Ethiopia
Executive Summary
Over the last year, Ethiopia has undertaken unprecedented economic and political reforms. The new Ethiopian government, led by Prime Minister (PM) Abiy Ahmed, who was sworn in on April 2, 2018, announced at the outset its plan to democratize the country, reform the economy, and increase private sector participation. Early in his tenure, PM Abiy addressed some of the public’s numerous longstanding grievances, including: ending the State of Emergency imposed by the government prior to his ascension; closing a notorious detention center; releasing thousands of detained individuals; restoring mobile internet throughout the country; retiring members of the political “old guard,” who were perceived as in the way of reform; and, reframing the government’s posture towards opposition parties.
On the economic front, the new administration is working to partially or wholly privatize major state-owned enterprises (SOEs) in the telecom, aviation, power, sugar, railway, and industrial parks sectors. In addition, the Government of Ethiopia (GOE) lifted a restriction on the logistics sector and enacted a law that allows Public Private Partnerships (PPP) to gradually open up some sectors of the economy to foreign investors. Ethiopia’s rapprochement with Eritrea could possibly open up alternative ports for trade. Furthermore, the country recently ratified the African Continental Free Trade Area Agreement and eased visa requirements for African Union member countries with the goal of enhancing regional trade and tourism and attracting foreign direct investment (FDI). The GOE announced its commitment to modernize the financial sector, improve the ease of doing business, and enhance macroeconomic and fiscal management.
Ethiopia’s economy is currently in transition. Coming off a decade of double-digit growth, fueled primarily by public infrastructure projects funded through debt, the GOE has tightened its belt, reducing inefficient government expenditures, putting a moratorium on most new government mega-projects, and attempting to get its accounts in order at bloated state-owned enterprises (SOEs). The IMF put the growth of the Ethiopian economy at 7.7 percent for FY2017/18 and is projecting an 8.5 percent annual growth rate for the medium term. Ethiopia is the second most populous country in Africa after Nigeria, with a population of over 100 million, approximately two-thirds of whom are under age 30. Low-cost labor, a national airline with 105 passenger connections, and growing consumer markets are key elements attracting foreign investment.
Ethiopia’s imports in the last year have experienced a slight decline in large part due to a reduction in public investment programs and a dire foreign exchange shortage. Distressingly, export performance remains weak, declining due to falling primary commodity prices and an overvalued exchange rate. The acute foreign exchange shortage (the Ethiopian birr is not a freely convertible currency) and the absence of capital markets are choking private sector growth. Companies often face long lead-times importing goods and dispatching exports due to logistical bottlenecks, high land-transportation costs, and bureaucratic delays. Ethiopia is not a signatory of major intellectual property rights treaties.
All land in Ethiopia belongs to “the people” and is administered by the government. Private ownership does not exist, but “land-use rights” have been registered in most populated areas. The GOE retains the right to expropriate land for the “common good,” which it defines to include expropriation for commercial farms, industrial zones, and infrastructure development. Successful investors in Ethiopia conduct thorough due diligence on land titles at both the state and federal levels, and undertake consultations with local communities regarding the proposed use of the land. The largest volume of foreign direct investment (FDI) in Ethiopia comes from China, followed by Saudi Arabia and Turkey. Political instability associated with various ethnic conflicts could negatively impact the investment climate and lower future FDI inflow.
Table 1
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
In November 2018, the GOE created a new one page government priority dashboard entitled “Ethiopia: A New Horizon of Hope.” The dashboard, which predominantly focuses on the economy, pinpoints “Key Facts and Challenges” in areas such as “Financial Sector,” “Macro-Economic Management,” and “Export and Revenue Mobilization.” The dashboard proposes push-to-grow manufacturing and emphasizes agriculture, information communication and technology, and tourism as pillars of a productive economy. The plan also sets concrete targets to raise credit available to the private sector by 20 percent per year and encourages increased private sector participation in several sectors, including power generation and logistics. The government is currently undertaking changes in legislation and institutions to implement the economic reforms laid out in the dashboard. In addition, Ethiopia has started implementing a Public Private Partnership (PPP) proclamation, equivalent to a law, which would permit foreign investment and ownership of public infrastructure, with an initial focus on power generation and road construction.
Given the scale of investment required to achieve the goal of becoming a middle income economy by 2025 and the announcement of new economic reforms, the country needs significant inflows of FDI. Tax incentives for investment in the high-priority sectors, such as manufacturing, agribusiness, textiles, sugar, chemicals, pharmaceuticals, minerals, and metal processing, underscore the government’s focus on FDI.
In June 2018, the GOE announced plans to partially privatize Ethiopian Airlines, EthioTelecom, Ethiopian Electric Power, and Ethiopian Shipping and Logistics Service Enterprise, and fully privatize railways, sugar projects, industrial parks and government-owned hotels. The GOE has taken concrete measures to open up closed sectors, including drafting a bill to open the aviation sector, drafting legislation to create a new telecommunications regulator and allow foreign investment in that sector, allow minority stakes in joint-ventures by foreign logistics companies, allowing Ethiopian diaspora to hold shares in private Ethiopian banks, and commissioning a study to advise on how best to open up the financial sector.
While laws and regulations may change relatively quickly under the current dynamic reform period, under the existing code, foreign investment is prohibited in wholesale trade (excluding supply of petroleum and its by-products as well as wholesale trade by foreign investors of their locally-produced products), most import trade, export trade of raw coffee, khat, oilseeds, pulses, the export of live sheep, goats, and cattle not raised or fattened by the investor, construction companies (excluding those designated as grade 1), tanning of hides and skins up to crust level, hotels (excluding star-designated hotels), restaurants and bars (excluding international and specialized restaurants), trade auxiliary and ticket selling services, transport services, bakery products and pastries for the domestic market, grinding mills, hair salons, clothing workshops (except garment factories), building and vehicle maintenance, saw milling and timber production, museums, theaters and cinema hall operations, and printing industries. As part of its ongoing economic reform efforts, the government is in the process of revising the investment code. Foreigners of Ethiopian origin can obtain a resident card from the Ministry of Foreign Affairs that allows them to invest in many sectors closed to other foreigners. While foreign firms cannot engage in joint ventures in closed sectors, they are allowed to supply goods and services to Ethiopian firms in these sectors.
The Ethiopian Investment Commission (EIC) has the mandate to promote and facilitate investments in Ethiopia and its services including: 1) to promote the country’s investment opportunities; 2) to issue investment permits, business licenses, and construction permits; 3) to issue commercial registration certificates and renewals; 4) to negotiate and sign bilateral investment agreements; and, 5) to issue work permits. In addition, the EIC has the mandate to advise the government on policies to improve the investment climate. At the local level, regional investment agencies facilitate regional investment. Ethiopia’s rank on the 2019 World Bank Ease of Doing Business Index improved from 2018, moving from 161 to 159 out of 190 countries. Progress was primarily in the area of reducing barriers to starting a new business by removing competence certificate for certain businesses; reducing the time it takes to obtain planning consent for construction permits; and, establishing specialized benches to resolve commercial cases addressing contract enforcement. The World Bank also identified areas where Ethiopia’s Ease of Doing Business worsened from 2018 relative to other ranked countries, including getting electricity, registering property, and resolving insolvency. In order to improve the investment climate, attract more FDI, and tackle unemployment challenges, a committee has been formed by the Prime Minister’s Office to systematically examine each indicator on the Doing Business Index, identify factors that inhibit businesses, and envision placing Ethiopia among the top 100 doing business ranking countries.
The American Chamber of Commerce (AmCham) works on voicing the concerns of the U.S. businesses in Ethiopia. AmCham has provided a mechanism to compete with investors from India, China, the U.K, and the Netherlands, who meet regularly with government officials through their respective associations to discuss issues that hinder their operation in Ethiopia. The Addis Ababa Chamber of Commerce also organizes a monthly business forum, which enables the business community to discuss issues related to the investment climate with government officials by sector.
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign and domestic private entities have the right to establish, acquire, own, and dispose of most forms of business enterprises. However, there are sectors (mentioned above) that are closed to foreign investors. There is no private ownership of land. All land is owned by the state, but can be leased for up to 99 years. Small-scale rural landholders have indefinite use rights, but cannot lease out holdings for extended periods, except in the Amhara Region. The 2011 Urban Land Lease Proclamation allows the government to determine the value of land in transfers of leasehold rights, in an attempt to curb speculation by investors.
A foreign investor intending to buy an existing private enterprise or buy shares in an existing enterprise needs to obtain prior approval from the EIC. While foreign investors have complained about inconsistent interpretation of the regulations governing investment registration (particularly relating to accounting for in-kind investments), they generally do not face undue screening of FDI, unfavorable tax treatment, denial of licenses, discriminatory import or export policies, or inequitable tariff and non-tariff barriers.
Other Investment Policy Reviews
Over the past four years, the EIC has undertaken an independent review of its investor services in an effort to streamline the investment process. According to the EIC, the Commission has already implemented at least 28 services pertaining to licensing and registration, and duty-free importation of capital goods for investment in manufacturing. The EIC has three Deputy Commissioners, with responsibilities for the following divisions: Investment Operations; Industrial Parks Regulation; and, Policy and Investment Climate Improvement.
Business Facilitation
The EIC has established a one-stop shop service to cut the time and cost of acquiring investment and business licenses. If all requirements are met, it is now possible to obtain a business license in a single day, although this remains the exception rather than the rule. According to the 2019 World Bank’s Ease of Doing Business Report, on average, it takes 32 days to start a business in Ethiopia. Meanwhile, the EIC has adopted a Customer or Account Manager system to build lasting relationships and provide post-investment assistance to investors. U.S. investors report that the EIC often fails to meet its own stringent deadlines. The EIC readily admits that many bureaucratic barriers to investment remain, but hopes to eliminate many of these in the future.
Currently, more than 95 percent of Ethiopia’s trade passes through the Port of Djibouti, with residual trade passing through the Somaliland port of Berbera or Port Sudan. In March 2018, Ethiopia concluded an agreement with the Somaliland Ports Authority and DP World to acquire a 19 percent stake in the joint venture developing the Port of Berbera. The agreement will help Ethiopia secure an additional logistical gateway for its increasing import and export trade. Following the July 2018 rapprochement with Eritrea, the Ethiopian government has investigated the opportunity of accessing an alternative port at either Massawa or Asseb.
The Government of Ethiopia is working to improve business facilitation services by making the licensing and registration process easier and faster, by registering foreign Chambers and business associations in Ethiopia to advocate for their respective country businesses. U.S. companies can obtain detailed information for the registration of their business in Ethiopia from an online investment guide to Ethiopia (https://www.theiguides.org/public-docs/guides/ethiopia ). Though the government is taking positive steps to socially empower women (half of the new cabinet are women), there is no special treatment provided to those who wish to engage in business.
Online business registration is not yet available, but the Ministry of Trade and Industry claims to have plans to migrate the paper-based registration process to a digital system at some unnamed time in the future. In 2016, the government revised its commercial registration and business licensing legislation, which eliminated some cumbersome and duplicative requirements, such as the yearly renewal of business registrations and the 15,000 ETB (approximately USD 680) minimum capital requirements to set up limited liability companies. In 2018 the government removed the need to obtain a certificate of competence for certain types of businesses, made the process of obtaining construction permits faster by reducing the time to obtain planning consent, and made enforcing contracts easier by establishing specialized benches to resolve commercial cases.
The full Doing Business Report is available here: http://www.doingbusiness.org/data/exploreeconomies/ethiopia
http://www.doingbusiness.org/en/data/exploreeconomies/ethiopia#DB_sb
Outward Investment
There is no outward investment by domestic investors from Ethiopia as citizens/local investors are not allowed to hold foreign accounts.
Kenya
Executive Summary
Kenya has a positive investment climate that has made it attractive to international firms seeking a location for regional or pan-African operations. In the World Bank’s 2019 Doing Business report, Kenya moved up 19 places, ranking 61 of 190 economies reviewed. In the last three years, it has jumped 47 places on this index. Year-on-year, Kenya continues to improve its regulatory framework and its attractiveness as a destination for foreign direct investment. Corruption, however, remains endemic and Transparency International’s (TI) 2018 Global Corruption Perception Index ranked Kenya 144 out of 180 countries, one place lower than in 2017. Kenya has strong telecommunications infrastructure, a robust financial sector, and extensive aviation connections throughout Africa, Europe, and Asia. In 2018, Kenya Airways initiated direct flights to New York City in the United States. Mombasa Port is the gateway for the majority of East African trade and Kenya’s membership in the East African Community (EAC), as well as other regional trade blocs, provides growing access to larger regional markets.
In 2018, Kenya took steps to improve its business environment, including passage of the Tax Laws (amended) Bill (2018) and the Finance Act (2018), establishing new procedures and provisions relating to income taxes, value-added taxes, and excise duties. In 2017, Kenya instituted broad business reforms: simplifying registration procedures for small businesses; improving access to credit information; reducing the cost of construction permits; enhancing electricity reliability; easing the payment of taxes through the iTax platform; and establishing a single window system to speed movement of goods across borders.
Kenya’s macroeconomic fundamentals remain among the strongest in Africa, with five to six percent GDP growth over the past five years, six to eight percent inflation, improving infrastructure, and strong consumer demand from a growing middle class. A prolonged and acrimonious national election period during the second half of 2017 raised business anxiety and created a drag on growth but, following the elections, business and investment quickly recovered, and tourism was little affected by this turmoil. President Kenyatta has remained focused on his second term “Big Four” development agenda, seeking to provide universal healthcare coverage; establish national food security; build 500,000 affordable new homes; and increase employment by doubling the manufacturing sector’s share of the economy.
The World Bank’s annual Kenya Economic Update, released in April 2019, cited some short term economic risks to Kenya’s continued growth such as the interest rate cap inhibiting monetary policy and continuing drought conditions, but noted positive developments including the Government of Kenya (GOK) enhancing agricultural financing programs. At the same time, Kenya’s medium-term economic outlook appears strong especially in the agricultural sector. There has been great interest on the part of American companies to establish or expand their business presence and engagement in Kenya, especially following President Kenyatta’s August 2018 meeting with President Trump in Washington, D.C. Sectors offering the most opportunities for investors include: agro-processing, financial services, energy, extractives, transportation, infrastructure, retail, restaurants, technology, health care, and mobile banking.
Table 1
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Kenya has enjoyed a steadily improving environment for foreign direct investment (FDI). Foreign investors seeking to establish a presence in Kenya generally receive the same treatment as local investors, and multinational companies make up a large percentage of Kenya’s industrial sector. The government’s export promotion programs do not distinguish between goods produced by local or foreign-owned firms. The major regulations governing FDI are found in the Investment Promotion Act (2004). Other important documents that provide the legal framework for FDI include the 2010 Constitution of Kenya, the Companies Ordinance, the Private Public Partnership Act (2013), the Foreign Investment Protection Act (1990), and the Companies Act (2015). GOK membership in the World Bank’s Multilateral Investment Guarantee Agency (MIGA) provides an opportunity to insure FDI against non-commercial risk.
The government does not have a policy to steer investment to specific geographic locations, but encourages investments in sectors that create employment, generate foreign exchange, and create forward and backward linkages with rural areas. The Central Bank has successfully maintained macroeconomic stability with relatively low inflation and stable exchange rates. The National Treasury is increasingly attentive to ensuring prudent debt management. Kenya puts significant effort into assuring the health and growth of its tourism industry. To strengthen Kenya’s manufacturing capacity, the government offers incentives for the production of goods for export.
Investment Promotion Agency
KenInvest, the country’s official investment promotion agency, is viewed favorably by international investors (http://www.investmentkenya.com ). KenInvest’s mandate is to promote and facilitate investment by assisting investors in obtaining the licenses necessary to invest and by providing other assistance and incentives to facilitate smoother operations. To help investors navigate local regulations, KenInvest has developed an online database known as eRegulations, designed to provide investors and entrepreneurs with full transparency on Kenya’s investment-related regulations and procedures (http://kenya.eregulations.org/?l=en ).
The GOK prioritizes investment retention and maintains an ongoing dialogue with investors. All proposed legislation must pass through a period of public consultation in which investors have an opportunity to offer feedback. Private sector representatives can serve as board members on Kenya’s state-owned enterprises. Since 2013, the Kenya Private Sector Alliance (KEPSA), the apex private sector business association, has had bi-annual round table meetings with President Kenyatta and his cabinet. Investors’ concerns are considered by a Cabinet committee on the ease of doing business, chaired by President Kenyatta. The American Chamber of Commerce has also taken an increasingly active role in engaging the GOK on Kenya’s business environment, often providing a forum for dialogue.
Limits on Foreign Control and Right to Private Ownership and Establishment
The government provides the right for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity. In an effort to encourage foreign investment, the GOK in 2015 repealed regulations that imposed a 75 percent foreign ownership limitation for firms listed on the Nairobi Securities Exchange, allowing such firms to be 100 percent foreign-owned. Also in 2015, the government established regulations requiring Kenyans own at least 15 percent of the share capital of derivatives exchanges, through which derivatives such as options and futures can be traded.
Kenya considered imposing “local content” requirements on foreign investments under the Companies Act (2015), which initially contained language requiring all foreign companies to demonstrate at least 30 percent of shareholding by Kenyan citizens by birth. United States business associations, however, raised concerns over the bill, pointing to its lack of clarity and the possibility such measures could run afoul of Kenya’s commitments under the WTO. After the U.S. government also raised the issue with the Kenyan government, the clause was repealed.
Telecommunications regulator Communications Authority requires 20 percent Kenyan shareholding within three years of receiving a license. The Mining Act (2016) restricts foreign participation in the mining sector and reserves the acquisition of mineral rights to Kenyan companies, requiring 60 percent Kenyan ownership of mineral dealerships and artisanal mining companies. The Private Security Regulations Act (2016) restricts foreign participation in the private security sector by requiring that at least 25 percent of shares in private security firms be held by Kenyans. The National Construction Authority Act (2011) imposes local content restrictions on “foreign contractors,” defined as companies incorporated outside Kenya or with more than 50 percent ownership by non-Kenyan citizens. The act requires foreign contractors to enter into subcontracts or joint ventures assuring that at least 30 percent of the contract work is done by local firms. Regulations implementing these requirements remain in process. The Kenya Insurance Act (2010) restricts foreign capital investment to two-thirds, with no single person controlling more than 25 percent of an insurers’ capital.
Other Investment Policy Reviews
Kenya had no investment policy reviews though multilateral organizations in the last three years.
Business Facilitation
In 2011, the GOK established a state agency called KenTrade to address trading partners’ concerns regarding the complexity of trading regulations and procedures. KenTrade is mandated to facilitate cross-border trade and to implement the National Electronic Single Window System. In 2017, KenTrade launched InfoTrade Kenya, located at infotrade.gov.ke, which provides a host of investment products and services to prospective investors in Kenya. The site documents the process of exporting and importing by product, by steps, by paperwork, and by individuals, including contact information for officials’ responsible relevant permits or approvals.
The Movable Property Security Rights Bill (2017) enhanced the ability of individuals to secure financing through movable assets, including using intellectual property rights as collateral. The Nairobi International Financial Centre Act (2017) seeks to provide a legal framework to facilitate and support the development of an efficient and competitive financial services sector in Kenya. The act created the Nairobi Financial Centre Authority to establish and maintain an efficient operating framework to attract and retain firms. The Kenya Trade Remedies Act (2017) provides the legal and institutional framework for Kenya’s application of trade remedies consistent with World Trade Organization (WTO) law, which requires a domestic institution to both receive complaints and undertake investigations in line with the WTO Agreements. To date, however, Kenya has implemented only 7.1 percent of its commitments under the WTO Trade Facilitation Agreement, which it ratified in 2015. The Kenya Trade Remedies Act provides for the establishment of the Kenya Trade Remedies Agency for the investigation and imposition of anti-dumping, countervailing duty, and trade safeguards measures, and enables the GOK to take necessary measures to protect domestic industries from unfair trade practices.
The Companies Amendment Act (2017) amended the prior Companies Act clarifying ambiguities in the act and conforms to global trends and best practices. The act amends provisions on the extent of directors’ liabilities, on the extent of directors’ disclosures, and on shareholder remedies to better protect investors, including minority investors. The amended act eliminates the requirement for small enterprises to have lawyers register their firms, the requirement for company secretaries for small businesses, and the need for small businesses to hold annual general meetings, saving regulatory compliance and operational costs.
The Business Registration Services (BRS) Act (2015) established a state corporation known as the Business Registration Service to ensure effective administration of the laws relating to the incorporation, registration, operation and management of companies, partnerships, and firms. The BRS also devolves to the counties business registration services such as registration of business names and promoting local business ideas/legal entities, thus reducing costs of registration. The Companies Act (2015) covers the registration and management of both public and private corporations.
In 2014, the GOK established a Business Environment Delivery Unit to address challenges facing investors in the country. The unit focuses on reducing the bureaucratic steps related to setting up and doing business in the country. Separately, the Business Regulatory Reform Unit operates a website (http://www.businesslicense.or.ke/ ) offering online business registration and providing information on how to access detailed information on additional relevant business licenses and permits, including requirements, costs, application forms, and contact details for the relevant regulatory agency. In 2013, the GOK initiated the Access to Government Procurement Opportunities program, requiring all public procurement entities to set aside a minimum of 30 percent of their annual procurement spending facilitate the participation of youth, women, and persons with disabilities (https://agpo.go.ke/).
An investment guide to Kenya, also referred to as iGuide Kenya, can be found at http://www.theiguides.org/public-docs/guides/kenya/about# . iGuides designed by UNCTAD and the International Chamber of Commerce provide investors with up-to-date information on business costs, licensing requirements, opportunities, and conditions in developing countries. Kenya is a member of UNCTAD’s international network of transparent investment procedures.
Outward Investment
The GOK does not promote or incentivize outward investment. Despite this, Kenya is evolving into an outward investor in tourism, manufacturing, retail, finance, education, and media. Currently, the majority of outward investment remains in the EAC, making the most of Kenyan preferential access between EAC member countries. The GOK also does not restrict domestic investors from investing abroad. Rather, the EAC advocates for free movement of capital across the six member states – Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda.
Mozambique
Executive Summary
The once-promising Mozambican economy, which had seen steady 8 percent growth for many years, skidded into economic crisis following the revelation of USD 2 billion in illicit government debt in 2016, causing the IMF to cancel a second tranche of its standby credit facility and donors to suspend direct budget support. In 2016, economic growth rates fell to 3.5 percent, the local currency– the metical– devalued by over 40 percent against the U.S. dollar, and inflation rates climbed above 20 percent. Through decisive actions, the Central Bank was able to stabilize the currency and reduce inflation rates to the single digits. Devastated by Cyclones Idai and Kenneth in 2019, the IMF revised Mozambique’s economic growth forecasts down to 1.8 percent in 2019 and 6 percent in 2020, with growth accelerating to near 10 percent after 2023 with the advent of liquefied natural gas (LNG) exports. Two consortiums led by ExxonMobil and Anadarko are expected to take final investment decisions (FID) in 2019, which would eventually lead to more than USD 50 billion in investment to the LNG sector in Mozambique.
The country still faces significant security challenges related to violent extremism in Cabo Delgado province, the future home of the LNG investment. Since 2017, Islamic extremists have carried out more than 200 unprecedented attacks against government facilities and communities, killing scores of government security personnel and local villagers. The extremists, which claim affiliation with ISIS and claim to wish to establish an Islamic state, reject secular government, secular education, and gender equality. Most members of the extremist group appear motivated by local socio-economic grievances, income inequality, and perceptions of political favoritism and corruption.
Negotiations between the Government of Mozambique (GRM) and Renamo, the main opposition party, made significant progress towards a lasting peace. The two sides have agreed to a decentralization package, which was incorporated into the Mozambican Constitution by Parliament in May 2018, and will allow for the first time, the election of provincial governors during the October 2019 elections. The parties have also agreed in principle to the integration of Renamo personnel into leadership and working level positions in Mozambican security forces, and some critical appointments have already been made. With ongoing technical and financial support from the international community, a comprehensive plan for disarmament and demobilization of Renamo military personnel and their reintegration into local communities is being developed and is scheduled to be implemented prior to the October 2019 elections.
Mozambique offers the experienced investor the potential for high returns, but remains a challenging place to do business. Investors must factor in corruption, an underdeveloped financial system, poor infrastructure, and significant operating costs. Transportation inside the country is slow and expensive, while bureaucracy, port inefficiencies, and corruption complicate imports. Local labor laws remain an impediment to hiring foreign workers, even when domestic labor lacks the requisite skills. The financial crisis also impacted the GRM’s ability to secure financing for even the most critical infrastructure projects. Additionally, because of the economic crisis, inflation, and currency fluctuations, local Mozambican partners selling imported products in the local currency have trouble making payments in U.S. dollars to suppliers.
Natural gas development will drive economic growth in Mozambique, presenting many investment opportunities. There are also significant opportunities for investment in the power and infrastructure sectors, particularly related to the reconstruction after Cyclones Idai and Kenneth in Manica, Sofala, and Cabo Delgado provinces. The agriculture and tourism sectors remain underdeveloped relative to their potential, as do critical services sectors, such as the health care sector.
Table 1: Key Metrics and Rankings
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The GRM is open to foreign investment, seeing it as a driver of economic growth and job creation. All business sectors are open to foreign investors, with the exception of a few sectors related to national security. The GRM reviews and approves each foreign and domestic investment; there are almost no restrictions on the form or extent of foreign investment.
APIEX (Agencia para a Promocao de Investimentos e Exportacoes –Agency for Promotion of Investments and Exports) is the primary investor contact within the GRM, operating under the Ministry of Industry and Commerce. Its objective is to promote and facilitate private and public investment. It also oversees the promotion of national exports. It can assist with administrative, financial, and property issues. Through APIEX, investors can receive exemptions from some customs and value-added tax (VAT) duties when importing “class K” equipment, which includes capital investments.
Contact information for APIEX is:
Agency for Promotion of Investments and Exports
Rua da Imprensa, 332 (ground floor)
Tel: (+258) 21313310
Ahmed Sekou Toure Ave., 2539
Tel: (+258) 21 321291/2/3
Mobile: (+258 ) 823056432
Mozambique’s Law on Investment, No. 3/93, passed in 1993, and its related regulations, govern national and foreign investment. In August 2009, Decree No. 43/2009 replaced earlier amendments from 1993 and 1995, providing new regulations to the Investment Law. In general, large investors receive more support from the government in the business registration process than small and medium-sized investors do. Government authorities must approve all foreign and domestic investment requiring guarantees and incentives. Regulations for the Code of Fiscal Benefits were established by Decree No. 56/2009 and approved in October 2009. The Code of Fiscal Benefits, Law No. 4/2009, passed in January 2009, can be found at: http://investmentpolicyhub.unctad.org/InvestmentLaws/laws/110 .
The GRM, through the Confederation of Business Associations (Portuguese acronym – CTA), Mozambique’s primary business and industry association, maintains an ongoing dialogue with the private sector, holding quarterly meetings with the Prime Minister and an annual meeting with the President. CTA provides feedback to the GRM on laws and regulations that impact the business environment.
Limits on Foreign Control and Right to Private Ownership and Establishment
Mozambique investment law and its regulations generally do not distinguish between investor origin or limit foreign ownership or control of companies. With the exception of security, safety, media, entertainment, and certain game hunting concessions, there were no legal requirements that Mozambican citizens own shares of foreign investments until 2011.
Law No. 15/2011, passed in August 2011 and often referred to as the “Mega-Projects Law,” governs public-private partnerships, large-scale ventures, and business concessions. It states that Mozambican persons should participate in the share capital of all such undertakings in a percentage ranging from 5 percent to 20 percent of the equity capital of the project company. Implementing regulations were approved by the Council of Ministers in June 2012.
Article 4.1 in Law 14/2014, often referred to as The Petroleum Law, states that the GRM regulates the exploration, research, production, transportation, trade, refinery, and transformation of liquid hydrocarbons and their by-products, including petrochemical activities. Article 4.6 established state-owned oil company ENH as the government’s exclusive representative for investment and participation in oil and gas projects. ENH typically owns up to 15 percent of shares in oil and gas projects in the country.
Other Investment Policy Reviews
Mozambique has undergone investment policy reviews by the following international organizations:
OECD Investment Policy Review (2013)
http://www.oecd.org/daf/inv/investment-policy/mozambique-investment-policy.htm
WTO Trade Policy review – Report by the Secretariat – Mozambique – Revision (2017)
https://www.wto.org/english/tratop_e/tpr_e/tp454_e.htm
UNCTAD Investment Policy Review (2012)
http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=222
Business Facilitation
APIEX is the government entity that promotes and facilitates investment in Mozambique. It provides support to investors for the following services: incorporation, business licensing, entrance visas, work permits, residence permits, identification and licensing of land, identification of business partners, troubleshooting, project monitoring, and implementation follow-up.
Lengthy registration procedures can be problematic for any investor – national or foreign – but those unfamiliar with Mozambique and the Portuguese language face greater challenges. Some foreign investors find it beneficial to work with a local equity partner familiar with the bureaucracy at the national, provincial, and district levels.
In 2019, Mozambique ranked 135 among 190 countries in the World Bank Doing Business report. The report states that Mozambique performs slightly better than the sub-Saharan average for the ease of doing business but below peers such as Botswana and South Africa in the region. Mozambique ranks 174 out of 190 countries in how easy it is to start a business, taking 17 days to complete the process, requiring 10 procedures, and costing 120 percent of the per capita income. The report also indicates that getting credit and enforcing contracts are comparatively more challenging in Mozambique than most countries. The GRM has made improvements in areas such as getting construction permits and electricity.
Outward Investment
The GRM does not promote or incentivize outward investment. It also does not restrict domestic investors from investing abroad. The law does request that domestic investors remit investment income from overseas, except for amounts required to pay debts, taxes, or other expenses abroad.
Tanzania
Executive Summary
The United Republic of Tanzania enjoys a relatively stable political environment, reasonable macroeconomic policies, resiliency from external shocks, and debt relief. However, recently adopted Government of Tanzania (GoT) policies have raised questions about long-term prospects for foreign direct investment (FDI), and fostered a more challenging business environment. Tanzania slipped 12 spots in two years on the World Bank’s “Doing Business” rankings. Despite Tanzania’s GDP growth, 28.2 percent of the population lives below the GoT-determined poverty line and youth unemployment remains a problem. The IMF continues to warn of a slowdown in economic growth, and possible economic risks including private sector concerns about heavy-handed and arbitrary enforcement of rules; stagnated credit growth; poor budget credibility and implementation; and excessive domestic arrears.
In 2016, the GoT began a campaign to raise revenue, encourage the hiring of Tanzanian citizens over foreigners, and protect/grow local industry. These measures included new taxes in certain industries as well as aggressive collection by the Tanzania Revenue Authority (TRA) that some labeled as arbitrary and harassing. On the employment front, the GoT implemented labor regulations that make it more difficult to hire foreign employees, creating unclear bureaucratic standards. Finally, on the local industry front, the GoT continued to use increased tariffs and import and export bans as a stated, but ineffective way to protect/grow local industry.
The private sector continues to struggle with recent legislation that is vague and often punitive to the private sector. These laws increased the risk/cost of investing in broadly defined natural resources, primarily by removing rights to international arbitration and giving Parliament the unilateral right to rewrite undefined “unconscionable” contract terms. In addition, new mining local content laws strongly encourage the hiring of, contracting with, and partnering with Tanzanian companies or individuals. In 2019, in response to calls from local and international investors, as well as the World Bank and the IMF, the GoT renewed its efforts to engage in public private dialogue and address challenges in the business environment. President Magufuli named 2019 “the year of investment” and as such has made a number of high-profile remarks highlighting the importance of the private sector.
Profitable sectors for foreign investment in Tanzania have traditionally included agriculture, mining and services, driven by banking, construction, tourism, and trade. However, aggressive revenue raising measures and unfriendly investor legislation have made investment less attractive in recent years. Corruption, especially in government procurement, privatization, taxation, and customs clearance remains a concern for foreign investors, though the government has prioritized efforts to combat the practice. GoT plans for infrastructure development are expected to offer investment opportunities in rail, real estate development, and construction.
Compared to its many neighboring countries, Tanzania remains a politically stable and peaceful country, as well as a regional leader, including in the East African Community (EAC). Since November 2015, however, the government is placing increasing restrictions on political activity, including severely limiting the ability of opposition political parties and civil society organizations to debate issues publicly, or peacefully assemble. October 2015 general elections were conducted in a largely open and transparent atmosphere; however, simultaneous elections in Zanzibar were controversially annulled after an opposition candidate declared victory. A re-run election was boycotted by the opposition. By-elections in 2017 and 2018 were marred by allegations of irregularities and instances of political violence.
Table 1: Key Metrics and Rankings
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The United Republic of Tanzania, according to Government officials, welcomes foreign direct investment (FDI) as it pursues its industrialization and development agenda. However, in practice, government policies and actions do not effectively keep and attract investment. The 2018 World Investment Report indicates that FDI flows to Tanzania shrank by 14 percent in 2017 to USD 1.18 billion, a 24 percent decline from 2015. Some concerns noted by stakeholders included difficulty in hiring foreign workers, reduced profits caused by unfriendly and opaque tax policies, increased local content requirements, regulatory/policy instability, lack of trust between the GoT and the private sector, and mandatory initial public offerings (IPOs) in mining and communication industries.
The United Republic of Tanzania does have framework agreements on investment, and offers various incentives and the services of investment promotion agencies. Investment is mainly a non-Union matter, thus there are different laws, policies, and practices for the mainland and Zanzibar. However, international agreements on investment are covered as Union matters and therefore apply to both regions.
The Tanzania Investment Center (TIC) is intended to be a one-stop center for investors, providing services to investors such as permits, licenses, visas, and land. The Zanzibar Investment Promotion Authority (ZIPA) provides the same function in Zanzibar. In January 2019, the President moved the TIC from the Ministry of Industry, Trade, and Investment (MITI) to the Prime Minister’s Office (PMO) and appointed a Minister of State for Investment in the Prime Minister’s Office. The move, part of Tanzania’s “2019: The Year of Investment” campaign, aims to improve the business climate by enabling better coordination and reduced bureaucracy. (See Chapter 4 for more information on TIC).
The Government of Tanzania has an ongoing dialogue with the private sector via the Tanzania National Business Council (TNBC), created in 2001. TNBC meetings are chaired by the President of the United Republic of Tanzania and co-chaired by the head of the Tanzania Private Sector Foundation (TPSF). Unfortunately, the TNBC has only met twice in the past four years. There is also a Zanzibar Business Council (ZBC) launched in 2005, and Regional Business Councils (RBCs) and District Business Councils (DBCs). In April 2019, the new Minister of State for Investment announced she was launching a new series of forums with foreign investors, including U.S. investors.
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign investors generally receive treatment equivalent to domestic investors but limits still persist in a number of sectors. Tanzania conforms to best practice in several cases. There are no geographical restrictions on location for private establishments with foreign participation or ownership, no limitations on number of foreign entities that can operate in a given sector, and no sectors in which foreign investment approval is required for greenfield FDI and not for domestic companies.
However, Tanzania discourages foreign investment by imposing limitations on foreign equity ownership or activity in several sectors, including aerospace, agribusiness (fishing), construction, and heavy equipment, travel and tourism, energy and environmental industries, information and communication, and publishing, media, and entertainment. For example,
- Foreign companies may not provide tourism services like mountain guides, tour guides, car rental, or travel agency services, per the Tourism Act, 2008.
- Per the Merchant Shipping Act of 2003, only citizen-owned ships are authorized to engage in local trade (waiver by ministerial discretion), and the Shipping Agency Act states that only Tanzanians may be licensed as shipping agents. Port services licenses are solely for citizen-owned Tanzania companies.
- The Fisheries (Amendment) Regulations, 2009 implies onerous conditions for foreigners to fish and export fishery products, and fishing licenses cost three times more for foreigners than locals, and foreigners can only deal with certain fish and fish products.
- Foreign construction contractors can only obtain temporary licenses, per the Contractors Registration Act of 1997, and contractors must commit in writing to leave Tanzania upon completion of the set project. The Contractors Registration (Amendment) By- Laws, 2004 limit foreign contractors to specified, more complex classes of work.
- Foreign capital participation in the telecommunications sector is limited to a maximum of 75 percent.
- All insurers require one-third controlling interest by Tanzania citizens, per the Insurance Act.
- The Electronic and Postal Communications (Licensing) Regulations 2011 limits foreign ownership of Tanzanian TV stations to 49 percent, and prohibits foreign capital participation in national newspapers.
- Mining projects must be at least partially owned by the GoT and “indigenous” companies and hire, or at least favor, local suppliers, service providers, and employees. (See Chapter 4: Laws and Regulations on FDI for details.). Gemstone mining is limited to Tanzanian citizens with a possible waiver by ministerial discretion. In February 2019, responding to low growth and investment in the sector, the government revised the 2018 Mining (Local Content) Regulations 2018 by reducing the local shareholder requirement from 51 percent to 20 percent.
Currently, foreigners can invest in stock traded on the Dar es Salaam Stock Exchange (DSE), but only East African residents can invest in government bonds. East Africans, excluding Tanzanian residents, however, are not allowed to sell government bonds bought in the primary market for at least one year following purchase.
Other Investment Policy Reviews
There have not been any third-party investment policy reviews (IPRs) on Tanzania in the past three years, the most recent OECD report is for 2013. The World Trade Organization (WTO) published a Trade Policy Review in 2019 on all the East African Community states, including Tanzania.
WTO – Trade Policy Review: East African Community (2019)
https://www.wto.org/english/tratop_e/tpr_e/tp484_e.htm
OECD – Tanzania Investment Policy Review (2013)
http://www.oecd.org/daf/inv/investment-policy/tanzania-investment-policy-review.htm
WTO – Secretariat Report of Tanzania
https://www.wto.org/english/tratop_e/tpr_e/s384-04_e.pdf
UNCTAD – Trade and Gender Implications (2018)
https://unctad.org/en/PublicationsLibrary/ditc2017d2_en.pdf
Business Facilitation
The World Bank’s Doing Business 2019 Indicators rank Tanzania 144 out of 190 overall for ease of doing business, and 163rd for ease of starting a business. There are 10 procedures to open a business, higher than the sub-Saharan average of 7.4. The Business Registration and Licensing Agency (BRELA) issues certificates of compliance for foreign companies, certificates of incorporation for private and public companies, and business name registration for sole proprietor and corporate bodies. After registering with BRELA, the company must: obtain the taxpayer identification number (TIN) certificate, apply for a business license, apply for the VAT certificate, register for workmen’s compensation insurance, register with the Occupational Safety and Health Authority (OSHA), receive inspection from the Occupational Safety and Health Authority (OSHA), and obtain a Social Security registration number.
The TIC provides simultaneous registration with BRELA, TRA, and social security (http://tiw.tic.co.tz/ ) for enterprises whose minimum capital investment is not less than USD 500,000 if foreign owned or USD 100,000 if locally owned.
In May 2018, the government adopted the Blueprint for Regulatory Reforms to improve the business environment and attract more investors. The reforms, which were developed as a collaborative effort between the Ministry of Industry, Trade and Investment and the private sector, seek to improve the country’s ease of doing business through regulatory reforms and to increase efficiency in dealing with the government and its regulatory authorities. The Blueprint is largely pending implementation.
Outward Investment
Tanzania does not promote or incentivize outward investment, and in fact, generally discourages capital flight. There are restrictions on Tanzanian residents’ participation in foreign capital markets and ability to purchase foreign securities. Under the Foreign Exchange (Amendment) Regulations 2014 (FEAR), however, there are circumstances where Tanzanian residents may trade securities within the East African Community (EAC). In addition, FEAR provides some opportunities for residents to engage in foreign direct investment and acquire real assets outside of the EAC.
Zambia
Executive Summary
The Republic of Zambia is a landlocked country in Southern Africa that shares its borders with eight countries: Angola, Democratic Republic of the Congo, Tanzania, Malawi, Mozambique, Zimbabwe, Botswana, and Namibia. The country has a population of 17.2 million and GDP per capita of USD 1,513, according to the World Bank.
The economy grew by 4 percent in 2018, meeting IMF projections, and inflation remained broadly stable and within the Bank of Zambia’s target range of 6-8 percent. Though the agriculture sector performed poorly in 2018 due to erratic rainfall, other sectors such as mining, energy (electricity generation), manufacturing, and financial services performed above expectations. The mining sector grew 6 percent, with copper production increasing above 850,000 metric tons (MT) in 2018 from 797,000 MT in 2017; electricity generation increased by 11.7 percent; manufacturing and financial sector growth was at 5 percent and 4 percent, respectively. Overall, GDP growth was better than expected, as many financial analysts did not expect the economy to achieve the 4 percent growth rate projected by the IMF in 2017, and the World Bank had revised its projections down to 3.6 percent.
Zambia’s large debt load remains a concern. Zambia’s external debt rose to USD 10.05 billion in 2018, up from USD 8.74 billion in 2017. The fiscal deficit ended 2018 at 7.6 percent of GDP, well above the 2018 target of 6.1 percent. This was mainly due to the increase in interest payments on Eurobond debt and service payments on foreign financed projects. Domestic arrears rose to K15.1 billion from K12.7 billion (approximately USD 1.3 billion and USD 1.2 billion, with respective exchange rates for 2018 and 2017). The kwacha also depreciated against the dollar by 22.4 percent in 2018, increasing the cost of external debt service. Investor appetite for domestic bonds continued to shrink, and short- and long-term domestic borrowing costs rose. Government austerity and fiscal consolidation remain key to ensuring that the macroeconomic fundamentals do not deteriorate further. Foreign exchange reserves stood at USD 1.59 billion at the end of 2018, representing 1.9 months of import cover. Reserves are projected to fall further in 2019, making Zambia vulnerable to outside shocks to its economy. In addition to debt sustainability concerns, erratic rainfall in the 2018/2019 growing season, with severe drought in certain areas, poses threats to agricultural output and electricity generation; eighty-five percent of the latter relies on hydroelectric dams. These challenges will constrain businesses looking to partner with the government on new projects.
Budget execution by the Government of the Republic of Zambia (GRZ) has historically been poor, with documented evidence of significant extra-budgetary spending. The IMF has delayed a much-anticipated USD 1.3 billion loan deal due to large-scale borrowing by, and lack of clarity on fiscal policies from, the government; the government requested the IMF recall the Resident Representative in August 2018, and as of early 2019 there did not appear to be substantive discussions on a new IMF program taking place.
Foreign direct investment (FDI) into Zambia to support structural transformation that can lead to domestic production of export-quality products remains low. FDI in the manufacturing sector eroded from 9.4 percent of total FDI in 2007 to 3.3 percent in 2017. Zambia recorded USD 310 million of FDI inflow by mid-year 2018, down from USD 329 million over the same time period for 2017. Large mining investments from Canada, Australia, UK, China, and the United States, in addition to large infrastructure and other projects performed almost entirely by Chinese companies, continue to dominate FDI flows.
The legal environment is generally conducive to U.S. investors, although there is a relatively small commercial presence of U.S. companies in Zambia. Agriculture and mining continue to be the headlining sectors of Zambia’s economy. While U.S. companies continue to incrementally grow their presence in the agricultural sector, new, large-scale agricultural investments remain elusive. Despite these challenges, interest from U.S. firms in new projects remains high, and could translate into growth in economic sectors beyond mining, such as tourism, power generation, and agriculture, particularly if the government continues with its plan to reduce or eliminate market-distorting subsidies.
In spite of broad economic reforms in the early 2000s, Zambia today confronts the challenge of diversifying its economy and accelerating private-led growth to address the poverty of its people. Cumbersome administrative procedures, unpredictability of legal and regulatory changes, lack of transparency in government contracting, the high cost of doing business due to poor infrastructure, the high cost of finance, inadequate human resources, and the lack of reliable electricity and internet service remain concerns.
Table 1
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Toward Foreign Direct Investment
In general, Zambian law does not restrict foreign investors in any sector of the economy, although there are a few regulations and practices limiting foreign control laid out below. The country has affirmed its commitment to fostering private sector development and attracting FDI. FDI, which is monitored by the government, continues to play an increasing role in Zambia’s economy, contributing to increased capital inflows and overall investment. FDI is facilitated through the Zambia Development Agency (ZDA), which is responsible for fostering economic growth and development in Zambia through promoting trade and investment and an efficient, effective, and coordinated private sector-led economic development strategy.
Zambia has undertaken institutional reforms aimed at improving its attractiveness to investors; these reforms include the Private Sector Development Reform Program (PSDRP), which addresses issues related to cost of doing business through legislation and institutional reforms, and the Millennium Challenge Account (MCA), which addresses some issues relating to transparency and good governance. However, frequent government policy changes create uncertainty for foreign investors. Recent examples include: a planned, rapid transition from a value-added tax regime to a sales tax currently projected to take effect on July 1, 2019; taxes and royalty increases in the mining sector that took effect on January 1, 2019 and mark the 10th significant change to mining taxes and regulations in 16 years; and constant and unpredictable limits on various crop exports.
Limits on Foreign Control and Right to Private Ownership and Establishment
The ZDA does not discriminate against foreign investors, and all sectors are open to both local and foreign investors. Foreign and domestic private entities have a right to establish and own business enterprises and engage in all forms of remunerative activities, and no business ventures are reserved solely for the government. Although private entities may freely establish and dispose of interests in business enterprises, investment board approval is required to transfer an investment license for a given enterprise to a new owner.
Currently, all land in Zambia is considered state land and ownership is vested in the president; there is no private land in the country. Land titles held by foreigners are for 99-year state leases; ownership is not conferred. According to the government, the current land administration system leaves little room for the empowerment of citizens, especially the poor and vulnerable rural communities. The government began reviewing the current land policy in earnest in March 2017. The resulting draft land policy would assert more central government control over traditional lands and seeks to reduce the lease tenure on foreign-owned properties from 99 years to renewable terms of 25 years. Both traditional chiefs and foreign investors have objected to terms in the draft bill, which has not been presented to Parliament and is currently with the Ministry of Lands for further stakeholder consultation.
Foreign investors in the telecom sector are required to disclose certain proprietary information to the ZDA as part of the regulatory approval process. Further information regarding information and communication regulation can be found at the website of the Zambia Information and Communication Technology Authority at http://www.zicta.zm .
The ZDA board screens all investment proposals and usually makes its decision within 30 days. The reviews appear routine and non-discriminatory and applicants have the right to appeal the investment board decisions. An investment application is screened to determine: the extent to which the proposed investment will help create employment; the development of human resources; the degree to which the project is export-oriented; the likely impact on the environment; the possible technology transfer; and any other considerations the Board considers appropriate.
The following are the requirements for registering a foreign company in Zambia:
- At least one and not more than nine local directors must be appointed as directors of a majority foreign-owned company. At least one local director of the company must be resident in Zambia, and if the company has more than two local directors, more than half of them shall be residents of Zambia.
- There must be at least one documentary agent (a firm, corporate body registered in Zambia or an individual who is a resident in Zambia).
- A certified copy of the Certificate of Incorporation from the country of origin must be attached to Form 46.
- The charter, statutes, regulations, memorandum and articles, or other instrument relating to a foreign company must be submitted.
- The Registration Fee of K4,166 (~ USD 348.00) must be paid.
- The issuance and sealing of the Certificate of Registration marks the end of the process for registration.
This information can also be found at the web address of the Patents and Companies Registration Agency (PACRA), http://www.pacra.org.zm .
Other Investment Policy Reviews
The Organization for Economic Co-operation and Development (OECD) conducted its first review in sub-Saharan Africa on the basis of the OECD Policy Framework for Investment in Zambia in 2012. The OECD review made the following recommendations regarding Zambia’s investment environment: 1) develop a harmonized national investment policy; 2) take better advantage of the investment promotion and facilitation options available; 3) undertake a cost-benefit analysis with regard to fiscal incentives; 4) improve the consultative mechanisms for policy development; 5) strengthen the framework for Public-Private Partnerships (PPPs); 6) strengthen the oversight and enforcement mechanisms of the regulatory framework; and 7) develop mechanisms to channel industry demands for human resource development.
Following the review, the government began an ongoing process to consider new investment reforms, including development of a harmonized investment policy and a review of its tax incentive system and framework for PPPs. In 2016, the government, under the leadership of the Ministry of Commerce, Trade, and Industry, adopted an industrial policy to support and accelerate industrialization in Zambia. The policy addressed issues of productive capacity for enterprises to promote the production and consumption of local content. Zambia has also committed to develop a Green Growth Strategy that makes sustainable and equitable use of Zambia’s natural resources within ecological limits.
Report found here: http://www.oecd.org/daf/inv/investment-policy/zambia-investmentpolicyreview-oecd.htm
The GRZ conducted a trade policy review through the World Trade Organization (WTO) in June 2016. The report found that Zambia recorded relatively strong economic growth at an average rate of 6.6 percent per year up to 2015. The improvement was attributed to growing demand for copper (the main export product) and its spillover effects on some other sectors such as transport, communications, and wholesale and retail trade. Buoyant construction activity and higher agricultural production also helped.
The trade policy review report of 2016 reached the following conclusions: the government will continue to implement programs and initiatives directed at attaining inclusive growth and job creation and pay particular attention to macroeconomic stability, diversification of the economy, support to small and medium enterprises (SMEs), engagement with cooperating partners, and promotion of investment. Zambia is committed to continue to use bilateral, regional, and multilateral frameworks to support the growth and development of the economy.
Report found here: https://www.wto.org/english/tratop_e/tpr_e/tp440_e.htm
Business Facilitation
The Zambian government, often with support from cooperating partners, has undertaken economic reforms to improve its business facilitation process and attract foreign investors, including steps to support transparent policymaking and to encourage competition. The impact of these progressive policies, however, has been undermined by persistent fiscal deficits and widespread corruption. Business surveys generally indicate that corruption in Zambia is a major obstacle for conducting business in the country. Given these reasons, companies prefer using a specialized public procurement due diligence tool in order to help mitigate the costs and risks of corruption involving public procurement processes in Zambia.
The Zambian Business Regulatory Review Agency (BRRA) has responsibility for Regulatory Services Centers (RSCs) that serve as a one-stop shop for investors. RSCs provide for an efficient regulatory clearance system by streamlining business registration processes; providing single licensing system; reducing the procedures and time it takes to complete the registration process; and increasing accessibility of business registration institutions by placing them under one roof.
With an RSC, an investor need contact only one entity to obtain all the necessary paperwork in one streamlined and coordinated process. This means investors, both local and foreign, are provided with centralized organizations that tend to their needs comprehensively, without having to move from one stakeholder agency to another. The government established RSCs in Lusaka, Livingstone, Kitwe, and Chipata, and has plans to establish additional RSCs so that there is at least one in each of the country’s 10 provinces. Information about the RSCs can be found at the following links:
The Companies Act No. 10 of 2017 was operationalized through a statutory instrument (June 2018) and implementing regulations (February 2019) aimed at fostering accountability and transparency in the management of companies. Companies are now required to maintain a register of beneficial owners, and persons holding shares on behalf of other persons or entities must now disclose those beneficial owners.
In order to facilitate improved access to credit, the Patents and Company Registration Office (PACRA) established the collateral registry system, a central database that records all registrations of charges or collaterals created by borrowers to secure credits provided by lenders. This service allows lenders to search for collateral offered by loan applicants to see if that collateral already has an existing claim registered against it. Creditors can also register security interests against the proposed collateral to protect their priority status in accordance with the Movable Property (Security Interest) Act No. 3 of 2016. Generally, the first registered security interest in the collateral has first priority over any subsequent registrations.
Parliament passed the Border Management and Trade Facilitation Act in December 2018. The Act, among other things, calls for coordinated border management and control to facilitate the efficient movement and clearance of goods; puts into effect provisions for one-stop border posts; and simplifies clearance of goods with neighboring countries. While one-stop border posts have existed for several years and agencies are co-located at some border crossings, agencies still had conflicting regulations and processes. The new law seeks to harmonize outstanding issues.
Outward Investment
Through the ZDA, the government continues to undertake a number of activities to promote investment through provision of fiscal and non-fiscal incentives, establishment of Multi-Facility Economic Zones (MFEZs), the development of SMEs, as well as the promotion of skills development, productive investment, and increased trade. However, there is no incentive for outward investment nor is there any known government restriction on domestic investors from investing abroad.