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The launch of the industrial sector and economic diversification in Equatorial Guinea

Interview - May 20, 2015

The newly appointed Minister for Finance and Budgets talks about the strength of Equatorial Guinea’s finance sector, how it could become a financial hub in the region and about the economic diversification the government is actively seeking


The exploitation of oil has allowed the state to focus on infrastructure development, opening the possibility of diversifying the economy, the great challenge Equatorial Guinea is facing. Could you describe the country's economic growth over the last decade and its future prospects?

Since we started producing oil in the early nineties, the government had the idea of organizing a National Economic Conference, which was held in the year ‘97. This was the first conference which established that revenues from the oil sector could only be used to develop the country while current income would finance the running costs of the administration. This position was reconfirmed in the second Economic Conference in 2007, and since then there have been mainly two phases identified: the first is infrastructure, including roads, housing, electricity and potable water. In 2000 we did not have even 100 kilometers of paved road, but today we already have 3000 kilometers of roads.

So, in the first phase in 2012 and 2013 we reached the execution of a 90 percent and that's when we launched the second phase, which is diversification and industrialization. In this last phase we have also identified the key sectors, which are industry, livestock, mining and its derivatives, fishing, up to creating a financial sector for our Horizon 2020. This financial sector would already allow resources from oil, when they are declining, to be used to create a fund to participate in profitable investments locally, in the subregion and, why not, participate in foreign investment. This is the National Development Plan to get to an emergency in 2020.

In the financial sector, I think we have a solid foundation for the financial sector today, in the sense that even before the European Union adopted a common currency we already had the CFA franc, which is a common currency that has a legal course in the world and so far today it works and has its effects. After this common currency, to become a common central bank, we came to the establishment of a common supervisor of banks: the Banking Commission of Central Africa, which is the body of CEMAC in charge of banking supervision. Therefore, today we have these solid structures that will allow the development of the financial sector without any doubt. To this, the financial market was added, which today also has a community supervision, which is the COSUMAF, which is also taking part in the regulation, supervision and control of the stock exchanges. What remains to be developed, and this is understood by the narrowness of the market, are the stock exchanges themselves, because today we only have the community stock exchange and Douala.

With this, the banks have all the necessary tools to create their financial products where we know there would come a regulation before it is implemented; the bank regulation is there, available since the ‘90s and this has allowed the financial structure, at CEMAC level in general and in our country in particular, to be a solid structure.

At the Symposium of Economic Diversification, which was led by your predecessor, it was said that Equatorial Guinea has both demand and the capacity to become a financial hub in the region. What is your opinion?

Indeed, within the development program designed in the second national conference, after the phase of infrastructure and diversification, which already implies that there is a basic economy, the second phase is to create a financial center in Equatorial Guinea which could, after the creation of an investment fund, participate in private investment nationally and in the community as well as abroad. But we are running this whole program according to what was programmed in the second national conference. The symposium last year helped us to effectively launch the second phase of diversification, and with the audience we had there the MoUs were signed for the private sector to work on the basic economic activity, with state participation.

One of the topics was also how to use technology and innovation to exploit financial services further. What are your plans in this regard?

The option we are looking for is, precisely, first the training of human resources. The financial sector is not even as simple as simple banking, getting into the international stock exchange means a requirement of high technology and well-trained staff. This is what we will start with from the years 2017-18, to send first a group of experts to get training during two or three years, while the foundations of the physical structure of the market in the financial sector are set. Currently, we are seeing that the headquarters building that is being built for BANGE has a place inside to install financial services.

Given that SMEs are the major creator of wealth and jobs, how will you encourage the creation of SMEs in Equatorial Guinea?

We have been developing this since years ago, from the direct financing of SMEs that the government has been doing through the granting of direct loans. But in view of certain hindrance due to, a little, lack of entrepreneurial culture, which is also being promoted and is going very well, the government has created a guarantee fund for loans to small and medium enterprises. The fund is being managed by the National Bank of Equatorial Guinea (BANGE), and through that fund small and medium entrepreneurs can apply for loans; first they receive the approval of the Ministry of Commerce and Business Development, which has previously studied the project. Then the same banking services study the project again to see if it is a bankable project or not and, from there, they can grant a loan. But instead of demanding the material guarantee from the company, the state gives guarantees through the fund the Ministry has created.

What is the role of the National Bank of Equatorial Guinea - BANGE?

Like any actor in the private banking sector, only that as banks are used for other purposes, we try to diversify participation so that there is no bank that is specifically supported by the government. Therefore, in each of the interventions that the government wants to make in the economy, it can use any of the several banks operating in the country, and it has no other operation apart from banking.

Given that banks are the catalysts of foreign investment in the country and that the United States are very focused on Africa at the time, especially after the US-African Leaders Summit last year, what message would you send about the strength and safety of banks operating in Equatorial Guinea for investors who want to come into the country?

I can give them a message of confidence: monthly, quarterly and annual reports issued by the Banking Commission of Central Africa (COCAB), which is a fully independent body, have confirmed, and this can be verified and demonstrated, that today our banks have a solid financial structure. In terms of capital, the minimum capital until 2008 was five billion, and banking regulations now require a minimum of ten billion. The economic development, not only in this country but in the subregion, and the need for banks to finance the economic activity have forced the banking commission to raise the minimum for the creation of a bank. Added to this, called the banks' own funds, the reserve is added, so that the financial structure of the bank has no difficulties at the time of participating in the financing of the economic activity. These reports can be taken from the database of the Central Bank or the same Banking Commission of Central Africa.

What opportunities are offered by financial services in Equatorial Guinea?

In Equatorial Guinea, what is still under development is the banking activity, with the few products they offer, etc. Today, at subregional level, we already find countries such as Gabon, Cameroon, Chad, that, when they emit a Treasury bond at the level of the financial market, they easily find more participation than they have requested. Therefore, if we started moving forward in this direction, not only for us but for the entire subregion we can between now and later find ourselves in a situation where we have created our fund; when a state issues bonds, we can easily have access to buying them, as they are, today, much more profitable than deposits at banking level.

The financial activity can be greatly developed at the subregional level and not only in the country, but perhaps what still remains there is the confidence in the economic agents, otherwise, everything else can move forward perfectly.

As newly appointed Minister of Finance and Budgets of Equatorial Guinea, what is your master plan to contribute to the development of Equatorial Guinea?

There cannot be a master plan other than the general policy set by the government. Within this policy, the Ministry of Finance is a part, although the biggest there can be. Because, in general, today, with the crisis in the oil market, our first challenge is to guide the management of public finance in order to have sustainability in the medium and long term. And while running at the same time the development projects we have planned for the period ahead of us. Therefore, this economic activity is very important to us. The launch of the industrial sector and diversification, those are the major branches of fiscal policy we are following and we are called to implement.