Coronavirus: African Energy Chamber Proposes Tax Moratorium for Oil Companies
Acknowledging the looming crisis in the oil sector as a direct consequence of the coronavirus pandemic, the African Energy Chamber urges African States to put in place a fiscal moratorium.
Extraordinary circumstances call for extraordinary measures. This is, in essence, the message of the African Energy Chamber to the hydrocarbon-producing countries of the continent. In a press release released on March 18, the inter-professional organization of energy and mining professions in Africa, noting the « difficult times for African oil and gas » due to « coronavirus and low prices, » urges African states to find as soon as possible « ways to reduce the burden » on companies in the sector. Indeed, with a barrel of Brent oil trading below $26 a barrel, oil prices have fallen by nearly 60 percent since the start of the Covid-19 pandemic. An unprecedented collapse in the contemporary history of commodity markets.
As a result, according to the African Energy Chamber, Africa is expected to lose more than $110 billion in taxes, oil exports, jobs and contracts with local companies over the next three months. This is a critical situation which, as the organisation points out, comes on top of previous difficulties faced by players in the sector in Africa, such as « low profitability » and « difficult access to financing for oil and gas projects ». Among the avenues proposed by the EAC are « the cancellation or deferral of tax payments for up to three months to African-owned service companies, local exploration and production companies and all international and local companies working on exploration programmes ». Strong tax measures that, according to the organization, will « enable employers to pay salaries, improve their liquidity and reduce some of the revenue losses while minimizing job losses ».
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But it is not certain that all the countries concerned will have the means to implement these support programmes. With a barrel of debt that seems to be settling permanently below $30, nations such as Algeria, Nigeria, Congo or Libya - which have national budgets based on a barrel of debt of $50 or even more than $60 - are already seeing their economies hit hard. This will further reduce the financial room for manoeuvre.