Equatorial Guinea

Executive Summary

The Republic of Equatorial Guinea is endowed with oil and gas resources that attracted billions of dollars in direct U.S. investment instrumental to extracting those resources. Discovery of oil in the 1990s resulted in rapid economic growth by the late 2000s. Growth has slowed as several operational oil fields have matured and are now in decline. Equatorial Guinea is among the world’s lowest ranking countries in various global indices, including those for corruption, transparency, and ease of doing business. Some companies have reported that these ratings underscore the challenging and opaque environment in which both local and foreign businesses must operate, with corruption, perceptions of a biased judiciary and a burdensome, inefficient bureaucracy undermining the general investment climate in the country.

The government of the Republic of Equatorial Guinea is seeking investment in several underdeveloped sectors: agribusiness; fishing; energy and mining; petrochemicals, plastics, and composites; travel and tourism; and finance. The Equatoguinean domestic market is small, with an estimated population of 1.2 million, although the country is a member of the Central African Monetary and Economic Union (CEMAC) sub-region, comprising more than 50 million people. The zone has a central bank and a common currency – the CFA franc, which is pegged to the euro. Equatorial Guinea graduated from “Least Developed Country” (LCD) status in 2017 and recently reactivated its efforts to accede to the World Trade Organization. Equatorial Guinea became a full member of the Organization of the Petroleum Exporting Countries (OPEC) in 2017 and is a member of the Gas Exporting Countries Forum (GECF).

Equatorial Guinea’s economy has suffered from the effects of the COVID–19 pandemic. The drop in global demand and oil prices occasioned by the crisis, coupled with the drop in household consumption and the slowdown in business activities due to measures to contain the spread of the disease, exacerbated the country’s already serious growth problems. Real GDP shrank 6.1% in 2020, compared with 5.6% in 2019. It was the eighth consecutive year of recession due to growth problems in both the oil (–7.2 %) and nonoil sectors (–4.7%). On the demand side, investment contracted by 35%. Although output fell, prices rose. Inflation was 3% in 2020, up from 1.2% in 2019, the result of a pandemic-related decline in the terms of trade, reduced supply of essential goods, and a worsening monetary situation. As a result, the Bank of Central African States gave up trying to reduce liquidity in the banking system and proposed a series of measures to support the economies in the Economic and Monetary Community of Central Africa (CEMAC) by cutting the policy interest rate and the marginal lending facility rate from 3.5% to 3.25%, and from 6% to 5%, respectively.

The country’s gross domestic product (GDP) shrank nearly 50% between 2014 and 2019, from USD 21.7 billion to USD 11 billion. The economy is expected to grow 2.6% in 2021, a projection based on the successful completion of a large gas project and the recovery of the world economy by the second half of the year. The country is expected to again return to recession in 2022, with a real GDP decline of -4.4%. The inflation rate is expected to settle at 2.9% over the next two years, remaining within the CEMAC limit of 3%. The budget is expected to be in a deficit of 2.4% of GDP in 2021 and 1.5% of GDP in 2022. The current account balance is expected to remain in deficit at 6% of GDP in 2021 and 5.6% the following year. The country’s main risk factor, beyond the persistence of the pandemic, remains the lack of diversification of its oil-based economy, to which is added the structural weakness of inadequate human capital. Indeed, the country has a capacity deficit, particularly in terms of public finance management and governance, that hinders effective implementation of its economic and social transformation policy.

On December 18, 2019, the Executive Board of the International Monetary Fund (IMF) approved a USD 282.8 million, three-year Extended Fund Facility (EFF) for Equatorial Guinea. The arrangement was intended to support Equatoguinean authorities’ three-year economic program, which aims at further reducing macroeconomic imbalances and addressing financial sector vulnerabilities; improving social protection and human capital development; promoting economic diversification; and fostering good governance, increasing transparency, and fighting corruption—all with the overarching aim of achieving sustainable and inclusive economic growth. Equatorial Guinea’s Fund-supported program was also intended to serve as a mechanism to spur additional external resources as well as contribute to rebuilding the CEMAC regional reserves. The new Minister of Finance, Economy and Planning, Valentin Ela Maye Mba, is tasked with improving the country’s economy and fiscal situation, including working with international financial institutions. The new three-year plan was supposed to increase revenue through greater tax compliance among individuals and greater public payment for utilities, such as water and electricity. Government leaders have publicly stated that good governance is important, and there were several bills proposed or passed in 2020 and 2021 to help, including the Fiscal Incentive Law to increase tax compliance by registering the tax obligations of individuals; and the Anti-Corruption Law, which has been under discussion for more than a year. Foreign businesses continue to express challenges and concerns about new regional banking and foreign exchange regulations implemented by the Bank of Central African States (BEAC) given the lack of liquidity in the local banking sector.

Despite various challenges, U.S. businesses have mainly had success in the hydrocarbons sector. Some U.S. businesses have profited in other sectors, such as technology and computer services. Various international companies continued to enter the market in response to new licensing rounds in the hydrocarbons and mining sectors. U.S. businesses may find investment opportunities in other sectors such as telecommunications, infrastructure, agriculture, mining, security, and transportation.

Since the onset of COVID-19, Equatorial Guinea has been proactive in safeguarding opportunities for foreign investors and continuing to drive capital into its hydrocarbon resources. Investors have reported that past commercial disputes have involved delayed payment, or non-payment, by the Government of the Republic of Equatorial Guinea to foreign firms for delivered goods and services. Certain companies reportedly exited the country with millions in unpaid bills.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 174 of 180 https://www.transparency.org/en/
countries/equatorial-guinea 
World Bank’s Doing Business Report 2020 178 of 190 https://www.doingbusiness.org/en/data/
exploreeconomies/equatorial-guinea
 
Global Innovation Index 2020 NA https://www.globalinnovationindex.org/
analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2019 $908 https://apps.bea.gov/international/factsheet/factsheet.cfm 
World Bank GNI per capita 2019 $6,460 https://data.worldbank.org/indicator/
NY.GNP.PCAP.CD?locations=GQ
 

6. Financial Sector

Capital Markets and Portfolio Investment

The banking sector provides limited financing to businesses. The government claims two microfinance institutions operating in country, with a government-backed microcredit program for small- and medium-sized enterprises (SMEs). The country does not have its own stock market. According to investors, capital markets are non-existent. Credit is available but interest rates are high, ranging from 12 to 18 percent for mortgages and about 15 percent for personal loans. Business loans generally require significant collateral, limiting opportunities for entrepreneurs, and may have rates of 20 percent or greater. It is unclear if foreigners could obtain credit on the local market. The Single Window office assumes investors have already secured all financing.

Equatorial Guinea is a member of CEMAC, which has a stock market common to all member states. The Central Africa Banking Commission (COBAC) regulates the region’s banking system. The BEAC and the COBAC regulate transfer limits. Commercial banks follow BEAC requirements. To attract investment and promote economic diversification, the government offers facilities for granting loans, including through the National Institute of Promotion and Development (INPYDE), which has an investment fund for entrepreneurs.

The National Bank of EG (BANGE), in which the government has a 51% stake, plans to launch the country’s first brokerage business to facilitate foreign investment, negotiating equity and even debt for major companies operating in Equatorial Guinea. BANGE falls under the Central African Financial Market Surveilling Committee and includes such customers as supermarket chains Martinez Hermanos and EGTC. Additionally, BANGE inaugurated the BANGE Business School in 2020 to train students to work in the banking sector and facilitate underwriting, syndication, and funding. In November 2020, BANGE announced it first capital increase through an initial public officering directly through its offices. In April 2021, the institution announced the second capital increase of $75 million, which was open to individual investor (nationals and foreigners).

Money and Banking System

BANGE has the most branches of any bank in EG and estimated that 60% of the population used formal financial services. BANGE estimates that its clients are 26% of the population.

Banking revenues have been deteriorating over the last five years as the government gradually reduced or stopped infrastructure projects due to the economic recession. The government established the Partial Guarantee Fund to insure non-performing loans through the National Institute for Businesses Promotion (INPYDE). Demand for loans was supported by specific budget allocations each fiscal year, mostly from BANGE. In 2020, INPYDE negotiated an agreement to include other banks and to enlarge the Guarantee Fund.

While banks have branches throughout the country, they are concentrated in urban centers. There is little information available about the assets and health of the banking system. BANGE leads with 29 branches throughout the country. CCEI/CCIW Bank de Guinea Ecuatorial, a subsidiary of First Bank Afriland (Cameroon), has four branches in the largest cities. BGFI Bank Guinée Equatoriale operates as a subsidiary of BGFI Holding Corporation (Gabon). Pan-African EcoBank (Togo) and Societe Générale (France) also operate in Equatorial Guinea. If a bank does not have a branch in the location where an individual wants to do business, they would not have access to their funds there. ATMs are in limited locations.

The Government of the Republic of Equatorial Guinea is a member of the Economic and Monetary Community of Central African States (CEMAC) and shares a regional Central Bank with other CEMAC members. Members have ceded regulatory authority over their banks to CEMAC, but also are entitled to national BEAC branches. Ebibeyin, Bata and Malabo each have a branch. The government of the Republic of Equatorial Guinea is also a member of the Banking Commission of Central African States (COBAC) within CEMAC.

Foreigners must provide proof of residency to establish a bank account.

The country’s economy is an almost entirely cash based, with credit cards available but not widely used by the general population, confined to foreigner or wealthy citizens using at international hotels, international airlines, and major supermarkets. In April 2020, partly in response to the COVID-19 pandemic’s social distancing measures, the government encouraged banks to increase electronic payment mechanisms. The Ministry of Finance, the Economy, and Planning also continued to expand electronic payments for government employees. In May 2020, the Government of the Republic of Equatorial Guinea endorsed the guiding principles of the United Nations’ “Better than Cash” Alliance, a partnership of governments, companies, and international organizations to accelerate the transition from cash to digital payments as part of the United Nation’s Sustainable Development Goals. The Alliance has 75 member countries committed to digitizing payments to boost efficiency, transparency, and women’s economic participation and financial inclusion.

The banking sector is affected by relatively lengthy bureaucratic procedures and a lack of computerized record keeping. Customers have reported that currency is not always available on demand, and delays for transfers or exchanges of local currency into foreign denominations have increased since the BEAC instituted new banking and foreign currency regulations in 2019.

The National Economic and Financial Committee publishes a semi-annual report on the evolution of banks in the country. The CEMAC establishes the requirements for any bank that wants to operate in a member country, which COBAC can grant. COBAC also publishes information on the banking system of each member country. There are no restrictions, but there are requirements that applicants must meet to open an account, whether or not they are a resident. The country is currently starting the use of mobile banking; financial services are mainly limited to banking and microfinance.

The government’s failure to repay loans has increased interest rates and reduced access to credit for the private sector, especially households. Banks in EG have the lowest ratio of loans to savings within the subregion. During the economic expansion (2009-2014), the government developed a line of credit with CCEI Bank to finance infrastructure development projects with construction companies. Loan defaults rose rapidly as the government failed to meet its legal obligations with CCEI Bank, prompting the government to nationalize the bank in January 2021 by acquiring Afriland First Group’s shares.

Foreign Exchange and Remittances

Foreign Exchange

Decree No. 54/1994 provides the right to freely transfer convertible currency abroad at the end of each fiscal year, but in practice many businesses report that limited financial services create barriers to successfully executing international transfers. On April 1, 2019, the Bank of Central African States (BEAC) published a regulation to enforce an existing requirement to maintain bank accounts in Central African francs (CFA) rather than foreign currency, with a six-month grace period until October 1, 2019. Account holders are theoretically able to convert funds to foreign exchange through an administrative process, but it is unclear if this applies to all accounts in the region. Following pushback from the extractive industry, which accounts for over 80% of EG government revenues, CEMAC exempted gas and oil companies from the regulation through December 31, 2021. Many other businesses and individuals have reported lengthy delays to convert currency and make international bank transfers under the new rules. The BEAC announced that regulations were intended to usher in reforms that redefine BEAC’s role, and the role of the Bank’s control bodies, to ensure compliance with IMF guidance and currency stabilization, including a 30-day waiting period to withdraw foreign currency. Other reforms included: reinforcement of the regulatory framework for manual exchanges; assuring the flexibility of certain operational arrangements as instructed by the BEAC governor; adapting foreign exchange regulations to new methods of payment and transfer institutions; and simplifying procedures to increase compliance. In September 2020, the BEAC instituted an online “e-transfer” application to ensure credit establishments comply with the new regulation. The online application automates the entire process of transfer requests and monitors in real time the progress of each request through an e-tracking site. Foreign currency is not widely available in the Central African Franc zone but can be obtained in the Republic of Equatorial Guinea in small quantities.

Equatorial Guinea does not engage in currency manipulation as the CFA franc currently has a fixed exchange rate to the euro: 100 CFA francs = 1 former French (nouveau) franc = 0.152449 euro or 1 euro = 655.957 CFA francs exactly. The exchange rate fluctuates with the value of the euro.

Remittance Policies

On April 1, 2019, the CEMAC Central Bank published a regulation to enforce an existing requirement to maintain bank accounts in CFA rather than foreign exchange, with a six-month moratorium until October 1, 2019. Account holders are theoretically able to convert funds to foreign exchange through an administrative process. It is unclear if this applies to all accounts in the region. Companies in the hydrocarbons and mining sectors received an exemption on implementation through 2021.

Sovereign Wealth Funds

The Government of the Republic of Equatorial Guinea established a sovereign wealth fund, the Fund for Future Generations, in 2002. The fund receives 0.5% of all oil revenues and is governed and managed by the Bank of Central African States (BEAC). The Sovereign Wealth Fund Institute (SWFI) estimates assets under management of USD 165.5 million ( https://www.swfinstitute.org/profile/598cdaa50124e9fd2d05b002 ). There is no publicly available information on its allocations.

7. State-Owned Enterprises

The Republic of Guinea Equatorial has at least eight state-owned enterprises (SOEs) in the energy, housing, fishing, aerospace and defense, and information and communication sectors. Sonagas is the national natural gas company and GEPetrol is the national oil company. The energy SOEs report to the Ministry of Mines and Hydrocarbons and hold monopolies in their respective sectors. SEGESA is the national electricity company. GECOMSA and GETESA are the national telecommunication service providers. SONAPESCA focusses on the promotion of fishing and reports to the Minister of Fisheries and Water Resources. ENPIGE is the SOE that oversees the government’s affordable housing program. Ceiba Intercontinental is the main airline and is currently near bankruptcy, facing internal structural crisis, after the termination of a joint venture with Ethiopian Airlines in 2020. The budget includes allocations to and earnings from SOEs. Large SOEs lacked publicly available audits. According to some companies, there is little evidence of oversight of SOEs. A requirement of the IMF’s 2018 staff monitored program, however, is that the government 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. (The audits were still ongoing in mid-2020, with no report of completion.) All oil and gas projects must include a partnership with state-owned companies GEPetrol or Sonagas.

Equatorial Guinea’s oil and gas sector scored 22 of 100 points in the 2017 Resource Governance Index (RGI), ranking 85th among 89 assessments. Its overall failing performance can be attributed to the enabling environment component, which scores 17 of 100 points and ranks 79th among 89 assessments, along with an equally low score for revenue management. For more information, see https://resourcegovernance.org/ .

Privatization Program

The Ministry of Finance, the Economy, and Planning discussed plans to involve the private sector in the management of state-owned assets, including through privatization. The initiative was a recommendation from the Third National Economic Conference (April-May 2019), which included discussion of options to improve management of state assets. The government envisages three paths: (i) restructuring autonomous agencies and state-owned enterprises; (ii) concession of assets to the private sector; and (iii) sale of public assets to private operators (privatization). The authorities also plan to open to competition sectors where public enterprises operate, with the aim of limiting monopolistic practices and passing on efficiency gains to the rest of the economy. The Ministry will present a substantive list of state assets to be privatized, as well as a list of entities that will be restructured or placed under a concession regime with the private sector for the approval of the Council of Ministers (structural benchmark, end of June 2020). Once the Council of Ministers approves this plan, the authorities will present an action program for privatization (planned for the second half of 2020). To generate revenue, they plan to prioritize privatization, with the proceeds going to pay down validated domestic arrears and rebuild EG’s foreign currency reserves at the BEAC. Sales and concessions will be carried out through open, international tenders. The sale of the listed assets may be delayed so that their prices are not negatively affected by the current global slowdown. Information is likely to be announced on the Ministry’s website:    https://minhacienda-gob.com/.

9. Corruption

There is no publicly designated contact at a government agency responsible for combating corruption. Various ministries, including the office of the Prime Minister, nominally have responsibility for combatting corruption either within their own ministry or in the government at large. A commission to combat corruption was formed in 2019 and worked with the legislature to pass a new law on corruption in April 2021. There are no “watchdog” organizations operating in country.The Government of the Republic of Equatorial Guinea has laws and regulations against corruption, but many businesses have complained that they are not often enforced, and as a result, corruption is very common. There are no specific laws about conflict of interest or nepotism. Numerous foreign investigations continued into high-level official corruption.

In December 2020, the International Court of Justice ruled that a Paris mansion at the center of a dispute between France and Equatorial Guinea could not be unilaterally designated a diplomatic outpost. French authorities seized the building on Paris’ Avenue Foch in 2012 as they investigated Teodoro Nguema Obiang Mangue, the Vice President of Equatorial Guinea, for misuse of public funds and money laundering. In 2017 Vice President Mangue was tried in absentia in a French court for allegedly embezzling public funds. He was given a three-year suspended sentence and fined $32 million. The International Court of Justice found that France did not violate the Vienna Convention on Diplomatic Relations when it raided the building because the Parisian mansion was not a diplomatic residence for Equatorial Guinea and thus France had a right to seize it.

Obiang Mangue has publicly committed to eradicate corruption and promote fiscal transparency. In September 2020, the government established an anti-corruption audit commission, for which the port administrations of Bata and Malabo became the primary focus. The commission seized significant amounts of money allegedly siphoned off through those ports. As a result, the Director General for Customs was dismissed after more than twenty years on the job, though he was not charged. During 2020 and 2021, executives of state-owned enterprises have faced prosecution on embezzlement charges following surprise government audits as part of the anticorruption strategy. Those under investigation included the deputy director of the national power company (SEGESA) and the regional director of the National Institute of Social Security (INSESO).

U.S. companies operating in Equatorial Guinea are required to adhere to the U.S. Foreign Corrupt Practices Act. Some U.S. firms report concern about corruption in government procurement, the award of licenses and concessions, the customs process, and dispute settlement. Major U.S. firms have internal controls, ethics, and compliance programs to detect and prevent bribery of foreign officials. It is unclear what controls exist at smaller companies and other foreign and domestic firms.

The country’s greatest concerns in terms of money laundering and terrorism financing are cross-border currency transactions and the illegal international transfer of money by companies or corrupt individuals. Some report that widespread corruption, at times involving members of the government, is a primary catalyst for money laundering and other financial crimes. Certain businesses have noted that diversion of public funds and corruption are widespread in both commerce and government, particularly as regards the use of proceeds from the extractive industries, including oil, gas, and timber, and infrastructure projects.

Equatorial Guinea became a signatory to the United Nations Convention against Corruption on May 30, 2018. Equatorial Guinea is a member of the Task Force against Money Laundering in Central Africa, an entity in the process of becoming a Financial Action Task Force-style regional body. The country is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

On July 13, 2020, President Obiang Nguema Mbasogo approved Decree-Law No. 1/2020 on the prevention and fight against corruption in Equatorial Guinea as an interim measure pending approval of anti-corruption legislation in Parliament. The legislation passed in April 2021.

Resources to Report Corruption

Decree-Law No. 1/2020 stablished the National Commission for Prevention and Fight against Corruption as the primary source to report corruption. However, this Legal Entity of Public Law is not yet operational.

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