorial Guinea is a member, began enforcing new foreign currency regulations on companies operating in extractive industries. While there continue to be negotiations on the final implementation of these regulations, they are likely to impact foreign firms’ willingness to invest in the hydrocarbon sector in Equatorial Guinea and other CEMAC countries. Finally, as a small country with an estimated population of 1.2 million residents and an underdeveloped education system, Equatorial Guinea suffers from a shortage of both skilled and unskilled labor, which affects many businesses’ abilities to operate competitively.

In the face of the country’s growing economic and fiscal challenges, the International Monetary Fund (IMF) approved a $282.8 million, three-year Extended Fund Facility (EFF) arrangement in December 2019, which required the government to implement reforms to improve transparency, good governance, and the business environment. Between 2019 and 2021, the government passed laws, issued decrees, and established institutions to comply with these requirements. It implemented a new anti-corruption law, created an Investment Promotion Center (IPC), passed an updated labor law, announced the privatization of its main state-owned enterprises (SOEs), and launched its Single Business Window to simplify the process of registering a business. Some of these initiatives have had modest success, while most exist on paper only.

On the surface, Equatorial Guinea appears to provide opportunities for foreign investment. In addition to its hydrocarbon reserves, the country has rich soils, abundant fishing waters, vast forests, eye-catching landscapes, relatively developed road infrastructure, and a strategic location for maritime trade. Before investing in Equatorial Guinea, however, potential investors should conduct extensive research and carefully consider both the potential benefits and pitfalls of establishing operations in the country’s opaque and challenging environment.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 172 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index N/A N/A https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $690 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $5,810 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

The government controls at least eight state-owned enterprises (SOEs) in the energy, housing, fishing, aerospace and defense, and information and communication sectors. These include Sonagas (natural gas), GEPetrol (oil), SEGESA (electricity), GECOMSA and GETESA (telecommunications), SONAPESCA (fishing), ENPIGE (low-income housing), and Ceiba Intercontinental (national airline). The government’s annual budget includes allocations to and earnings from SOEs, but other details – such as total assets and number of employees – are not made available. SOEs also lack publicly available audited financial statements. In 2017, the government contracted Deloitte and Ernst & Young to conduct a detailed report on its SOEs, which provided a comprehensive list of these entities. The report and other information regarding SOEs can be found on the Ministry of Finance’s website at https://minhacienda-gob.com/empresas-publicas-y-entidades-autonomas/ .

Following the recommendations of the IMF’s 2018 staff-monitored program, the government began efforts to improve governance of its SOEs. It established a committee for the restructuring of public entities and appointed new governing boards for each one. The IMF also required the government to contract an internationally reputable firm to audit the accounts of the state-owned oil (GEPetrol) and gas (Sonagas) companies, which the government hired at the start of 2019. As of April 2022, however, the audits had not been completed.

8. Responsible Business Conduct

The government does not have a clearly defined vision on responsible business conduct (RBC) for companies operating in the country. Rather, it encourages such practices through individual decrees and enforcement of laws and policies. The Ministry of Mines and Hydrocarbons, for example, mandates that international oil companies invest a percentage of their proceeds in local corporate social responsibility (CSR) projects. Under the local content rules added to the Hydrocarbon Law in 2014, a significant portion of these funds are used to support the National Technological Institute of Mines and Hydrocarbons, which trains local nationals to work in the extractive sector. Some funds are invested in environmental projects through local and U.S.-based NGOs, while others support social projects like a human trafficking awareness campaign. All CSR projects must be approved by the Ministry of Mines and Hydrocarbons, and the Ministry receives branding and credit for all CSR initiatives even it doesn’t contribute any funding. The Ministry oversees the entire CSR process through its Department of Local Content, including selecting the project, local implementing partner(s), and location(s).

While there are significant human rights concerns in Equatorial Guinea, including arbitrary detentions and restrictions on free speech and assembly, in general these are not directly related to the investment sector. There are no alleged instances of child labor in supply chains, major land tenure issues, forced evictions of indigenous peoples, or arrests of environmental defenders. There are some cases of alleged forced labor of third country nationals working for foreign companies and foreign state-owned enterprises, which are covered in more detail in the Department of State’s Trafficking in Humans Report linked below.

As a result of Equatorial Guinea’s underdeveloped and under-resourced judicial system, laws designed to protect human rights, workers, the environment, and consumers are not always effectively enforced. The absence of labor unions and weak civil society organizations result in little third-party oversight of or advocacy for improved government actions related to RBC. A high-profile case in early 2022 resulted in the arrest of six individuals accused of putting consumers at risk by falsifying the expiration dates on products at a prominent supermarket. In 2021, national police arrested multiple individuals for falsifying official signatures and documents to engage in illegal logging.

Equatorial Guinea applied to join the Extractive Industries Transparency Initiative (EITI) in 2010, but its application was delisted after the government missed the validation deadline. To comply with IMF recommendations, it reapplied in 2019, but it once again had to withdraw its application in 2020 for failure to meet all requirements. The government has been unable to identify a civil society organization to serve as part of an effective multi-stakeholder oversight mechanism, a key component of admission into the EITI. In late 2021, the Minister of Mines and Hydrocarbons stated that the government would be resubmitting its application in early 2022, but as of April, no progress toward reapplying had been made public.

Equatorial Guinea is not a signatory of the Montreux Document on Private Military and Security Companies, nor does it participate directly in the International Code of Conduct for Private Security Service Providers’ Association (ICoCA), although several companies in the country are members.

9. Corruption

Corruption at all levels of government remains a serious issue, although the government has taken some steps to combat it. The government ratified the UN Convention against Corruption in May 2018 and the African Union Convention on Preventing and Combating Corruption in October 2019. In July 2020, the President issued Decree-Law No. 1/2020 on the Prevention and Fight against Corruption to bring its existing anti-corruption laws up to international standards in compliance with requirements from the IMF. The decree requires public officials to disclose all assets and sources of income, sets new rules to prevent conflicts of interests, prohibits officials from receiving most types of gifts, establishes a National Commission on the Prevention and Fight Against Corruption, and establishes punishments for corruption offenses, as well as protections for whistleblowers.

As with the investment regulatory regime, however, anti-corruption enforcement remains weak. Some anti-corruption agencies, such as a Court of Accounts and a Commission on Ethics, have been created by law but have yet to be operationalized. Other offices, such as those of the anti-corruption prosecutor and the ombudsman, have been launched but remain weak and under-resourced. While some high-profile corruption cases against low- and mid-level officials were prosecuted in 2021, a culture of impunity remains among higher level leaders. Despite public disclosure of assets being included in both the anti-corruption law and the amended 2012 constitution, many public officials have yet to comply. Many high-level officials continue to have ownership of private sector businesses with no oversight of conflict of interest, contract negotiations, or anti-nepotism mechanisms.

Law No. 2/2014 on Civil Servants of the State sets forth responsibilities and prohibited actions of public workers, and some autonomous entities and SOEs have established their own codes of conduct. In 2019, the government called for the establishment of a Commission on Ethics to facilitate reporting by public officials of acts of corruption, but it is not yet operational.

Through harassment and intimidation, the government prevents civil society organizations from advocating on any issues that it considers to be political, and it does not offer protection for entities investigating corruption. NGOs of all kinds, but especially those engaging on issues of human rights and good governance, have difficulty obtaining legal registration through the Ministry of Interior and Local Corporations, some waiting for years without an official answer despite multiple attempts.

Corruption is reportedly present in many stages of the business cycle, including during procurement and awarding of licenses, as well as in regulatory enforcement and dispute settlement

10. Political and Security Environment

Politically motivated arbitrary detentions do occur. Equatorial Guinea does not have a recent history of political violence or civil disturbance, due in part to significant government controls on political opposition and civil society. Over 50 percent of the population has official membership in the ruling Democratic Party of Equatorial Guinea (PDGE), which has maintained control of the legislative, executive, and, by extension, judicial branches since its founding in 1987. The Convergence for Social Democracy is the only legal, non-aligned opposition party, while 16 minor parties make up the “aligned opposition” and are closely affiliated with the PDGE. Legislative elections are expected to take place in 2022, with presidential elections anticipated in 2023. During its November 2021 national convention, the PDGE surprised many observers by not announcing whether President Teodoro Obiang Nguema Mbasogo, who has led the country since taking power in 1979, would run for his final constitutionally authorized term. If a new PDGE candidate is named for the 2023 presidential elections or following President Obiang’s final term, some observers predict in-fighting within the party and/or the ruling family that could lead to temporary political instability. In almost all official meetings and speeches, Equatorial Guinea’s top leaders warn of the many internal and external threats faced by the country. Some of these warnings results from thwarted coup attempts in 2004, 2009, and 2017, as well as increasing instability in West and Central Africa, but they may also be designed to solidify popular support for the PDGE and the Obiang family.

Maritime piracy remains a critical threat in the Gulf of Guinea (GoG). While reported attacks dropped from 81 in 2020 to 34 in 2021, all 57 of the global piracy-related kidnappings in 2021 occurred in the GoG. The year-to-year decrease in incidents was in part the result of several foreign governments sending vessels to patrol the waters of the GoG, including the Russian, Brazilian, and Danish navies. Following the 2019 hijacking of a supply vessel in transit to Exxon-Mobil’s offshore facility and the October 2020 on-land attack on an oil compound, the government required all ships operating in Equatorial Guinea’s water to have an armed security officer, provided by Equatorial Guinea’s military, on board. Some international oil companies are instead attempting to procure their own armed security vessels, although the government has yet to provide final approval. Despite these efforts, five high-profile attacks in and around Equatorial Guinea’s waters occurred in November and December 2021.

11. Labor Policies and Practices

In December 2021, the Parliament passed General Labor Law No. 4/2021, updating the regulations governing Equatorial Guinea’s labor law. This new law was designed to strengthen workers’ rights and create streamlined procedures for arbitrating labor disputes. It also raised the retirement age from 60 to 65. While the government has not published the law’s text online, in March 2022 it organized a public session to provide information on the new regulations to private companies.

Labor disputes may be heard by the legislature or in the courts, and decisions often favor the employee. This can be especially true for foreign firms. Labor disputes involving companies are frequently resolved through legislative hearings, after which the company may be obligated to pay a substantial compensation to the local employee. Employers are required to make significant severance payments to separated employees, even when employment demands fluctuate due to market conditions. Currently, the government does not provide any unemployment insurance or other social safety net programs to assist laid-off workers.

Due to its small labor pool and underdeveloped education system, Equatorial Guinea has a consistent shortage of both skilled and unskilled local labor. Foreign laborers make up an important segment of all sectors of the economy, and dominate in highly skilled professions, including engineers, pilots, and doctors. Despite local skilled labor shortages, the National Content Law of Equatorial Guinea requires that 70 percent of foreign oil company’s staff consist of local nationals. Furthermore, before hiring an expatriate worker, these companies must demonstrate to the Ministry of Mines and Hydrocarbons that they have been unable to find a suitable local employee during a period of 30 days.

While official statistics are scarce, anecdotal evidence suggests that youth unemployment is widespread and that women remain under-represented in the formal economy. A study conducted by the Ministry of Finance in 2017 estimated that the informal sector is responsible for 32 percent of Equatorial Guinea’s GDP. This informal sector, which includes the provision of both goods and services, grew quickly following the start of an economic recession in 2015, which was further exacerbated by the COVID-19 pandemic.

Aside from a union of small farmers and the taxi association, the government has not recognized any labor unions, so collective bargaining is not common. The government allows small collectives and associations to register but does not permit them to engage in labor advocacy. There have not been any strikes during the last year that posed an investment risk, as the government typically restricts strikes or protests. There is no evidence of the government waiving labor laws to attractive foreign investments. Equatorial Guinea joined the International Labor Organization (ILO) in 1981 and has ratified the ILO’s Worst Forms of Child Labor Convention, the Abolition of Forced Labor Convention, and the Discrimination (Employment and Occupation) Convention.

14. Contact for More Information

Economic-Commercial Section
U.S. Embassy Malabo
(+240) 333 09 57 41
malabopol-econ@state.gov 

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