The Republic of the Congo, often called Congo-Brazzaville, is a country located in Central Africa that straddles the Equator line and covers a surface of 342,000 km2 with a population of approximately four (4) million. The country is bordered by Central African Republic and the Republic of Cameroon to the north, the Democratic Republic of the Congo to the south and east, the Republic of Angola (Cabinda) in the south and the Republic of Gabon to the west. The Republic of Congo has a sea coastline of 170 km along the Atlantic Ocean.
The Republic of the Congo, along with the six (6) African countries covered by the Congo Basin forest, is the second tropical forest in the world after the Amazon. The Congolese forest estate covers an area of more than 20 million of hectares, or more than 60 % of the national territory.
The second economic sector after oil, timber represents nearly 5 % of GDP and constitutes a significant share of exports. The country exports varied species (sapelli, sipo, okoumé, limba, wengé, padouk, iroko…).
Forestry is marked by the presence of many private foreign companies: Congolaise Industrielle des Bois (CIB), a Congolese subsidiary of Singaporean Olam Gropup, which operates nearly 1.3 million of hectares of forest in the northern part of the country; Industrie Forestière de Ouesso (IFO), a subsidiary of German-Swiss Danzer Group; Likouala Timber, an Italian corporate; Taman Industries and Asia Congo Industrie (ACI), Malaysian companies; Sicofor, a Chinese company; Foralac and Trabec, European companies or Mokabi, a French subsidiary of Rougier Group, etc.
Compared to other companies, only CIB and IFO have provided their areas with FSC label (Forest Stewardship Council) resulting from the in-house entrepreneurial strategy based on sustainable forest managements.
The country has voluntarily joined the FLEGT (Forest Law Enforcement, Governance and Trade) to control wood poaching and trade related thereof. The Voluntary Partnership Agreement signed on May 9, 2009 defines impartial trade conditions on timber logged from timber concessions of the Congo. Furthermore, the country has signed a national programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries “REDD+”.
I. Legal framework
The forest sector is regulated by Law No 16-2000 of November 20, 2000 establishing the Forest Code, which was amended by Law No 14-2009 of December 30, 2009. However, other supporting texts exist which include: Law No 003/91 of April 23,1991 on environmental protection; Law No 9-2004 of March 26, 2004 establishing the State-owned Property Code; Law No 10-2004 of March 26, 2004 defining general principles applicable to systems on Private and State-owned land; Decree No 2002-438 of December 31, 2002 defining terms and conditions of distribution of area levy for development of administrative divisions; Decree No 2002-437 of December 31, 2002 determining forest management and conditions of use; Decree No 2002-436 of December 31, 2002 establishing duties, organization and operation of control service of saleable forest products; Decree No 2002-435 of December 31, 2002 determining duties, organization and operation of the National Centre for Inventories and Management of Forest and Wildlife Resources; Decree No 2002-434 of December 31, 2002 defining organization and operation of forest fund; Decree No 2002-433 of December 31, 2002 establishing organization and operation of water and forest officers; Decree No 2009-415 of November 20, 2009 defining the scope, content and processes of the environmental and social impact assessment; and various Orders.
Furthermore, Law No. 6-2003 of January 18, 2003 creating the Investment Charter stipulates that any individual or legal entity, regardless of nationality, is free to carry out any forest, industrial, farming and commercial activity in the Congo in accordance with the legislation in force in the country.
II. Forest ownership and role of the State
Natural resources in the Republic of the Congo, particularly the forests, are State property pursuant to the Constitution of January 20, 2002. However, the State grants to private operators the right to undertake logging activities. In addition, the Forest Law separates the State forest estate from the private forest estate. Theoretically, the State has the basic role to define forest policy, management and preservation.
III. Organization of forest estate and exploitation permits
- Private forest estate
Private forest estate consists of private forest and forest plantations. Private forests are those that are on lands owned by individuals or private corporations. Private forest plantations are acquired by a Congolese national or a foreigner or by a Congolese company, willing to plant forest trees on lands of non-permanent State-owned estates.
In this case, interested persons enjoy exclusive use of land with planted trees and, ownership of trees thereof, subject to rights of third parties and provided that the number of planted trees exceeds the number of trees not resulting from plantation and that the limits of land with planted trees are clearly marked. Acquired rights are transferrable. They lapse when the land is cleared, abandoned or trees fall from disease.
- State-owned forest estate
The State-owned forest estate includes the permanent and non-permanent forest estate. The non-permanent forest estate consists of protected forests, which were not classified. It is a public property.
The State-owned permanent forest estate1 is divided into many forest management units, which are basic units for management, protection, conservation, restoration and production. Man-made forests or plantation mainly made of eucalyptus, pines, okoumé and limba may be added to this natural potential.
Congolese forest Law stipulates that commercial operation of any forest products from State-owned forest estate shall be carried out under state control or by a holder of an exploitation title.
To that end, the Forest Code distinguishes four (4) exploitation titles that may be granted to private companies for wood operations: Agreement for industrial processing, Agreements for management and processing, permits for plantations timber-cutting and special permits.
The licensees have the right to collect limited quantities of forest products. Permits are granted only to companies incorporated under the Congolese laws. Foreign private companies willing to carry out logging activities in Congo-Brazzaville must, therefore, establish subsidiaries in accordance with Congolese law. Furthermore, logging companies with foreign capital shall open their share-capital to Congolese citizens.
- Agreements for industrial processing
Agreements for industrial processing give forest operators the right to collect from Forest Management Units, annual quotas of species. To benefit from this operation permit, licensees shall undertake to process rough lumbers in an industrial unit owned by them. The validity of these operation permits, determined according to the volume of output, may not exceed 15 years and may be renewed.
- Agreements for management and processing
Agreements for management and processing are identical to the agreements for industrial processing, except that the holders shall carry out silvicultural operations as provided for in development plans of concerned Management Forest Unit. The validity of these operations permits may not exceed 25 years. They are indefinitely renewed, except when the beneficiary fails to meet its obligations, trees fall, species become scarce or due to any public interest grounds. In this last instance, the State shall compensate the holder for the loss suffered.
- Permits for plantations timber-cutting
Permits for plantations timber-cutting concern the exploitation of trees from forest plantations, which are part of State-owned forest estate. The validity of these permits is determined according to the amount of trees to be collected and may not exceed six months. They may be extended only due to cases of force majeure.
- Special Permits
Holders of these permits have the right to commercially exploit accessory forest products in specified number and areas. These holders may also be authorized to exploit a limited number of timber species for commercial purposes.
Special Permits may be granted only to Congolese individuals, NGOs and associations incorporated under Congolese laws which apply for them. Therefore, commercial companies are not concerned. Special permits are valid for a month and may not be renewed.
IV. Forest agreements
Agreements for industrial processing and agreements for management and processing are granted after a tender process launched through an Order from the Minister for Water and Forests. Tenders of applying companies are assessed according to various criteria relating to the socio-economic impact of their activities, financial guaranties, equipment or their commitment to implement a development plan.
Holders of an agreement shall submit to the Departmental Directorate of Water and Forest an application for the authorization to set necessary facilities for industrial sites preparation, residential camps - or road construction; and an application for authorization of annual cuttings as they wish to do. This annual cutting corresponds to the maximum volume of species that the enterprise shall exploit in the following year.
Thus, logging agreements, including the above mentioned permits, may not be transferred or sub-contracted, except as authorized by the Water and Forest administration, particularly for prospecting, cutting and transportation operations. Likewise, the exploitation permit held by a company into receivership may not be transferred to any creditor in compensation for company liabilities.
V. Timber processed locally
The Congolese law requires that the timber be processed locally. Thus, exports do not apply to raw materials, rather to finished or semi-finished products. For this purpose, holders of management contracts shall first deliver logged timber to industries based on the Congolese territory. They shall enter into procurement contracts with industries based in Congo.
However, article 180 of the Forest Code, amended by Law No. 14-2009 of 30 December 2009, stipulates that some industries not yet based in the country shall export only 15% of high-quality timber as authorized by the Minister of Waters and Forests. In other words, 85% of this timber shall be processed in the Congo. Exceeding this limit of 15% shall result in payment of a 35% surcharge on the FOB value, as per specie quality.
Moreover, this article 180 creates a national market of quotas allowing transfer of quotas between companies which have processed more than 85% of timber and companies which have not reached 85% of production. This would imply that companies, which have not processed 85% of their rough timber production, may buy the missing quotas to comply with the Congolese legislation.
VI. Environmental requirements
Law No. 003/91 of April 23, 1991 on the environmental protection sets forth provisions applicable to the protection of human settlements, fauna and flora, atmosphere, water and soil. This law defines rules applicable to classified facilities and defines taxes and royalties thereof. In addition, this law subjects any proposed economic development to an environmental impact assessment.
Furthermore, the Forest Code stipulates that forest activities shall be carried out with the view of rationally managing forest resources based on a sustainable management of forest ecosystems, maintaining a sustained forest production, while preserving the environment and, particularly the bio-diversity. These activities shall be conducted in order to avoid destruction and maintain the sustainability of national forest estate.
Therefore, any operation of forest and wildlife products, burn and slash farming and any activity at water springs and banks located on rugged grounds are prohibited. Also, any spill of sawdust, shavings, wood waste and any other solid, gaseous or liquid substance, likely to deteriorate the water quality, is prohibited.
Finally, any exploration and exploitation project of natural resources in lands occupied or used traditionally by local populations, shall be first subjected to social, economic and environmental impact assessment. These populations may be relocated from lands traditionally occupied and used only for public interest.
VII. Tax and customs regime
Companies holding forest exploitation permits shall pay the following export, import and forestry taxes: stumpage dues, area levy, tax on accessory forest products and tax related to deforestation. Export tax and stumping dues are expressed as a percentage of the FOT value2 or Ex Works (ExW). Export of gross forest products or processed products is subjected to the tax on exported quantities, to their tax area and the FOT value per unit. Revisable rates of export rates are determined by Interministerial Order for each category of product between 0 and 10% of the FOT value. The rate of import tax is indexed to the declared CIF value (Cost, Insurance, Freight) declared during import.
Stumping dues of timber from natural forests is computed on the annual volume of species that companies undertake to produce. Its revisable rates are determined by the joint Order of the Minister of Waters and Forests and the Minister of Finances for each specie and production area at 7% of the FOT value.
Area tax is defined according to the series of production if the concession has a development plan or to the entire concession area if there is no development plan. The amount thereof ranges from 250 and 500 FCFA per hectare.
Tax on accessory forest products is also determined by an Order from the Minister of Waters and Forests and the Minister of Finances per tariff according to the products. The deforestation tax is levied for any activities resulting in the degradation of the forest estate. This tax is FCFA 50,000 per hectare when deforestation occurred in a natural forest.
In conclusion, logging companies shall also pay taxes as provided for in the General Tax Code, particularly the corporate tax, which is 33% in the Congo. However, companies qualified under the Investment Charter may enjoy tax benefits, such as tax exemption or a discount of 50% on the corporate tax.
VIII. Exchange rate regime
Foreign economic operators shall comply with the exchange regulation and benefit from free convertibility between the national currency and foreign currencies. The Republic of the Congo is a member of the Central Africa Economic and Monetary Community (CEMAC). In CEMAC, rates for buying and selling currencies other than the euro are established based on the fixed exchange rate of Franc CFA compared to the euro and rates of these currencies compared to euro on exchange rate markets.