Equatorial Guinea Market Entry

Equatorial Guinea Market Entry

The Guinean market is small and the purchasing power of most of the population is low. Despite the still strong Spanish and French influence and rapidly growing Chinese and other competition, there is still room for the use of Czech goods on the local market. In addition to the price of the product, the basic condition for success on the market is a long-term active export strategy focused on this country and, more broadly, the entire CEMAC zone. You cannot wait for a really good contract in the Czech Republic.

Market entry: distribution and sales channels, use of local representatives, other factors affecting sales

According to cheeroutdoor.com, Czech companies have not yet built up any network of representatives in Equatorial Guinea who would regularly service the local market. Although it is possible to export directly to Equatorial Guinea, cooperation with a local representative or a company registered in Guinea (importer) removes obstacles and is a competitive advantage. Even these people need to be actively sought out, preferably personally on the spot. Companies that have a contact person speaking Spanish or French or a direct representative in the country have a competitive advantage. Due to the complexity of the local business environment, it is of the utmost importance to negotiate all aspects of the business agreement in detail (preferably with the help of local legal counsel). Before concluding the contract, the partner must be carefully checked by a specialized company (due diligence). One of the basic conditions for success is the mastery of Spanish,

Cooperation with the Czech-Sub-Saharan Africa Mixed Chamber of Commerce (Staroměstské náměstí 15/603, 110 00 Prague 1, phone: +420 224 237 118, fax: +420 224 228 690) can be of significant help to Czech entities interested in entering the local market., www.crgchamber.com).

A foreign company can sell its goods directly to the customer, through an agent or distributor (recommended) working on the basis of a commission contract, it can open a representative office or enter into a “joint venture” with a Guinean partner. The most suitable for the supplier (but at the same time the least likely) is of course finding a local creditworthy partner who would work on his own account and pay for the offered goods himself when they are collected in the Czech Republic. If the company doesn’t want/can’t export directly, a reputable and reliable distributor/agent is a key person – you need to maintain personal and direct relationships with him as often as possible. For any major case, it is essential that the local representative has good contacts with the local administration, especially useful is a connection with the family of the president or someone from the government and the leadership of the ruling party. The Czech Republic has not yet built any network of representatives in Guinea who would regularly treat the local market. The best market entry strategy is through a local representative. The local conditions are so complicated that it is impossible to establish yourself without long-term experience and contacts.

The main distribution channels run through a port in Europe to Douala in Cameroon and from there to a port in Equatorial Guinea (Malabo, Bata). Air traffic goes to Malabo or Bata Airport. In Guinea, daily necessities are mostly sold in small (mostly Cameroonian, Nigerian, etc.) shops, of which there are a large number. Spanish or Lebanese shops and supermarkets exist only in the big cities (Malabo and Bata). There are not enough distributors in the country, and their activities are taken over by large foreign carriers (e.g. sea carriers).

The customer focuses primarily on the price, the quality of the goods comes second – the ever-increasing imports of cheap Chinese goods represent a major competitive obstacle. Goods that need service are better sold through an authorized dealer, and the necessary amount of spare parts must always be supplied.

Import conditions and documents, customs system, export control, domestic market protection

An importer of goods worth more than XFA 50000 needs an import license. Importing goods into the country is technically quite complex (as well as to other countries of the territory). The customs system is one of the most corrupt in the country, and customs officials very often artificially increase the price of imported goods and collect fines (they get extra fees) – it is best to leave customs clearance to a local partner. No duty is (should not be) applied to products from CEMAC countries. Import duties from third countries vary depending on the type of imported goods. The customs tariff (which is based on the CEMAC tariff) distinguishes four basic categories (however, it is possible for the customs officer to assess his “own” duty):

  • basic products (medicines, vaccines, medical equipment, poultry, meat, milk, rice and wheat) – the rate is 5%
  • raw materials for the industrial sector – 10% rate
  • semi-finished products (especially most imported food products) – the customs rate is 20%
  • general consumer goods – 30% rate.

Importers also pay VAT, turnover tax of 1%, CEMAG tax of 1.4% and in some cases a special duty of 15-50% (alcoholic beverages, tobacco, luxury consumer goods). On the other hand, importers who have concessions under the Investment Act and importers of fuel do not pay customs duty (however, in its Regulation No. 72/2014 of 21 May 2014, the government unexpectedly canceled all customs and tax exemptions, stating that each company must renegotiate them. If if she fails to do so, she must pay all relevant taxes and duties. Exemptions from paying VAT and personal income tax have been completely abolished).

The importer of goods to Equatorial Guinea especially needs invoices (Commercial Invoice), in four copies, if possible in Spanish or French or another world language, but with a Spanish or French translation and a description of the goods attached. All invoices must include the names of the supplier and recipient of the goods, the name of the goods, the unit and total price and the quantity details. Unit price and total price must be quoted in cif (import) parity, with specified gross and net weight and terms of sale. The importer also submits a bill of lading or air waybill, packing list, import permit (license), proof of payment for the goods or letter of credit (Levante de comercio) and certificate of origin of the goods ( issued by the official Chamber of Commerce and Industry in the country of origin of the goods).

The certificate of origin of goods when exported from Equatorial Guinea is issued for the exporter by the Chamber of Commerce CCGE (Cámara de Comercio de Guinea Ecuatorial), or CCAFM (Cámara de Comercio, Agricola y Forestal de Malabo). Oil companies and exporters of timber, cocoa beans and coffee are subject to a special export regime and taxation. The export tax is 20% of the wood price (fob). Royalties from oil sales amount to 10-16%.

Information on technical and hygienic standards is not available and is often the reason for collecting “surcharges”. When importing medicines, it is necessary to have a permit from the Ministry of Health. In general, it can be said that goods that meet Spanish/French standards can be imported without major problems. Imported goods (especially food) must have instructions (composition) in Spanish or French and bear the inscription Vente en la CEMAC.

Conditions for setting up an office, representative office, joint venture

The World Bank ranks Equatorial Guinea among the countries where starting a business is the most difficult (186th place out of 189). It is therefore necessary to entrust the formalities to a local partner or a local lawyer. On January 1, 1998, an agreement between the 15 African countries of the CFA currency area (and Guinea), called OHADA (Organisation pour l’Harmonisation du Droit des Affaires en Afrique), which promotes the development of the African Economic Community, a common trade policy and guarantees traders and investors legal certainty and compatibility. Investments are then regulated by the Investors’ Charter for the entire CEMAC zone. Although Equatorial Guinea acceded to the OHADA agreement and is a member of CEMAC, it applies the relevant regulations in its own way, belatedly and incompletely. Establishing a company is therefore more complicated than in the surrounding francophone CEMAC countries and the legal framework is more confusing.

Foreign companies with a head office in Equatorial Guinea have the same rights under the law as local companies. Guinean commercial law (common under the OHADA agreement) allows companies to operate, among other things, as “Société a Responsabilité Limitée” (SARL/Sociedad de Responsabilidad Limitada – spol. s ro) or “Société Anonyme/Sociedad anónima”. See here). A joint-stock company (SA) must have a share capital of 10 million CFA (shares of 10,000 XFA each), a limited liability company of 1 million CFA. The local partner must own at least 35% of the shares, 1/3 of the management must be Guineans. 18 steps are required to establish a company, the necessary time is approx. 180 days (see Doing Business). After drafting the partnership agreement and appointing the statutory bodies, it is particularly necessary to:

  • register the company in the commercial register and at the notary
  • obtain a business license (excerpts from the criminal record, copies of the passport data page of foreign partners, local ID, application for a business license signed by the Prime Minister, certified copy of the founding agreement, copy of the extract from the commercial register, company and management information, proof of account opening at a local bank confirmed by the Ministry of Finance, solvency certificate from the Ministry of Finance, bank solvency certificate, business plan confirmed by the Ministry of Economy)
  • obtain the permission of the sector ministry (a confirmation of the allocation of a fiscal statistical number from the tax institution and a business permit is submitted).

Equatorial Guinea Market Entry