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Congo, Democratic Republic of the

Executive Summary

The Democratic Republic of the Congo (DRC) is the second largest country in Africa and potentially 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 security, infrastructure and health care to its estimated 81 million inhabitants, of which 75 percent live on less than two dollars a day.

The country possesses untapped resources that attract investors and could make it a giant in the African and global economies, but it occupies the 184th place (of 190) in the World Bank’s Doing Business 2019 report.

Overall, businesses in the DRC face numerous challenges, including fragility of functional infrastructure and alleged corruption at all levels of government.  Though, the election of President Felix Tshilombo Tshisekedi has raised the hopes of the business community in the DRC, and there is optimism that this change in leadership heralds the beginning of a new era of transparency in the country.

Armed groups remain active in the eastern part of the country making for a fragile security situation that negatively affects the business environment.  A long cycle of delayed elections finally ended in December 2018, with the arrival in power of the new President Felix Tshilombo Tshisekedi, reducing long-standing political tensions.

Poor governance, corruption and a deficit of transport, energy, and telecommunications infrastructure continue to make the business climate difficult.  The infrastructure deficit is the main challenge as it hinders intra- and international trade.  The poor quality of DRC’s infrastructure leads to import and export costs that are reported to be among the highest in Africa.

Despite some reforms implemented by the government, investors continue to complain about corruption and the lack of reform in the mining and subcontracting sectors.

ANAPI (Agence de promotion des investissements au Congo) strives to coordinate the actions of the Government of the Democratic Republic of the Congo (GDRC) in an attempt to simplify administrative formalities and procedures, but its influence in the administrative sphere is still limited.  In 2018 business remained sluggish, with only the extractives sector exhibiting significant growth.

GDP growth in 2018 was 4.1 percent (compared to 3.7 percent in 2017), while the average rate of inflation was 27 percent (compared to 54 percent in 2017).  Despite this, the year-on-year increase in consumer prices dipped to approximately 7 percent by the 4th quarter of 2018.  The CDF stabilized against the USD, losing only 2.7 percent of its value in 2018 (compared to a depreciation rate of 23 percent in 2017).  In 2018, the financing of the elections was supported by USD 500 million in public funds, roughly 9 percent of the 2018 state budget.

According to the Governor of the Central Bank, the main challenge remains the insufficient mobilization of public revenues, which is estimated by various sources to be between 7 and 10 % of GDP, as compared to an average of 20% in sub-Saharan Africa.

The primary minerals sector is the country’s main source of revenue. Copper, cobalt, gold, coltan, diamond, tin and tungsten, along with oil from offshore fields, provide over 95 percent of the DRC’s export revenue.

The agricultural sector and the forestry sector present opportunities for economic diversification in the DRC.  Agriculture is the mainstay of the economy, as it employs approximately 60% of Congolese.  The National Strategic Development Plan (NSDP), currently being finalized, plans to use agricultural transformation to advance the DRC into a middle-income country by 2022, including through the establishment of agro-industrial parks in the country’s various regions, which will take into account the interests of small producers.  The industrialization of the forest-based sector would strengthen diversification efforts.

According to foreign investors, inadequate infrastructure and allegedly predatory taxation have greatly diminished the secondary sector.  Several breweries and bottlers, a number of large construction firms, and limited textiles production are still active.

The tertiary sector includes retail and wholesale sales, banking, transport and communication components.  Micro commerce dominates the retail sector; the banking sector is small in terms of capitalization, but diverse in terms of ownership; the highly competitive telecommunications industry is expanding into electronic banking.

The banking sector configuration in 2018 remains unchanged from the previous year.  There are currently 17 operational banks in the Congolese banking industry. This includes BIAC, which is in serious difficulty and will likely be dissolved and another, Byblos Bank RDC, which became Solidaire Banque following the withdrawal of its majority shareholder and has remained practically inactive.  The bank penetration rate is well below the sub-Saharan African average of 25%.  The nation’s economy is highly dollarized, which weakens monetary policy execution, financial development and systemic stability.

The DRC is finally opening up its insurance sector after years of hesitancy and delay. The new regulator ARCA (Autorité de Régulation et de Contrôle des Assurances), approved four new insurance companies and two insurance brokers on March 28th, 2019.  The insurance sector will hopefully stimulate the economy, by mitigating risk and financing economic development projects.

Reform of a non-transparent and often corrupt legal system is also a prerequisite for investors to benefit more fully from the DRC’s membership in the Organization for the Harmonization of Business Laws in Africa (OHADA).

The Embassy invites all prospective investors to visit www.travel.state.gov to read the latest country-specific information and travel warnings before traveling to the DRC.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 161 of 180 http://www.transparency.org/research/cpi/overview
World Bank Doing Business Report “Ease of Doing Business” 2019 184 of 190 http://www.doingbusiness.org/rankings
Global Innovation Index 2017 N/A of 126 http://www.globalinnovationindex.org/content/page/data-analysis
U.S. FDI in partner country ($M USD, stock positions) 2017 $76 http://www.bea.gov/international/factsheet/
World Bank GNI per capita 2017 $460 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

The DRC remains a challenging environment in which to conduct business.  At the same time, the GDRC sporadically takes steps to improve economic governance and its business climate, while the DRC’s rich endowment of natural resources, large population and generally open trading system provide significant potential opportunities for U.S. investors.  The GDRC’s investment agency, the National Agency for Investment Promotion (ANAPI), provides investment facilitation services for initial investments over USD 200,000 and is mandated to simplify the investment process, make procedures more transparent, assist new foreign investors and improve the image of the DRC as an investment destination.  Current investment regulations prohibit foreign investors from engaging in informal small retail commerce, referred to locally as petit commerce, and ban foreign majority-ownership of agricultural concerns. Visas for foreign workers are limited to six consecutive months and cost between USD 300 (single entry) and USD 400 (multiple-entry).

Following approval of an initial “temporary” work visa, which, normally, is not difficult to procure, a foreign worker may qualify for a more expensive “establishment visa” with at least a one year validity.  Salaries paid to expatriates are taxed at a higher rate than those of locals to encourage local employment.

Limits on Foreign Control and Right to Private Ownership and Establishment

The DRC Constitution stipulates entitlement to own and establish a business enterprise, and to engage in all forms of remunerative activity, noting minimal restrictions related to small commerce and a prohibition of foreign shareholder ownership of more than 49 percent of an agribusiness.  The government has drafted foreign ownership legislation, but parliamentary debate is still pending. Although it may not be based in law, many investors note that in practice the GDRC requires foreign investors to both hire local agents and participate in a joint venture with the government or local partners.

A new law on subcontracting in the private sector, which was enacted in January 2017, restricts foreign investors’ participation in subcontracting in almost all sectors and is considered discriminatory to the interests of some U.S. companies operating in DRC.  The law restricts subcontracting activity to majority Congolese-owned and capitalized-companies whose head offices are located in the national territory.  The only exception is in the case of unavailability of expertise in a specific subcontracting area. In that case, proof of lack of expertise must be provided to the competent authority to enable a non-Congolese company to be used as a subcontractor, but the activity may not exceed six months.

The law also forbids the subcontracting of more than 40 percent of the overall value of a contract; voids clauses, stipulations and contractual arrangements that violate the provisions of this law; and carries penalties of up to USD 150,000 and the risk of closure of operations for six months if certain provisions are violated.  As of April 2017, the Federations of Enterprises of the Congo (FEC), the American Chamber of Commerce DRC, and other business organizations were lobbying to review and revise the law.  Foreign businesses had a 12-month grace period, which ended in January 2018, to comply with the new law, but as noted below, the law is not yet being enforced.

On April 16th, 2018, the Congolese government adopted the draft decree on the “creation, organization and functioning of the Authority to Regulate Subcontracting in the Private Sector” (ARSP).  On December 27th, 2018 former President Kabila and Prime Minister Tshibala signed an order to appoint the Authority’s general management and the board of directors, which would implement the law.  The Director General of the ARSP announced in May 2019 that the Authority would begin operations shortly.

On March 9, 2018, the government promulgated a new mining code which increased royalty rates by two to ten percent, raised tax rates on “strategic” metals, and imposed a surcharge on “super profits” of mining companies.  Of particular concern to mining companies, the government unilaterally removed a stability clause contained in the mining code of 2002.  The stability clause protects investors from any new fees or taxes for ten years.  With no coherent and transparent legal and fiscal framework to alleviate investors’ concerns, the stability clause offered a significant inducement to major mining companies.  Removal of the stability clause may deter future investment in the mining sector.  Since August 27th, 2018, the day of the last meeting between the government and investors, the situation has not progressed.  Also in August, the DRC’s major industrial mining companies, responsible for 80 percent of copper and cobalt production and 90 percent of gold production, formed a new industry body, the Initiative for the Promotion of the Mining Industry (IPM), to engage the GDRC more effectively on the new mining code.  IPM is awaiting appointment of the new government to resume discussions.  The Tshisekedi government has indicated that it is willing to reopen discussions on the new mining code, but given its minority status in the National Assembly, it may not be able to implement changes that require legislative approval.

Other Investment Policy Reviews

The DRC has not undergone an Organization for Economic Cooperation and Development (OECD) or United Nations Conference on Trade and Development (UNCTAD) Investment Policy Review in the last 10 years, but the GDRC has made significant progress to improve its customs clearance procedures. Cities with high custom clearance traffic use Sydonia, which is an advanced software system for custom administrations in compliance with ASYCUDA.  (ASYCUDA is a large technical assistance software program recommended by UNCTAD for custom clearance management.)

Business Facilitation

Since 2013, the GDRC has operated a “one-stop shop” (https://www.guichetunique.cd/) that brings together all the government entities involved in the registration of a company in the DRC.  The registration process now officially takes three days, but in practice it can take much longer.  Yet, some businesses have reported that the Guichet Unique has considerably shortened and simplified the overall process of business registration.

Outward Investment

The GDRC does not prohibit outward investment, nor does it particularly promote it.  There are no current government restrictions preventing domestic investors from investing abroad, and there are no current blacklisted countries with which domestic investors are precluded from doing business.

2. Bilateral Investment Agreements and Taxation Treaties

The U.S.-DRC Bilateral Investment Treaty (BIT) was signed in 1984 and entered into force in 1989.  The BIT guarantees reciprocal rights and privileges to each country’s investors and provides that, should a claim arise under the treaty, it can be submitted to a dispute resolution mechanism through international arbitration.

Germany, France, Belgium, Italy, South Korea, and China have also signed bilateral investment treaties with the DRC, while South Africa and Kenya are currently negotiating BITs with the DRC.  Lebanon, Cote d’Ivoire, and Burkina Faso have negotiated, but not signed, bilateral investment treaties with the DRC.  In October 2016, the DRC and Rwanda signed an agreement on a simplified trade regime covering only small-scale commerce between the countries.

There is no bilateral taxation treaty between the United States and the DRC.  In August 2015, Zambia and the DRC signed a bilateral taxation treaty that abolished customs taxes across their common border.

3. Legal Regime

Transparency of the Regulatory System

The DRC still does not have a legal system to address the issue of competition.  By joining OHADA and COMESA, the DRC plans to implement the standards and regulations of these structures in order to create a more transparent and effective policy to promote competition on a non-discriminatory basis.

There are no informal regulations that would discriminate against foreign or American investors in particular.  Nevertheless, the new regulations in the mining code and the law on subcontracting are perceived as discriminatory and punitive by foreign investors.

The GDRC authority on business standards, the Congolese Office of Control (OCC), oversees foreign businesses engaged in the DRC.

There are no formal or informal provisions systematically employed by the GDRC to impede foreign investment, but neither are there provisions that are universally employed to attract such investment.  Problems encountered within the GDRC tend largely to be administrative and/or bureaucratic in nature, as reforms and improved laws and regulations are often poorly or unevenly applied.

Proposed laws and regulations are rarely published in draft format for public discussion and comments; discussion is typically limited to the governmental entity that proposes the draft law and Parliament prior to enactment.

By implementing the OHADA, the GDRC strengthened its legal framework in the areas of contract, company, and bankruptcy law and set up an accounting system better aligned to international standards.  For this purpose, a Coordination Committee was established internally in the GDRC to monitor OHADA implementation.

The Extractive Industries Transparency Initiative (EITI), a multi-stakeholder initiative to increase transparency in transactions between governments and companies in the extractive industries, declared in 2014 that DRC’s payment and receipt procedures conform to EITI requirements.  In 2016, EITI awarded the DRC the first Initiative Award for Transparency in Extractive Industries for a pilot study DRC EITI conducted on establishing beneficial ownership, i.e. identifying the persons who actually control or benefit from a company.

The DRC adopted a Beneficial Ownership Roadmap in December 2016 outlining the steps to be taken to ensure the country complies with the more rigorous EITI Standard of 2016.  The roadmap sought to achieve stakeholder consensus on a definition of beneficial ownership in the DRC context, and to draft legislation requiring certain categories of businesses to disclose their beneficial owners.  No progress was made on the issue during 2016 however.  As a result, stakeholders amended the roadmap and a revised version was published in December 2017.

The DRC’s validation process for compliance with the 2016 EITI Standard commenced in November 2018, with assessment due in 2020.  The initial report published by the International EITI Secretariat in April 2019 stated that DRC EITI failed to adequately address 13 of the  requirements of the EITI Standard, with two of these assessed as unmet with inadequate progress.  The report also stressed the need to clarify the financial flows of state-owned enterprises (SOEs) in the DRC’s extractive sector.

International Regulatory Considerations

The DRC is a member of several regional economic blocks, including the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA), the Economic Community of Central African States (ECCAS), and the Economic Community of the Great Lakes Countries (ECGLC).

According to the Congolese National Standardization Committee, the DRC has adopted 470 harmonized COMESA standards, almost achieving the objective set by the country in 2008.

In order to formalize the DRC’s integration into the COMESA Free Trade Area and to comply with its commitments, in December 2015, the DRC President promulgated, after its adoption by both chambers of Parliament, an act establishing a new scale of import duties and taxes pursuant.  The act establishes a zero rate for goods originating in COMESA member countries following a three-year graduated scale of 40 percent, 30 percent and 30 percent reductions respectively.  Still, the DRC is not on track to meet this goal, and significant tariff reductions have yet to take place.  The DRC has signed several customs agreements in the region and sub-region to reduce import tariffs, but it has not yet implemented these agreements.

The DRC is a World Trade Organization (WTO) member and, as such, seeks to comply with Trade Related Investment Measures (TRIM) requirements.  In October 2016, the WTO noted that there had been positive developments on various fronts in the DRC, including streamlining of the country’s tax system, introduction of a value added tax (VAT), and enactment of a new customs act, a new excise act, and a new procurement code.  The WTO also noted that the business environment has improved as a result of the progressive establishment of single sites for conducting international trade (https://segucerdc.cd/ ) and setting up enterprises (www.guichetunique.cd ).  The WTO further commended the adoption of new sectoral policies that have opened several economic sectors, including insurance services and hydrocarbon trade, to competition.  The GRDC has proposed a new Strategic National Development Plan which sets the goal of modernizing and industrializing the country by 2035.

Legal System and Judicial Independence

The DRC is a civil law country, and the main provisions of its private law can be traced to the Napoleonic Civil Code.  As a result of colonialism, the general characteristics of the Congolese legal system are similar to those of the Belgian legal system.  Customary or tribal law is another aspect of the legal system. Various local customary laws regulate both personal status laws and property rights, especially the inheritance and land tenure systems in traditional communities throughout the country.  The Congolese legal system is divided into three branches: public law, private law and economic law.  Public law regulates legal relationships involving the state or state authority; private law regulates relationships between private persons; and economic law regulates interactions in areas such as labor, trade, mining and investment.

As of early 2018, the DRC had established thirteen commercial courts located in DRC’s main business cities, including Kinshasa, Lubumbashi, Matadi, Boma, Kisangani, and Mbuji-Mayi, though only the Kikwit and Boma courts appear to be functioning reasonably well.  These courts are designed to be led by professional judges specializing in commercial matters and exist in parallel to an otherwise inadequate judicial system.  A lack of qualified personnel and a reluctance by some DRC jurisdictions to fully recognize OHADA law and institutions have hindered commercial courts.  In 2013, the European Union began funding the construction or rehabilitation of commercial courts in Boma, Butembo, Kolwezi and Kananga, and the World Bank later supported the rehabilitation of the courts in Kinshasa, Kisangani, and Mbuji-Mayi.  Infrastructure, quality issues, and delays in execution have hampered these projects.

The current judicial process is not procedurally reliable, as its rulings are not always respected.  The national court system provides an appeals mechanism, and the OHADA provides regulations and a legal framework to appeal verdicts.  Legal documents in the DRC can be found at: http://www.leganet.cd/index.htm .

Laws and Regulations on Foreign Direct Investment

Most Foreign Direct Investment (FDI) is governed by the 2002 Investment Code.  Mining, hydrocarbons, finance, and other sectors are also governed by sector-specific investment laws.  The GDRC deregulated the electricity and insurance sectors in 2015, and in 2016 Parliament passed a bill to reform the hydrocarbons sector and revised the labor law.  Lawmakers have also authored legislation to address consumer protection, e-commerce, liberalization of prices, competition regulation, account auditing, agriculture regulation, entrepreneurship, and free trade areas.  With the exception of the bill on e-commerce, all of these bills were adopted and promulgated in 2018.

ANAPI is the DRC agency with the mandate to simplify the investment process, make procedures more transparent, assist new foreign investors, and improve the image of the country as an investment destination (investindrc.cd). There is also a Steering Committee for the Improvement of the Business and Investment Climate (CPCAI), which has the overall goal of improving the DRC’s ranking in the World Bank’s “Doing Business” indicators by reducing administrative delays, red tape, and the overall cost of establishing a business.  Since its inception, CPCAI has eliminated 46 of 117 taxes applied to cross-border trade.  The GDRC also instituted a “Guichet Unique,” in 2013, which is a one-stop shop to simplify business creation, cutting processing time from five months to three days, and reducing incorporation fees from USD 3,000 to USD 120. (www.guichetunique.cd ). A “one-stop-shop” also exists for import-export business, covering, among other things, the collection of taxes and transshipment operations. (https://segucerdc.cd/ ).

Competition and Anti-Trust Laws

There is no existing national agency that reviews transactions for competition or antitrust-related concerns, however, as a member of COMESA, the DRC falls under the organization’s competition regime, which is made up of the COMESA Competition Regulations and rules. Under the COMESA Treaty, the regulations are binding on all member states.  Since the DRC does not have a dedicated domestic competition law regime, the regional competition law regime is effectively the only competition law available.

Expropriation and Compensation

Technically, the GDRC may only proceed with an expropriation when it benefits the public interest, and the person or entity subject to an expropriation should receive fair compensation.  The U.S. Embassy is unaware of any new expropriation activities by the GDRC against U.S. citizens in 2017 and 2018, but there are a number of existing and some long standing claims made against the GDRC.  Some claims have been taken to arbitration, though many arbitral judgments against the GDRC are not paid in a timely manner, if at all.  The U.S. – DRC BIT also contains provisions on expropriation.

Dispute Settlement

ICSID Convention and New York Convention

The DRC is a member of the International Center for Settlement of Investment Disputes (ICSID) Convention and has been a Contracting State to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) since February 2015.  Although the DRC has not made any notifications or reservations in accordance with the New York Convention, the internal legislation facilitating the DRC’s accession to the New York Convention contains reservations regarding reciprocity (the DRC will only enforce awards made in the territory of other Contracting States); commerciality (only awards on matters which are considered commercial under DRC law will be recognized and enforced under the New York Convention); non-retroactivity (the New York Convention will only apply to awards made after February 3, 2015); and finally, that the New York Convention will not apply to disputes related to immovable property (i.e. real estate, industrial plants, etc.) or to rights related to immovable property.

In the case of an investment dispute, the U.S.-DRC BIT provides for reconciliation of national or international arbitration.  In the case of a dispute between a U.S. investor and the GDRC, the U.S. investor is subject to the Congolese civil code and legal system.  If the parties cannot reach agreement under the terms of the U.S.-DRC BIT the dispute is taken to ICSID or the Paris-based International Chamber of Commerce (ICC).  Commercial parties may also seek redress under the Organization for the Harmonization of African Business Law (OHADA).

The DRC’s accession to the New York Convention is important to international investors seeking to develop activities in the DRC because it facilitates the enforcement of international arbitral awards.  Nevertheless, the reservation related to immovable property effectively excludes disputes relating to mining rights, which, under Congolese law, are considered immovable property.

Although there are instances of ongoing corruption at every level of the DRC judicial system, several disputes between foreign investors and State Owned Enterprises (SOE) have been resolved in favor of the foreign investor.

International Commercial Arbitration and Foreign Courts

As a signatory to the OHADA, the DRC also adopted the OHADA Uniform Act on Arbitration (the UAA).  The UAA sets out the basic rules applicable to any arbitration where the seat of arbitration is located in an OHADA member state.  Because DRC is a member of the New York Convention, the requirements set out under Article 5 of the New York Convention for the recognition and enforcement of foreign awards will apply where the seat of any arbitration is outside an OHADA member state, or where the parties chose arbitral rules outside the UAA.

OHADA‘s UAA offers an alternative dispute resolution mechanism for settling disputes between two parties.  The two main consequences of the DRC’s September 2012 accession to OHADA with respect to dispute resolution are:

  • The mandatory application of the UAA, which sets out arbitration procedures applicable to any arbitration arising in a Member State of OHADA where the place of arbitration is situated in a Member State.
  • Disputes must be submitted to the Common Court of the Justice and Arbitration (CCJA) (based in Abidjan, Cote d’Ivoire) in accordance with the provisions of the OHADA Treaty and the OHADA Arbitration Rules.

The UAA, while not directly based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law, is similar in that it provides for the recognition and enforcement of arbitration agreements and arbitral awards and supersedes the national laws on arbitration to the extent that any conflict arises.  Arbitral awards with a connection to an OHADA member state are given final and binding status in all OHADA member states, on a par with a judgment of a national court.  Support is provided by the CCJA which can rule on the application and interpretation of the UAA.

Arbitral awards rendered in any OHADA Member State are enforceable in any other OHADA member state, subject to obtaining an exequatur (a legal document issued by a sovereign authority allowing a right to be enforced in the authority’s domain of competence) of the competent court of the State in which the award is to be made.  Exequaturs shall, in principle, be granted unless the award clearly affects public order in that State.  Decisions granting or refusing the granting of an exequatur may be appealed to the CCJA.

Bankruptcy Regulations

The OHADA Uniform Act on Insolvency Proceedings provides a comprehensive framework not only for companies encountering financial difficulties and seeking relief from the pressing demands of creditors, but also for creditors to file their claims.  The GDRC judiciary system has agreed to enforce the OHADA Insolvency Act.

4. Industrial Policies

Investment Incentives

Investment incentives for companies entering the DRC are generally negotiated during a streamlined period of approximately 30 days.  Negotiated incentives can range from tax breaks to duty exemptions, and are dependent upon the location and type of enterprise, the number of jobs created, the degree of training and promotion of local staff, and the export-producing potential of the operation.  Investors who wish to take advantage of customs and tax incentives in the extant 2002 Investment Code must apply to the National Agency for Investment Promotion (ANAPI), which, in turn, submits applications to the Ministries of Finance and Planning for final approval.

Foreign Trade Zones/Free Ports/Trade Facilitation

The DRC does not have designated free trade areas or free port zones; however legislation is pending to create such zones.  DRC is still progressively implementing legislation to integrate into the COMESA and SADC Free Trade Areas.  In 2015, the GDRC confirmed its commitment to work to enter the tripartite COMESA-SADC-EAC (Eastern African Community) Free Trade Area and the Continental Free Trade Area.  The implementation process has been on hold since that time, however, newly elected President Tshisekedi has signaled that he will revive stalled efforts to join the EAC.  Notwithstanding, the GDRC signed the agreement for the Continental Free Trade Area (Zone de libre-échange continentale or ZLEC) on March 21, 2018 in Kigali, under the aegis of the African Union.  The GDRC has yet to take any steps to implement the agreement.

Performance and Data Localization Requirements

Although there are no specific performance requirements for foreign investors, they invariably must negotiate many of the conditions of their investments with ANAPI.  Performance requirements agreed upon with ANAPI typically include a timeframe for the investment, use of OHADA accounting procedures and periodic authorized GDRC audits, protection of the environment, periodic progress reports to ANAPI, and the maintenance of international and local norms for the provision of goods and services.  The investor must also agree that all imported equipment and capital will remain in country for at least five years.

The Ministry of Labor controls expatriate residence and work permits.  For U.S. companies, the BIT assures the right to hire staff of their choice to fill some management positions, but companies agree to pay a special tax on expatriate salaries.  Visa, residence or work permit requirements are not discriminatory or excessively onerous, and are not designed to prevent or discourage foreigners from investing in the DRC, though corruption and bureaucratic hurdles can create serious delays in obtaining the necessary permits and visas.

The GDRC enacted a new law on subcontracting in January 2017, which requires foreign companies to use local subcontractors for subsidiary services.  The DRC does not have specific legislation on data storage, however, it recognizes the need for appropriate regulation.  As there is no obligatory legislation, in practice, few companies report having issues regarding data storage.

5. Protection of Property Rights

Real Property

The DRC’s Constitution (Chapter 2, Articles 34-40) protects private property ownership without discriminating between foreign and domestic investors.  Despite this provision, the GDRC has acknowledged the lack of enforcement in the protection of property rights.  Relevant draft bills have been pending before Parliament since 2015. Congolese law related to real property rights enumerates provisions for mortgages and liens, and real property (buildings and land) is protected and registered through the Ministry of Land’s Office of the Mortgage Registrar.  Nevertheless, land registration may not fully protect property owners, as records can be incomplete and legal disputes over land deals are common.  In addition, there is no specific regulation of real property lease or acquisition.

Ownership interest in personal property (e.g. equipment, vehicles, etc.) is protected and registered through the Ministry of the Interior’s Office of the Notary.

Intellectual Property Rights

In principle, intellectual property rights (IPR) are legally protected in the DRC, but enforcement of IPR regulations is limited.  Prior to independence in 1960, IPR was regulated by multiple Belgian instruments.  In 1963, the DRC became a party to the Berne Convention of 1886 for the Protection of Literary and Artistic Works, and in 1975 it joined the 1883 Paris Convention for the Protection of Industrial Property.  The DRC introduced Law No. 82-001 on Industrial Property in 1982, and Law No. 86-022 on the Protection of Copyright and Neighboring Rights in 1986.  Both instruments remain in force, but legislative action in the area of IPR and enforcement of the existing laws has been virtually non-existent since their passage.

The country is also a signatory to a number of relevant agreements with international organizations such as the World Intellectual Property Organization (WIPO) and the World Trade Organization (WTO), and is thus ostensibly subject to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), an international legal agreement between all the member nations of the WTO which sets down minimum standards for the regulation by national governments of many forms of IPR.  Specifically, TRIPS requires WTO members to provide copyright rights covering content producers, including performers; producers of sound recordings and broadcasting organizations; geographical indications, including appellations of origin; industrial designs; integrated circuit layout-designs; patents; new plant varieties; trademarks; trade dress; and undisclosed or confidential information.  TRIPS also specifies enforcement procedures, remedies, and dispute resolution procedures.  As a least-developed country member, DRC was given a longer transition period, through 2006, to comply with TRIPS, but it continues to be out of compliance with its international IPR obligations.

The pertinent conventions provide maximum protection of 20 years for patents, and 20 years, renewable, for trademarks, starting from the date of registration.  If not used within three years, a trademark can be cancelled. By contrast, the current Congolese laws provide only 15 years of protection on a number of patents, and do not include all the means mentioned in TRIPS for enforcement of IPR rights.  In July 2011, the Ministry of Culture and Art established the Société des Droits d’Auteur et des Droits Voisins (SOCODA) to address IPR issues faced by authors, and presented a bill to the government that seeks to rectify shortcomings of the existing 1982 IPR law.  Still, the reform bill is pending Parliamentary approval and it is unclear when that will be forthcoming.

6. Financial Sector

Capital Market and Portfolio Investment

The Congolese financial system continues to improve with new regulations and guidelines seeking to maintain stability and consolidate the system.  Although reforms have been initiated, the Congolese financial system remains small, heavily dollarized, characterized by fragile balance sheets, and cumbersome to use.  The GDRC backed away from its short-lived (2013-2016) de-dollarization program, and further reforms are needed to strengthen the financial system, support the expansion of the financial sector, and spur economic growth.  Shock resilience is undermined by inadequate risk-based controls, weak enforcement of regulations, low profitability, and excessive reliance on demand deposits.  The system is also characterized by a significant concentration of credit and exposure to systemic failure in the event of the insolvency of a large borrower.

Financial inclusion is increasing, but substantial progress is needed to develop payment systems, facilitate the use of financial services, and strengthen regulation of the non-banking sector. Consolidation and strengthening of microfinance along with reform of the pension sub-sector and continued privatization of the insurance sector could facilitate the expansion of financial services and attract long-term investors.

The DRC’s capital market remains underdeveloped and consists mainly of the issuance of treasury bonds.  There are no stock exchanges operating in the country, although a small number of private equity firms are actively investing in the mining industry.

The institutional investor base is not well developed, with only an insurance company and a state pension fund as participants.  The Central Bank of Congo (BCC), developed a market for short-term bonds, but most of these bonds are bought and held by local Congolese banks.  In the absence of private debt securities, the fixed-rate market is limited to government-issued treasury bonds with maturities of up to 28 days traded through commercial banks.

Access to the primary market is limited to commercial banks holding securities accounts at the BCC, and all investors, including institutional and individual investors, must submit bids through banks.  Commercial banks, which dominate the investor base, may trade in treasury bills in the secondary market, but in order to do so, bids and prices for which they agree to trade must be transparent and publicized.  There is no market for derivatives in the country.

The DRC suffers from a weak and fragile financial infrastructure.  National payment systems are not governed by central legislation, although the DRC’s National Payments and Settlement Committee is in the process of proposing legal reform through a draft bill that was proposed in 2016, has been adopted by the DRC Senate, and, as of the date of this report, is before the National Assembly for a second reading.

The Central Bank worked for a decade to implement reform on the national payment system via a gradual and interactive approach that identified and corrected deficiencies at each stage. This culminated with the Central Bank inaugurating in September 2017 an automated system that supports customer transfers, regulation of monetary policy operations, and the processing of transactions for the regional payment system-REPSS, set up by COMESA member countries. The system also includes an interbank automated clearing module for check payments, collections, and bills of exchange.

Borrowing options for small and medium enterprises (SME) are limited.  Maturities for loans are usually limited to 3-6 months, and interest rates typically hover around 16-21 percent.  Several companies complain that the inconsistency of the legal system, the often-cumbersome business climate, and the difficulty in obtaining inter-bank financing discourages banks from providing long-term loans.  There are limited possibilities to finance major projects in the domestic currency, the Congolese franc (CDF).  The Central Bank sets minimum capital requirements for local banks in CDF or its equivalent in USD.  Prior to 2016, the average was roughly USD 12 million per bank, but the economic downturn prompted the Central Bank to mandate an increase to USD 30 million by January 2019.  Foreign currency deposits account for almost 90 percent of bank holdings.

As for the insurance sector, the DRC Insurance Authority, ARCA, began implementing privatization of the sector in 2018, granting licenses to four private insurance companies.  These approvals came four years after passage of the 2015 Insurance Reform Law, and three years after the decree establishing ARCA as the regulator of the insurance sector.  Once the state owned insurance company SONAS is fully privatized, the DRC insurance sector should operate under competitive market conditions.  While analysts estimate that the DRC insurance market could be worth roughly USD 5 billion in ten years’ time, the current Congolese insurance market comprises roughly USD 80 million worth of insurance premiums for a penetration rate of only 0.5 percent.

Portfolio investment is absent in the DRC.  Cross-shareholding and stable shareholding arrangements are also not common.  There are occasional complaints about unfair privileges extended to certain investors in profitable sectors such as mining and telecommunications.

Money and Banking system

The Congolese financial system is growing but it remains fragile and operates primarily through the Central Bank.  The financial sector is comprised of 17 licensed banks, a national insurance company (SONAS), the National Social Security Institute (INSS), one development bank, SOFIDE (Société Financière de Development), a savings fund (CADECO), 102 microfinance institutions and cooperatives, 95 money transfer institutions which are concentrated in Kinshasa, Kongo Central, North and South Kivu and the former Katanga provinces, three electronic money institutions, and 23 foreign exchange offices. There is no secondary equity or debt market.

The Congolese Central Bank developed a charter of compliance with international financial rules that has been accepted by virtually all banks operating in DRC.  The stricter regulatory regime put in place after the global financial crisis increased bank compliance costs, however, and the resultant “de-risking” saw the bank lose two of its three remaining correspondent banks.  It currently works with one correspondent bank, Citigroup. All foreign banks accredited by the Congolese Central Bank are considered Congolese banks with foreign capital and fall under provisions and regulations covering the credit institutions’ activities in the DRC.

The financial system is mostly banking-based with aggregate holdings estimated at USD 5.1 billion, about 95 percent of the overall holdings of the financial system. Bank deposits account for about 90 percent of total deposits, with the balance held by microfinance institutions.  Among the five largest banks, four are local and one is controlled by foreign holdings.  The five largest banks hold almost 65 percent of bank deposits and more than 60 percent of total bank assets.

Bank financing is dominated by the collection of deposits, nearly 90 percent of which are denominated in U.S. dollars and held in demand accounts.  Bank operations are highly dollarized and financed largely by demand deposits.  Nearly 95 percent of loans are in dollars, and clients are mainly companies seeking working capital primarily for daily operations and import/export activities.  National and local government entities have significant balances in some banks (deposits in dollars used for investments) and also borrow funds from a few banks to finance administrative expenses.  Statistics on non-performing loans do not seem reliable.  According to the Central Bank’s regulatory framework, many banks only record the balance due rather than the total amount of the non-performing loan.

Transactions involving correspondence with associated foreign banks represent a significant part of the activities of DRC banks.  Correspondent accounts represent more than 30 percent of bank assets and more than 95 percent of interbank market activity.  They allow banks to settle transactions denominated in dollars, reflecting efforts to limit risks.  The profitability of the banks is fragile and has deteriorated over the last year, reflecting high operating costs and exchange rates.  Fees charged by banks are a major source of their revenues.

The banking system faces challenges in terms of net income and profitability.  In 2018, the banking system recorded a steady increase in net banking income and confirmed a strengthening and enrichment of banks.  Yet, the banking sector struggled to offset the increase in its cost/income ratio and the deterioration in the quality of its loan portfolio.

The DRC has roughly USD 4.6 billion of deposits in the banking system, up from USD 3.7 billion in 2017.  The 2018 Mining Code increased the percentage of export revenue that mining companies are required to repatriate from 40 percent to 60 percent.  This likely accounts for a good proportion of the increase in deposits, and will contribute to a further increase in 2019.  An estimated USD 10 billion of savings exist outside of banks informally.  Most deposits in the formal system are U.S. dollar-denominated.  A slight increase in bank penetration occurred after 2011 as the GDRC switched public employee payments from cash to bank transfers.

Bank penetration is roughly 6 percent or about 3.9 million accounts, which places the country among the most under-banked nations in the world.  Based on its strategic plan, the Central Bank seeks to increase the number of bank accounts to more than 20 million by 2030.  Banks are increasingly offering savings accounts that pay approximately 3 percent interest, but few Congolese hold savings in banks.

The overall balance sheet of the banks amounted to roughly USD 6.9 billion in 2018.  Credit volume is estimated at roughly USD 2.8 billion in comparison to USD 1.9 billion in 2017.  Credit remains scarce, short-term, and highly concentrated.  Domestic credit granted by banks increased from USD 1.9 billion in 2017 to USD 2.8 billion in 2018.  In 2018, the largest depositors in the banking system are private enterprises and households with 48 and 40 percent of deposits, respectively.  Public enterprises and central administration deposits comprise six percent and four percent, respectively.

Foreign Exchange and Remittance

Foreign Exchange

As part of broad economic reforms begun in 2001, the DRC adopted a free-floating exchange rate policy and lifted various restrictions on business transactions, including in the mining sector.  The international transfer of funds takes place freely when channeled through local commercial banks.  On average, bank declaration requirements and payments for international transfers take less than one week to complete.

The Central Bank is responsible for regulating foreign exchange and trade.  The only currency restriction imposed on travelers is a USD 10,000 limit on the amount an individual can carry when entering or leaving the DRC.  The GDRC requires that the Central Bank license exporters and importers.  The DRC’s informal foreign exchange market is large and unregulated and has tended to offer exchange rates not widely dissimilar from the official rate.  In practice, the nation’s economy remains highly dollarized.

On September 25, 2014, the Central Bank put into place new foreign exchange regulations. These regulations declared the Congolese franc (CDF) as the main currency in all transactions within the DRC.  Payment of fees related to education, medical care, water and electricity consumption, residential rents, and national taxes were mandated to be paid in CDF.  In the last several years, this requirement has been relaxed and where the parties involved and the appropriate monetary officials agree, exceptions may, and routinely are, made.

Any payments exceeding USD 10,000 must be executed within the banking system, unless there is no presence of banking entities.  The largest, albeit rarely used, banknote in circulation is the CDF 20,000 note (approximately USD 12.36).  Far more common are the CDF 500 and CDF 1,000 notes worth approximately USD 0.30 and USD 0.61 respectively.  U.S. banknotes printed after 2008 are readily accepted in virtually all transactions, with the exception of one-dollar bills.  Banks provide accounts denominated in either currency.  In September 2013, the GDRC embarked on a process of “de-dollarizing” the economy by requiring that tax records be kept in CDF and tax payments from mining companies be paid in CDF.  In March 2016, however, as a result of a dollar shortage, the GDRC began requiring mining and oil companies to pay their customs fees and taxes in U.S. dollars.

The economic forecast calls for continuing inflation and currency depreciation over the long term, but the currency has remained stable since August 2017.  The annualized inflation rate, which was stable at an average 1.4 percent from 2013 through 2015, increased to 54 percent in 2017 and decreased to 7.2 percent in 2018.  As of April 2018, foreign exchange reserves totaled USD 1 billion or 4.2 weeks of import cover in comparison to the 2017 level of USD 859 million 2.9 weeks of cover.  If government revenues from the extractive sectors continue to increase, the Central Bank will again have the option to support the CDF and maintain currency stability.

Remittance Policies

Although there is no legal restriction on converting or transferring funds related to investment, new exchange regulations will increase the time for in-country foreigners to repatriate export and re-export income from 30 to 60 days.  Foreign investors may remit through parallel markets when they are legally established and recognized by the Central Bank.

Sovereign Wealth Funds

The DRC has no reported Sovereign Wealth Funds, though the 2018 Mining Code discusses a Future Fund that is to be capitalized by a percentage of mining revenues.

7. State-Owned Enterprises

Some report the DRC state-owned enterprises (SOEs) can generally act as a burden on the nation’s economy. Investors have noted that SOEs stifle competition and are unable to provide reliable electricity, transportation, and other important services over which they have monopolies.  Some SOEs and other Congolese parastatal organizations are in a poor financial and operational state due primarily to indebtedness, mismanagement of resources and employees, and poor service delivery.

Reporting on the assets of SOEs and other parastatal enterprises is limited, making valuation difficult.  According to State law N° 08/007 of July 7, 2008 (related to business transformation), any firm of which the state owns 50 percent plus one share is considered to be an SOE.  DRC law does not grant SOEs advantage over private companies in bidding for government contracts, however, in practice, SOEs are accused of being favored over private companies, sometimes using questionable practices and arguably unsupportable legal actions.  The list of SOEs can be found at: http://www.leganet.cd/Legislation/Droit percent20Public/EPub/d.09.12.24.04.09.htm .

SOE accounts are not audited.  While the Supreme Audit Institution (Cour des Comptes) is authorized to audit SOEs and to publish findings, a lack of resources devoted to the organization has resulted in no or partial SOE audits.  In addition, the Conseil Superieur du Portefeuille – an oversight body under the Ministry of Portfolio – is mandated with assessing SOE financial performance in terms of growth, profitability, and solvency.  Their reports are for internal use and are not publicly available.

There is no official provision requiring preferential access to land and raw materials for SOEs; in a situation where both an SOE and private enterprise show interest in the same land or material, preferential access shall be granted to the first applicant.

The DRC is not a party to the WTO’s procurement agreement (GPA) but nominally adheres to the OECD guidelines on Corporate Governance for SOEs.  The DRC is a Participating Country in the Southern Africa SOE network, with the Ministry of Portfolio and the Steering Committee for SOE reforms designated as Regularly Participating Institutions.

According to some, in addition to being inadequately managed, some SOEs also serve as conduits for the illicit diversion of funds. U.S. NGO the Carter Center issued the November 2017 study, “A State Affair:  Privatizing Congo’s Copper Sector,” stating that roughly USD 750 million earned by the DRC’s state-owned mining company Gecamines between 2011 and 2014 cannot be reliably accounted for.  More recently, Gecamines has aggressively audited some of its joint venture partners, threatening to dissolve partnerships, and ultimately expropriate private mine holdings, unless partners transferred more revenue to GDRC and Gecamines accounts.

Privatization Program

The DRC has no official privatization program, though, with support of the World Bank, the GDRC established a Steering Committee in 2010 for the Reform of Public Enterprises (COPIREP), which attempts to address the performance of SOEs.  To date, only a handful of SOEs have undergone reform, with mixed results.

8. Responsible Business Conduct

In the past, the GDRC has taken actions of limited impact to support responsible business conduct (RBC) by encouraging the development and adherence to a code of ethics, and respect for the environment in which companies in the DRC operate.  Specific steps taken to encourage RBC include a 2012 roundtable between the GDRC, economic operators and the Fond Social de la République Democratique du Congo (FSRDC) in order to evaluate the implementation of socially responsible and environmentally sustainable investments in the DRC.

The DRC Labor Code includes provisions intended to protect employees, and there are legal provisions that require businesses to protect the environment or face prosecution.  Yet, these are spottily enforced and not effectively communicated to the private sector.  The DRC does not possess a legal framework to protect the rights of consumers and there are no existing domestic laws intended to protect individuals from adverse business impacts in general.  Most legal issues of this nature are resolved, if at all, on a case-by-case basis.

In September 2017, the United Nations Global Compact, with the support of the Embassy of the Netherlands in the DRC, officially launched the Global Compact Network DRC in Kinshasa.  The DRC Network consists of some 40 local firms, subsidiaries of multinational corporations, and international and national NGOs that seeks to encourage locally operating businesses to adopt sustainable and socially responsible policies.  The DRC Network is developing a partnership project to raise their visibility and highlight the Global Compact’s goals.

In 2016, the GDRC, in conjunction with the Federations of Enterprises of the Congo (FEC), and civil society organizations interested in the mining sector, launched the Guide on Corporate Social Responsibility (CSR Guide) for the mining sector in Katanga.  The project was financed by GIZ, the German development agency, and offers directives and guidance that propose a voluntary approach to achieve two objectives: (i) better enforcement of mining sector laws, and; (ii) identification of international standard practices for companies operating in DRC.

Although it is not a member of the Organization for Economic Cooperation and Development, the DRC has adopted the OECD due diligence guidelines on responsible mineral supply chains, as defined by the United Nations Group of Experts, as well as various resolutions of the UN Security Council related to business and human rights in the Congolese mining sector.  In addition, the DRC authorities renewed the mandate of the UN Group of Experts on transparency in the mining industry in June 2016.

The DRC participates in the Extractive Industries Transparency Initiative (EITI) and publishes reports on its revenue from natural resources, although in recent years the reports have been late and/or incomplete.  Systematizing the procedures necessary for a competitive process in awarding contracts and concessions in mining, oil, and forestry requires additional effort.

There are also existing internal measures in place in the DRC requiring supply chain due diligence for companies that source minerals in DRC.  Both the 2002 and 2018 mining codes provide domestic transparency measures requiring the disclosure of payments made to government entities, though they appear to have been infrequently enforced.  In addition, Promines, a technical parastatal body financed by the GDRC and the World Bank, works to improve the transparency of the artisanal mining sector.  Amnesty International, Pact Inc., Global Witness and the Carter Center have also published reports related to a responsible business climate in the DRC mining sector.  The Dodd-Frank Act mandated companies publicly listed in the United States to declare their supply chains for DRC-sourced “3Ts” (tin, tungsten and tantalum) and gold.  Although the Securities and Exchange Commission is no longer actively enforcing the act, many U.S. multinationals appear to be complying voluntarily so as to avoid possible reputational damage.

9. Corruption

The GDRC’s constitution includes laws intended to fight corruption and bribery by all citizens, including public officials.  Notwithstanding, the application of the laws are inconsistent and according to some sources they are sometimes politically motivated.  Historically, private firms have been more likely to develop and implement anti-corruption controls than their SOE and parastatal counterparts.

In 2015, former President Kabila authorized the creation of an anti-corruption office to fight corruption in the management of public affairs and appointed a “corruption czar” to decrease governmental malfeasance.  The office is reportedly under-financed and, although it has allegedly prepared reports on several politicians who have been accused of corruption and embezzlement of public funds, the reports have not been publicized, leading many to believe that the office is highly politicized.  The DRC’s 2018 Corruption Perception Index score—161 out of 180— highlights the lack of progress in fighting corruption, and underlines the endemic and deep roots of corruption in the DRC government.

While several NGOs contribute to the fight against corruption, the government can be prone to ignore their reports, particularly when government officials are implicated.  American firms see corruption as one of the main hurdles to investment in the DRC.

The DRC is a signatory to the UN Anticorruption Convention, but not to the OECD Convention on Combating Bribery.  In September 2007, the DRC ratified a protocol agreement with SADC on Fighting Corruption.  In 2015, the government drafted a bill to fight corruption that was scheduled to be discussed in Parliament in 2016, however that did not happen and it is not mentioned in the 2018 parliamentary agenda.

In December 2018, newly elected President Tshisekedi promised to combat corruption within the administration and establish a charter of good conduct.  The charter will be implemented in the administration and by SOEs in order to promote good governance, integrity and to encourage responsible business conduct within the communities in which they operate.  Since his arrival in power, President Tshisekedi has suspended two SOE administrators accused of embezzlement and mismanagement and has disciplined several other civil servants for specific acts of corruption.

The Agency in charge of fighting corruption in the DRC is:

Cellule Technique de Lutte contre l’Impunité
Falanga Mawete Coordinateur
Tel: 00243815189341
Email: nmbayo2002@yahoo.fr

Palais de Justice, Place de l’Indépendance
Kinshasa/Gombe, DRC
Special Advisor for Good Governance
Position is vacant
Email: jedenonce2015@gmail.com

10. Political and Security Environment

After decades of political instability and conflict, in December 2018 President Felix Tshisekedi was elected in DRC’s first peaceful transition of power.  The successful elections were the result of international, including U.S, pressure, as well as a long period of mediation involving the Catholic Church, the government, and the opposition. Maintaining public support for the Tshisekedi government will ultimately require the administration to deliver on the campaign slogan of “the People First.”  Nevertheless, large parliamentary majorities held by former President Kabila’s coalition have prevented the quick creation of a government, though a Prime Minister was named in May 2019.

Thousands of members of armed groups have been disarming and turning themselves in to the United Nations’ DRC peacekeeping operation (MONUSCO) and the GDRC since President Tshisekedi’s election, according to international observers.  Most of the defections have taken place in eastern and central (the Kasai provinces) DRC.  Nevertheless, international statistics indicate that over 140 armed groups continue to operate in 17 of the DRC’s 26 provinces, primarily in the east of the country.  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 do not appear to have demobilized to any significant degree.  Unlike his predecessor, President Tshisekedi appears cognizant of the important role security plays in attracting foreign investment, and is ready to work with MONUSCO to eliminate armed groups.

US citizens and interests are not being specifically targeted by armed groups, but 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, http://www.acleddata.com/ .  Kivu Security Tracker (www.kivusecurity.org ) is another database for information on attacks in eastern DRC.   In addition, the Department of State continues to advise travelers to review the Embassy’s travel advisory: https://travel.state.gov/content/travel/en/search.html?search_input=travel+advisory+drc&data-sia=true&data-con=true&starton=0

11. Labor Policies and Practices

The DRC is a difficult labor market, with chronically high unemployment, particularly among youth, as well as a lack of marketable skills in the labor force.  Expatriates frequently fill jobs requiring technical or vocational training.

There is no official or formal policy to mandate the make-up of senior management or boards of directors. Nonetheless, the labor law stipulates that for businesses with over 100 employees, 10 percent of all employees should be local.  Further, if the managing director is a foreigner, his deputy or secretary general is generally expected to be a Congolese citizen.  These provisions can be waived depending on the sector of activity and available expertise.  There are no onerous conditionality, visa, residence or work permit requirements inhibiting mobility of foreign investors and their employees, although visa fees are substantial.

While the agricultural sector is expanding, it continues to face challenges related to poor infrastructure; its contribution to employment though large, is primarily informal.

The DRC faces a deficit in skilled labor across all sectors.  There are few formal vocational training programs, though Article 8 of the labor law stipulates that all employers should provide training to their employees.  To address the high unemployment rate, the GDRC enacted a preferential policy, giving Congolese preference in hiring over expatriates.  Laws prevent firms from firing workers under most conditions without compensation.  These restrictions, however, have deterred hiring and encouraged the use of temporary contracts in lieu of permanent hiring.  In 2016, a new labor law was enacted that authorizes foreigners, under certain conditions, to be appointed to the management of a trade union, and allows women to work the night shift.  Despite these changes, the DRC labor code still requires substantial revision, including facilitating foreign employment and providing more protection for employees, foreign and domestic.

Congolese law imposes certain restrictions on the practice of free and voluntary collective bargaining in the public sector.  The law bans collective bargaining in certain sectors, including 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 undermine this right, including requiring unions to obtain permission and adhere to lengthy compulsory arbitration and appeal procedures prior to initiating a strike.

Despite GDRC ratification of the International Labor Organization’s (ILO) eight core conventions, some Congolese laws continue to be inconsistent with the ILO Convention on Forced Labor.  There are significant gaps both in law and practice regarding compliance with ILO conventions.

The 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 employment of career public service members.  According to some businesses, the government does not always effectively enforce relevant employment laws.

As of January 1, 2018, the DRC labor code increased the minimum wage (SMIG) from USD 1.04 to USD 5 per day for public and private enterprises.  The change did not affect civil servants’ salaries.

Although the new SMIG was supposed to take effect January 1, 2018, implementation has lagged.  Labor law defines different standard workweeks, ranging from 45 to 72 hours, for various jobs and prescribes rest periods and premium pay for overtime.  The law establishes no monitoring or enforcement mechanism, and 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.  The Ministry of Labor employs 200 labor inspectors, which is not sufficient to enforce consistent compliance with labor regulations.  The government does not effectively enforce such standards in the informal sector, and enforcement is uneven to non-existent in the formal sector.

The DRC Penal Code does not establish appropriate criminal penalties regarding the imposition of forced labor.  In practice, forced labor persists and remains a serious concern.  According to a 2015 UNICEF study, nearly a third of Congolese employed in the informal mining sector, or 40,000 individuals, were children.  According to the DRC’s Ministry of Labor, children continue to be engaged in the mining of gold, cassiterite (tin ore), and wolframite (tungsten ore).  The presence of children working in eastern DRC’s mines, especially in cobalt mines, was subject to growing international press coverage in 2017 and 2018.  In May 2018 the U.S. Department of Labor announced a USD 2.5 million, three-year project to combat child labor in the DRC’s cobalt mines.

Penalties for violations for the worst forms of child labor, which are one to three years of imprisonment and fines as high as 200,000 Congolese francs (USD 170), have proven to be insufficient to deter violations.  While DRC’s criminal courts could in principle adjudicate cases of child labor, neither the courts, nor other government agencies, effectively enforce these laws.

Reportedly, political parties also increasingly recruit children for violent election campaign activities targeting political opponents.  In order to combat this and other child labor issues, President Kabila signed and promulgated a law on July 15, 2016 fixing the legal working age at 18.

According to a report of the US Department of Labor, in 2017, the DRC made minimal advancement in efforts to eliminate the worst forms of child labor.  The GDRC adopted a revised Mining Code in 2018 which includes penalties for selling ore mined with child labor.  Children in the DRC continue to engage in the worst forms of child labor, including in the forced mining of gold, tin ore (cassiterite), tantalum ore (coltan), and tungsten ore (wolframite), and are used in armed conflict, sometimes because of forcible recruitment or abduction by non-state armed groups.

Other gaps remain in efforts to limit the worst forms of child labor, including a lack of trained enforcement personnel, a lack of financial resources for enforcement, and poor coordination of government efforts to combat child labor.

12. OPIC and Other Investment Insurance Programs

The U.S. Overseas Private Investment Corporation (OPIC), which provides political risk insurance and project financing to U.S. investors and non-governmental organizations, has granted political risk insurance for projects in the DRC in the past and is open to working on future projects in the DRC.  President Trump signed the Better Utilization of Investments Leading to Development (BUILD) Act on 5 October 2018, which established the Development Finance Corporation to succeed OPIC.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data

Host Country
Statistical Source
USG  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) N/A

N/A

N/A

N/A

N/A

N/A

2015

2016

2017

$37,9

$37,1

$37,6

http://data.worldbank.org/country/con 

http://data.worldbank.org/country/con 

https://www.imf.org/en/Countries/COD 

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

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

Points of contact for inquiries from the public:

Jigar Bhatt
Economic Officer
BhattJ@state.gov

Elisée Kaozi
Commercial Assistant
KaoziEN@state.gov

Econ Section’s email address: KinshasaEcon@State.gov

Cote d’Ivoire

Executive Summary

Cote d’Ivoire offers a fertile environment for U.S. investment, and the Ivoirian Government is keen to deepen its economic cooperation with the United States.  The 2018 investment code is considered generous with incentives and few foreign investor restrictions. The most fruitful areas of investment for U.S. businesses are in oil and gas exploration and production; agriculture and value-added agribusiness processing; power generation and renewable energy; IT services; and infrastructure.  In 2018, Cote d’Ivoire improved in the World Bank’s Doing Business ranking of 190 countries, moving from 139 to 122. Improvements in the business environment include the establishment of a one-stop shop for registering businesses, the implementation of a single tax user identification number for business creation, and the creation of an online tax payment for businesses.

Following a credible and peaceful election in 2015 in which President Ouattara was overwhelmingly re-elected to a second term, a new constitution was adopted in 2016 and a Senate established in April 2018.  Legislative and municipal elections in 2018 were marred by fraud and violence in certain locations, possibly setting the stage for a turbulent political situation in the lead up to the 2020 presidential elections.  The power struggle is dividing the country’s leaders and is deepening the rift between political parties, causing concerns for political transition in 2020.  Labor tensions led to a crippling teachers’ strike in 2019 during which many schools closed for nearly two months. Mutinies among disaffected military members in January and May 2017 briefly brought the country’s economy to a standstill and renewed worries about political stability, although the mutineers did not target foreigners and foreign interests.  To resolve the crisis, the government acceded to most of the mutinous soldiers’ demands for bonuses and back pay and promised to refocus its efforts to reform the military. Despite these promises, security sector reform remains incomplete, primarily due to a lack of government will. The government has also failed to make real progress on national reconciliation and transitional justice, undermining the full consolidation of democratic gains.  Cote d’Ivoire suffered its first terrorist attack in March 2016 on the beaches of Grand Bassam, for which al-Qaeda in the Islamic Maghreb claimed responsibility. Ivoirian security forces responded quickly, demonstrating that the capacity of the country’s special operations units has improved over the past few years.

Economically, Cote d’Ivoire is Africa’s second fastest growing economy and since 2012 has experienced rapid progress in all sectors.  The largest economy in francophone Africa, Cote d’Ivoire’s growth attracts migrants and a significant expatriate community.  The IMF expects GDP growth to continue at 7 percent in 2019, led by growth in the industrial and service sectors.

Despite improvements, doing business with the government remains a significant challenge.  The government has awarded a number of sole source contracts without competition and at times disregarded objective evaluations on competitive tenders.  An overly complicated tax system and the slowness and lack of transparency in government decision-making hinders investment. In August 2017, the Appeal Court of the Commercial Court of Abidjan was created, and other commercial jurisdictions will be progressively established throughout the country.

Legally, women do not face restrictions on investment development, but have historically faced discrimination and a lack of access to credit that has hindered their extent of business ownership.

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 105 of 175 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2019 122 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2018 123 of 126 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, stock positions) 2017 $ – 146  http://www.bea.gov/international/factsheet/ 
World Bank GNI per capita 2018 $ 1,580 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The government actively encourages Foreign Direct Investment (FDI) and is committed to doubling foreign investment over the next several years.  Foreign companies are free to invest and list on the regional stock exchange Bourse Regionale des Valeurs Mobilieres (BRVM), which is based in Abidjan and covers the eight countries of the West African Economic and Monetary Union (WAEMU).  WAEMU members are part of the Regional Council for Savings and Investment, a regional securities regulatory body.

In most sectors, there are no laws that limit foreign investment.  There are restrictions on foreign investment in the health sector, law and accounting firms, and travel agencies.  Although there are regulations designed to control land speculation in urban areas, foreigners own significant amounts of land.  Freehold land tenure in rural areas is difficult to negotiate and inhibits outside investment. Land tenure disputes exist all over the country owing to the lack of formal private land ownership in most areas.  Most businesses, including agribusinesses and forestry companies, circumvent this by acquiring long-term leases. Companies that wish to purchase

land must have the property surveyed before obtaining title.  Surveying is tightly controlled by a small oligopoly of companies, and can often cost more than the value of the parcel of land.

Cote d’Ivoire’s investment promotion agency, the Centre for the Promotion of Investment in Cote d’Ivoire (CEPICI), facilitates foreign investment, and its services are available to all investors.  CEPICI provides its services through a one-stop shop to facilitate business creation, operation, and expansion; requests incentives in the investment code and for access to industrial land; and promotes and attracts national and foreign investments.  More information is available at http://www.cepici.gouv.ci/  .

Cote d’Ivoire maintains an ongoing dialogue with investors through various business networks and platforms, such as CEPICI, the Ivoirian Chamber of Commerce (CCI-CI), the association of large enterprises (CGECI), and the bankers’ association.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investors generally have access to all forms of remunerative activity on terms equal to those enjoyed by Ivoirians.  The government encourages foreign investment, including in the privatization of state-owned and public firms, although in most cases the state reserves an equity stake in the new company.

There are no significant limits on foreign investment, nor are there legal differences in the treatment of foreign and national investors, either in terms of the level of foreign ownership or sector of investment.  There are no laws specifically authorizing private firms to adopt articles of incorporation or association that limit or prohibit foreign investment, participation, or control, and no such practices have been reported.

Banks and insurance companies are subject to licensing requirements, but there are no restrictions designed to limit foreign ownership or to establish subsidiaries of foreign companies in this sector.  Investments in health, law and accounting, and travel agencies are subject to prior approval and require appropriate licenses and association with an Ivoirian partner. The Ivoirian government has, on a case-by-case basis, mandated using local providers, hiring local employees, or arranging for eventual transfer to local control.

The government does not have an official policy to screen investments and its overall economic and industrial strategy does not discriminate against foreign-owned firms.  There are indications in some instances of preferential treatment for firms from countries with longstanding commercial ties to Cote d’Ivoire.

Other Investment Policy Reviews

Cote d’Ivoire has not conducted an investment policy review (IPR) through the OECD.

A Trade Policy Review was last done by the WTO in July 2012 and can be found at https://www.wto.org/english/tratop_e/tpr_e/tp366_e.htm  

UNCTAD does not provide an IPR report for Cote d’Ivoire, though there are statistics on FDI in the country profile at http://unctadstat.unctad.org/Country Profile/GeneralProfile/en-GB/384/index.html  .

The government of Cote d’Ivoire provides information about sector policies and business opportunities in various reports.  More information can be found at: http://www.cepici.gouv.ci/en/   or at: www.gcpnd.gouv.ci/  .

Business Facilitation

The government has engaged in business facilitation efforts through a series of reforms using the World Bank’s Ease of Doing Business Index as a reference to improve the business environment.  These reform efforts include the acceleration of business creation to 24 hours, the issuing of a construction permit in 26 days, the establishment of a one-stop shop for external trade, and the establishment of a single tax declaration form.  In 2018, Cote d’Ivoire improved its Doing Business ranking from 139th to 122nd place.

Cote d’Ivoire’s online information portal containing all documents dedicated to business creation and registration (https://cotedivoire.eregulations.org/  ) is managed by CEPICI.  All the necessary documentation for registration is available online.  The one-stop shop for business registration takes between 24-48 hours and has all the agencies under a single roof, allowing for a more simplified approach to business creation.  Businesses have noted the one-stop shop has been very successful in speeding up registration.

The registration process is generally equitable toward women and underrepresented nationalities, and there have not been any reports of discrimination.

Outward Investment

Cote d’Ivoire does not promote or incentivize outward overseas investment.  The government does not restrict domestic investors from investing abroad.

2. Bilateral Investment Agreements and Taxation Treaties

There is no bilateral investment treaty between Cote d’Ivoire and the United States in force.  Cote d’Ivoire has signed Bilateral Investment Treaties (BITs) with the following countries and multilateral organizations:  Belgium, Luxembourg, Canada, China, the EU, Germany, Ghana, Italy, the Netherlands, Singapore, Sweden, Switzerland, Tunisia, and the United Kingdom.  The Ivoirian government ratified the Economic Partnership Agreement (EPA) with the EU in September 2016, allowing it to access the European market with no tax.  The EPA is scheduled to go into effect in 2019.

Cote d’Ivoire does not have a bilateral taxation treaty with the United States, though Cote d’Ivoire has concluded tax treaties with Belgium, Canada, France, Germany, Italy, Norway, and Switzerland.  For leasing, the depreciation period of the item is now aligned with the period of the contract and not the lifespan of the item for accounting purposes. A special tax incentive for equipment has been adopted to help business development.

Businesses and foreign investors have expressed some concerns about the level of taxation, but there are currently no U.S. firms involved in ongoing systemic tax disputes.

3. Legal Regime

Transparency of the Regulatory System

The government has taken steps to encourage a more transparent and competitive economic environment, and the IMF, World Bank, EU, and other large donors continue to urge the government to make further reforms.  The government aims for transparency in law and policy to foster competition and provide clear rules of the game and a level playing field for domestic and foreign investors. Transparency of the regulatory system, however, is a concern in Cote d’Ivoire, as companies complain that regulations are issued with little warning and without a period for public comment.

There are no informal regulatory processes managed by non-governmental organizations or private sector associations.

In general, regulatory authority exists at the national level and is the most relevant for foreign businesses.  For most industries or sectors, regulations are developed through the relevant ministry. In the telecommunications, electricity, cocoa, coffee, cotton, and cashew sectors, the government has established control boards or independent regulatory agencies to regulate the sector and pricing.

Cote d’Ivoire’s accounting, legal, and regulatory procedures are consistent with international norms, though businesses often complain about the system’s lack of clarity and the government’s poor communication.  Cote d’Ivoire is a member of the Organization for the Harmonization of African Business Law (OHADA), which is common to 16 countries and adheres to the West African Economic and Monetary Union’s (WAEMU) accounting system.  In accounting, companies use the WAEMU system, which complies with international norms in force and is a source of economic and financial data.

Draft bills and regulations are not published or made available for public comment.  The government often holds public seminars and workshops to discuss proposed plans with trade and industry associations.

Key regulatory actions are published in the Journal Officiel de la Republique de Cote d’Ivoire, and each regulatory body provides regulatory actions (laws, decisions, and sanctions) on its website http://www.sgg.gouv.ci/jo.php  .

The regulatory body, Autorite Nationale de Regulation des Marches Publics (ANRMP), ensures transparency and compliance with administrative processes.  Consumers, trade associations, private companies, and individuals have the right to file complaints with ANRMP to ensure that the government follows administrative processes.

There is no centralized online location where regulatory actions or their summaries are published, similar to the Federal Register.  The website https://abidjan.net/   makes the Journal Officiel available for purchase online.

The U.S. government does not have any knowledge of recent regulatory system, including enforcement reforms, that have been announced since the last ICS report.  Regulatory reforms announced in prior years have been fully implemented, with the goal to create an enabling business environment, foster competition, and build investors’ confidence in the economy.

The regulatory enforcement mechanisms are made available to the public through the private and public institutions tasked with controlling and regulating these sectors.

Regulations are reviewed on data-driven assessments, as regulatory bodies regularly publish and promote access for the business community and development partners to their data.  Quantitative analysis and public comments are made available.

Cote d’Ivoire’s government ensures transparency of public finances and debt obligations (including explicit and contingent liabilities) with the publication of this information through the following websites:

http://budget.gouv.ci/budget/budget-etat  
https://www.tresor.gouv.ci/tres/fr_FR/rapport-de-la-dette/  

International Regulatory Considerations

The Ivoirian government accounts for regional bodies in public procurement by incorporating WAEMU directives into the bidding processes and auditing, as well as into the regulation of public procurement within the WAEMU.  The public procurement code harmonizes public procurement policy and is in compliance with WAEMU directives. Changes include the separation of auditing and regulating functions, the transformation from a national to a regional system of procurement for intellectual services, and an increase from 25 to 30 percent of advance payment for the initial procurement of goods and services.  The ANRMP regulates public procurement with a view to improve governance and transparency. It may sanction entities which do not comply with public procurement regulations.

Cote d’Ivoire’s laws, codes, professional association standards, and regional directives are incorporated in the country’s regulatory system.  European norms are often followed due to Cote d’Ivoire’s free trade agreement with the EU.

Cote d’Ivoire has been a WTO member since 1995 but has not notified all draft technical regulations to the WTO Committee on Technical Barriers to Trade.  Cote d’Ivoire signed the Trade Facilitation Agreement (TFA) in December 2013 and ratified it in December 2015. There have been notable efforts to implement the TFA requisites with the establishment of the TFA National Committee to coordinate its implementation.  Other efforts include the USAID trade facilitation support program, which has helped in the national implementation of the TFA.

Legal System and Judicial Independence

Cote d’Ivoire’s legal system is based on the French civil law model.  The law guarantees the right to own and transfer private property. While this right is respected in most instances, the law regarding rural land tenure makes it prohibitively difficult to do so.  The court system enforces contracts.

Cote d’Ivoire is a signatory to the Organization for the Harmonization of Corporate Law in Africa (OHADA) that provides common corporate law and arbitration procedures for the 16 member states.  The Commercial Court of Abidjan handles business cases. Mediation is also available through the Ivoirian legal framework in addition to the Commercial Court and the Arbitration Tribunal. Following the recommendations of business associations and commercial law experts, in August 2017, the government established the Court of Appeals of the Commercial Court of Abidjan.  The IMF has recommended the creation of other commercial jurisdictions in the interior of the country.

Cote d’Ivoire’s judicial system is ostensibly independent, but magistrates are sometimes subject to political or financial influence.  Judges sometimes fail to base their decisions on the legal or contractual merits of a case and are often seen to rule against foreign investors in favor of entrenched interests.  The greatest complaint from investors is the slow process. Cases are often postponed and appealed without a reasonable explanation, moving from court to court for years or even decades.  With international assistance, the government is making an effort to reform the judiciary system to make it more efficient and transparent.

Regulations or enforcement actions are appealable and adjudicated in the national court system.

Laws and Regulations on Foreign Direct Investment

The major law affecting foreign investment is the 2018 Investment Code.  The code is considered generous as it has no restrictions on foreign investment or the repatriation of funds.  The code offers mixed fiscal incentives, combining tax exoneration and tax credits to encourage investment. There are also incentives to promote small businesses and entrepreneurship, low-cost housing construction, factories, and infrastructure development, which the government considers key to the country’s economic development.  In mining, the 2014 Mining Code allows a period for holding permits for ten years with a possibility to extend for two more years on a limited permit area of 400 square kilometers. The code has spurred investment in the sector.

CEPICI provides a one-stop shop website for investment.  More information on Cote d’Ivoire’s laws, rules, procedures, and reporting requirements can be found at:

www.apex-ci.org/  
www.cepici.gouv.ci/  

Competition and Anti-Trust Laws

The Ministry of Commerce, Handicraft and Small Business Promotion, through the Commission on Anti-Competition Practices, is responsible for reviewing competition–related concerns under the 1991 competition law, which was updated in 2013.  The National Authority for the Regulation of Public Tenders is responsible for reviewing the awards of contracts.    

No significant competition cases were reported over the past year.

Expropriation and Compensation

Private expropriation to force settlement of contractual or investment disputes continues to be a problem.  Local individuals or local companies, using what appear to be spurious court decisions, have challenged the ownership of some foreign companies in recent years.  On occasion, the government has blocked the bank accounts of U.S. and other foreign companies because of ownership and tax disputes.

There is no history of public expropriations.

In cases of illegal expropriations, Ivoirian law affords claimants due process.  Even so, perceived corruption and lack of capacity in the judicial and security services have resulted in poor enforcement of private property rights, particularly when the entity in question is foreign and the plaintiff is Ivoirian or a long-established foreign resident.

Dispute Settlement

ICSID Convention and New York Convention

Cote d’Ivoire is a signatory to the International Center for Settlement of Investment Disputes (ICSID) and a signatory to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

In cases where the firm does not meet the nationality conditions stipulated by Article 25 of the Convention, the code stipulates that the dispute be resolved within the provisions of the supplementary mechanisms approved by the ICSID.

Investor-State Dispute Settlement

Cote d’Ivoire is a signatory to investment agreements subject to binding international arbitration of investment disputes.  Cote d’Ivoire recognizes and has been known to enforce foreign arbitral awards, but enforcement is inconsistent.

Cote d’Ivoire does not have a Bilateral Investment Treaty (BIT) or a Free Trade Agreement (FTA) with the United States.

In the past 10 years, foreign investors have had investment disputes, which are often resolved through arbitration or an amicable settlement.  One U.S. firm was involved in tax and customs disputes over its investment in the cocoa sector. As a result, the U.S. firm chose to divest its holdings.  One U.S. dispute still ongoing involves the decision of the government to nullify a memorandum of understanding with a U.S. company to fulfill sanitation work.

As a signatory to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards, local courts are obliged to enforce foreign arbitral awards.

The U.S. government is not aware of any history of extrajudicial action against foreign investors, including U.S. firms.

International Commercial Arbitration and Foreign Courts

The Abidjan-based regional Joint Court of Justice and Arbitration (CCJA) provides a means of solving contractual disputes.  The arbitration tribunal has the ability to enforce awards more quickly, but the use of the tribunal in lieu of the court system has been limited.

Cote d’Ivoire is a member of the Organization for the Harmonization of African Business Law (OHADA), whose provisions of 1999 have replaced domestic law on arbitration.  The unified law is based on the UNICITRAL model law.

Judgments of foreign courts are recognized but difficult to enforce in local courts.  To avoid working through the Ivoirian legal system, some investors stipulate in contracts that disputes must be settled through international commercial arbitration.  Yet, even if stipulated in the contract, decisions reached through international arbitration or through OHADA are sometimes not honored by local courts.

Cote d’Ivoire’s domestic courts have no preferential treatment for state-owned enterprises involved in investment disputes.

Bankruptcy Regulations

As a member of OHADA, Cote d’Ivoire has both commercial and bankruptcy laws that address the liquidation of business liabilities.  OHADA is a regional system of uniform laws on bankruptcy, debt collection, and rules governing business transactions. OHADA permits three different types of bankruptcy liquidation:  an ordered suspension of payment to permit a negotiated settlement; an ordered suspension of payment to permit restructuring of the company, similar to Chapter 11; and the complete liquidation of assets, similar to Chapter 7.  Creditors’ rights, irrespective of nationality, are protected equally by the Act. Bankruptcy is not criminalized. Monetary judgments resulting from a bankruptcy are usually paid out in local currency. Cote d’Ivoire is ranked 77 out of 190 countries for ease of resolving insolvency, according to the World Bank’s Doing Business Report.

The joint venture Credit Info – Volo West Africa manages regional credit bureaus in the WAEMU.

4. Industrial Policies

Investment Incentives

The 2018 Investment Code offers mixed fiscal incentives combining tax exoneration and tax credits focusing on agriculture, agro-business, tourism, health, and education.  These include a full exoneration of customs duties or suspended VAT, and tax exemptions to business operations in some remote areas, with incentives based on the type of investment, phase of operation, local content, and participation.   There are also incentives to promote small businesses and entrepreneurship, low-cost housing construction, factories, and infrastructure development, which the government considers key to the country’s economic development. The Investment Code, the Petroleum Code, and the Mining Code delineate incentives available to new investors in Cote d’Ivoire.

The government occasionally guarantees loans or jointly finances foreign direct investment projects.  This is not a common practice.

Foreign Trade Zones/Free Ports/Trade Facilitation

Created in 2008, the free trade zone for information technology and biotechnology (VITIB) is located in the city of Grand Bassam.  In 2014, VITIB inaugurated the Mahatma Gandhi Technology Park at Grand Bassam with a loan of USD 20 million from India’s EXIM bank.  Current plans are to develop a technology corridor on VITIB land in Grand Bassam. Bonded warehouses do exist, and bonded zones within factories are allowed.  High port costs and maritime freight rates have inhibited the development of in-bond manufacturing or processing, and there are consequently no general foreign trade zones.

Performance and Data Localization Requirements

The government strongly encourages investors and firms to hire Ivoirian employees, but this is not a requirement.

The 2012 Investment Code (Article 14) guarantees the freedom to designate senior management and board members.

Citizens of Economic Community of West African States (ECOWAS) countries can legally work in Cote d’Ivoire.  For other nationalities, visa, work, and residence permits are required and the investment agency CEPICI facilitates their acquisition.  The process is not onerous and does not inhibit the mobility of foreign investors and their employees.

There are no government-imposed conditions on permission to invest, including tariff and non-tariff barriers.

The government does occasionally place conditions on location, local content, equity ownership, import substitution, export requirements, host country employment, and technology.  The Ivoirian government required that Kentucky Fried Chicken franchises, that began operating in April 2018, use locally-sourced chicken. The government also makes use of a number of tax exemptions and customs exonerations to incentivize companies to do more value-added processing in Cote d’Ivoire.

There are no performance requirements for investments.

Cellular telephone companies must meet technology and performance requirements to maintain their licenses.  Cote d’Ivoire does not have any known requirements for foreign IT firms to turn over source code or provide access to encryption.

There are no requirements that prevent or unduly impede companies from freely transmitting customer or other business related data.  Data transmission or transfer is subject to prior authorization of the telecom regulatory board Autorite de Regulation des Telecommunications (ART-CI).

Cote d’Ivoire’s law on data protection requests prior declaration or authorization by ART-CI for any data processing.  ART-CI is responsible for the oversight of local data storage.

5. Protection of Property Rights

Real Property

The Ivoirian civil code provides for the enforcement of private property rights, and the government has undertaken reform efforts to secure property rights.  Mortgages and liens exist. Secured interests in property are enforced by the Land Registry Office of the Ministry of Economy and Finance. In the World Bank’s Doing Business report, Cote d’Ivoire is ranked 112 out of 190 countries for registering property.

Foreign and/or nonresident investors who wish to lease land must obtain a permit for the development of the site, as well as a bylaw from the prefecture or sub-prefecture for the occupation of the site.

In Cote d’Ivoire, 96 percent of land does not have a clear title.  The government has committed to titling all private land within 10 years.  The government has made efforts to raise awareness on land titling throughout the country and to streamline procedures for obtaining land titles.  In 2018, the World Bank approved a program to build the capacity and institutions to support the implementation of the national rural land tenure security program, and register customary land rights in selected rural areas.  All land that is to be titled must be professionally surveyed. The surveying, which must be performed by one of the few companies allowed to execute land surveys in Cote d’Ivoire, can cost more than the value of the land. The status of the land from which thousands of refugees moved during the 2011 post-election conflict has not been resolved.  Much of that land is now occupied by squatters, many of whom are immigrants or descendants of immigrants from neighboring countries to the north of Cote d’Ivoire, particularly from Burkina Faso. A lack of titles and a conflict between modern land-tenure law and common practice hinders resolution of the land tenure issue.

If legally purchased property is unoccupied, ownership cannot be reverted to other owners (such as squatters).

Intellectual Property Rights

The Ivoirian Civil Code protects intellectual property rights (IPR).  The government’s Office of Industrial Property is charged with ensuring the protection of patents, trademarks, industrial designs, and commercial names.  Patents are valid for ten years, with the possibility of two five-year extensions. Trademarks are valid for ten years and are renewable indefinitely. Copyrights are valid for 50 years.  The Ivoirian Copyright Office has a labeling system in place to prevent counterfeiting and protect audio, video, literary, and artistic property rights in music and computer programs. In general, the protection of IPR in Cote d’Ivoire is weak and the government has limited resources for IPR protection.  While Ivoirian IPR law is in conformity with standards established by the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), enforcement is weak due to a lack of custom checks at the country’s porous borders, limiting the law’s impact.

No IPR related laws or regulations have been enacted in the past year.

Legally the government must protect intellectual property on both exported and imported goods.  Customs has the power to seize products imported with equipment installed, detained, marketed, or illegally supplied.  Such seizures, generally of counterfeit consumer goods, are routinely publicized on government websites and media outlets, although statistics on seizures are unavailable.  The intellectual property office’s police unit has sometimes held raids against retail outlets and street vendors to confiscate pirated CDs and DVDs, and they have instituted legal proceedings against counterfeiters.  IPR violations are prosecuted and sanctions vary from three months to two years of imprisonment and fines from USD 163 to USD 8,000.

Cote d’Ivoire is not listed in USTR’s Special 301 Report.

Cote d’Ivoire is not listed in the USTR’s Notorious Markets List.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/  .

6. Financial Sector

Capital Markets and Portfolio Investment

Government policies generally encourage foreign portfolio investment.

The Regional Stock Exchange (BRVM) is in Abidjan and the BRVM lists companies from the eight countries of the WAEMU.  An effective regulatory system exists to facilitate portfolio investment through the West African Central Bank (BCEAO) and the Regional Council for Savings Investments (CREPMF).  There is sufficient liquidity in the markets to enter and exit sizeable positions.

Government policies allow the free flow of financial resources into the product and factor markets.

The central bank BCEAO respects IMF Article VIII on payment and transfers for current international transactions.

Credit allocation is based on market terms and has increased to support the private sector and economic growth, specifically for large businesses.  Banks lend to the private sector, offering short-term and long-term loans and overdraft facilities. Foreign investors can acquire credit on the local market.

Money and Banking System

The banking sector is composed of 28 commercial banks and two credit institutionsBanks are expanding their networks, especially in the secondary cities outside Abidjan, as domestic investment has increased upcountry.  The total number of bank branches has more than doubled from 324 in 2010 to 709 branches in 2018.

Cote d’Ivoire’s banking sector is improving with most banks being compliant with the BCEAO’s new minimum capital requirements.  Some public banks have had large numbers of nonperforming loans. The government is restructuring and privatizing the commercial banking sector in order to reinvigorate the banks and remove low performers from government accounts.

The estimated total assets of the five largest banks are around USD 9 billion.

The central bank of the BCEAO is common to the eight member states of the WAEMU and manages regulations.

Foreign banks are allowed to establish operations in Cote d’Ivoire.  They are subject to prudential measures and regulations of the WAEMU Banking Commission.  Cote d’Ivoire did not lose any correspondent banking relationships in the past three years.  No known correspondent banking relationships are in jeopardy.

The U.S. government is not aware of the implementation of block chain technologies in banking transactions.

Alternative financial services available include mobile money and microfinance for payments, transfers, and finances.  Mobile money has become a very popular way to make payments and many Ivoirians prefer mobile money over banking, but mobile money has yet to expand to offering full financial services.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions on the transfer or repatriation of capital and income earned, or on investments financed with convertible foreign currency.  Once an investment is established and documented, the government regularly approves the remittances of dividends and/or repatriation of capital. The same holds true for requests for other sorts of transactions (e.g. imports, licenses, and royalty fees).

Funds associated with investments funded with convertible currency are freely convertible into any world currency.

Cote d’Ivoire is a member of the WAEMU, which uses the West African Franc (XOF), also known as the CFA.  The French Treasury holds the international reserves of WAEMU member states and supports the fixed exchange rate of 655.956 CFA to the Euro.

Remittance Policies

There are no recent changes or plans to change investment remittance policies.

There are no time limitations on remittances.  Remittances for Ivoirians were about USD 381 million in 2018 or 0.7 percent of GDP.

Sovereign Wealth Funds

Cote d’Ivoire does not have a sovereign wealth fund.

7. State-Owned Enterprises

Companies owned or controlled by the state are subject to national laws and the tax code.  The Ivoirian government still holds substantial interests in many firms, including the refinery SIR (49 percent), the public transport firm (60 percent), the national television station RTI (98 percent), the national lottery (80 percent), the national airline Air Cote d’Ivoire (58 percent), and the land management agency Agence de Gestion Fonciere AGEF (35 percent).  Of the SOEs, 28 are wholly government owned, 15 are majority owned, eight are with a blocking minority, and 30 are minority owned.  Each SOE has an independent board. The government has begun the process of divestiture for some state-owned enterprises, but the program has not been completed.  The Ivoirian government is an active participant in the banking, agri-business, mining, and telecom industries.

The published list of SOEs is available at https://dgpe.gouv.ci/index.php?p=portefeuille_etat  

SOEs competing in the domestic market do not receive non-market based advantages from the government.  They are subject to the same tax burdens and policies as private companies.

The corporate governance of SOEs in Cote d’Ivoire does not meet the standards of the OECD, though the government has made some efforts to improve it.

Privatization Program

The government proposed a program to privatize a quarter of public enterprises, including approximately 15 public or semi-public enterprises, banks, the sugar company Sucrivoire (SIFCA), and USD 232 million of investments the government holds in Industrial Promotion Services (IPS)-Aga Khan Foundation projects.  The privatization process is completed for the Societe Ivoirienne de Banque (now Attijariwafa-bank), the sugar company Sucrivoire, and the cotton firm Compagnie Ivoirienne de pour le Developpement du Textile.   At the urging of the IMF, the government is continuing the privatization of banks including Versus Bank, NSIA Bank, and the housing finance bank BHCI.

Foreign investors are encouraged to compete.

These programs have a public bidding process in French.  No website on privatizations is available.

8. Responsible Business Conduct

The private sector, the government, NGOs, and local communities are becoming progressively aware of the importance of Responsible Business Conduct (RBC) regarding environmental, social, and governance issues in Cote d’Ivoire.

Investment projects in energy, infrastructure, agriculture, forestry, waste management, and extractive industries are required by decree to provide an environmental impact study prior to approval.  Foreign businesses, particularly in mining, energy, and agriculture, often provide social infrastructure, including schools and health care clinics, to communities close to their sites of operation, often at the request of the government.  Some companies complain that these requests can be quite numerous. Companies are not required under Ivoirian law to disclose information relating to RBC, although many companies, especially in the cocoa sector, publicize their work. Cocoa companies publicize efforts to improve sustainability and combat the worst forms of child labor.  As a part of public procurement reform, the Ministry of Budget plans to include social needs in public procurement contracts to support job creation, fair trade, decent working conditions, social inclusion and compliance with social standards. On the environment, suggested reforms include the selection of goods and services that have a smaller impact on the environment.

There have not been high profile instances of a private sector impact on human rights or the resolution of such cases in the past year.

The government, through the Ministry of Employment and Social Protection, sets workplace health and safety standards and is responsible for enforcing labor laws.

The Act of Organization for the Harmonization of Business Law in Africa (OHADA), which is common to 17 countries including Cote d’Ivoire, outlines corporate governance standards that protect shareholders.

There are government-funded agencies in charge of monitoring business conduct.  Human rights, environmental protection, and consumer NGOs report misconduct and violations of good governance practices.

While international firms are aware of OECD guidelines and international best practices in RBC, most local firms have limited familiarity with international standards.

Cote d’Ivoire is compliant with the Extractives Industries Transparency Initiative (EITI) and discloses revenues and payments in the oil, gas, and mineral sectors.  More information can be found at: www.cnitie.ci/  

9. Corruption

Corruption is a concern for businesses in Cote d’Ivoire.  Cote d’Ivoire endorsed ordinance number 2013-660 related to the prevention and the fight against corruption.  The High Authority for Good Governance covers corruption issues and requires that all public officials submit asset declarations at the beginning and end of their tenures in office.  The country’s financial intelligence office CENTIF has broad authority to investigate suspicious financial transactions, including those of government officials. Despite the establishment of these bodies, there have been no prominent public corruption cases despite credible allegations of widespread corruption.  These watchdog agencies are generally regarded as lacking the power and will to actively combat corruption.

The laws extend to family members of officials and to political parties.

The country’s Code of Public Procurement No. 259 and the associated WAEMU directives cover conflicts-of-interest in awarding contracts or government procurement.

Under the Ivoirian Penal Code, a bribe by a local company to a foreign official is a criminal act.

Some private companies use compliance programs or measures to prevent and detect bribery of government officials.  U.S. firms underscore to their Ivoirian counterparts that they are subject to the Foreign Corrupt Practices Act (FCPA).

Cote d’Ivoire ratified the UN Anti-Corruption Convention, but the country is not a signatory to the OECD Anti-Bribery Convention.  In 2016, Cote d’Ivoire joined the Partnership on Illicit Finance, which obliges it to develop an action plan to combat corruption.

There are no special protections to NGOs involved in investigating corruption.

Corruption in many forms is deeply engrained in public and private sector practices and remains a serious impediment to investment and economic growth in Cote d’Ivoire.  Many companies cite corruption as the major obstacle to investment in Cote d’Ivoire. It has the greatest impact on judicial proceedings, contract awards, customs, and tax issues.  Lack of transparency and failure to follow the government’s own tender procedures in the awarding of contracts lead businesses to conclude bribery was involved. Businesses have reported encountering corruption at every level of the civil service, with some judges appearing to base their decisions on bribes.  Clearance of goods at the ports often require substantial “commissions,” and the Embassy has heard anecdotal accounts of customs agents rescinding valuations that were declared by other customs colleagues in an effort to extract bribes from customers. The demand for bribes can mean that containers stay at the Port of Abidjan for months, incurring substantial demurrage charges, despite having the proper paperwork in order.

No local industry or non-profit groups offer services for vetting potential local investment partners.

Resources to Report Corruption

These contacts at agencies are responsible for combating corruption:

Inspector General of Finance
(Brigade de Lutte Contre la Corruption)
Lassina Sylla
Inspector General
TELEPHONE: +225 2252 9797
FAX: +225 2252 9798
HOTLINE: +225 8000 0380
http://www.igf.finances.gouv.ci/blc/  
info@igf.finances.gouv.ci

High Authority for Good Governance
(Haute Autorite pour la Bonne Gouvernance)
N’Golo Coulibaly
President
TELEPHONE: +225 22479 5000
FAX: +225 2247 8261

Police Anti-Racketeering Unit
(Unite de Lutte Contre le Racket –ULCR)
Alain Oura
Unit Commander
TELEPHONE: +225 2244 9256
info@ulcr.ci

10. Political and Security Environment

President Alassane Ouattara was elected to a second term in 2015.  In 2016, a new constitution was adopted through a referendum creating the position of Vice-President, and a Senate, which convened in April 2018.  During electoral periods, demonstrations and protests by political parties occur often and occasionally lead to vandalism and clashes with security forces.  During the October 2018 municipal and regional elections, there were reports of violence in Abidjan and in areas throughout the country, raising concerns for the 2020 presidential election.  Unions also engage in protests that sometimes become violent. Still, social unrest has not had a serious economic impact.

Cote d’Ivoire‘s security situation has significantly improved since the 2010-2011 post electoral dispute that led to civil conflict.  The government lacks proper command and control over much of the armed forces. In January, February, and May 2017, soldiers mutinied, demanding payment of bonuses.  The government responded by largely acceding to their demands and pledging to improve living and working conditions for armed and security forces. Cote d’Ivoire suffered its first terrorist attack in March 2016 on the beaches of Grand Bassam, for which Al Qaeda in the Islamic Maghreb claimed responsibility.  Ivoirian security forces responded very quickly, demonstrating that the capacity of the country’s special operations units has improved over the past few years.

Political tension in Cote d’Ivoire is increasing as the next presidential election in 2020 approaches, leading some observers to express concern about the possibility of increasing social unrest or potential electoral violence.

11. Labor Policies and Practices

The official unemployment rate is 11 percent with higher unemployment in urban areas.  The unemployment rate among those aged 14-35 is 8.6 percent. The percentage of the non-agricultural workforce in the informal economy is 47 percent.  Foreign workers from neighboring countries make a significant part of the work force, especially in agriculture. The numbers fail to fully account for the large informal economy throughout the country, and do not accurately portray the general lack of well-paying employment opportunities.  Despite the government’s efforts, child labor remained a widespread problem in rural and urban areas, particularly on cocoa and coffee plantations, artisanal gold mining areas, and urbanized regions.

There are significant shortages of skilled labor in higher education fields including information technology, engineering, finance, management, health, and science.  The Ivoirian government is working with the Millennium Challenge Corporation (MCC) to build and develop four technical and vocational training centers.

Labor laws favor the employment of Ivoirians in private enterprises, and state that any vacant position must be advertised for two months.  If after two months no qualified Ivoirian is found, the employer is allowed to recruit a foreigner provided that s/he plans to recruit an Ivoirian to fill the position in the next two years.  The foreign employee must be given a labor contract.

There are no restrictions on employers adjusting employment to fluctuating market conditions.  Employees terminated for reasons other than theft or flagrant neglect of duty have the right to termination benefits.  Unemployment insurance and other social safety programs exist for employees laid off for economic reasons, but for the 85 percent of workers employed in the informal sector, this is not an option.

Labor laws are not waived to attract or retain investment.

Collective bargaining agreements are in effect in many major business enterprises and sectors of the civil service.  A prolonged teachers’ strike was submitted for settlement but due to the fractured nature of the teacher’s union not all parties agreed to the decision.

Labor disputes are submitted to the labor inspector for amicable settlement before engaging in any legal proceedings.  If this attempt to settle the dispute fails, then the labor court can be engaged to resolve the dispute.

No strike has posed an investment risk during the last year.

There are no gaps in law or practice with international labor standards that pose a reputational risk to investors.

In 2017, the government passed a law forbidding most forms of child labor for children 12 and under while restricting it for children aged 13 to 17.  The law’s passage put Ivoirian law on par with ILO standards for child labor.

12. OPIC and Other Investment Insurance Programs

There are currently no OPIC projects in Cote d’Ivoire, but OPIC continues to look for opportunities, particularly in energy and infrastructure.  In 2017, the Ivoirian government ratified its investment incentive agreement with OPIC.

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) ($M USD) 2018 N/A 2017 USD 37.3 billion www.worldbank.org/en/country   
Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or international Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2018 N/A 2017 $ -146 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  
Host country’s FDI in the United States ($M USD, stock positions) 2018 N/A 2017 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 2018 N/A 2017 25.7% UNCTAD data available at https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx  

 


Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations, 2017   (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $8,321 100% Total Outward $1,535 100%
France $1,582 17% Burkina Faso $389 25%
Canada  $1,084 13% Liberia $277 18%
Morocco  $639 8% Mali $170 11%
Belgium,  $530 6% Benin $128 8%
United States  $463 5% Senegal $115 7%
“0” reflects amounts rounded to +/- USD 500,000.


Table 4: Sources of Portfolio Investment

Data not available.

14. Contact for More Information

Jeremy Chen (until June 2019)
Email: chenjh2@state.gov

Davinia Seay (after June 2019)
Email: seaydm@state.gov

Economic and Commercial Officer
B.P. 730 Abidjan Cidex 03, Cote d’Ivoire
Tel: +225 2249 4416

South Africa

Executive Summary

South Africa boasts the most advanced, broad-based economy on the African continent.  The investment climate is fortified by stable institutions, an independent judiciary and vibrant legal sector committed to upholding the rule of law, a free press and investigative reporting, a mature financial and services sector, good infrastructure, and a broad selection of experienced local partners.  South Africa encourages investment that develops manufacturing of goods for export.

South Africa is still fighting its way back from a “lost decade” in which economic growth stagnated, largely as a consequence of corruption and economic mismanagement during the term of its former president.  Since assuming office in February 2018, South Africa’s new president, Cyril Ramaphosa, has committed to improving the investment climate. The early steps he has taken are encouraging, but the challenges are enormous.  At a minimum, South Africa will need to strengthen economic growth and stabilize public finances in order to reverse the credit downgrades by two of the three global ratings agencies. Other challenges include: creating policy certainty; reinforcing regulatory oversight; making state-owned enterprises (SOEs) profitable rather than recipients of government bail-outs; weeding out widespread corruption; reducing violent crime; tackling labor unrest; improving basic infrastructure and government service delivery; creating more jobs while reducing the size of the state (unemployment is over 27 percent); and increasing the supply of appropriately-skilled labor.

In dealing with the legacy of apartheid, South African laws, policies, and reforms seek to produce economic transformation to increase the participation of and opportunities for historically disadvantaged South Africans.  The government views its role as the primary driver of development and aims to promote greater industrialization. Government initiatives to accelerate transformation have included tightening labor laws to achieve proportional racial, gender, and disability representation in workplaces, and ascriptive requirements for government procurement such as equity stakes for historically disadvantaged South Africans and localization requirements.  Following the adoption of a resolution calling for land expropriation without compensation at the December 2017 conference of the African National Congress, investors are watching closely how the government will implement land reform initiatives and what Parliament will decide as a result of its review of the constitution on this issue.

Despite these uncertainties and some important structural economic challenges, South Africa is a destination conducive to U.S. investment; the dynamic business community is highly market-oriented and the driver of economic growth.  President Ramaphosa aims to attract USD 100 billion in investment over the next five years. South Africa offers ample opportunities and continues to attract investors seeking a comparatively low-risk location in Africa from which to access the continent with the fastest growing consumer market in the world.

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 73 of 180 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2019 82 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2018 58 of 126 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, stock positions) 2017 $7,334 http://www.bea.gov/international/factsheet/ 
World Bank GNI per capita 2017 $5,430 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The government of South Africa is generally open to foreign investment as a means to drive economic growth, improve international competitiveness, and access foreign markets.  Merger and acquisition activity is more sensitive and requires advance work to answer potential stakeholder concerns. The 2018 Competition Amendment Bill, which was signed into law on February 13, 2019, introduced a mechanism for South Africa to review foreign direct investments and mergers and acquisitions by a foreign acquiring firm on the basis of protecting national security interests (see section on Laws and Regulations on Foreign Direct Investment below).  Virtually all business sectors are open to foreign investment. Certain sectors require government approval for foreign participation, including energy, mining, banking, insurance, and defense.

The Department of Trade and Industry’s (the dti) Trade and Investment South Africa (TISA) division provides assistance to foreign investors.  In the past year, they opened provincial One-Stop Shops that provide investment support for foreign direct investment (FDI), with offices in Johannesburg, Cape Town, and Durban, and a national One Stop Shop located at the dti in Pretoria and online at http://www.gov.za/Invest percent20SA percent3AOnestopshop  .  An additional one-stop shop has opened at Dube Trade Port, which is a special economic zone aerotropolis linked to the King Shaka International Airport in Durban.  The dti actively courts manufacturing industries in which research indicates the foreign country has a comparative advantage. It also favors manufacturing that it hopes will be labor intensive and where suppliers can be developed from local industries.  The dti has traditionally focused on manufacturing industries over services industries, despite a strong service-oriented economy in South Africa. TISA offers information on sectors and industries, consultation on the regulatory environment, facilitation for investment missions, links to joint venture partners, information on incentive packages, assistance with work permits, and logistical support for relocation.  The dti publishes the “Investor’s Handbook” on its website: www.dti.gov.za  

While the government of South Africa supports investment in principle and takes active steps to attract FDI, investors and market analysts are concerned that its commitment to assist foreign investors is insufficient in practice.  Some felt that the national-level government lacked a sense of urgency to support investment deals. Several investors reported trouble accessing senior decision makers. South Africa scrutinizes merger- and acquisition-related foreign direct investment for its impact on jobs, local industry, and retaining South African ownership of key sectors.  Private sector representatives and other interested parties were concerned about the politicization of South Africa’s posture towards this type of investment. Despite South Africa’s general openness to investment, actions by some South African Government ministries, populist statements by some politicians, and rhetoric in certain political circles show a lack of appreciation for the importance of FDI to South Africa’s growth and prosperity and a lack of concern about the negative impact domestic policies may have on the investment climate.  Ministries often do not consult adequately with stakeholders before implementing laws and regulations or fail to incorporate stakeholder concerns if consultations occur. On the positive side, the President, assisted by his appointment of four investment envoys, and his new cabinet are working to restore a positive investment climate and appear to be making progress as they engage in senior level overseas roadshows to attract investment.

Limits on Foreign Control and Right to Private Ownership and Establishment

Currently there is no limitation on foreign private ownership. South Africa’s transformation efforts – the re-integration of historically disadvantaged South Africans into the economy – has led to policies that could disadvantage foreign and some locally owned companies.  In 2017, the Broad-Based Black Socio-Economic Empowerment Charter proposed for the South African mining and minerals industry required an increase to 30 percent ownership by black South Africans, but was mired in the courts as industry challenged it. The Charter was retracted for revision and a new version was proposed in 2018. The Broad-Based Black Economic Empowerment Act of 2013 (B-BBEE), and associated codes of good practice, requires levels of company ownership and participation by Black South Africans to get bidding preferences on government tenders and contracts. The dti created an alternative equity equivalence (EE) program for multinational or foreign owned companies to allow them to score on the ownership requirements under the law, but many view the terms as onerous and restrictive.  Currently eight multinationals, most in the technology sector, participate in this program, most in the technology sector.

Other Investment Policy Reviews

The World Trade Organization carried out in 2015 a Trade Policy Review for the Southern African Customs Union, in which South Africa accounts for over 90 percent of overall GDP.  Neither the OECD nor the UN Conference on Trade and Development (UNCTAD) has conducted investment policy reviews for South Africa.

Business Facilitation

According to the World Bank’s Doing Business report, South Africa’s rank in ease of doing business in 2019 was unchanged from 2018 at 82nd of 190.  It ranks 134th for starting a business, taking an average of forty days to complete the process. South Africa ranks 143rd of 190 countries on trading across borders.

In 2017, the dti launched a national InvestSA One Stop Shop (OSS) to simplify administrative procedures and guidelines for foreign companies wishing to invest in South Africa.  The dti, in conjunction with provincial governments, opened physical OSS locations in Cape Town, Durban, and Johannesburg. These physical locations bring together key government entities dealing with issues including policy and regulation, permits and licensing, infrastructure, finance, and incentives, with a view to reducing lengthy bureaucratic procedures, reducing bottlenecks, and providing post-investment services.  The virtual OSS web site is: http://www.gov.za/Invest percent20SA percent3AOnestopshop  .

The Companies and Intellectual Property Commission (CIPC), a body of the dti, is responsible for business registrations and publishes a step-by-step process for registering a company.  This process can be done on its website (http://www.cipc.co.za/index.php/register-your-business/companies/  ), through a self-service terminal, or through a collaborating private bank.  New business registrants also need to register through the South African Revenue Service (SARS) to get an income tax reference number for turnover tax (small companies), corporate tax, employer contributions for PAYE (income tax), and skills development levy (applicable to most companies).  The smallest informal companies may not be required to register with CIPC, but must register with the tax authorities. Companies also need to register with the Department of Labour (DoL) – www.labour.gov.za   – to contribute to the Unemployment Insurance Fund (UIF) and a compensation fund for occupational injuries.  The DoL registration takes the longest (up to 30 days), but can be done concurrently with other registrations.

Outward Investment

South Africa does not incentivize outward investments.  South Africa’s stock foreign direct investments in the United States in 2017 totaled USD 4.1 billion (latest figures available), an almost 40 percent increase from 2016.  The largest outward direct investment of a South African company is a gas liquefaction plant in the State of Louisiana by Johannesburg Stock Exchange (JSE) and NASDAQ dual-listed petrochemical company SASOL.  There are some restrictions on outward investment, such as a R1 billion (USD 83 million) limit per year on outward flows per company. Larger investments must be approved by the South African Reserve Bank and at least 10 percent of the foreign target entities voting rights must be obtained through the investment. https://www.resbank.co.za/RegulationAndSupervision/
FinancialSurveillanceAndExchangeControl/FAQs/Pages/Corporates.aspx
 

2. Bilateral Investment Agreements and Taxation Treaties

Of South Africa’s 49 signed bilateral investment treaties (BITs), 35 never entered into force or were terminated.  According to UNCTAD, fourteen agreements are still in force including with Russia, China, Cuba, and Iran. The 2015 “Protection of Investment Act” replaces lapsed BITs and stipulates that “Existing investments that were made under such treaties will continue to be protected for the period and terms stipulated in the treaties.  Any investments made after the termination of a treaty, but before promulgation of this Act, will be governed by the general South African law.” It also provides that “the government may consent to international arbitration in respect of investments covered by the Act, subject to the exhaustion of domestic remedies.” Such “arbitration will be conducted between the Republic and the home state of the applicable investor.”  South Africa is not engaged in new BIT negotiations.

South Africa is a member of the Southern Africa Customs Union (SACU) which has a common external tariff and tariff-free trade between its five members (South Africa, Botswana, Lesotho, Namibia, and Eswatini, formerly known as Swaziland).  South Africa is generally restricted from negotiating trade agreements by itself because SACU is the competent authority. Nevertheless, South Africa has free trade agreements with the Southern African Development Community (SADC) including its 12 members; the Trade, Development and Cooperation Agreement (TDCA) between South Africa and the European Union (EU); EFTA-SACU Free Trade Agreement between SACU and the European Free Trade Association (EFTA) – Iceland, Liechtenstein, Norway, and Switzerland; and the Economic Partnership Agreement (EPA) between the SADC EPA States (South Africa, Botswana, Namibia, Eswatini, Lesotho, and Mozambique) and the EU and its Member States.  These agreements mainly cover trade in goods and provide preferential market access, though article 52 of the 1999 EU-TDCA covers investment promotion and protection.  South Africa, through SACU, is currently negotiating a “rollover” EPA with the United Kingdom (UK) similar to its EPA with the EU in an effort to curb any trade disruptions when the UK exits the EU.  Progress in reaching an agreement is mired in negotiations over rules of origin, cumulation, and sanitary and phytosanitary matters. 

South Africa is a signatory to the SADC-EAC-COMESA Tripartite FTA which includes 26 countries with a combined GDP of USD 860 billion and a combined population of approximately 590 million people.  This agreement primarily covers trade in goods. South Africa ratified the African Continental Free Trade Agreement in 2018. It joins 21 other African countries, reaching the threshold needed to bring the agreement into force, once these countries submit their ratification instruments to the African Union.  Implementation of the agreement still requires signatories to present offers on tariff lines and services, and agree to rules of origin among other outstanding issues.

The United States and South Africa signed a Trade and Investment Framework Agreement (TIFA) in 1999.  The last TIFA discussions were held in 2015. The United States and SACU negotiated a Trade, Investment and Development Cooperation Agreement (TIDCA) in 2008.

The first U.S.-South Africa bilateral tax treaty eliminated double taxation and entered into force in 1998.  In 2014, a new bilateral tax treaty was signed to implement the U.S. Foreign Asset Tax Compliance Act (FATCA).

As part of a broad set of tax increases, in 2018 the government raised, for the first time since 1993, the value added tax (VAT) by one percentage point to 15 percent.  Other fiscal measures intended to raise government revenues, such as no upward adjustments to personal income tax brackets to account for inflation, higher alcohol and tobacco excise duties, and an extra 29 cents per liter for gasoline and 30 cents per liter for diesel in fuel levies – are meant to generate an additional R15-billion (USD 1.1 billion) for the national coffers.  The tax increases come alongside government expenditure cuts primarily in government payroll compensation. Taken together, these interventions aim to stabilize public finances by 2023. According to Finance Minister Tito Mboweni, “It will not be easy. There are no quick fixes. But our nation is ready for renewal. We are ready to plant the seeds of our future.”

The South African Revenue Service (SARS) began collecting the health promotion levy – previously known as the sugar-sweetened beverages tax – in April 2018, almost one year after it was initially due to come into effect.  In February 2019, the Minister of Finance announced a five percent increase to this tax from 2.1 rand cents to 2.21 rand cents (USUSD 0.0015 to USD 0.0016) per gram of sugar content that exceeds 4 grams per 100 ml.  The tax, which applies to both domestic and international products, is meant to encourage the reduction in the consumption of sugar-sweetened beverages to deal with obesity and the epidemic of non-communicable diseases such as diabetes, which is cited as the second leading cause of death, after tuberculosis, among South Africans.  The Treasury argued that taxes on foods high in sugar can be an important element in a strategy to address diet-related diseases.

The South African Revenue Service will impose a carbon emissions tax from June 2019, based on an initial levy of R120 per ton of carbon dioxide equivalent (CO2e) of greenhouse gas emissions above certain tax-free allowances.

3. Legal Regime

Transparency of the Regulatory System

South African laws and regulations are generally published in draft form for stakeholders to comment, and legal, regulatory, and accounting systems are generally transparent and consistent with international norms.

The dti is responsible for business-related regulations. It develops and reviews regulatory systems in the areas of competition, standards, consumer protection, company and intellectual property registration and protections, as well as other subjects in the public interest.  It also oversees the work of national and provincial regulatory agencies mandated to assist the dti in creating and managing competitive and socially responsible business and consumer regulations. The dti publishes a list of Bills and Acts that govern the dti’s work at http://www.dti.gov.za/business_regulation/legislation.jsp  .

The 2015 Medicines and Related Substances Amendment Act authorized the creation of the South African Healthcare Products Regulatory Authority (SAHPRA), meant in part to address the backlog of more than 7000 drugs waiting for approval to be used in South Africa.  Established in 2018, and unlike its predecessor, the Medicines Control Council (MCC), SAHPRA is a stand-alone public entity governed by a board that is appointed by and accountable to the South African Ministry of Health. SAHPRA is responsible for the monitoring, evaluation, regulation, investigation, inspection, registration, and control of medicines, scheduled substances, clinical trials and medical devices, in vitro diagnostic devices (IVDs), complementary medicines, and blood and blood-based products.  SAHPRA intends to do this through 207 full-time in-house technical evaluators, though this structure has not been fully staffed. Unlike with the MCC, SAHPRA’s funding is provided by the retention of registration fees. Despite its launch in 2018, the full staffing and implementation of SAPHRA is anticipated to take up to five years, and clearing the backlog of drug registration dossiers will also take significant time.

South Africa’s Consumer Protection Act (2008) went into effect in 2011. The legislation reinforces various consumer rights, including right of product choice, right to fair contract terms, and right of product quality. Impact of the legislation varies by industry, and businesses have adjusted their operations accordingly. A brochure summarizing the Consumer Protection Act can be found at:  http://www.dti.gov.za/business_regulation/acts/CP_Brochure.pdf . Similarly, the National Credit Act of 2005 aims to promote a fair and non-discriminatory marketplace for access to consumer credit and for that purpose to provide the general regulation of consumer credit and improves standards of consumer information. A brochure summarizing the National Credit Act can be found at: http://www.dti.gov.za/business_regulation/acts/NCA_Brochure.pdf 

International Regulatory Considerations

South Africa is a member of the Southern African Customs Union (SACU), the oldest existing customs union in the world.  SACU functions mainly on the basis of the 2002 SACU Agreement which aims to: (a) facilitate the cross-border trade in goods among SACU members; (b) create effective, transparent and democratic institutions; (c) promote fair competition in the common customs area; (d) increase investment opportunities in the common customs area; (e) enhance the economic development, diversification, industrialization and competitiveness of member States; (f) promote the integration of its members into the global economy through enhanced trade and investment; (g) facilitate the equitable sharing of revenue arising from customs and duties levied by members; and (h) facilitate the development of common policies and strategies.

The 2002 SACU Agreement requires member States to develop common policies and strategies with respect to industrial development; cooperate in the development of agricultural policies; cooperate in the enforcement of competition laws and regulations; develop policies and instruments to address unfair trade practices between members; and calls for harmonization of product standards and technical regulations.

SACU member States are working to develop the regional industrial development policy to harmonize competition policy and unfair trade practices.  Progress is limited in general to customs related areas, mainly tariff and trade remedies. SACU has not harmonized non-tariff measures. Also, the 2002 SACU Agreement is limited to the liberalization of trade in goods and does not cover trade in services.  In 2008, the SACU Council of Ministers agreed that new generation issues such as services, investment, and Intellectual Property Rights should be incorporated into the SACU Agenda. Work is ongoing. South Africa is generally restricted from negotiating trade agreements by itself, since SACU is the competent authority.

In general, South Africa models its standards according to European standards or UK standards where those differ.

South Africa is a member of the WTO and attempts to notify all draft technical regulations to the Committee on Technical Barriers to Trade (TBT), though often after the regulations have been implemented.

In November 2017, South Africa ratified the WTO’s Trade Facilitation Agreement. According to the government, it has implemented over 90 percent of the commitments as of February 2018. The outstanding measures were notified under Category B, to be implemented by the indicative date of 2022 without capacity building support and include Article 3 and Article 10 commitments on Advance Rulings and Single Window.

The South African Government is not party to the WTO’s Government Procurement Agreement (GPO).

Legal System and Judicial Independence

South Africa has a mixed legal system composed of civil law inherited from the Dutch, common law inherited from the British, and African customary law, of which there are many variations.  As a general rule, South Africa follows English law in criminal and civil procedure, company law, constitutional law, and the law of evidence, but follows Roman-Dutch common law in contract law, law of delict (torts), law of persons, and family law.  South African company law regulates corporations, including external companies, non-profit, and for-profit companies (including state-owned enterprises). Funded by the national Department of Justice and Constitutional Development, South Africa has district and magistrates courts across 350 districts and high courts for each of the provinces (except Limpopo and Mpumalanga, which are heard in Gauteng).  Often described as “the court of last resort,” the Supreme Court of Appeals hears appeals, and its jurisprudence may only be overruled by the apex court, the Constitutional Court. Moreover, South Africa has multiple specialized courts, including the Competition Appeal Court, Electoral Court, Land Claims Court, the Labour and Labour Appeal Courts, and Tax Courts to handle disputes between taxpayers and the South African Revenue Service.  These courts exist parallel to the court hierarchy, and their decisions are subject to the same process of appeal and review as the normal courts. Analysts routinely praise the competence and reliability of judicial processes, and the courts’ independence has been repeatedly proven with high-profile rulings against controversial legislation, as well as against former presidents and corrupt individuals in the executive and legislative branches.

Laws and Regulations on Foreign Direct Investment

The February 2019 ratification of the Competition Amendment Bill introduced, among other revisions, section 18A that mandates the President create a committee – comprised of 28 Ministers and officials chosen by the President – to evaluate and intervene in a merger or acquisition by a foreign acquiring firm on the basis of protecting national security interests.  According to the bill, any decisions taken by this committee are required to be published in the Gazette and must be presented, in appropriate detail, to the National Assembly. The new section states that the President must identify and publish in the Gazette – the South African equivalent of the U.S. Federal Register – a list of national security interests including the markets, industries, goods or services, sectors or regions in which a merger involving a foreign acquiring firm must be notified to the South African government.  The law also outlines what factors the President should take into consideration when determining what constitutes a threat to national security interest, including the merger’s impact on the use or transfer of sensitive technology or know-how; the security of critical infrastructure, including systems, facilities, and networks; the supply of critical goods or services to citizens and/or to the government; and the potential to enable foreign surveillance or espionage or hinder intelligence or law enforcement operations. It also suggests the President consider transactions that enable or facilitate terrorism, terrorist organizations, or organized crime; and to consider a merger’s impact on the economic and social stability of South Africa.  The law further recommends the committee take into consideration whether the foreign acquiring firm is a firm controlled by a foreign government.

Competition and Anti-Trust Laws

The Competition Commission is empowered to investigate, control and evaluate restrictive business practices, abuse of dominant positions, and mergers in order to achieve equity and efficiency.  Their public website is www.compcom.co.za  

The Competition Tribunal has jurisdiction throughout South Africa and adjudicates competition matters in accordance with the Competition Act.  While the Commission is the investigation and enforcement agency, the Tribunal is the adjudicative body, very much like a court.

In addition to the points made in the previous section, the amendments, presented by the Ministry for Economic Development that revise the Competition Act of 1998 and entered effect in February 2019 extend the mandate of the competition authorities and the executive to tackle high levels of economic concentration, address the limited transformation in the economy, and curb the abuse of market power by dominant firms.  The changes introduced through the Competition Amendment Act are meant to curb anti-competitive practices and break down monopolies that hinder “transformation” – the increased participation of black and HDSA in the South African economy. The amendments aim to deter the abuse of market dominance by large firms that use practices such as margin squeeze, exclusionary practices, price discrimination, and predatory pricing.  By increasing the penalties for these prohibited business practices – for repeat offences the penalties could amount to between 10 percent to 25 percent of a firm’s annual turnover – and allowing the parent or holding company to be held liable for the actions of its subsidiaries that contravene competition law, the Competition Commission hopes to break down these anticompetitive practices and open up new opportunities for SMEs.

Expropriation and Compensation

Racially discriminatory property laws and land allocations during the colonial and apartheid periods resulted in highly distorted patterns of land ownership and property distribution in South Africa.  Given the slow and mixed success of land reform to date, the National Assembly (Parliament) passed a motion in February 2018 to investigate a proposal to amend the constitution (specifically Section 25, the “property clause”) to allow for land expropriation without compensation (EWC). The constitutional Bill of Rights, where Section 25 resides, has never been amended.  Some politicians, think-tanks, and academics argue that Section 25, as written, allows for EWC in certain cases, while others insist that in order to implement EWC more broadly, amending the constitution is required. Academics foresee a few test cases for EWC over the next year, primarily targeted at abandoned buildings in urban areas, informal settlements in peri-urban areas, and involving labor tenants in rural areas.

Parliament tasked an ad hoc Constitutional Review Committee – made up of parliamentarians from various political parties – to report back on whether to amend the constitution to allow EWC, and if so, how it should be done.  In December 2018, the National Assembly adopted the committee’s report recommending a constitutional amendment, but Parliament ran out of time to draft the amendment before its final session before the May 8, 2019 elections.  The next Parliament will need to compose a new ad hoc committee to draft the constitutional amendment bill.

South African law requires that Parliament engage in a rigorous public participation process.  Parliament must publish a proposed bill to amend the Constitution in the Government Gazette at least 30 days prior to its introduction to allow for public comment.  Any change to the constitution would need a two-thirds parliamentary majority (267 votes) to pass, as well as the support of six out of the nine provinces in the National Council of Provinces.  Currently, no single political party has such a majority.

In September 2018, President Ramaphosa appointed an advisory panel on land reform, which supports the Inter-Ministerial Committee on Land Reform chaired by Deputy President David Mabuza.  Comprised of ten members from academia, social entrepreneurship, and activist organizations, the panel will submit a formal report in 2019 on issues related to land restitution, redistribution, tenure security, and agricultural support.  Analysts have praised the panel for representing the executive branch’s interest and dedication to engaging with diverse sectors to handle the sensitive, multi-faceted issues related to land reform.

Existing expropriation law, including The Expropriation Act of 1975 (Act) and the Expropriation Act Amendment of 1992, entitles the government to expropriate private property for reasons of public necessity or utility.  The decision is an administrative one. Compensation should be the fair market value of the property as agreed between the buyer and seller, or determined by the court, as per Section 25 of the Constitution. In several restitution cases in which the government initiated proceedings to expropriate white-owned farms after courts ruled the land had been seized from blacks during apartheid, the owners rejected the court-approved purchase prices.  In most of these cases, the government and owners reached agreement on compensation prior to any final expropriation actions. The government has twice exercised its expropriation power, taking possession of farms in Northern Cape and Limpopo provinces in 2007 after negotiations with owners collapsed. The government paid the owners the fair market value for the land in both cases. A new draft expropriation law, intended to replace the Expropriation Act of 1975, was passed and is awaiting Presidential signature.  Some analysts have raised concerns about aspects of the new legislation, including new clauses that would allow the government to expropriate property without first obtaining a court order.

In 2018, the government operationalized the 2014 Property Valuation Act that creates the office of Valuer-General charged with the valuation of property that has been identified for land reform or acquisition or disposal by a department.  Among other things, the Act gives the government the option to expropriate property based on a formulation in the Constitution termed “just and equitable compensation.” This considers the market value of the property and applies discounts based on the current use of the property, the history of the acquisition, and the extent of direct state investment and subsidy in the acquisition and capital improvements to the property.  Critics fear that this could lead to the government expropriating property at a price lower than fair market value. The Act also allows the government to expropriate property under a broad range of policy goals, including economic transformation and correcting historical grievances.

The Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA), enacted in 2004, gave the state ownership of all of South Africa’s mineral and petroleum resources.  It replaced private ownership with a system of licenses controlled by the government of South Africa, and issued by the Department of Mineral Resources.  Under the MPRDA, investors who held pre-existing rights were granted the opportunity to apply for licenses, provided they met the licensing criteria, including the achievement of certain B-BBEE objectives.  Amendments to the MPRDA passed by Parliament in 2014, but were not signed by the President.  In August 2018, the Minister for the Department of Mineral Resources, Gwede Mantashe, called for the recall of the amendments so that oil and gas could be separated out into a new bill.  The Minister also announced the B-BBEE provisions in the new Mining Charter would not apply during exploration, but would start once commodities were found and mining commenced.  The Amendments are now with the Department of Mineral Resources to draft a new bill to be submitted to Parliament.

Dispute Settlement

ICSID Convention and New York Convention

South Africa is a member of the New York Convention of 1958 on the recognition and enforcement of foreign arbitration awards, but is not a member of the World Bank’s International Center for the Settlement of Investment Disputes.

Investor-State Dispute Settlement

The 2015 Promotion of Investment Act removes the option for investor state dispute settlement through international courts typically afforded through bilateral investment treaties (BITs).  Instead, investors disputing an action taken by the South African government must request the Department of Trade and Industry to facilitate the resolution by appointing a mediator. A foreign investor may also approach any competent court, independent tribunal, or statutory body within South Africa for the resolution of the dispute.

Dispute resolution can be a time-intensive process in South Africa.  If the matter is urgent, and the presiding judge agrees, an interim decision can be taken within days while the appeal process can take months or years.  If the matter is a dispute of law and is not urgent, it may proceed by application or motion to be solved within months. Where there is a dispute of fact, the matter is referred to trial, which can take several years.  The Alternative Dispute Resolution involves negotiation, mediation or arbitration, and may resolve the matter within a couple of months.

International Commercial Arbitration and Foreign Courts

Arbitration in South Africa follows the Arbitration Act of 1965, which does not distinguish between domestic and international arbitration and is not based on UNCITRAL model law.  South African courts retain discretion to hear a dispute over a contract entered into under U.S. law and under U.S. jurisdiction; however, the South African court will interpret the contract with the law of the country or jurisdiction provided for in the contract.

South Africa recognizes the International Chamber of Commerce, which supervises the resolution of transnational commercial disputes.  South Africa applies its commercial and bankruptcy laws with consistency and has an independent, objective court system for enforcing property and contractual rights.

Alternative Dispute Resolution is increasingly popular in South Africa for many reasons, including the confidentiality which can be imposed on the evidence, case documents, and the judgment.  South Africa’s new Companies Act also provides a mechanism for Alternative Dispute Resolution.

Bankruptcy Regulations

South Africa has a strong bankruptcy law, which grants many rights to debtors, including rejection of overly burdensome contracts, avoiding preferential transactions, and the ability to obtain credit during insolvency proceedings.  South Africa ranks 66 out of 190 countries for resolving insolvency according to the 2019 World Bank Doing Business report, an increase from its 2018 rank of 55 despite receiving the same overall score, indicating that the increase is only due to other countries falling below South Africa in 2019.

4. Industrial Policies

Investment Incentives

South Africa offers various investment incentives targeted at specific sectors or types of business activities. The dti has a number of incentive programs ranging from tax allowances to support in the automotive sector and helping innovation and technology companies to film and television production.

12I Tax Allowance: is designed to support new industrial projects that utilize only new and unused manufacturing assets and expansions or upgrades of existing industrial projects. The incentive offers support for both capital investment and training. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=45&subthemeid=26  

Agro-Processing Support Scheme (APSS): aims to stimulate investment by South African agro-processing/beneficiation (agri-business) enterprises. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=69&subthemeid=25  

Aquaculture Development and Enhancement Programme (ADEP): is available to South African registered entities engaged in primary, secondary, and ancillary aquaculture activities in both marine and freshwater classified under SIC 132 (fish hatcheries and fish farms) and SIC 301 and 3012 (production, processing and preserving of aquaculture fish). https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=56&subthemeid=26  

Automotive Investment Scheme (AIS): designed to grow and develop the automotive sector through investment in new and/ or replacement models and components that will increase plant production volumes, sustain employment and/ or strengthen the automotive value chain. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=37&subthemeid=26  

Medium and Heavy Commercial Vehicles Automotive Investment Scheme (MHCV-AIS): is designed to grow and develop the automotive sector through investment in new and/or replacement models and components that will increase plant production volumes, sustain employment and/or strengthen the automotive value chain. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=60&subthemeid=26  

People-carrier Automotive Investment Scheme (P-AIS): provides a non-taxable cash grant of between 20 percent and 35 percent of the value of qualifying investment in productive assets approved by the dti. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=55&subthemeid=26  

Business Process Services (BPS): aims to attract investment and create employment opportunities in South Africa through offshoring activities. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=6&subthemeid=25  

Capital Projects Feasibility Programme (CPFP): is a cost-sharing grant that contributes to the cost of feasibility studies likely to lead to projects that will increase local exports and stimulate the market for South African capital goods and services. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=4&subthemeid=26  

Cluster Development Programme (CDP): aims to promote industrialization, sustainable economic growth and job creation needs of South Africa through cluster development and industrial parks. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=66&subthemeid=28  

Critical Infrastructure Programme (CIP): aims to leverage investment by supporting infrastructure that is deemed to be critical, thus lowering the cost of doing business.  https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=3&subthemeid=26  

Clothing and Textile Competitiveness Improvement Programme (CTCIP): aims to build capacity among manufacturers and in other areas of the apparel value chain in South Africa, to enable them to effectively supply their customers and compete on a global scale. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=35&subthemeid=25  

Export Marketing and Investment Assistance (EMIA): develops export markets for South African products and services and recruits new foreign direct investment into the country. The purpose of the scheme is to partially compensate exporters for costs incurred with respect to activities aimed at developing an export market for South African product and services and to recruit new foreign direct investment into South Africa. https://www.thedti.gov.za/trade_investment/emia.jsp  

Foreign Film and Television Production and Post-Production Incentive: to attract foreign-based film productions to shoot on location in South Africa and conduct post-production activities. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=63&subthemeid=26  

Innovation and Technology Funding instruments: click on the link to see a graphic of the various funding instruments the government has made available. https://www.thedti.gov.za/financial_assistance/Innovation_value_Chain.jsp  

Manufacturing Competitiveness Enhancement Programme (MCEP): aims to encourage manufacturers to upgrade their production facilities in a manner that sustains employment and maximizes value-addition in the short to medium term.  Participants can also apply for incentives for energy efficiency and green economy incentives. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=53&subthemeid=25  

Production Incentive (PI): forms part of the Clothing and Textile Competitiveness Program, and forms part of the customized sector program for the clothing, textiles, footwear, leather and leather goods industries. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=36&subthemeid=25  

Sector-Specific Assistance Scheme (SSAS): is a reimbursable cost-sharing incentive scheme which grants financial support to organizations that support the development of industry sectors and those that contribute to the growth of South African exports. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=8&subthemeid=26  

Shared Economic Infrastructure Facility (SEIF)contact the Department of Small Business Development on +27 861 843 384 (select option 2) or E-Mail: sbdinfo@dsbd.gov.za for more information. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=61&subthemeid=1  

Support Programme for Industrial Innovation (SPII): is designed to promote technology development in South Africa’s industry, through the provision of financial assistance for the development of innovative products and/or processes. SPII is focused on the development phase, which begins when basic research concludes and ends at the point when a pre-production prototype has been produced. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=48&subthemeid=8  

Strategic Partnership Programme (SPP)The SPP aims to develop and enhance the capacity of small and medium-sized enterprises to provide manufacturing and service support to large private sector enterprises. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=67&subthemeid=1  

Workplace Challenge Programme (WPC): managed by Productivity South Africa, WPC aims to encourage and support negotiated workplace change towards enhancing productivity and world-class competitiveness, best operating practices, continuous improvement, lean manufacturing, while resulting in job creation. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=68&subthemeid=25  

Foreign Trade Zones/Free Ports/Trade Facilitation

South Africa designated its first Industrial Development Zone (IDZ) in 2001. IDZs offer duty-free import of production-related materials and zero VAT on materials sourced from South Africa, along with the right to sell in South Africa upon payment of normal import duties on finished goods.  Expedited services and other logistical arrangements may be provided for small to medium-sized enterprises or for new foreign direct investment. Co-funding for infrastructure development is available from the dti. There are no exemptions from other laws or regulations, such as environmental and labor laws.  The Manufacturing Development Board licenses IDZ enterprises in collaboration with the South African Revenue Service (SARS), which handles IDZ customs matters. IDZ operators may be public, private, or a combination of both. There are currently five IDZs in South Africa: Coega IDZ, Richards Bay IDZ, Dube Trade Port, East London IDZ, and Saldanha Bay IDZ.  For more detailed information on IDZs in South Africa please see: http://www.thedti.gov.za/industrial_development/sez.jsp  

In February 2014, the dti introduced a new Special Economic Zones (SEZs) Bill focused on industrial development. The SEZs encompass the IDZs but also provide scope for economic activity beyond export-driven industry to include innovation centers and regional development.  There are five SEZ in South Africa: Atlantis SEZ, Nkomazi SEZ, Maliti-A-Phofung SEZ, Musina/Makhado SEZ, and OR Tambo SEZ. The broader SEZ incentives strategy allows for 15 percent Corporate Tax as opposed to the current 28 percent, Building Tax Allowance, Employment Tax Incentive, Customs Controlled Area (VAT exemption and duty free), and Accelerated 12i Tax Allowance.

Performance and Data Localization Requirements

Employment and Investor Requirements

Foreign investors who establish a business or who invest in existing businesses in South Africa must show within twelve months of establishing the business that at least 60 percent of the total permanent staff are South African citizens or permanent residents.

The Broad-Based Black Economic Empowerment (B-BBEE) program measures employment equity, management control, and ownership by historically disadvantaged South Africans for companies which do business with the government or bid on government tenders.  Companies may consider the B-BBEE scores of their sub-contractors and suppliers, as their scores can sometimes contribute to or detract from the contracting company’s B-BBEE score.

A business visa is required for foreign investors who will establish a business or who will invest in an existing business in South Africa.  They are required to invest a prescribed financial capital contribution equivalent to R2.5million (USD 178 thousand) and have at least R5 million (USD 356 thousand) in cash and capital available.  These capital requirements may be reduced or waived if the investment qualifies under one of the following types of industries/businesses: information and communication technology; clothing and textile manufacturing; chemicals and bio-technology; agro-processing; metals and minerals refinement; automotive manufacturing; tourism; and crafts.

The documentation required for obtaining a business visa is onerous and includes, among other requirements, a letter of recommendation from the Department of Trade and Industry regarding the feasibility of the business and its contribution to the national interest, and various certificates issued by a chartered or professional South African accountant.

U.S. citizens have complained that the processes to apply for and renew visas and work permits are lengthy, confusing, and difficult.  Requirements frequently change mid-process, and there is little to no feedback about why an application might be considered incomplete or denied.  Many U.S. citizens use facilitation services to help navigate these processes.

Goods, Technology, and Data Treatment

The government does not require the use of domestic content in goods or technology.  The transfer of personal information about a subject to a third party who is in a foreign country is prohibited unless certain conditions are met.  These conditions are outlined in the Protection of Personal Information (PoPI) Act, which the government enacted in 2013 to regulate how personal information may be processed.  The conditions relate to: accountability, processing limitations, purpose specification, information quality, openness, security safeguards, and data subject participation. PoPI also created an Information Regulator (IR) to draft regulations and enforce them; the five member body that comprises the IR was established in 2018.  The IR released regulations on personal information processing in December 2018, but government was not clear if the one year grace period to begin implementation started from the date the regulations were published or from the date the IR is fully operational.

Investment Performance Requirements

There are no performance requirements on investments.

5. Protection of Property Rights

Real Property

The South African legal system protects and facilitates the acquisition and disposition of all property rights (e.g., land, buildings, and mortgages).  Deeds must be registered at the Deeds Office. Banks usually register mortgages as security when providing finance for the purchase of property.

South Africa ranks 106th of 190 countries in registering property according to the 2019 World Bank Doing Business report.

Intellectual Property Rights

South Africa has a strong legal structure and enforcement of intellectual property rights through civil and criminal procedures.  Criminal procedures are generally lengthy, so the customary route is through civil enforcement.  There are concerns about counterfeit consumer goods, illegal commercial photocopying, and software piracy.

Owners of patents and trademarks may license them locally, but when a patent license entails the payment of royalties to a non-resident licensor, the Department of Trade and Industry (the dti) must approve the royalty agreement.  Patents are granted for twenty years – usually with no option to renew. Trademarks are valid for an initial period of ten years, renewable for ten-year periods. The holder of a patent or trademark must pay an annual fee to preserve ownership rights.  All agreements relating to payment for the right to use know-how, patents, trademarks, copyrights, or other similar property are subject to approval by exchange control authorities in the SARB. A royalty of up to four percent is the standard approval for consumer goods, and up to six percent for intermediate and finished capital goods.

Literary, musical, and artistic works, as well as cinematographic films and sound recordings are eligible for copyright under the Copyright Act of 1978.  New designs may be registered under the Designs Act of 1967, which grants copyrights for five years. The Counterfeit Goods Act of 1997 provides additional protection to owners of trademarks, copyrights, and certain marks under the Merchandise Marks Act of 1941.  The Intellectual Property Laws Amendment Act of 1997 amended the Merchandise Marks Act of 1941, the Performers’ Protection Act of 1967, the Patents Act of 1978, the Copyright Act of 1978, the Trademarks Act of 1993, and the Designs Act of 1993 to bring South African intellectual property legislation fully into line with the WTO’s Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS).  Further Amendments to the Patents Act of 1978 also brought South Africa into line with TRIPS, to which South Africa became a party in 1999, and implemented the Patent Cooperation Treaty. The private sector and law enforcement cooperate extensively to stop the flow of counterfeit goods into the marketplace, and the private sector believes that South Africa has made significant progress in this regard since 2001.   Statistics on seizures are not available.

In an effort to modernize outdated copyright law to incorporate “digital age” advances, the dti introduced the latest draft of the Copyright Amendment Bill in May 2017.  The South African Parliament and the National Council of Provinces approved the Copyright Amendment Bill in March 2019 and sent the bill to the president for signature. As of mid-May 2019, the bill had not been signed.  Among the issues of concern to some private sector stakeholders is the introduction of the U.S. model of “fair use” for copyright exemptions without prescribing industry-specific circumstances where fair use will apply, creating uncertainty about copyrights enforcement.  Other concerns that stakeholders have include a clause which allows the Minister of Trade and Industry to set royalty rates for visual artistic works and impose compulsory contractual terms. The bill also limits the assignment of copyright to 25 years before it reverts back to the author.

The Performers’ Protection Amendment Bill seeks to address issues relating to the payment of royalties to performers; safeguarding the rights of contracting parties; and promotes performers’ moral and economic rights for performances in fixations (recordings).  Similar to the Copyright Amendment Bill, this bill gives the Minister of Trade and Industry authority to determine equitable remuneration for a performer and copyright owner for the direct or indirect use of a work. It also suggests that any agreement between the copyright owner and performer will only last for a period of 25 years and does not determine what happens after 25 years.  The bill also does not stipulate how it will address works with multiple performers, particularly how to resolve potential problems of hold-outs when contracts are renegotiated that could hinder the further exploitation of a work.

The dti released the final Intellectual Property Policy of the Republic of South Africa Phase 1  in June, 2018, that informs the government’s approach to intellectual property and existing laws.  Phase I focuses on the health space, particularly pharmaceuticals. The South African Government, led by the dti, held multiple rounds of public consultations since its introduction and the 2016 release of the IP Consultative Framework.

Among other things, the IP policy framework calls for South Africa to carry out substantive search and examination (SSE) on patent applications and to introduce a pre- and post-grant opposition system.  The dti repeatedly stressed its goal of creating the domestic capacity to understand and review patents, without having to rely on other countries’ examinations. U.S. companies working in South Africa have been generally supportive of the government’s goal; they are concerned, however, that the relatively low number of examiners currently on staff (20) to handle the proposed SSE process and the introduction of a pre-grant opposition system in South Africa could lead to significant delays of products to market.  The South African Government is working with international partners (including USPTO and the European Union) to provide accelerated training of their patent reviewers while also recruiting new staff.

The new IP policy framework also raises concerns around the threat of separate patentability criteria for medicines and a more liberalized compulsory licensing regime.  Stakeholders are calling for more concrete assurances that the use of compulsory licensing provisions will be as a last resort and applied in a manner consistent with WTO rules.  Industry sources report they are not aware of a single case of South Africa issuing a compulsory license.

South Africa is currently in the process of implementing the Madrid Protocol.  CIPC has completed drafting legislative amendments after consultations with stakeholders and the World Intellectual Property Organization (WIPO) on the implementation process in South Africa.  WIPO has conducted a number of missions to South Africa on this matter, the latest of which was in February 2018. South Africa has also engaged with national IP offices with similar trade mark legislation, such as New Zealand.

Resources for Rights Holders

Economic Officer covering IP issues:

Juan Manuel Cammarano
Trade and Investment Officer
+27(0)12 431-4343
CammaranoJM@State.gov

For additional information about South Africa’s treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/  .  A list of attorneys for various South African districts can be found on the U.S. Mission Citizen Services page: https://za.usembassy.gov/u-s-citizen-services/local-resources/attorneys/

6. Financial Sector

Capital Markets and Portfolio Investment

South Africa recognizes the importance of foreign capital in financing persistent current account and budget deficits and openly courts foreign portfolio investment.  Authorities regularly meet with investors and encourage open discussion between investors and a wide range of private and public-sector stakeholders. The government enhanced efforts to attract and retain foreign investors.  President Cyril Ramaphosa hosted an investment conference in October 2018 and attended the World Economic Forum in Davos in January 2019 to promote South Africa as an investment destination. South Africa suffered a two-quarter technical recession in 2018 with economic growth registering only 0.8 percent for the entire year.

South Africa’s financial market is regarded as one of the most sophisticated among emerging markets.  A sound legal and regulatory framework governs financial institutions and transactions.

The fully independent South African Reserve Bank (SARB) regulates a wide range of commercial, retail and investment banking services according to international best practices, such as Basel III, and participates in international forums such as the Financial Stability Board and G-20 Finance Ministers and Central Bank Governors.  There are calls to “nationalize” the privately-held SARB, which would not change its constitutional mandate to maintain price stability. The Johannesburg Stock Exchange (JSE) serves as the front-line regulator for listed firms, but is supervised in these regulatory duties by the Financial Services Board (FSB). The FSB also oversees other non-banking financial services, including other collective investment schemes, retirement funds and a diversified insurance industry.  The South African government has committed to tabling a Twin Peaks regulatory architecture to provide a clear demarcation of supervisory responsibilities and consumer accountability and to consolidate banking and non-banking regulation in 2017.

South Africa has access to deep pools of capital from local and foreign investors which provide sufficient scope for entry and exit of large positions.  Financial sector assets amount to almost three times GDP, and the JSE is the largest on the continent with capitalization of approximately USD 900 billion and approximately 400 companies listed on the main, alternative and other smaller boards.  Non-bank financial institutions (NBFI) hold about two thirds of financial assets.  The liquidity and depth provided by NBFIs make these markets attractive to foreign investors, who hold more than a third of equities and government bonds, including sizeable positions in local-currency bonds. A well-developed derivative market and a currency that is widely traded as a proxy for emerging market risk allows investors considerable scope to hedge positions with interest rate and foreign exchange derivatives.

The SARB’s exchange control policies permit authorized currency dealers, normally one of the large commercial banks, to buy and borrow foreign currency freely on behalf of domestic and foreign clients.  The size of transactions is not limited, but dealers must report all transactions to SARB, regardless of size.  Non-residents may purchase securities without restriction and freely transfer capital in and out of South Africa.  Local individual and institutional investors are limited to holding 25 percent of their capital outside of South Africa. Given the recent exchange rate fluctuations, this requirement has entailed portfolio rebalancing and repatriation to meet the prescribed prudential limits.

Banks, NBFIs, and other financial intermediaries are skilled at assessing risk and allocating credit based on market conditions.  Foreign investors may borrow freely on the local market.  A large range of debt, equity and other credit instruments are available to foreign investors, and a host of well-known foreign and domestic service providers offer accounting, legal and consulting advice.  In recent years, the South African auditing profession has suffered significant reputational damage with the leadership of two large foreign firms being implicated in allegations of aiding and abetting irregular client management practices that were linked to the previous administration, or of delinquent oversight of listed client companies.  South Africa’s WEF competitiveness rating for auditing and reporting fell from number one in the world in 2016, to number 55 in 2018.

Money and Banking System

South African banks are well capitalized and comply with international banking standards. There are 19 registered banks in South Africa and 15 branches of foreign banks. Twenty-nine foreign banks have approved local representative offices. Five banks – Standard, ABSA, First Rand (FNB), Capitec, and Nedbank – dominate the sector, accounting for over 85 percent of the country’s banking assets, which total over USD 390 billion.  The SARB regulates the sector according to the Bank Act of 1990. There are three alternatives for foreign banks to establish local operations, all of which require SARB approval: separate company, branch, or representative office. The criteria for the registration of a foreign bank are the same as for domestic banks. Foreign banks must include additional information, such as holding company approval, a letter of “comfort and understanding” from the holding company, and a letter of no objection from the foreign bank’s home regulatory authority. More information on the banking industry may be obtained from the South African Banking Association at the following website: www.banking.org.za  .

The Financial Services Board (FSB) governs South Africa’s non-bank financial services industry (see website: www.fsb.co.za/  ).  The FSB regulates insurance companies, pension funds, unit trusts (i.e., mutual funds), participation bond schemes, portfolio management, and the financial markets.  The JSE Securities Exchange SA (JSE) is the nineteenth largest exchange in the world measured by market capitalization and enjoys the global reputation of being one of the best regulated.  Market capitalization stood at USD 900 billion as of November 2018, with 388 firms listed. The Bond Exchange of South Africa (BESA) is licensed under the Financial Markets Control Act. Membership includes banks, insurers, investors, stockbrokers, and independent intermediaries.  The exchange consists principally of bonds issued by government, state-owned enterprises, and private corporations. The JSE acquired BESA in 2009. More information on financial markets may be obtained from the JSE (website: www.jse.co.za  ).  Non-residents are allowed to finance 100 percent of their investment through local borrowing.  A finance ratio of 1:1 also applies to emigrants, the acquisition of residential properties by non-residents, and financial transactions such as portfolio investments, securities lending and hedging by non-residents.

Foreign Exchange and Remittances

Foreign Exchange

The South African Reserve Bank (SARB) Exchange Control Department administers foreign exchange policy.  An authorized foreign exchange dealer, normally one of the large commercial banks, must handle international commercial transactions and report every purchase of foreign exchange, irrespective of the amount.  Generally, there are only limited delays in the conversion and transfer of funds. Due to South Africa’s relatively closed exchange system, no private player, however large, can hedge large quantities of Rand for more than five years.

While non-residents may freely transfer capital in and out of South Africa, transactions must be reported to authorities.  Non-residents may purchase local securities without restriction. To facilitate repatriation of capital and profits, foreign investors should ensure an authorized dealer endorses their share certificates as “non-resident.”  Foreign investors should also be sure to maintain an accurate record of investment.

Remittance Policies

Subsidiaries and branches of foreign companies in South Africa are considered South African entities and are treated legally as South African companies.  As such, they are subject to exchange control by the SARB. South African companies may, as a general rule, freely remit the following to non-residents: repayment of capital investments; dividends and branch profits (provided such transfers are made out of trading profits and are financed without resorting to excessive local borrowing); interest payments (provided the rate is reasonable); and payment of royalties or similar fees for the use of know-how, patents, designs, trademarks or similar property (subject to prior approval of SARB authorities).

While South African companies may invest in other countries, SARB approval/notification is required for investments over R500 million (USD 43.5 million).  South African individuals may freely invest in foreign firms listed on South African stock exchanges. Individual South African taxpayers in good standing may make investments up to a total of R4 million (USD 340,000) in other countries.  As of 2010, South African banks are permitted to commit up to 25 percent of their capital in direct and indirect foreign liabilities. In addition, mutual and other investment funds can invest up to 25 percent of their retail assets in other countries.  Pension plans and insurance funds may invest 25 percent of their retail assets in other countries.

Before accepting or repaying a foreign loan, South African residents must obtain SARB approval.  The SARB must also approve the payment of royalties and license fees to non-residents when no local manufacturing is involved.  When local manufacturing is involved, the dti must approve the payment of royalties related to patents on manufacturing processes and products.  Upon proof of invoice, South African companies may pay fees for foreign management and other services provided such fees are not calculated as a percentage of sales, profits, purchases, or income.

Sovereign Wealth Funds

South Africa does not have a Sovereign Wealth Fund.

7. State-Owned Enterprises

State-owned enterprises (SOEs) play a significant role in the South African economy.  In key sectors such as electricity, transport (air, rail, freight and pipelines), and telecommunications, SOEs play a lead role, often defined by law, although limited competition is allowed in some sectors (e.g., telecommunications and air).  The government’s interest in these sectors often competes with and discourages foreign investment.  South Africa’s overall fixed investment was 19 percent of GDP.  The SOEs share of the investment was 21 percent while private enterprise contributed 63 percent (government spending made up the remainder of 16 percent).  The IMF estimates that the debt of the SOEs would add 13.5 percent to the overall national debt.

The Department of Public Enterprises (DPE) has oversight responsibility in full or in part for seven of the approximately 700 SOEs that exist at the national, provincial and local levels:  Alexkor (diamonds); Denel (military equipment); Eskom (electricity generation, transmission and distribution); South African Express and Mango (budget airlines); South African Airways (national carrier); South African Forestry Company (SAFCOL – (forestry); and Transnet (transportation).   These seven SOEs employ approximately 105,000 people.  For other national-level SOEs, the appropriate cabinet minister acts as shareholder on behalf of the state. The Department of Transport, for example, has oversight of the state-owned South African National Roads Agency (SANRAL), Passenger Rail Agency of South Africa (PRASA), and Airports Company South Africa (ACSA), which operates nine of South Africa’s airports. The Department of Communications has oversight of the South African Broadcasting Corporation (SABC). The National Treasury assumed control of South African Airways (SAA) in 2014 through 2018, but SAA has since returned to the DPE. .

Combined, South Africa’s SOEs that fall under DPE’s authority posted a loss of R15.5 billion (USD 1.3 billion) in the 2017/2018 financial year.  In recent years many have been plagued by mismanagement and corruption, and repeated government bailouts have exposed the public sector’s balance sheet to sizable contingent liabilities.  The election of President Cyril Ramaphosa and appointment of Minister of Public Enterprises Pravin Gordhan signaled a renewed emphasis on improving SOE governance and performance.

The state-owned electricity giant Eskom generates approximately 95 percent of the electricity used in South Africa.  Coal-fired power stations generate approximately 93 percent of Eskom’s electricity.  Eskom’s core business activities are generation, transmission, trading and distribution.  South Africa’s electricity system operates under strain because of low availability factors for base load generation capacity due to maintenance problems.  The electricity grid’s capacity reserve margins frequently fall under two percent, well below international norms.  Beginning in November 2013, Eskom periodically declared “electricity emergencies,” and asked major industrial users to reduce consumption by ten percent for specified periods (usually one to two days).   To meet rising electricity demand, Eskom is building new power stations (including two of the world’s largest coal-fired power stations, but both are years overdue and over budget).  Eskom and independent industry analysts anticipate South Africa’s electricity grid will remain constrained for at least the next several years.  The South African government has implemented a renewable energy independent power producer procurement program (REIPPP) that in the past three years has added 1500Mw of a planned 3900Mw of renewable energy production to the grid and recently signed 27 Independent Power Producer agreements to provide an additional 2,300 MW to the grid.  In February 2018, S&P announced that it “lowered its long-term foreign and local currency issuer credit ratings on South Africa-owned utility ESKOM Holdings SOC Ltd. to ‘CCC+’ from ‘B-‘.

Transnet National Ports Authority (TNPA), the monopoly responsible for South Africa’s ports, charges some of the highest shipping fees in the world.  In March 2014, Transnet announced an average overall tariff increase of 8.5 percent at its ports to finance a USD 240 million modernization effort.  High tariffs on containers subsidize bulk shipments of coal and iron ore, thereby favoring the export of raw materials over finished ones.  According to the South African Ports Regulator, raw materials exporters paid as much as one quarter less than exporters of finished products.  TNPA is a division of Transnet, a state-owned company that manages the country’s port, rail and pipeline networks.  In April 2012, Transnet launched its Market Driven Strategy (MDS), a R336 billion (USD 28 billion) investment program to modernize its port and rail infrastructure.  Transnet’s March 2014 selection of four OEMs to manufacture 1064 locomotives is part of the MDS.  This CAPEX is being 2/3 funded by operating profits with the remainder from the international capital markets.  In 2016, Transnet reported it had invested R124 billion (USD 10.3 billion) in the previous four years in rail, ports, and pipeline infrastructure.  In recent years ratings agencies have downgraded Transnet’s rating to below the investment-grade threshold.  In November 2017 S&P downgraded Transnet’s local currency rating from BBB- to BB+.

Direct aviation links between the United States and South Africa are limited to flights between Atlanta, New York (JFK), and Washington (Dulles) to Johannesburg.  The growth of low-cost carriers in South Africa has reduced domestic airfares, but private carriers are likely to struggle against national carriers without further air liberalization in the region and in Africa.  The launch of the Single African Air Transport Market, which is composed of 23 African Union member states including South Africa, in January 2018 demonstrates the potential for further cooperation on the continent.  In South Africa, the state-owned carrier, South African Airways (SAA), relies on the government for financial assistance to stay afloat and received back-to-back bailouts of R5 billion (USD 357 million) in 2018 alone to repay creditors.  New management at SAA, including a new board and CEO offer some hope that SAA will implement its turnaround plan, but the airline has a long journey to recover from mismanagement and six consecutive years of losses. The new management has requested a R21.7 billion (USD 1.55 billion) bailout from government over three years to turn the company around. During fiscal year 2017/2018, SAA lost R5.7 billion (USD 407 million) bringing the company’s cumulative losses since 2011 to a total of R23 billion (USD 1.65 billion).

The telecommunications sector in South Africa, while advanced for the continent, is hampered by regulatory uncertainty and poor implementation of the digital migration, both of which contribute to the high cost of data.  In 2006, South Africa agreed to meet an International Telecommunication Union deadline to achieve analogue-to-digital migration by June 1, 2015.  As of April 2019, South Africa has initiated but not completed the migration.  Until this process is finalized, South Africa will not be able to allocate the spectrum freed up by the conversion.  Many of the issues stemmed from the confusion and infighting caused by the 2014 split of the Department of Communications into two departments—the Department of Communications (DOC) and the Department of Telecommunications and Postal Services (DTPS). In November 2018, the Ramaphosa administration announced their re-incorporation into a single Department of Communications to take effect after the May 2019 elections.

In October 2016, DTPS released a policy paper addressing the planned course of action to realize the potential of the ICT sector.  The paper advocates for open access requirements that could overhaul how telecommunications firms gain access to and use infrastructure.  It also proposes assigning all high-demand spectrum to a Wireless Open Access Network.  Some stakeholders, including state-owned telecommunications firm Telkom, agree with the general approach.  Others, including the major private sector mobile carriers, feel the interventions would curb investment while doing little to facilitate digital access and inclusion.  In November 2017, DTPS published a draft Electronic Communications Amendment Bill that would implement the ICT White Paper, but the Minister of Communications withdrew the bill in February 2019.  Private industry and civil society had criticized the reach of the bill. The Minister stated that the DoC would consult with relevant stakeholders to re-draft the bill before submitting it to Parliament.

Privatization Program

Although in 2015 and 2016 senior government leaders discussed allowing private-sector investment into some of the more than 700 SOEs and a recently released report of a presidential review commission on SOE that called for rationalization of SOEs, the government has not taken any concrete action to enable this.  The CEO of SAA has stated that a fund-raising plan to sell a stake in SAA to an equity partner will be shelved until the airline can shore up its balance sheet. He announced the restructuring of the national carrier into three segments: international, regional, and domestic, but he has not articulated how that would occur in practice.

Other candidates for unbundling of SOEs / privatization are ESKOM and defense contractor Denel.

8. Responsible Business Conduct

Responsible Business Conduct (RBC), is well-developed in South Africa, and is driven in part by the recognition that the private sector has an important role to play.  The socio-economic development element of B-BBEE has formalized and increased RBC in South Africa, as firms have largely aligned their RBC activities to the element’s performance requirements.  The 2013 amendment’s compliance target is one percent of net profit after tax spent on RBC, and at least 75 percent of the RBC activity must benefit historically disadvantaged South Africans referred to the B-BBEE act as black people, which includes South Africans of black, colored, Chinese and Indian descent.  Most RBC is directed towards non-profit organizations involved in education, social and community development, and health.

The South African mining sector follows the rule of law and encourages adherence to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas.  For example South Africa is a founding member of the Kimberley Process Certification Scheme (KPCS), the process established in 2000 to prevent conflict diamonds from entering the mainstream rough diamond market. The Kimberley Process is designed to ensure that diamond purchases do not finance violence by rebel movements and their allies seeking to undermine legitimate governments.

South Africa does not participate in the Extractive Industries Transparency Initiative (EITI). South African mining, labor and security legislation seek to speak to the values as embodied by Voluntary Principles on Security and Human Rights.

South African mining laws and regulations allow for the accounting of all revenues from the extractive sector in the form of mining taxes, royalties, fees, dividends and duties.  The reporting and accounting of all revenues from the extractive sector is done through Parliament by such institutions as the Auditor General and the National Treasury budgetary processes and the results are publicly available. There is a sizeable illicit mining sector in South Africa, mostly in decommissioned gold mines.

9. Corruption

South Africa has a robust anti-corruption framework, but laws are inadequately enforced and accountability in public sectors tends to be low. The law provides for criminal penalties for conviction of official corruption, and the government continued efforts to curb corruption, but officials sometimes engaged in corrupt practices with impunity.

High-level political interference has undermined the ability of the country’s National Prosecuting Authority (NPA) – constitutionally responsible for all prosecutions – to pursue criminal proceedings and enforce accountability.  After an unprecedented consultative process, President Ramaphosa appointed Shamila Batohi as the National Director of Public Prosecutions (NDPP) in December 2018, and he created an Investigative Directorate within her office in March 2019 to focus on the significant number of cases emanating from ongoing corruption investigations.  The Constitutional Court ruled in August 2018 that Zuma’s appointment of Shaun Abrahams as the former NDPP was invalid and ordered President Ramaphosa to replace Abrahams within 90 days. Widely praised by civil society, the court also ordered former NDPP Mxolisi Nxasana to repay a “golden handshake” (an illegal departure bonus) of 10.2 million rand (USD 788,000) he received when Zuma replaced him with Abrahams in 2015.

The Department of Public Service and Administration formally coordinates government initiatives against corruption, and the “Hawks” – South Africa’s Directorate for Priority Crime Investigations – focuses on organized crime, economic crimes, and corruption.  In 2018, the Office of the Public Protector, a constitutionally mandated body designed to investigate government abuse and mismanagement, investigated thousands of cases, some of which involved high-level officials. The public and NGOs considered the Office of the Public Protector independent and effective, despite limited funding.  According to the NPA’s 2017-2018 Annual Report, it recovered 410,000 rand (USD 31,700) from government officials involved in corruption, a 92-percent decrease from the previous year.  Courts convicted 213 government officials of corruption.

The Prevention and Combating of Corrupt Activities Act (PCCA) officially criminalizes corruption in public and private sectors and codifies specific offenses (such as extortion and money laundering), making it easier for courts to enforce the legislation.  Applying to both domestic and foreign organizations doing business in the country, the PCCA covers receiving or offering bribes, influencing witnesses and tampering with evidence in ongoing investigations, obstruction of justice, contracts, procuring and withdrawal of tenders, and conflict of interests, among other areas.  Inconsistently implemented, the PCCA does not include any protectionary measures for whistleblowers.  Complementary acts – such as the Promotion of Access to Information Act and the Public Finance Management Act – calls for increased access to public information and review of government expenditures.

“State capture” – the popular term used to describe systemic corruption of the state’s decision-making processes by private interests – has become synonymous with the administration of former president Jacob Zuma.  In response to widespread calls for accountability, President Cyril Ramaphosa has denounced corruption since assuming office in February 2018. He has vowed to tackle the scourge at all levels of government, including through proposed lifestyle audits of officials to expose bribery, corruption, and public tender irregularities.  He has also launched four separate judicial commissions of inquiry to investigate corruption, fraud, and maladministration, including in the Public Investment Corporation, South African Revenue Service, National Prosecuting Authority, and writ large across the government. These commissions have revealed pervasive networks of criminality across all levels of the municipal, provincial, and national government.  Numerous former senior officials had already testified before the commission; a number of them directly implicated former president Jacob Zuma in corruption cases.

Corruption charges were reinstated against Zuma in 2018 related to a USD 2.5-billion arms deal in the late 1990s.  The Zuma-linked Gupta family, which owns interests in multiple industries from computer services to mining, has also been placed under investigation and its assets frozen while the state investigates allegations of state capture, bribery, and the siphoning off of public funds meant for small-holder farmers.  These and other ongoing efforts are meant to rebuild the public’s trust in government and to foment transparency and predictability in the business environment in order to woo investors.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

South Africa signed the Anticorruption Convention on 9 Dec 2003 and ratified it on 22 Nov 2004.  South Africa also signed the OECD Convention on Combatting Bribery in 2007, with implementing legislation dating from 2004.

South Africa is also a party to the SADC Protocol Against Corruption, which promotes the development of mechanisms needed to prevent, detect, punish and eradicate corruption in the public and private sector.  The protocol also seeks to facilitate and regulate cooperation in matters of corruption amongst Member States and foster development and harmonization of policies and domestic legislation related to corruption.  The Protocol defines ‘acts of corruption,’ preventative measures, jurisdiction of Member States, as well as extradition. http://www.sadc.int/files/7913/5292/8361/Protocol_Against_Corruption2001.pdf 

Resources to Report Corruption

To report corruption to the government:

Advocate Busisiwe Mkhwebane
Public Protector
Office of the Public Protector, South Africa
175 Lunnon Street, Hillcrest Office Park, Pretoria 0083

Anti-Corruption Hotline: +27 80 011 2040 or +27 12 366 7000
http://www.pprotect.org   or customerservice@pprotect.org

Or for a non-government agency:

David Lewis
Executive Director
Corruption Watch
87 De Korte Street, Braamfontein/Johannesburg 2001
+27 80 002 3456 or +27 11 242 3900
http://www.corruptionwatch.org.za/content/make-your-complaint  
info@corruptionwatch.org.za

10. Political and Security Environment

South Africa has a history of politically-motivated violence and civil disturbance.  Violent protests, often by residents in poor communities against the lack of effective government service delivery, are common.  Killings of, and by, mostly low-level political and organized crime rivals take place on a regular basis.  Still, South Africa enjoys strong, democratic political institutions and the overall political environment is stable and secure.

In May 2018, President Cyril Ramaphosa set up an inter-ministerial committee in the security cluster to serve as a national task force on political killings.  The task force includes the Police Minister‚ State Security Minister‚ Justice Minister‚ National Prosecuting Authority, and the National Police Commissioner.  The task force ordered multiple arrests, including of high profile officials, in what appears to be a crackdown on political killings.

There is suspicion that criminal threats have been used to resolve business disputes. There was one known incident in 2018 when two expat employees of a U.S. company managing an ongoing construction project received threats to leave the country.  The threats escalated to mention the expats’ families as targets, and the company evacuated them from South Africa. Subcontractors accused of using substandard construction materials were suspected. There were no reports of physical damage at the project.

Labor unrest in one part of South Africa has caused damage to property and halted operations to a U.S. company operating in an industrial zone.  In this case, the U.S. company was targeted as a single employer by strikes and labor unrest on what was a national bargaining council issue.

11. Labor Policies and Practices

Since 1994, the South African government has replaced apartheid-era labor legislation with policies that emphasize employment security, fair wages, and decent working conditions.  Under the aegis of the National Economic Development and Labor Council (NEDLAC), government, business, and organized labor are to negotiate all labor laws, with the exception of laws pertaining to occupational health and safety.  The South African Constitution and South African laws allows workers to form or join trade unions without previous authorization or excessive requirements. Labor unions that meet a locally negotiated minimum threshold of representation (often, 50 percent plus one union member) are entitled to represent the entire workplace in negotiations with management.  As the majority union or representative union, they may also extract agency fees from non-union members present in the workplace. In some workplaces and job sectors, this financial incentive has encouraged inter-union rivalries, including intimidation and violence, as unions compete for the maximum share of employees in seeking the status of representative union.

In February 2019, South Africa reported a year-on-year unemployment rate increase of 0.4 percentage point to 27.1 percent.  However, labor force participation increased by 0.6 percentage points to 59.4 percent from 58.8 percent in 2018. The youth unemployment (ages 15-24) rate has hovered at or just over 50 percent since 2015.  Approximately 3.2 million (31.1 percent) of the 10.3 million of these South Africans were not in employment, education, or training. On a quarterly basis, employment in the formal sector increased in all industries with the exception of professional employment and skilled agriculture.

There are 205 trade unions registered with the Department of Labor as of February 2019, up from 190 the prior year, but down from the 2002 high of 504.  According to the 2018 Fourth Quarter Labor Force Survey (QLFS) report from Statistics South Africa (StatsSA), 4.04 million workers belonged to a union, an increase of 511,000 from the fourth quarter of 2017.  Department of Labor statistics indicate union density declined from 45.2 percent in 1997 to 24.7 percent in 2014, the most recent data available. Using StatsSA data, however, union density can be calculated: The February 2019 QLFS reported 4.041 million union members and 13.992 million employees, for a union density of 28.9 percent.

The right to strike is protected under South Africa’s constitution and laws.  The law allows workers to strike due to matters of mutual interest, such as wages, benefits, organizational rights disputes, socioeconomic interests of workers, and similar measures. Workers may not strike because of disputes where other legal recourse exists, such as through arbitration. Although the number of workdays lost to strikes jumped from 480,000 in 2017 to 1.95 million in 2018, the figure remains low in comparison to the 2005-2014 period in which every year but one (2008) saw lost workdays total at least 2.3 million.  Long-running strikes in the plastics and mining sector accounted for the 2018 increase. Strikes in 2018 were triggered almost exclusively (96 percent of strikes) by wages and grievances. The health and education sectors saw the most strikes in 2018, followed by miners and municipal sector workers. Due to long-running strikes in the plastics and mining sectors, these industries saw the most work days lost to strikes in 2018.

Layoffs and retrenchments are permitted for economic reasons, but they are subject to a statutory process requiring consultations between employers and labor unions in an effort to reach consensus.

Employers and employees are each required to pay one percent of workers’ wages to the national unemployment fund.  The fund pays benefits based on reverse sliding scale of the prior salary, up to 58 percent of the prior wage, for up to 34 weeks.

There are robust labor dispute resolution institutions in South Africa, including the Commission for Conciliation, Mediation and Arbitration (CCMA), the bargaining councils, and specialized labor courts of both first instance and appellate jurisdiction.

Improved labor stability is essential for South Africa’s economic stability and development and vital to the country’s ability to continue to attract and retain foreign investment.  The government of South Africa does not waive labor laws to attract or retain investment.

Collective bargaining is a cornerstone of the current labor relations framework.  As of February 2019, the South Africa Department of Labor listed 39 private sector bargaining councils through which parties negotiate wages and conditions of employment.  Per the Labor Relations Act, the Minister of Labor must extend agreements reached in bargaining councils to non-parties of the agreement operating in the same sector. Employer federations, particularly those representing small and medium enterprises (SMEs) argue the extension of these agreements – often reached between unions and big business – negatively impacts SMEs that cannot afford to pay higher wages.  In 2018, the average wage settlement resulted in a 7.2 percent wage increase, on average 2.6 percent above the increase in South Africa’s consumer price index and down slightly from the average increase of 7.6 percent in 2017.

Major labor legislation includes:

As of January 1, 2019, South Africa has a national minimum wage of R20/hour, with lower rates for domestic (R16/hour) and agricultural (R 18/hour) workers.  This rate is subject to annual increases as suggested by the 13-member National Minimum Wage Commission and as approved by parliament and signed by the president.

In November 2018, President Ramaphosa signed an amendment to the Basic Conditions of Employment Act which provides benefits to new parents.  Fathers may now claim ten days of paternity leave, whereas adoptive parents and commissioning parents in a surrogate motherhood agreement may now claim ten weeks of leave.  South Africa’s Unemployment Fund funds this leave at the same rate for unemployment claims (see above) and not at the claiming employee’s wage rate.

The Labor Relations Act (LRA), in effect since 1995 with amendments made in 2014, provides fair dismissal guidelines, dispute resolution mechanisms, and retrenchment guidelines stating employers must consider alternatives to retrenchment and must consult all relevant parties when considering possible layoffs.  The Act enshrines the right of workers to strike and of management to lock out striking workers. The Act created the Commission on Conciliation, Mediation, and Arbitration (CCMA), which can conciliate, mediate, and arbitrate in cases of labor disputes, and is required to certify an impasse in bargaining council negotiations before a strike can be called legally.  The CCMA’s caseload currently exceeds what was anticipated; the South African Government provided the CCMA an additional USD 60 million to handle its caseload and any possible increase caused by the 2014 amendments to the LRA. Amendments to the LRA modify the regulation of temporary employment service firms, extend organizational rights to workplaces with a majority of temporary or fixed term contract workers, reduces the maximum period of temporary or fixed term contract employment to three months, establishes joint liability by temporary employment services and their clients for contraventions of employment law, and strengthens other protections for temporary or contract workers.

The Basic Conditions of Employment Act (BCEA), implemented in 1997 and amended in 2014, establishes a 45-hour workweek, standardizes time-and-a-half pay for overtime, and authorizes four months of maternity leave for women. No employer may require or permit an employee to work overtime except by agreement, and overtime may not be more than 10 hours a week. The law stipulates rest periods of 12 consecutive hours daily and 36 hours weekly and must include Sunday. The law allows adjustments to rest periods by mutual agreement. A ministerial determination exempted businesses employing fewer than 10 persons from certain provisions of the law concerning overtime and leave.  Farmers and other employers can apply for variances from the law by showing good cause. The law applies to all workers, including workers in informal sectors, foreign nationals, and migrant workers, but the government did not prioritize labor protections for workers in the informal economy. The law prohibits employment of children under age 15 and prohibits anyone from requiring or permitting a child under age 15 to work. The law allows children under age 15 to work in the performing arts, but only if their employers receive permission from the Department of Labor and agree to follow specific guidelines. Amendments made in 2014 clarify the definitions of employment, employers, and employees to reflect international labor conventions, closing a loophole that previously existed in South African law between the LRA and the BCEA.  The Act gives the Minister of Labor the power to set sectoral minimum wages and annual minimum wage increases for employees not covered by sectoral minimum wage agreements.

The Employment Equity Act of 1998 (EEA), amended in 2014, protects all workers against unfair discrimination on the grounds of race, age, gender, religion, marital status, pregnancy, family responsibility, ethnic or social origin, color, sexual orientation, disability, conscience, belief, political, opinion, culture, language, HIV status, birth, or any other arbitrary ground. The EEA further requires large- and medium-sized companies to prepare employment equity plans to ensure that historically disadvantaged South Africans, such as Blacks, South Asians, and Coloreds, as well as women and disabled persons, are adequately represented in the workforce.  The EEA amendments increase fines for non-compliance with employment equity measures and have a new provision of equal pay for work of equal value. The Act prohibits the use of foreign nationals to meet employers’ affirmative action targets and relaxes the standards for parties in labor disputes to access the CCMA instead of going directly to the Labor Court.

More information regarding South African labor legislation can be found at:  www.labour.gov.za/legislation  

12. OPIC and Other Investment Insurance Programs

The Overseas Private Investment Corporation (OPIC) has an approximately USD 1.2 billion portfolio in South Africa.  Since a 1993 agreement to facilitate OPIC programs, OPIC has invested in a number of funds supporting sub-Saharan Africa development, including the Africa Catalyst Fund (USD 300 million focused on small- and medium-sized enterprise development), Africa Healthcare Fund (USD 100 million focused on private healthcare delivery businesses), and ECP Africa Fund II, (USD 523 million, focused on telecommunications, oil and gas, power, transportation, agribusiness, media, financial services and manufacturing).  Tailored products to support clean and renewable energy are a particular focus. OPIC opened an office in Johannesburg in 2013 to support investment to key African countries through its financing and risk mitigation instruments. Additional information on OPIC programs that involve South Africa may be found on OPIC’s website: http://www.opic.gov  

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) 2018 $368,500 2017 $348,872 www.worldbank.org/en/country   
Foreign Direct Investment Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2016 $9,578 2017 $7,334 BEA 
Host country’s FDI in the United States ($M USD, stock positions) 2016 $6,683 2017 $4,117 BEA 
Total inbound stock of FDI as % host GDP 2016 43.1% 2017 47.2% UNCTAD

* Statistics South Africa (STATS SA) www.statssa.gov.za


Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $156,103 100% Total Outward $276,450 100%
United Kingdom $64,505 41.3% China $165,477 59.9%
Netherlands $28,075 18% United Kingdom $24,334 8.8%
United States $10,459 6.7% Mauritius $11,422 4.1%
Germany $7,623 4.9% Australia $8,840 3.2%
China $7,290 4.7% United States $7,872 2.8%
“0” reflects amounts rounded to +/- USD 500,000.


Table 4: Sources of Portfolio Investment

Portfolio Investment Assets
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries $167,005  100% All Countries $157,749 100% All Countries $9,255 100%
United Kingdom $61,226 36.7% United Kingdom $59,434 37.7% United States $2,169 23.4%
Ireland $26,485 15.8% Ireland $24,926 15.8% United Kingdom $1,792 19.4%
United States $20,676 12.4% United States $18,507 11.7% Ireland $1,559 16.8%
Luxembourg $15,761 9.4% Luxembourg $15,153 9.6% Italy $691 7.5%
Bermuda $9,491 5.7% Bermuda $9,491 6.0% Luxembourg $609 6.6%

14. Contact for More Information

Juan Manuel Cammarano
Trade and Investment Officer
877 Pretorius Street
Arcadia, Pretoria 0083
+27 (0)12-431-4343
cammaranojm@state.gov