The Banque des États de l’Afrique Centrale (BEAC) has been in a crisis state now when it comes to forex and money laundering.
The BEAC recently issued new rules to control both these activities but the new laws have upset a lot of businesses in the Africa continent. Their biggest complaint is that the new laws are causing transaction delays and currency shortages among the six member states.
The BEAC is the bank for the six-member central African CFA union. This includes Chad, Congo Republic, Equatorial Guinea, Gabon, Cameroon and Central African Republic.
The trouble with the region is that, even though the place is rich with oil money, much of the foreign money does not go into the local economy. These funds are directly sent to the back accounts of rich oversea investors.
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This is why the BEAC introduced new rules that will help curb the flight of money. Now, all forex transfers over a 1 million CFA francs ($1,680) need the approval of the bank. Additionally, all export proceeds above 5 million CFA ($8,400) need to be placed in a local bank within 150 days.
The BEAC also closed onshore foreign currency accounts but stated that they might end up reopening them with approval. Local firms are also prohibited from using offshore accounts unless they get approval. We have also reported that East Africa countries have also clamped down on illegal forex trading last year. The result is that many businesses are complaining about a limited access to foreign currency which they need for international orders and salaries.
In a statement, Celestin Tawamba, President of the Cameroon Employers Group, said
Slow money transfers mean there is a reticence, a climate of mistrust between operators and their foreign partners. Some payments are months in arrears.
Most of the big mining and drilling companies are against these tougher restrictions and they are pushing for them to be changed. The BEAC extended the deadline for compliance to December 1 instead of the earlier deadline of September 1.
Will The BEAC Change Its Laws?
The International Monetary Fund (IMF) has been pushing Central Africa to build up its foreign currency reserves. The current estimate is that the region only had 2.7 months of import cover at the end of 2018. That is pretty low for an oil-producing region and the BEAC has promised to boost it up to five months by 2022. The new rules are aimed at bolstering these supplies.
According to reports some banks are actually having problems meeting the demand for foreign currency while they try to fulfill the current rules. As it is, the Congo Republic has issued a warning to its diplomats about currency shortages and has ordered banks to import currency for diplomatic purposes. There are also reports that money transfers are taking two to three months. It will be interesting to see if the BEAC sticks to its decision or yields to pressure and changes its new laws.
