Regulation No. 01/CEMAC/UMAC/CM on the Implementation of Foreign Exchange Rules for Resident Extractive Companies

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ECONOMIC AND MONETARY COMMUNITY OF CENTRAL AFRICA

MONETARY UNION OF CENTRAL AFRICA

MINISTERS' COMMITTEE

REGULATION NO. 01/CEMAC/UMAC/CM Stipulating the implementation modalities of certain provisions of foreign exchange regulations by resident extractive companies

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THE MINISTERS' COMMITTEE,

Having regard to the Revised Treaty of the Economic and Monetary Community of Central Africa (CEMAC) ;

Having regard to the Convention governing the Monetary Union of Central Africa (UMAC) ;

Having regard to the Statutes of the Bank of Central African States (BEAC) ;

Having regard to the Convention establishing a Central African Banking Commission (COBAC) and subsequent amending texts ;

Having regard to the Convention on the harmonization of banking regulations in Central African States and subsequent amending texts ;

Having regard to Regulation No. 01/16/CEMAC/UMAC/CEMAC on the prevention and repression of money laundering, terrorism 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 CEMAC and subsequent implementing texts ;

Considering 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 Member States and the Community ; Considering the importance of activities carried out by resident companies in the extractive sector in achieving BEAC's objectives regarding strengthening CEMAC's foreign exchange reserves ;

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Considering that the repatriation of a substantial portion of foreign currency assets held by extractive companies and site rehabilitation funds contributes to the external sustainability of the common currency ;

Considering the need for integral and harmonious application of foreign exchange regulations in compliance with current monetary cooperation agreements ;

Considering the specificity and complexity of extractive sector activities, as well as the heavy investments required for their development and associated operational constraints ;

Eager to facilitate BEAC's achievement of its objectives regarding the repatriation of foreign currencies into CEMAC and subsequent strengthening of reserves, while not impairing the optimal functioning of extractive companies in the Zone ;

Eager to ensure the external stability of BEAC-issued currency through maintaining an adequate level of foreign exchange reserves, a guarantee of sustainable development for CEMAC economies ;

Having received the concurring opinion of BEAC's Board of Directors, delivered during its ordinary session on 17 December 2021 in Douala, Republic of Cameroon ;

Meeting in ordinary session on 23 December 2021 in Douala, Republic of Cameroon ;

On the proposal of the BEAC Governor,

HAS UNANIMOUSLY ADOPTED THE REGULATION FOLLOWS:

Article 1. – This Regulation aims to define specific rules regarding the implementation of the obligation to repatriate foreign currency assets held outside CEMAC, as well as those related to the declaration and domiciliation of imports and exports by resident extractive companies. It also determines rules regarding the obligation for these companies to establish site rehabilitation funds upon closure of operations.

For the purposes of this Regulation, extractive companies refer to resident upstream hydrocarbon and mining sector companies, excluding transporters and subcontractors as defined by an Instruction of the Central Bank Governor, subject to expressly provided cases under specific provisions.

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Article 2.– In accordance with current foreign exchange regulations, resident extractive companies are subject to the obligation to repatriate foreign currency assets held, under any title, outside CEMAC within the framework of their activities.

However, exceptionally, taking into account their operational constraints, extractive companies shall repatriate into CEMAC, through credit institutions, at least 35% of the foreign currency generated by their activities, including in-kind payments, whether royalties or petroleum or mining profits, excluding those allocated to site rehabilitation funds upon closure of operations.

Article 3.– The minimum repatriation rate provided in Article 2 of this Regulation is subject to upward revision by the Central Bank Government, following an evaluation of its implementation and considering CEMAC's economic situation, according to a periodicity and under conditions and modalities determined by an Instruction of the Central Bank Governor.

Article 4.– The repatriation obligation set in Article 2 of this Regulation does not apply to foreign currency derived from:

• activities related to the exploration phase;
• financing contracts of the "resource-backed loans" type, commonly known as « resource-backed loans »;
• any other financing type with characteristics similar to resource-backed loans, admitted by the Central Bank upon request of the extractive company.

Article 5.– The repatriation obligation for foreign currency held outside by extractive companies regarding the establishment of funds for site rehabilitation upon closure or RES Funds is integral.

Financial endowments or financial funds for site rehabilitation upon closure, established outside CEMAC before the effective date of this Regulation, shall be repatriated into CEMAC within a period of 3 years, starting from January 1, 2022, under conditions and modalities specified by an Instruction of the Central Bank Governor.

Article 6.– Financial endowments or financial funds intended for site rehabilitation upon closure are deposited by extractive companies in one or more account(s) opened in the books of the Central Bank in the name of the State and these companies.

An account opening and operation agreement, signed between the extractive company, BEAC, and the concerned State, specifies the conditions and modalities for managing site rehabilitation funds.

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An Instruction of the Central Bank Governor sets the conditions and modalities for opening and operating the accounts referred to in the first paragraph of this article.

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

Article 8.– An extractive company that has established site rehabilitation funds outside CEMAC or has not repatriated them within the applicable deadlines is subject to a fine equal to 150% of the amount of funds not domiciled or repatriated in the State where the operating activity is located.

An extractive company that has not transferred or established RES funds in an account opened in the books of the Central Bank within applicable regulatory or contractual deadlines is subject to a penalty equal to 1/1000th of the amount of funds not transferred or established, per month of delay starting from January 1, 2023.

The fine and penalty provided in this article are collected by the Central Bank and remitted, two thirds (2/3) to the RES fund account at BEAC, while the remaining one third (1/3) is distributed equally between BEAC and the Public Treasury.

Article 9.– Foreign currency repatriated under paragraph 2 of Article 2 of this Regulation may be deposited in FCFA or foreign currency accounts within CEMAC.

Article 10.– Extractive companies may open foreign currency accounts within CEMAC, including transporters and subcontractors, regardless of their place of establishment.

The opening of foreign currency accounts within CEMAC by extractive companies as provided in this article is subject to prior authorization from the Central Bank under conditions and modalities specified by an Instruction of its Governor.

Article 11.– Extractive companies holding duly authorized foreign currency accounts cannot be compelled to convert them into FCFA accounts, subject to compliance with current foreign exchange regulations and without prejudice, if applicable, to the application of Article 187 of Regulation No. 02/18/CEMAC/UMAC/CM on foreign exchange regulations in CEMAC regarding safeguard measures for preserving CEMAC's external accounts.

Article 12.– Extractive companies may hold foreign currency accounts outside CEMAC, after prior authorization from the Central Bank, solely for the realization of their activities.

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Foreign currency accounts outside CEMAC held by extractive companies operate in compliance with the applicable minimum repatriation rate.

Article 13.– Foreign currency accounts outside CEMAC cannot be used to settle transactions between resident extractive companies, in accordance with Article 30 of Regulation No. 02/18/CEMAC/UMAC/CM dated December 21, 2018 on foreign exchange regulations in CEMAC. However, resident extractive companies may carry out between themselves, from their foreign currency accounts outside CEMAC, only fund call operations.

Resident extractive companies periodically declare to the Central Bank fund call operations carried out between them from their foreign currency accounts outside CEMAC.

Article 14.– The conditions and modalities for opening and operating foreign currency accounts inside and outside CEMAC by extractive companies are specified by an Instruction of the Central Bank Governor.

Article 15.– Foreign currency accounts inside and outside CEMAC held by extractive companies are subject to periodic declarations under conditions and modalities specified by a Circular Letter from the Central Bank Governor, under penalty of sanctions provided by current foreign exchange regulations.

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

Article 17.– The domiciliation of imports and exports by extractive companies is carried out with credit institutions and the Central Bank, which proceed to their clearance.

Domiciliation may be carried out in any CEMAC credit institution, regardless of the country of establishment of the concerned extractive sector company or the CEMAC country in which goods or services are imported or exported.

Article 18.– The conditions and modalities for declaration, domiciliation, and clearance of imports and exports by extractive companies are specified by an Instruction of the Central Bank Governor.

Article 19.– This Regulation may be amended by the Ministers' Committee. Its provisions may, as necessary, be clarified by an Instruction or Circular Letter of the Central Bank.

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Article 20.– The Regulation on foreign exchange regulations in CEMAC, including its provisions regarding sanctions for non-compliance, applies to extractive companies, unless otherwise provided in this Regulation.

Article 21.– Credit institutions, COBAC, BEAC, and competent national authorities are responsible, each within their respective scope, for ensuring strict application of this Regulation.

Article 22.– This Regulation enters into force as of its signature date. It is published in the Official Bulletin of the Community.

Done in Douala, on 23 DEC 2021

The President of the Ministers' Committee,

[Signature] Louis Paul MOTAZE