Regulation 01/CEMAC/UMAC/CM on Foreign Exchange Rules for Resident Extractive Companies

ECONOMIC AND MONETARY COMMUNITY OF CENTRAL AFRICA CENTRAL AFRICAN MONETARY UNION REGULATION No. 01/CEMAC/UMAC/CM ON THE APPLICATION OF CERTAIN FOREIGN EXCHANGE REGULATIONS BY RESIDENT EXTRACTIVE COMPANIES

THE MINISTERIAL COMMITTEE, Having regard to the revised Treaty of the Economic and Monetary Community of Central Africa (CEMAC); Having regard to the Agreement governing the Central African Monetary Union (UMAC); Having regard to the Statutes of the Bank of the Central African States (BEAC); Having regard to the Agreement establishing the Central African Banking Commission (COBAC) and its subsequent amending texts; Having regard to the Agreement on the harmonization of banking regulations in the Central African States and its subsequent amending texts; Having regard to Regulation No. 01/16/CEMAC/UMAC/CM on the prevention and repression of money laundering and terrorist financing and proliferation in Central Africa; Having regard to Regulation No. 03/16/CEMAC/UMAC/CM on payment systems, instruments, and incidents; Having regard to Regulation No. 02/18/CEMAC/UMAC/CM on foreign exchange regulations in the CEMAC and its subsequent implementing texts; Having regard to the principles of the Extractive Industries Transparency Initiative (EITI); Considering that investments in the extractive sector contribute to ensuring the harmonious and sustainable development of the Member States and the Community; Considering the importance of activities carried out by resident companies operating in the extractive sector within the CEMAC; Considering that the repatriation of a substantial portion of foreign currency assets held by extractive companies and funds for site rehabilitation contributes to the external sustainability of the common currency; Considering the need for full and harmonious application of foreign exchange regulations in accordance with existing monetary cooperation agreements; Considering the specificity and complexity of extractive sector activities, as well as the strong investments required for their development and associated operational constraints; Concerned to ensure the external stability of the currency issued by the BEAC through maintaining an adequate level of foreign exchange reserves, guaranteeing the sustainable development of CEMAC economies; Having regard to the conforming opinion of the BEAC Board of Directors, issued at its ordinary session on 17 December 2021 in Douala, Republic of Cameroon; Having met in ordinary session on 23 December 2021 in Douala, Republic of Cameroon; ADOPTS BY UNANIMITY THE FOLLOWING REGULATION:

Article 1. - The objective of this Regulation is to define the specific rules relating to the application of the obligation to repatriate foreign currency assets held outside the CEMAC, as well as those relating to the declaration and domiciliation of imports and exports by resident extractive companies. It also determines the rules relating to these companies' obligation to establish funds for site rehabilitation at the end of operations. For the purposes of this Regulation, extractive companies are understood to be resident companies in the hydrocarbon and mining sectors, excluding carriers and subcontractors defined by an Instruction of the Central Bank Governor, without prejudice to cases expressly provided for by specific provisions.

Article 2. - In accordance with current foreign exchange regulations, resident extractive companies are subject to the obligation to repatriate foreign currency they hold, for any reason, outside the CEMAC region in the course of their activities.

Article 3. - The minimum repatriation rate provided for in Article 2 of this Regulation may be revised upwards by the Central Bank Government, following an evaluation of its application and taking into account the economic situation of the CEMAC, with a periodicity and under conditions determined by an Instruction of the Central Bank Governor. Notwithstanding, on an exceptional basis and taking into account their operational constraints, extractive companies must repatriate to the CEMAC, through credit institutions, at least 35% of the foreign currency generated by their activities, including in-kind payments, whether in the form of royalties or oil or mining profits, with the exception relating to funds for site rehabilitation at the end of operations.

Article 4. - The repatriation obligation established in Article 2 of this Regulation shall not apply to foreign currency originating from: activities related to the exploration phase; financing contracts of the loan type backed by resources, commonly known as "resource-backed loans"; any other type of financing with characteristics similar to resource-backed loans, accepted by the Central Bank at the request of the extractive company.

Article 5. - The obligation to repatriate foreign currency held by extractive companies abroad in order to establish funds for site rehabilitation at the end of operations or RES Funds shall be integral. Financial allocations or funds for site rehabilitation at the end of operations, established outside the CEMAC before the entry into force of this Regulation, shall be repatriated to the CEMAC within a period of three (3) years, starting from 1 January 2022, under the conditions and modalities specified by an Instruction of the Central Bank Governor.

Article 6. - Financial allocations or funds destined for site rehabilitation at the end of operations shall be deposited by extractive companies in one or more accounts opened in the books of the Central Bank in the name of the State and the companies. An account opening and operation agreement, signed between the extractive company, the BEAC, and the relevant State, shall specify the conditions and modalities for managing site rehabilitation funds. An Instruction of the Central Bank Governor shall fix the conditions and modalities for opening and operating the accounts mentioned in the first paragraph of this Article.

Article 7. - Financial allocations or funds destined for site rehabilitation, domiciled in the books of a credit institution within the CEMAC before the entry into force of this Regulation, shall be transferred to an account opened at the Central Bank, no later than within twelve (12) months, starting from 1 January 2022.

Article 8. - An extractive company that has established funds for site rehabilitation outside the CEMAC or has not repatriated them within the prescribed periods shall be sanctioned with a fine equivalent to 150% of the amount of funds not domiciled or repatriated in the State where the exploitation activity takes place. An extractive company that has not transferred or established RES funds in an account opened in the books of the Central Bank within the applicable regulatory or contractual periods shall be subject to a coercive fine equivalent to 1/1000 of the amount of funds not transferred or established, per month of delay starting from 1 January 2023. The fine and coercive fine provided for in this Article shall be recovered by the Central Bank, with two-thirds (2/3) deposited into the RES fund account at the BEAC, and the remaining one-third (1/3) distributed equally between the BEAC and the Public Treasury.

Article 9. - Foreign currency repatriated under paragraph 2 of Article 2 of this Regulation may be deposited in accounts in CFA francs or in foreign currencies within the CEMAC.

Article 10. - Extractive companies may open foreign currency accounts within the CEMAC, including carriers and subcontractors, regardless of their location. The opening of foreign currency accounts within the CEMAC by extractive companies, as provided for in this Article, shall be subject to prior authorization from the Central Bank under conditions and procedures specified by an Instruction of its Governor.

Article 11. - Extractive companies holding foreign currency accounts duly authorized by the Central Bank shall not be obliged to convert them into CFA franc accounts, provided they comply with current foreign exchange regulations and without prejudice, where applicable, to the application of Article 187 of Regulation No. 02/18/CEMAC/UMAC/CM on foreign exchange regulations in the CEMAC within the framework of safeguard measures relating to the conservation of external accounts of the CEMAC.

Article 12. - Extractive companies may hold foreign currency accounts outside the CEMAC, subject to prior authorization from the Central Bank, solely for the development of their activities. Foreign currency accounts outside the CEMAC held by extractive companies shall operate in accordance with the prevailing minimum repatriation rate.

Article 13. - Foreign currency accounts outside the CEMAC shall not be used to pay transactions between resident extractive companies, in accordance with Article 30 of Regulation No. 02/18/CEMAC/UMAC/CM of 21 December 2018 on foreign exchange regulations in the CEMAC. However, resident extractive companies may conduct fund request operations between themselves from their foreign currency accounts outside the CEMAC. Resident extractive companies shall periodically declare to the Central Bank fund requests made between them from their foreign currency accounts outside the CEMAC.

Article 14. - The conditions and modalities for opening and operating foreign currency accounts within and outside the CEMAC by extractive companies shall be specified by an Instruction of the Central Bank Governor.

Article 15. - Foreign currency accounts, within and outside the CEMAC, held by extractive companies shall be subject to periodic declarations under terms and conditions specified by a circular letter from the Central Bank Governor, under penalty of sanctions provided for by current foreign exchange regulations.

Article 16. - Extractive companies shall declare their imports and exports to the Central Bank.

Article 17. - Imports and exports by extractive companies shall be domiciled at credit institutions and the Central Bank, which proceed to their settlement. Domiciliation may be carried out at any credit institution within the CEMAC, regardless of the country in which the extractive sector company is established or the CEMAC country to which goods or services are imported or exported.

Article 18. - The conditions and modalities for the declaration, domiciliation, and settlement of imports and exports by extractive companies shall be specified by an Instruction of the Central Bank Governor.

Article 19. - This Regulation may be modified by the Ministerial Committee. Its provisions may be specified, as necessary, by an Instruction or Circular Letter from the Central Bank.

Article 20. - The rules governing foreign exchange in the CEMAC, particularly provisions relating to sanctions in case of non-compliance, shall apply to extractive companies, unless otherwise provided by this Regulation.

Article 21. - Credit institutions, COBAC, BEAC, and national competent authorities are each responsible for ensuring the strict application of this Regulation.

Article 22. - This Regulation shall enter into force from the date of its signature. It shall be published in the Official Gazette of the Community.

Signed, on 23 December 2021 The President of the Ministerial Committee. Louis Paul MOTAZE