Client Alert : Equatorial Guinea

 

ECONOMIC MEASURES TO IMPROVE SOCIAL PROTECTION AND SUPPORT SMEs AMIDST THE COVID-19 PANDEMIC

What happened?

Equatorial Guinea – which remains highly dependent on oil revenues – has been affected by the impact the COVID-19 pandemic has had on the Brent Crude Price.

To mitigate the adverse impacts on the economy, the Equatorial Guinean government has decided to adjust its 2020 budget, seek financial assistance from international financial institutions to cover its budgetary deficit and focus on incentivising SMEs.

All these changes and others have been enshrined in Presidential Decree No. 43/2020, dated 31st of March 2020 (the “Decree”).

We have prepared an unofficial translation of Decree 43/2020 for our clients to read and download (PDF format, 251 KB).

What are the consequences?

Changes to the Budget
  • The Ministry of Finance, Economy and Planning (“MFEP”) has been instructed to review the 2020 Budget, seek financial assistance from international financial institutions such as the IMF and the ADB to cover the deficit; and
  • The 2020 Budget will be adjusted to prioritise the most affected ministerial departments, specially Health, Social Affairs, Civil Aviation and National Security.
Management of Entities and Public Companies
  • Entry into Equatorial Guinea must be within a period not exceeding half of the time established by each case, as of the date of issuance. Once this term expires, the validity of the visa will expire automatically;
  • The visa granted may be cancelled at any time by the provisions of the Ministries of Foreign Affairs and Cooperation, and National Security, without prior notice; and
  • This Decree shall enter into force as of the date of its publication by the National Press (2nd December 2019).
State Contracts
  • The MFEP is required to create a Public Procurement Board, prepare an inventory of all public contracts in strategic sectors (namely Defence, Security, Mines, Energy and Telecom) and review all public contracts with the objective of terminating those it is advised to; and
  • The visa granted may be cancelled at any time by the provisions of the Ministries of Foreign Affairs and Cooperation, and National Security, without prior notice; and
  • Oil and Gas companies are required to pay their tax bill resulting from their CIT 2019 returns as per the tax law in force and the MMH and MFEP have been empowered to lead the negotiations.
State Revenue
  • A special tax declaration regime is expected to be established to regularise tax debt;
  • The MFEP has been granted powers to offer incentives to taxpayers that comply with this special tax declaration regime;
  • The CEMAC automated customs management system will be imposed in Malabo;
  • Parking lots at the Malabo and Bata airports are due to be nationalised; and
  • Oil and Gas companies are required to pay their tax bill resulting from their CIT 2019 returns as per the tax law in force and the MMH and MFEP have been empowered to lead the negotiations.
Public Expenditure
  • The MFEP has been asked to prepare a budgeting plan for recurring public administration expenditures; and
  • Expenditure will be reprogramed to avoid the accumulation of arrears.
Social Measures and Protection
  • The government plans a 5 billion XAF contribution to the National COVID-19 Emergency Fund;
  • The financial and other resources of the National COVID-19 Emergency Fund should be destined to finance the Public Social Guarantees Program (consisting of food and basic need for identified households, personal and household hygiene kits, counselling and psychological and health support); and
  • The Plan to Strengthen the National Public Health System as well as the cost of acquisition of materials to guarantee basic hygiene conditions in government offices will be financed by the State Budget.
Measures to Support SMEs
  • The payment of MIT and CIT for 2019 has been postponed to June and July 2020, respectively;
  • MIT has been reduced from 3% to 1,5% until the 30th of September 2020;
  • The government plans a 1 Billion XAF donation to the Partial Guaranty Fund;
  • The Partial Guaranty Fund is to be restructured to guaranty efficiency, transparency and objectivity;
  • A strategy will be put in place by the Ministries of Industries and Energy (“MIE”), the Ministry of Transport, Post and Telecommunication (“MTPT”), in consultation with the MFEP and SEGESA to reduce the cost of electricity and internet; >/li>
  • The MFEP, the Professional Association of Credit Establishments and the representatives of micro-finance companies are required to adopt a strategy to reschedule the amortization of financial credits for SMEs;
  • The rent payable by those leasing commercial public spaces at the Malabo and Bata airports is reduced by 50%;
  • A 100% bonus will be paid by the government on the social security contributions made by food distribution and marketing companies that hire new employees to comply with the requirements of the health authorities. This measure will end on the 30th of September 2020.
Measures to Strengthen Public Finances and the Banking Sector

The distribution of the State’s financial assets that are not in the national financial institutions has been ordered and the MFEP should continue regularising the debts owed to construction companies.

Does my company have to take any action?

Negotiations by Oil & Gas Companies

Oil and Gas companies should engage with the MMH and the MFEP to start negotiations under article 11 of the Decree.

Debt Recovery by Construction Companies

Construction companies should continue engaging and negotiating with the relevant stakeholders to secure the approval and payment of the sums owed to them.

Engage with the MFEP

Follow up on the issuance of any ministerial orders by the MFEP for the correct implementation of the Decree.

Internal Review

Perform an internal review with your management team to ascertain the financial impact of the Decree on your company’s operations.

Tax Advice and Representation

Tax advice and representation should be sought from tax experts as most of the provisions are tax related.

Draw up an Action Plan

An action plan should be drawn with your tax advisors to benefit from the incentives provided by the Decree.

Financial Provisions

Ensure the necessary financial provisions have been taken to settle the MIT and CIT before the newly established deadline, if applicable.

Engage with Banks

SMEs should contact the Banks that provided them with financing to renegotiate their repayment terms.

Benefit from the Reductions in the Cost of Internet and Electricity

Stay informed about the measures that will be implemented to reduce the cost of electricity and internet. Contact the Ministry of Transport, Post and Telecommunications, SEGESA and the telephone company contracted by your company once the measures have been passed.

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