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Democratic Republic of the Congo

Executive Summary

The Democratic Republic of the Congo (DRC) is the largest country in Sub-Saharan Africa and one of the richest in the world in terms of natural resources. With 80 million hectares (197 million acres) of arable land and 1,100 minerals and precious metals, the DRC has the resources to achieve prosperity for its people. Despite its potential, the DRC often cannot provide adequate food, security, infrastructure, and health care to its estimated 100 million inhabitants, of which 75 percent live on less than two dollars a day.

The ascension of Felix Tshisekedi to the presidency in 2019 and his government’s commitment to attracting international, and particularly U.S. investment, have raised the hopes of the business community for greater openness and transparency. In January 2021, the DRC government (GDRC) became eligible for preferential trade preferences under the Africa Growth and Opportunity Act (AGOA), reflecting progress made on human rights, anti-corruption, and labor. Tshisekedi created a presidential unit to address business climate issues. In late 2020 Tshisekedi ejected former President Joseph Kabila’s party from the ruling coalition and in April 2021 he appointed a new cabinet.

Overall investment is on the rise, fueled by multilateral donor financing and private domestic and international finance. The natural resource sector has historically attracted the most foreign investment and continues to attract investors’ attention as global demand for the DRC’s minerals grows. The primary minerals sector is the country’s main source of revenue, as exports of copper, cobalt, gold, coltan, diamond, tin, and tungsten provide over 95 percent of the DRC’s export revenue. The highly competitive telecommunications industry has also experienced significant investment, as has the energy sector through green sources such as hydroelectric and solar power generation. Several breweries and bottlers, some large construction firms, and limited textiles production are active. Given the vast needs, there are commercial opportunities in aviation, road, rail, border security, water transport, and the ports. The agricultural and forestry sectors present opportunities for sustainable economic diversification in the DRC, and companies are expressing interest in developing carbon credit markets to fund investment.

Overall, businesses in the DRC face numerous challenges, including poor infrastructure, a predatory taxation system, and corruption. The COVID-19 pandemic slowed economic growth and worsened the country’s food security, and the Russia’s attacks on Ukraine have raised global prices on imported foods and gasoline. Armed groups remain active in the eastern part of the country, making for a fragile security situation that negatively affects the business environment. Reform of a non-transparent and often corrupt legal system is underway. While laws protecting investors are in effect, the court system is often very slow to make decisions or follow the law, allowing numerous investment disputes to last for years Concerns over the use of child labor in the artisanal mining of copper and cobalt have served to discourage potential purchasers. USG assistance programs to build capacity for labor inspections and enforcement are helping to address these concerns.

The government’s announced priorities include greater efforts to address corruption, election reform, a review of mining contracts signed under the Kabila regime, and improvements to mining sector revenue collection. The economy experienced increased growth in 2021 based on renewed demand for its minerals.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 169 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index N/A N/A https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2021 $25 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita (USD) 2020 $550 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

9. Corruption

The DRC constitution and legal code include laws intended to fight corruption and bribery by all citizens, including public officials. The Tshisekedi government has used public prosecutions of high-level officials and the creation of an anti-corruption unit (APLC) to improve the DRC’s anti-corruption enforcement. Prosecutions have led to jail terms but often subsequent early releases. The 2021 edition of Transparency International’s Corruption Perceptions Index (CPI) ranked the DRC 169th out of 180 countries, with a score of 19 out of 100, up from 18 out of 100 the previous year.

Anti-corruption laws extend to family members of officials and political parties. In March 2020, President Tshisekedi created the National Agency for the Prevention and Fight Against Corruption (APLC). Currently corruption investigations are ongoing for three Managing Directors of SOEs.

The country has laws or regulations to address conflicts of interest in the awarding of public contracts or procurement. Conflicts of interest committed in the context of a public contract and a delegation of public service are punishable by a fine of USD 12,500 to USD25,000.

The government through regulatory authorities encourages or requires private companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials.

Law 017-2002 of 2002, establishes the code of conduct for public officials, which provides rules of conduct in terms of moral integrity and professional ethics and the fight against corruption in socio-professional environments. Private companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials.

The DRC is a signatory to both the UN Convention against Corruption (UNCAC) and the African Union Convention on Preventing and Combating Corruption but has not fully ratified the latter. The DRC is not a signatory to the OECD Convention on Combating Bribery. The DRC ratified a protocol agreement with the Southern African Development Community (SADC) on fighting corruption.

NGOs such as the consortium “The Congo is Not for Sale,” have an important role in revealing corrupt practices, and the law protects NGOs in a whistleblower role. However, in 2021 whistleblowers from Afriland First Bank that alleged to the international NGO Global Witness interaction between sanctioned individual Dan Gertler and the bank were subjected to prosecution and, in a private proceeding, sentenced to death in absentia. Although the government worked with Global Witness to contest the case, it remained unresolved as of early 2022. NGOs report governmental or other hindrance to their efforts to publicize and/or address corruption. The Observatory of Public Expenditure (ODEP), which works with civil society organizations, raises awareness of the social impact of the execution of finance laws in order to improve transparency and accountability in the management of public finances; to participate in the fight against corruption; and to promote citizen involvement in each stage of the budget process.

U.S. firms see corruption and harassment by local security forces as one of the main hurdles to investment in the DRC, particularly in the awarding of concessions, government procurement, and taxation treatment.

10. Political and Security Environment

The DRC has a history of armed group activity, sometimes of a politicized nature and particularly in the east of the country, and of elections-related violence and civil unrest. The 2018 election, which took place after years of delay marked by protests that were in some instances violently repressed, was marred by irregularities, but most citizens accepted the announced result, and the election aftermath was calm. In January 2019, Felix Tshisekedi became President in the DRC’s first peaceful transition of power. Following President Felix Tshisekedi’s establishment of a new political alliance known as the “Sacred Union,” Tshisekedi appointed Jean-Michel Sama Lukonde as Prime Minister in April 2021.

The security situation continues to be a concern and the U.S. Embassy, through its travel advisories ( https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/DemocraticRepublicoftheCongoDRC.html), keeps a list of areas where it does not recommend travel by U.S. citizens. The security situation in eastern DRC remains unstable. Some 15-20 significant armed groups are present and inter-communal violence can affect the political, security, and humanitarian situation. Several towns in eastern DRC continue to be reported to be under attack by armed groups or temporarily under their control.

The foreign terrorist organization-designated ISIS-DRC (aka the Allied Democratic Forces (ADF) rebel group) in eastern DRC is one of the country’s most notorious and intractable armed groups and its members have shown no interest in demobilizing. In May 2021, Tshisekedi declared a “state of siege” – effectively martial law – in North Kivu and Ituri provinces, installing military governors and ramping up Armed Forces of the Democratic Republic of the Congo (FARDC) operations against ISIS-DRC/ADF and other armed groups. The state of siege has been accompanied by problematic human rights practices; the United Nations Stabilization Mission in the Democratic Republic of the Congo (MONUSCO) has documented violations including extrajudicial killings by FARDC and police, while military governments have restricted civil society and political activists and prosecuted some for criticizing the state of siege.

US citizens and interests are not being specifically targeted by armed groups, but anyone can easily fall victim to violence or kidnapping by being in the wrong place at the wrong time. The Armed Conflict Location and Event Dataset tracks political violence in developing countries, including the DRC, https://acleddata.com/ . Kivu Security Tracker ( https://kivusecurity.org/ ) is another database for information on attacks in eastern DRC. The Department of State continues to advise U.S. citizen travelers to review the Embassy’s Travel Advisory and country information page ( https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/DemocraticRepublicoftheCongoDRC.html) for the latest security information.

11. Labor Policies and Practices

The DRC labor market has a large, low-skilled workforce with high youth unemployment. Women make up 47 percent of the labor force. Expatriates frequently work in jobs requiring technical training in the key mining sector. Approximately 85 percent of the nonagricultural labor force works in the informal sector. About 60 percent of the total labor force works in agriculture.

Informal employment dominates the labor market in the DRC. According to the World Bank, the DRC has one of the highest rates of informal work in the world, with about 80 percent of urban workers engaged in the informal economy. The Congolese trade union confederation estimates that the sector employs 97.5 percent of the country’s workforce. Informal workers in the artisanal mining sector have raised worries about the use of child labor in mining, forcing companies to go through an accreditation system to show they do not use child labor. It takes many forms and is characterized by the non-respect or non-application of labor standards related to minimum wage, working hours, safety and other social standards related to the social health system, retirement, etc. The informal sector’s share of GDP is estimated at nearly 55 percent. The EGI-ODD results show that slightly more than 91 percent of jobs in the non-agricultural sectors are informal, meaning that these workers do not have a contract, receive paid vacations, or family allowances. By gender, 94 percent of women’s jobs in the nonagricultural sector are informal, compared to 87.7 percent for men.

DRC labor law stipulates that for companies with more than 100 employees, ten percent of all employees must be local. If the general manager is a foreigner, his or her deputy or secretary general must be a Congolese national. The government may waive these provisions depending on the sector of activity and available expertise. There are no onerous conditionality, visa, residency, or work permit requirements that impede the mobility of foreign investors and their employees.

The DRC faces a shortage of skilled labor in all sectors. There are few formal vocational training programs, although Article 8 of the labor law requires all employers to provide training to their employees. To address the high unemployment rate, the GDRC has enacted a policy giving Congolese preference in hiring over expatriates. Laws prevent companies from laying off workers in most cases without compensation. These restrictions discouraged hiring and encouraged the use of temporary contracts instead of permanent employment. There is no government safety net to compensate laid-off workers.

There are no labor laws waived in order to attract or retain investment, nor are there additional/different labor law provisions in special economic zones, foreign trade zones, or free ports compared to the general economy. The law grants and guarantees equal treatment to all national and foreign investors.

Congolese law bans collective bargaining in some sectors, particularly by civil servants and public employees, and the law does not provide adequate protection against anti-union discrimination. While the right to strike is recognized, there are provisions which require unions to obtain authorization and to undergo lengthy mandatory arbitration and appeal procedures before going on strike. Unions often strike to obtain wage increases or payment of back wages and seek to make gains through negotiation with employers.

The DRC government has ratified all eight core International Labor Organization (ILO) conventions, but some Congolese laws continue to be inconsistent with the ILO Forced Labor Convention.

No strikes in the past year have posed an investment risk and government’s reaction.

According to some businesses, the government does not effectively enforce relevant employment laws. DRC law prohibits discrimination in employment and occupation based on race, gender, language, or social status. The law does not specifically protect against discrimination based on religion, age, political opinion, national origin, disability, pregnancy, sexual orientation, gender identity, or HIV-positive status. Additionally, no law specifically prohibits discrimination in the employment of career public service members.

Labor law defines different standard workweeks, ranging from 45 to 72 hours, for various jobs, and prescribes rest periods and premium pay for overtime. Employers in both the formal and informal sectors often do not respect these provisions. The law does not prohibit compulsory overtime.

The labor code specifies health and safety standards, but the government does not effectively enforce labor standards in the informal sector, and enforcement is uneven to non-existent in the formal sector. The Ministry of Labor employs 200 labor inspectors, but the Labor Inspector General reports that funding is not enough to facilitate the conduct of efficient labor inspections.

No new labor related laws or regulations have been enacted in the past year, and no bills are pending.

14. Contact for More Information

Kevin Ngunza
Commercial Assistant
U.S. Embassy Kinshasa
+243 810 556 0151
NgunzaKM@state.gov

Djibouti

Executive Summary

Djibouti, a country with few resources, recognizes the crucial need for foreign direct investment (FDI) to stimulate economic development. The country’s assets include a strategic geographic location, free zones, an open trade regime, and a stable currency. Djibouti has identified a number of priority sectors for investment, including transport and logistics, real estate, energy, agriculture, and tourism. Djibouti’s investment climate has improved in recent years, which has led to interest by U.S. and other foreign firms. There are, however, a number of reforms still needed to promote investment.

In 2020, according to the UN Conference of Trade and Development, FDI stock represented 58.53% of GDP, up from 52.5% in 2018. Real GDP growth has remained between 5% and a little over 8% per year for the last five years. Inflation decreased to 0.1 % in 2018 then peaked at an estimated 3.3% in 2019 and decreased to 2.9% in 2020. In recent years, Djibouti undertook a surge of foreign-backed infrastructure loans to posture themselves as the “Singapore of Africa.” Major projects have included a new gas terminal and pipeline to Ethiopia, a new port, free zones, improved road systems, a railroad connecting Djibouti and Addis Ababa, and a water pipeline from Ethiopia. Djibouti launched the first phase of an ambitious port and free zone project, Djibouti Damerjog Industrial Development (DDID) free-trade zone, scheduled to be built in three phases of five years each. The project includes a multipurpose port, a liquefied natural gas terminal, a livestock terminal, dry docks and a ship repair area, a power plant and a factory that will produce construction materials. DDID, which is expected to attract foreign investors, will offer all the preferential policies guaranteed by the free zone authority, such as tax exemption, minimized restrictions on foreign labor and competitive water and electricity rates. In April 2018, the Government of Djibouti enacted tax, labor, and financial reforms to improve its investment climate.

Various business climate reforms were introduced in 2020 with the objectives of improving competitiveness both regionally and internationally. These reforms included starting online registration for companies and the creation of the Djibouti Port Community System platform which is a portal that provides a comprehensive set of online services to the business community.

Economic development and foreign investment are hindered by high electricity costs, high unemployment, an unskilled workforce, a large informal sector, regional instability, opaque business practices, compliance risks, corruption, and a weak financial sector. The World Bank estimated the government’s public debt-to-GDP ratio was 66.7% in 2019 with a projection of 69.9% in 2020 which will gradually decrease over the years. The majority of the debt is owed to Chinese entities.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perception Index 2021 128 of 180 https://www.transparency.org/en/cpi/2021 
Global Innovation N/A N/A https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) N/A N/A https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $3,310 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

9. Corruption

Djibouti has several laws to combat corruption by public officials. These laws were either passed by the government or contained in the Penal Code. However, there have been no records of cases to combat corruption by public officials. Corruption laws are extended to all family members of officials and across political parties, but they have not been applied in a non-discriminatory manner. Djibouti ranked 128 of 180 countries on the 2021 Transparency International Corruption Perceptions Index. Djibouti does not have laws or regulations to counter conflict-of-interest in awarding contracts or government procurement.

Djibouti is a party to the UN Convention against Corruption. There are two government entities responsible for investigating corruption and enforcing the regulations. The State Inspector General (SGI) is tasked with ensuring human and material resources in the public sector are properly utilized. The Court of Auditors is mandated to verify and audit all public establishments for transparency and accountability, and to implement necessary legal sanctions. Both institutions are mandated to produce annual corruption reports. Despite the legal mandates, both institutions lack the authority to push for meaningful reform. The National Commission for Anti-Corruption is also mandated to enforce the laws on combatting corruption and provide safe haven for whistleblowers. This Commission launched a program in March 2018 to urge high-ranking government officials to publicly declare all of their assets, with little success. The contracting code and other laws passed by Djibouti contain provisions to counter conflict-of-interest contracts or government procurement.

According to a law passed in 2013, the government requires private and public companies to establish internal codes of conduct that prevent and prohibit bribery of public officials. However, these codes have not been implemented. Likewise, the government requirement that private companies use internal controls, ethics, and compliance to detect and prevent bribery of government officials is not enforced. Djibouti is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Djibouti is a signatory country of the UN Convention against Corruption.

U.S. firms have not specifically noted corruption as an obstacle to foreign direct investment in Djibouti, but there were allegations of foreign companies having to meet requirements such as renting houses owned by senior officials or hiring certain employees as a condition of receiving government procurement contracts. In addition, one company reported harassment of employees by local competitors. Prosecution and punishment for corruption is rare.

Resources to Report Corruption

Contact at government agency responsible for combating corruption is listed below:

Fatouma Mahamoud AbdillahiPresidentCommission Nationale Independante pour la Prevention et de Lutte Contre la CorruptionPlateau du Serpent+253 21 35 16 03 anticorruption@intnet.d j

No “watchdog” organizations are present in Djibouti.

10. Political and Security Environment

Djibouti has seen only very limited episodes of political violence over the last two decades.  In the last ten years, there have been no known incidents of political violence leading to damage to foreign investments.  Both the ruling coalition party and the recognized opposition parties favor foreign direct investment into Djibouti and local attitudes towards foreigners are positive.

Djibouti held presidential elections April 9, 2021, with President Ismael Omar Guelleh winning a fifth consecutive term with 98% of the vote. His 22-year reign has contributed to stability and economic growth, but questions of succession and subsequent instability remain.

Djibouti was recently awarded the International Peace Award by the journal Jeune Afrique for its secure environment, despite being surrounded by countries facing instability.  According to data acquired by the Armed Conflict Location and Event Data Project, Djibouti’s instances of violence and disorder have significantly declined in the past three years.

11. Labor Policies and Practices

Djibouti’s official unemployment rate is 47%. Youth unemployment, defined locally as the share of the labor force between age 15 and 24 without work but that is available and actively seeing employment, has remained between 11% and 12% in the past three decades. Estimates of a sizeable informal labor market of up to 75% exist in Djibouti, with a larger informal market outside of the capital city of Djibouti. The informal market consists mostly of individual operating units, is poorly structured, and is concentrated in trade, import-export, construction, various services and handicrafts. In Djibouti, women are largely predominant in the activities of the informal economy. The formal labor market is heavily service- or government-oriented with growing markets in construction, logistics, and transportation. Skilled Djiboutian workers, especially in high-demand trades such as construction, are in short supply.

Djibouti has complicated labor laws that favor the employee, especially in the areas of disputes and termination. Vocational and professional training facilities remain limited. The World Bank, the Ministry of Finance, USAID, and other entities are working on a variety of initiatives to address the shortage of workforce development programs. The government has promoted entrepreneurship as a means of stimulating the economy. The government, in partnership with the World Bank and European Union, opened the entrepreneurship and leadership center (CLE – Centre Leadership Entreprenariat ) to assist start-up companies.

Foreign workers are legally allowed to work in Djibouti only if their qualifications or expertise are not available among the nationals, as determined by the Ministry of Labor through the National Agency for Employment, Training, and Professional Integration (ANEFIP). This requirement is not strictly implemented. In January 2017, the cost for a work permit was reviewed and classified in three different categories based on the type of profession with respective annual fees of 50,000 Djibouti francs (USD 281), 100,000 Djibouti francs (USD 563) and Djibouti francs 200,000 (USD 1,125). ANEFIP maintains a database of Djiboutian job-seekers and issues work permits to foreign workers.

Employers have to abide by the Labor Code. Workers who are laid off get more compensation than employees who are fired. No unemployment insurance or other social safety net programs exist for workers laid off for economic reasons. Only those workers who contributed to the social insurance for 25 years and are sixty years of age are entitled to retirement benefits.

Minimum wage is DJF 45,000 (USD 254) per month. By law, all employers are obligated to make social security payments on behalf of their employees, through the National Council for Social Security. Two large labor unions exist in Djibouti, but only the Djiboutian Workers Union is recognized by international organizations.

Labor laws are not waived to attract investment, but the investment code and free zones have separate legal provisions to attract investment. By law, labor unions are independent of the government and employers. In practice they can be influenced by the government and/or employers. In case of labor disputes, the Labor Inspector will bring together the employer and the employee to settle the case acting as a mediator. If the mediation fails, then the case will be sent to the Court. The process is opaque and the results are not publicized.

In November 2020, the National Assembly amended the Labor Code to require companies employing 11 or more employees to report annually on the status of its workforce. This report aims to prevent companies from hiring foreigners illegally, not respecting legally allowed pregnancy leave, and/or illegally firing employees.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2019 $3,346 2020 $3,380 www.worldbank.org/en/country
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A N/A N/A BEA data available at https://apps.bea.gov/international/
factsheet/
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A N/A N/A BEA data available at https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
Total inbound stock of FDI as % host GDP N/A N/A 2020 58.3% UNCTAD data available at

https://unctad.org/topic/investment/
world-investment-report
  

* Ministry of Finance and Economy

Table 3: Sources and Destination of FDI

Data not available.

14. Contact for More Information

Joseph Chamberlain
U.S. Embassy Djibouti
Lot 350-B Haramouss
B.P. 185
Djibouti
+253 (21) 45 30 00
djibouticommerce@state.gov 

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.  The novel coronavirus pandemic has negatively affected the short-term economic outlook, but the country remains resilient in addressing the health and economic challenges.  In July 2020 the U.S. and Kenya launched negotiations for a Free Trade Agreement, the first in sub-Saharan Africa.  Despite this progress, U.S. businesses operating in Kenya still face aggressive tax collection attempts, burdensome bureaucratic processes, and significant delays in receiving necessary business licenses.  Corruption remains pervasive and Transparency International ranked Kenya 128 out of 180 countries in its 2021 Global Corruption Perception Index – reflecting modest progress over the last decade but still well below the global average.

Kenya has strong telecommunications infrastructure and a robust financial sector and is a developed logistics hub with 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 East Africa’s trade.  Kenya’s membership in the East African Community (EAC), the Africa Continental Free Trade Area (AfCFTA), and other regional trade blocs provides it with preferential trade access to growing regional markets.

In 2017 and 2018 Kenya instituted broad reforms to improve its business environment, including passing the Tax Laws Amendment (2018) and the Finance Act (2018), which established new procedures and provisions related to taxes, eased the payment of taxes through the iTax platform, simplified registration procedures for small businesses, reduced the cost of construction permits, and established a “one-stop” border post system to expedite the movement of goods across borders.  However, the Finance Act (2019) introduced taxes to non-resident ship owners, and the Finance Act (2020) enacted a Digital Service Tax (DST).  The DST, which went into effect in January 2021, imposes a 1.5 percent tax on any transaction that occurs in Kenya through a “digital marketplace.”  The oscillation between business reforms and conflicting taxation policies has raised uncertainty over the Government of Kenya’s (GOK) long-term plans for improving the investment climate.

Kenya’s macroeconomic fundamentals remain among the strongest in Africa, averaging five to six percent gross domestic product (GDP) growth since 2015 (excepting 2020due to the negative economic impact of the COVID-19 pandemic), five percent inflation since 2015, improving infrastructure, and strong consumer demand from a growing middle class.  There is relative political stability and President Uhuru Kenyatta has remained focused on his “Big Four” development agenda, seeking to provide universal healthcare coverage, establish national food and nutrition security, build 500,000 affordable new homes, and increase employment by growing the manufacturing sector.

Kenya is a regional leader in clean energy development with more than 90 percent of its on-grid electricity coming from renewable sources.  Through its 2020, second Nationally Determined Contribution to the Paris Agreement targets, Kenya has prioritized low-carbon resilient investments to reduce its already low greenhouse gas emissions a further 32 percent by 2030.  Kenya has established policies and a regulatory environment to spearhead green investments, enabling its first private-sector-issued green bond floated in 2019 to finance the construction of sustainable housing projects.

American companies continue to show strong interest to establish or expand their business presence and engagement in Kenya.  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: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 128 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 85 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $339 http://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $11,067.86 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

In 2013, the Presidential Task Force on Parastatal Reforms (PTFPR) published a list of all state-owned enterprises (SOEs) and recommended proposals to reduce the number of State Corporations from 262 to 187 to eliminate redundant functions between parastatals; close or dispose of non-performing organizations; consolidate functions wherever possible; and reduce the workforce — however, progress is slow (https://drive.google.com/file/d/0BytnSZLruS3GQmxHc1VtZkhVVW8/edit).  SOEs’ boards are independently appointed and published in Kenya Gazette notices by the Cabinet Secretary of the ministry responsible for the respective SOE.  The State Corporations Act (2015) mandated the State Corporations Advisory Committee to advise the GOK on matters related to SOEs.  Despite being public entities, only SOEs listed on the Nairobi Securities Exchange publish their financial positions, as required by Capital Markets Authority guidelines.  SOEs’ corporate governance is guided by the constitution’s chapter 6 on Leadership and Integrity, the Leadership and Integrity Act (2012) (L&I) and the Public Officer Ethics Act (2003), which establish integrity and ethics requirements governing the conduct of public officials.

In general, competitive equality is the standard applied to private enterprises in competition with public enterprises.  Certain parastatals, however, have enjoyed preferential access to markets. Examples include Kenya Reinsurance, which enjoys a guaranteed market share; Kenya Seed Company, which has fewer marketing barriers than its foreign competitors; and the National Oil Corporation of Kenya (NOCK), which benefits from retail market outlets developed with government funds.  Some state corporations have also benefited from easier access to government guarantees, subsidies, or credit at favorable interest rates.  In addition, “partial listings” on the Nairobi Securities Exchange offer parastatals the benefit of accessing equity financing and GOK loans (or guarantees) without being completely privatized.

In August 2020, the executive reorganized the management of SOEs in the cargo transportation sector and mandated the Industrial and Commercial Development Corporation (ICDC) to oversee rail, pipeline and port operations through a holding company called Kenya Transport and Logistics Network (KTLN).  ICDC assumes a coordinating role over the Kenya Ports Authority (KPA), Kenya Railways Corporation (KRC), and Kenya Pipeline Company (KPC).  KTLN focuses on lowering the cost of doing business in the country through the provision of cost effective and efficient transportation and logistics infrastructure.

SOE procurement from the private sector is guided by the Public Procurement and Asset Disposal Act (2015) and the published Public Procurement and Asset Disposal Regulations (2020) which introduced exemptions from the Act for procurement on bilateral or multilateral basis, commonly referred to as government-to-government procurement; introduced E-procurement procedures; and preferences and reservations, which gives preferences to the “Buy Kenya Build Kenya” strategy (http://kenyalaw.org/kl/fileadmin/pdfdownloads/LegalNotices/2020/LN69_2020.pdf).

Kenya is neither party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO) nor an Observer Government.

9. Corruption

Corruption is pervasive and entrenched in Kenya and international corruption rankings reflect its modest progress over the last decade.  The Transparency International (TI) 2021 Global Corruption Perception Index ranked Kenya 128 out of 180 countries, its second-best ranking, and a marked improvement from its 2011 rank of 145 out of 176.  Kenya’s score of 30, however, remained below the global average of 43 and below the sub-Saharan Africa average of 33.  TI cited lack of political will, limited progress in prosecuting corruption cases, and the slow pace of reform in key sectors as the primary drivers of Kenya’s relatively low ranking.  Corruption has been an impediment to FDI, with local media reporting allegations of high-level corruption related to health, energy, ICT, and infrastructure contracts.  Numerous reports have alleged that corruption influenced the outcome of government tenders, and some U.S. firms assert that compliance with the Foreign Corrupt Practices Act significantly undermines their chances of winning public procurements.

In 2018, President Kenyatta began a public campaign against corruption.  While GOK agencies mandated to fight corruption have been inconsistent in coordinating activities, particularly regarding cases against senior officials, cabinet, and other senior-level arrests in 2019 and 2020 suggested a renewed commitment by the GOK to fight corruption.  In 2020, the judiciary convicted a member of parliament to 67 years in jail or a fine of KES 707 million (approximately USD 7 million) for defrauding the government of KES 297 million (approximately USD 2.9 million).  The Ethics and Anti-Corruption Commission (EACC), in 2019, secured 44 corruption-related convictions, the highest number of convictions in a single year in Kenya’s history.  The EACC also recovered assets totaling more than USD 28 million in 2019 – more than the previous five years combined.  Despite these efforts, much work remains to battle corruption in Kenya.

Relevant legislation and regulations include the Anti-Corruption and Economic Crimes Act (2003), the Public Officers Ethics Act (2003), the Code of Ethics Act for Public Servants (2004), the Public Procurement and Disposal Act (2010), the Leadership and Integrity Act (2012), and the Bribery Act (2016).  The Access to Information Act (2016) also provides mechanisms through which private citizens can obtain information on government activities; however, government agencies’ compliance with this act remains inconsistent.  The EACC monitors and enforces compliance with the above legislation.

The Leadership and Integrity Act (2012) requires public officers to register potential conflicts of interest with the relevant commissions.  The law identifies interests that public officials must register, including directorships in public or private companies, remunerated employment, securities holdings, and contracts for supply of goods or services, among others.  The law requires candidates seeking appointment to non-elective public offices to declare their wealth, political affiliations, and relationships with other senior public officers.  This requirement is in addition to background screening on education, tax compliance, leadership, and integrity.

The law requires that all public officials, and their spouses and dependent children under age 18, declare their income, assets, and liabilities every two years.  Information contained in these declarations is not publicly available, and requests to obtain and publish this information must be approved by the relevant commission.  Any person who publishes or makes public information contained in a public officer’s declarations without permission may be subject to fine or imprisonment.

The Access to Information Act (2016) requires government entities, and private entities doing business with the government, to proactively disclose certain information, such as government contracts, and comply with citizens’ requests for government information.  The act also provides a mechanism to request a review of the government’s failure to disclose requested information, along with penalties for failures to disclose.  The act exempts certain information from disclosure on grounds of national security.  However, the GOK has yet to issue the act’s implementing regulations and compliance remains inconsistent.

The private sector-supported Bribery Act (2016) stiffened penalties for corruption in public tendering and requires private firms participating in such tenders to sign a code of ethics and develop measures to prevent bribery.  Both the constitution and the Access to Information Act (2016) provide protections to NGOs, investigative journalism, and individuals involved in investigating corruption.  The Witness Protection Act (2006) establishes protections for witnesses in criminal cases and created an independent Witness Protection Agency.  A draft Whistleblowers Protection Bill has been stalled in Parliament since 2016.

President Kenyatta directed government ministries, departments, and agencies to publish all information related to government procurement to enhance transparency and combat corruption.  While compliance is improving, it is not yet universal.  The information is published online (https://tenders.go.ke/website/contracts/Index).

Kenya is a signatory to the UN Convention Against Corruption (UNCAC) and in 2016 published the results of a peer review process on UNCAC compliance:  (https://www.unodc.org/documents/treaties/UNCAC/CountryVisitFinalReports/2015_09_28_Kenya_Final_Country_Report.pdf).  Kenya is also a signatory to the UN Anticorruption Convention and the OECD Convention on Combatting Bribery, and a member of the Open Government Partnership.  Kenya is not a signatory to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.  Kenya is also a signatory to the East African Community’s Protocol on Preventing and Combating Corruption.

10. Political and Security Environment

Kenya’s 2017 national election was marred by violence, which claimed the lives of nearly 100 Kenyans, a contentious political atmosphere, which pitted the ruling Jubilee Party against the opposition National Super Alliance (NASA), as well as political interference and attacks on key institutions by both sides.  In November 2017, the Kenyan Supreme Court unanimously upheld the October 2017 repeat presidential election results and President Uhuru Kenyatta’s win in an election boycotted by NASA leader Raila Odinga.  In March 2018, President Kenyatta and Odinga publicly shook hands and pledged to work together to heal the political, social, and economic divides highlighted by the election.  The GOK, civil society actors, private sector, and religious leaders are implementing a number of initiatives to promote peace in advance of the next national election in August 2022.

The United States’ Travel Advisory for Kenya advises U.S. citizens to exercise increased caution due to the threat of crime and terrorism, and not to travel to counties bordering Somalia and to certain coastal areas due to terrorism.  Due to the high risk of crime, it is common for private businesses and residences to have 24-hour guard services and well-fortified property perimeters.

Instability in Somalia has heightened concerns of terrorist attacks, leading businesses and public institutions nationwide to increase their security measures.  Tensions flare occasionally within and between ethnic communities in Kenya.  Regional conflict, most notably in Ethiopia, Somalia, and South Sudan, sometimes have spill-over effects in Kenya.  There could be an increase in refugees entering Kenya due to drought and instability in neighboring countries, adding to the already large refugee population in the country.

Kenya and its neighbors are working together to mitigate threats of terrorism and insecurity through African-led initiatives such as the African Union Mission in Somalia (AMISOM) and the Eastern African Standby Force (EASF).  Despite attacks against Kenyan forces in Kenya and Somalia, the Government of Kenya has maintained its commitment to promoting peace and stability in Somalia.

11. Labor Policies and Practices

In 2021, Kenya’s employed labor force was recorded at 17.4 million.  Kenya’s informal economy is estimated to employ about 80 percent of the work force and to contribute 34 percent to Kenya’s gross domestic product.  Informal enterprises are mainly run by women, have low levels of innovation, lack social security coverage, job security, and low levels of unionization.  Kenya’s constitution mandates that no gender hold more than two-thirds of any positions in all elective or appointive bodies.  Gender balance and regional inclusivity are key facets of public appointments.  The Government of Kenya has not, however, ensured regional inclusivity in its appointments and public service human capital reports show dominant regional communities in appointments.  The gender mandate is not mandatory for private sector companies.  The private sector, however, has been instrumental in advancing gender balance in its work force composition.  NSE-listed companies have 36 percent female board representations.

The Government of Kenya mandates local employment in the category of unskilled labor.  The Kenyan government regularly issues permit for key senior managers and personnel with special skills not available locally.  For other skilled labor, any enterprise, whether local or foreign, may recruit from outside if the required skills are not available in Kenya.  However, firms seeking to hire expatriates must demonstrate that they conducted an exhaustive search to find persons with the requisite skills in Kenya and were unable to find any such persons.  The Ministry of EAC and Regional Development, however, has noted plans to replace this requirement with an official inventory of skills that are not available in Kenya.  A work permit can cost up to KES 400,000 (approximately USD 4,000).

Kenya has one of the highest literacy rates in the region at 90 percent.  Investors have access to a large pool of highly qualified professionals in diverse sectors from a working population of over 47.5 percent out of a population of 47.6 million people.  Expatriates are permitted to work in Kenya provided they have a work (entry) permit issued under the Kenya Citizenship and Immigration Act (2011).  In December 2018, the Ministry of Interior and Coordination of National Government Cabinet Secretary issued a directive requiring foreign nationals to apply for their work permits prior to entering Kenya and to confirm that the skill they will provide is unavailable in Kenyan via the Ministry of Labor and Social Protection’s Kenya Labor Market Information System (KLMIS).  KLMIS provides information regarding demand, supply, and skills available in Kenya’s labor market (https://www.labourmarket.go.ke/labour/supply/).  Work permits are usually granted to foreign enterprises approved to operate in Kenya as long as the applicants are key personnel.  In 2015, the Directorate of Immigration Services (DIS) expanded the list of requirements to qualify for work permits and special passes.  Issuance of a work permit now requires an assured income of at least USD 24,000 annually or documented proof of capital of a minimum of USD 100,000 for investors.  Exemptions are available, however, for firms in agriculture, mining, manufacturing, or consulting sectors with a special permit.  International companies have complained that the visa and work permit approval process is slow, and some officials request bribes to speed the process.  Since 2018, the DIS has more stringently applied regulations regarding the issuance of work permits.  As a result, delayed or rejected work permit applications have become one of the most significant challenges for foreign companies in Kenya.

A company holding an investment certificate granted by registering with KenInvest and passing health, safety, and environmental inspections becomes automatically eligible for three class D work (entry) permits for management or technical staff and three class G, I, or J work permits for owners, shareholders, or partners.  More information on permit classes can be found at https://kenya.eregulations.org/menu/61?l=en.

According to the Kenya National Bureau of Statistics (KNBS), in 2019, the formal sector, excluding agriculture, employed 18.1 million people, with nominal average earnings of KES 778,248 (USD 7,780) per person per annum.  Kenya has the highest rate of youth joblessness in East Africa.  According to the 2019 census data, 5,341,182 or 38.9 percent of the 13,777,600 youths eligible to work are jobless.  Employment in Kenya’s formal sector was 2.9 million in 2019 up from 2.8 million in 2018.  The government is the largest employer in the formal sector, with an estimated 865,200 government workers in 2019.  In the private sector, agriculture, forestry, and fishing employed 296,700 workers while manufacturing employed 329,000 workers.  However, Kenya’s large informal sector – consisting of approximately 80 percent of the labor force – makes accurate labor reporting difficult.

The GOK has instituted different programs to link and create employment opportunities for the youth, published weekly in GOK’s “MyGov” newspaper insert.  Other measures include the establishment of the National Employment Authority which hosts the National Employment Authority Integrated Management System website that provides public employment service by listing vacancies ( https://neaims.go.ke/).  The Kenya Labour Market Information System (KLMIS) portal (https://www.labourmarket.go.ke/), run by the Ministry of Labour and Social Protection in collaboration with the labor stakeholders, is a one-stop shop for labor information in the country.  The site seeks to help address the challenge of inadequate supply of crucial employment statistics in Kenya by providing an interactive platform for prospective employers and job seekers.  Both local and foreign employers are required to register with National Industrial Training Authority (NITA) within 30 days of operating.  There are no known material compliance gaps in either law or practice with international labor standards that would be expected to pose a reputational risk to investors.  The International Labor Organization has not identified any material gaps in Kenya’s labor law or practice with international labor standards.  Kenya’s labor laws comply, for the most part, with internationally recognized standards and conventions, and the Ministry of Labor and Social Protection is currently reviewing and ensuring that Kenya’s labor laws are consistent with the constitution.  The Labor Relations Act (2007) provides that workers, including those in export processing zones, are free to form and join unions of their choice.

Collective bargaining is common in the formal sector but there is no data on the percentage of the economy covered by collective bargaining agreements (CBA).  However, in 2019 263 CBAs were registered in the labor relations court with the Wholesale and Retail trade sector recording the most, at 88.  The law permits workers in collective bargaining disputes to strike but requires the exhaustion of formal conciliation procedures and seven days’ notice to both the government and the employer.  Anti-union discrimination is prohibited, and the government does not have a history of retaliating against striking workers.  The law provides for equal pay for equal work.  Regulation of wages is part of the Labor Institutions Act (2014), and the government has established basic minimum wages by occupation and location.

The GOK has a growing trade relationship with the United States under the AGOA framework which requires compliance with labor standards.  The Ministry of Labor is reviewing its labor laws to align with international standards as labor is also a chapter in the Free Trade Agreement negotiations with the U.S.  In 2019, the government continued efforts with dozens of partner agencies to implement a range of programs for the elimination of child and forced labor.  However, low salaries, insufficient resources, and attrition from retirement of labor inspectors are significant challenges to effective enforcement.  Employers in all sectors routinely bribe labor inspectors to prevent them from reporting infractions, especially regarding child labor violations.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) (USD) 2020 $96.01 billion 2019 $101.01 billion https://data.worldbank.org/indicator/NY.GDP.
MKTP.CD?locations=KE
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2019 $353 M BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2019 $-16 M BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm
Total inbound stock of FDI as % host GDP 2019 1.2% 2020 0.1% https://unctad.org/webflyer/world-investment-report-2021

*Host Country Statistical Source: Central Bank of Kenya, Foreign Investment Survey 2020  

Table 3: Sources and Destination of FDI
Data not available.

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

U.S. Embassy Economic Section
U.N. Avenue, Nairobi, Kenya
+254 (0)20 363 6050

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