Algeria

Executive Summary

Following the April 2, 2019 resignation of President Abdelaziz Bouteflika, Algeria entered into a transition period headed by an interim president.  Algeria’s state enterprise-dominated economy has traditionally been a challenging market for U.S. businesses, though one that offers compelling opportunities.  Multiple sectors offer opportunities for long-term growth for U.S. firms, with many having reported double-digit annual profits. Sectors primed for continued growth include agriculture, tourism, information and communications technology, manufacturing, energy (both fossil fuel and renewable), construction, and healthcare.  A 2016 investment law offers lucrative, long-term tax exemptions, along with other incentives. Rising oil prices in the latter half of 2018 helped reduce the trade deficit and restore some revenue to the government budget, though government spending is still higher than revenue. 

The energy sector, dominated by state hydrocarbons company Sonatrach and its subsidiaries, forms the backbone of the Algerian economy, as oil and gas production and revenue have traditionally accounted for more than 95 percent of export revenues, 60 percent of the state budget, and 30 percent of GDP.  The Algerian government continues to pursue its goal of diversifying its economy, with an emphasis on attracting more foreign direct investment (FDI) to boost employment and offset imports via increased local production. Algeria has pursued a series of protectionist policies to encourage local industry growth.  In December 2017, the government scrapped a short-lived policy requiring importers of certain goods to obtain import licenses (the license requirement was subsequently retained only for automobiles and cosmetics), replacing it with a temporary ban on 851 products announced January 1, 2018. The government replaced that ban on January 29, 2019 with a set of tariffs between 30-200 percent on over 1,000 goods.  The import substitution policies have generated some regulatory uncertainty, supply shortages, and price increases.

Algeria’s political transition may affect economic policies, though most leaders recognize the importance of economic diversification and job creation.  Economic operators currently deal with a range of challenges, including overcoming customs issues, an entrenched bureaucracy, difficulties in monetary transfers, and price competition from international rivals, particularly China, Turkey, and France.  International firms that operate in Algeria sometimes complain that laws and regulations are constantly shifting and applied unevenly, raising the perception of commercial risk for foreign investors. Business contracts are likewise subject to changing interpretation and revision, which has proved challenging to U.S. and international firms.  Other drawbacks include limited regional integration and the 51/49 rule that requires majority Algerian ownership of all new foreign partnerships. Arduous foreign currency exchange requirements and overly bureaucratic customs processes combine to impede the efficiency and reliability of the supply chain, adding further uncertainty to the market.

Table 1: Key Metrics and Rankings

Egypt

Executive Summary

Progress on Egyptian economic reforms over the past two years has been noteworthy.  Though many challenges remain, Egypt’s investment climate is improving. The country has undertaken a number of structural reforms since the flotation of the Egyptian Pound (EGP) in November 2016 and implemtation of a three-year, USD 12 billion International Monetary Fund (IMF)-backed economic reform program.  Increased investor confidence and the reactivation of Egypt’s interbank foreign exchange (FX) market have attracted foreign portfolio investment and grown foreign reserves. As yields on government debt fall, investors may shift towards direct investments, which would be a positive market signal that the Egyptian economy is beginning to trend  towards higher growth. The Government of Egypt (GoE) understands that attracting foreign direct investment (FDI) is key to addressing many of the economic challenges it faces, including low economic growth, high unemployment, current account imbalances, and hard currency shortages. Though FDI inflows grew 13 percent year-on-year in 2017, they declined slightly in 2018 from USD 7.9 to 7.7 billion, according to the Central Bank of Egypt.

Egypt implemented a number of regulatory reforms in 2017 and 2018.  Key among these are the new Investment Law and the Companies Law – which aim to improve Egypt’s ranking in international reports of doing business and to help the economy realize its full potential.  These reforms have increased investor confidence.

The Investment Law (Law 72 of 2017) aims to attract new investment and provides a framework for the government to offer investors more investment-related incentives and guarantees.  Additionally, the law aims to attract new investments, consolidate many investment-related rules, and streamlines procedures.

The government also hopes to attract  international investment in several “mega projects,” including a large-scale industrial and logistics zone around the Suez Canal, the construction of a new national administrative capital, a 1.5 million-hectare agricultural land reclamation and development project, and to promote mineral extraction opportunities in the Golden Trianlge economic zone between the Red Sea and the Nile River.

Egypt is a party to more than 100 bilateral investment treaties, including with the United States.  It is a member of the World Trade Organization (WTO), the Common Market for Eastern and Southern Africa (COMESA), and the Greater Arab Free Trade Area (GAFTA).  In many sectors, there is no legal difference between foreign and domestic investors. Special requirements exist for foreign investment in certain sectors, such as upstream oil and gas as well as real estate, where joint ventures are required.

Several challenges persist for investors.  Dispute resolution is slow, with the time to adjudicate a case to completion averaging three to five years.  Other obstacles to investment include excessive bureaucracy, regulatory complexity, a mismatch between job skills and labor market demand, slow and cumbersome customs procedures, and various non-tariff trade barriers.  Inadequate protection of intellectual property rights (IPR) remains a significant hurdle in certain sectors and Egypt remains on the U.S. Trade Representative’s Special 301 Watch List. Nevertheless, Egypt’s reform story is noteworthy, and if the steady pace of implementation for structural reforms continues, and excessive bureaucracy reduces over time, then the investment climate should continue to look more favorable to U.S. investors.

Table 1: Key Metrics and Rankings

Ethiopia

Executive Summary

Over the last year, Ethiopia has undertaken unprecedented economic and political reforms.  The new Ethiopian government, led by Prime Minister (PM) Abiy Ahmed, who was sworn in on April 2, 2018, announced at the outset its plan to democratize the country, reform the economy, and increase private sector participation.  Early in his tenure, PM Abiy addressed some of the public’s numerous longstanding grievances, including: ending the State of Emergency imposed by the government prior to his ascension; closing a notorious detention center; releasing thousands of detained individuals; restoring mobile internet throughout the country; retiring members of the political “old guard,” who were perceived as in the way of reform; and, reframing the government’s posture towards opposition parties.

On the economic front, the new administration is working to partially or wholly privatize major state-owned enterprises (SOEs) in the telecom, aviation, power, sugar, railway, and industrial parks sectors.  In addition, the Government of Ethiopia (GOE) lifted a restriction on the logistics sector and enacted a law that allows Public Private Partnerships (PPP) to gradually open up some sectors of the economy to foreign investors.  Ethiopia’s rapprochement with Eritrea could possibly open up alternative ports for trade. Furthermore, the country recently ratified the African Continental Free Trade Area Agreement and eased visa requirements for African Union member countries with the goal of enhancing regional trade and tourism and attracting foreign direct investment (FDI).  The GOE announced its commitment to modernize the financial sector, improve the ease of doing business, and enhance macroeconomic and fiscal management.

Ethiopia’s economy is currently in transition.  Coming off a decade of double-digit growth, fueled primarily by public infrastructure projects funded through debt, the GOE has tightened its belt, reducing inefficient government expenditures, putting a moratorium on most new government mega-projects, and attempting to get its accounts in order at bloated state-owned enterprises (SOEs).  The IMF put the growth of the Ethiopian economy at 7.7 percent for FY2017/18 and is projecting an 8.5 percent annual growth rate for the medium term. Ethiopia is the second most populous country in Africa after Nigeria, with a population of over 100 million, approximately two-thirds of whom are under age 30. Low-cost labor, a national airline with 105 passenger connections, and growing consumer markets are key elements attracting foreign investment.

Ethiopia’s imports in the last year have experienced a slight decline in large part due to a reduction in public investment programs and a dire foreign exchange shortage.  Distressingly, export performance remains weak, declining due to falling primary commodity prices and an overvalued exchange rate. The acute foreign exchange shortage (the Ethiopian birr is not a freely convertible currency) and the absence of capital markets are choking private sector growth.  Companies often face long lead-times importing goods and dispatching exports due to logistical bottlenecks, high land-transportation costs, and bureaucratic delays. Ethiopia is not a signatory of major intellectual property rights treaties.

All land in Ethiopia belongs to “the people” and is administered by the government.  Private ownership does not exist, but “land-use rights” have been registered in most populated areas.  The GOE retains the right to expropriate land for the “common good,” which it defines to include expropriation for commercial farms, industrial zones, and infrastructure development.  Successful investors in Ethiopia conduct thorough due diligence on land titles at both the state and federal levels, and undertake consultations with local communities regarding the proposed use of the land.  The largest volume of foreign direct investment (FDI) in Ethiopia comes from China, followed by Saudi Arabia and Turkey. Political instability associated with various ethnic conflicts could negatively impact the investment climate and lower future FDI inflow.

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Gabon

Executive Summary

Gabon is a historically stable country located in a volatile region of the world and has significant economic advantages:  a small population (roughly 2 million), an abundance of natural resources, and a strategic location along the Gulf of Guinea.  After taking office in 2009, President Ali Bongo Ondimba introduced reforms to diversify Gabon’s economy away from oil and from traditional investment partners and to position Gabon as an emerging economy.  Gabon promotes foreign investment across a range of sectors, particularly in the oil and gas, infrastructure, timber, ecotourism, and mining sectors. Despite these efforts, Gabon’s economy remains dependent on revenue generated by the exportation of hydrocarbons.  Gabon’s commercial ties with France remain very strong, but the government continues to seek to diversify its sources by courting investors from the rest of the world. In 2018, the Gabonese government lifted exit visa requirements for U.S. citizens.

Although Gabon is taking steps towards making the country a more attractive destination for foreign investment, it remains a difficult place to do business, especially without in-country or francophone experience.  Foreign firms are active in the country, particularly in the extractive industries, but the difficulty involved in establishing a new business and the time it takes to finalize deals are impediments to increased U.S. private sector investment.  Although the Gabonese government is taking a more active role to ensure transparency in extractive industries, investors are still waiting for key reforms to be established in law and in practice. Gabon enacted a new mining code in 2015. Gabon proposed revisions to its 2014 hydrocarbons code to draw more investors with greater flexibility and attractive financial terms.  The Gabonese government expects to implement the new hydrocarbons code in 2019.   

Increased investment is constrained due to limited bureaucratic capacity, unclear lines of decision-making authority, a lack of a clearly-established and consistent process for companies to enter the market, lengthy bureaucratic delays, high production costs, a small domestic market, rigid labor laws, and limited and poor infrastructure.  The judicial system at times fails to enforce the rule of law and limits access to justice. Corruption and lack of transparency remain an impediment to investment. The Gabonese government inconsistantly applies customs regulations.

Economic conditions in Gabon weakened throughout 2017 and 2018.  In addition to budget constraints due to low oil prices, the government lacks fiscal transparency.  Many international companies, including U.S. firms, continue to have difficulties collecting timely payments from the Gabonese government, and some companies in the oil sector have closed down operations.  To address fiscal imbalances, Gabon signed in June of 2017 a three-year Extended Fund Facility arrangement of USD 642 million with the IMF.  While opportunities exist, the investment climate in Gabon will remain difficult as the government must have the politcal will to make prudent decisions.  In 2018, higher oil prices, new investment in the oil sector and export processing zones, and the increasing manganese production helped support a modest recovery of economic growth of about 2 percent (according to the IMF September 2018 report).

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Ghana

Executive Summary

Ghana’s macroeconomic situation has improved over the last three years under its extended credit facility agreement with the International Monetary Fund (IMF), which concluded in April 2019.  The fiscal deficit has narrowed, inflation has come down, and GDP growth has rebounded, driven primarily by increases in oil production. Ghana’s economy is projected to grow 8.8 percent in 2019, according to the IMF, after expanding over 8 percent in 2017 and an estimated 5.6 percent in 2018.  However, the economy remains highly dependent on the export of primary commodities such as gold, cocoa, and oil/gas, and consequently is vulnerable to potential slowdowns in the global economy and commodity price shocks. The Government of Ghana is seeking to diversify and industrialize, in particular through agro-processing, mining, and manufacturing.  It has made attracting foreign direct investment (FDI) a priority to support its industrialization plans and overcome an annual infrastructure funding gap of at least USD 1.5 billion.

While the economy is doing relatively well, high government debt, low government revenue, and high energy costs remain challenges.  Ghana has a population of 30 million with six million potential taxpayers of which only two million are actually registered to pay taxes.  As Ghana seeks to move beyond dependence on foreign aid, it must develop a solid domestic revenue base. On the energy front, Ghana has enough installed power generating capacity to meet current demand, but it needs to make the cost of electricity more affordable through more effective management of its power distribution system and diversification of its energy matrix, including through renewable energy.  

Among the challenges hindering foreign direct investment are: a burdensome bureaucracy, costly and difficult financial services, under-developed infrastructure, ambiguous property laws, a costly power and water supply, the high costs of cross-border trade, a shifting policy environment, lack of transparency, and an unskilled labor force.  Enforcement of laws and policies is weak. Public procurements are opaque and there are often issues with delayed payments. In addition, there are troubling trends in investment policy over the last five years, with the passage of local content regulations in the petroleum sector and the power sector.

Despite these challenges, Ghana’s abundant raw materials (gold, cocoa, and oil/gas), security, and political stability make it stand out as one of the better locations for investment in sub-Saharan Africa.  The investment climate in Ghana is relatively welcoming to foreign investment. There is no discrimination against foreign-owned businesses. Investment laws protect investors against expropriation and nationalization and guarantee that investors can transfer profits out of the country.  Ghana enjoys a lower degree of corruption than that of some regional counterparts, although companies have reported a high level of corruption in foreign investments. Among the most promising sectors are agribusiness; food processing; textiles and apparel; downstream oil, gas, and minerals processing; and mining-related services subsectors.

The government has acknowledged the need to foster an enabling environment to attract FDI, and is taking steps to overhaul the regulatory system and improve the ease of doing business, maintain fiscal discipline, combat corruption, and promote better transparency and accountability.

Table 1: Key Metrics and Rankings

Kenya

Executive Summary

Kenya has a positive investment climate that has made it attractive to international firms seeking a location for regional or pan-African operations.  In the World Bank’s 2019 Doing Business report, Kenya moved up 19 places, ranking 61 of 190 economies reviewed. In the last three years, it has jumped 47 places on this index.  Year-on-year, Kenya continues to improve its regulatory framework and its attractiveness as a destination for foreign direct investment. Corruption, however, remains endemic and Transparency International’s (TI) 2018 Global Corruption Perception Index ranked Kenya 144 out of 180 countries, one place lower than in 2017.  Kenya has strong telecommunications infrastructure, a robust financial sector, and extensive aviation connections throughout Africa, Europe, and Asia. In 2018, Kenya Airways initiated direct flights to New York City in the United States. Mombasa Port is the gateway for the majority of East African trade and Kenya’s membership in the East African Community (EAC), as well as other regional trade blocs, provides growing access to larger regional markets.

In 2018, Kenya took steps to improve its business environment, including passage of the Tax Laws (amended) Bill (2018) and the Finance Act (2018), establishing new procedures and provisions relating to income taxes, value-added taxes, and excise duties.  In 2017, Kenya instituted broad business reforms: simplifying registration procedures for small businesses; improving access to credit information; reducing the cost of construction permits; enhancing electricity reliability; easing the payment of taxes through the iTax platform; and establishing a single window system to speed movement of goods across borders.

Kenya’s macroeconomic fundamentals remain among the strongest in Africa, with five to six percent GDP growth over the past five years, six to eight percent inflation, improving infrastructure, and strong consumer demand from a growing middle class.  A prolonged and acrimonious national election period during the second half of 2017 raised business anxiety and created a drag on growth but, following the elections, business and investment quickly recovered, and tourism was little affected by this turmoil.  President Kenyatta has remained focused on his second term “Big Four” development agenda, seeking to provide universal healthcare coverage; establish national food security; build 500,000 affordable new homes; and increase employment by doubling the manufacturing sector’s share of the economy.

The World Bank’s annual Kenya Economic Update, released in April 2019, cited some short term economic risks to Kenya’s continued growth such as the interest rate cap inhibiting monetary policy and continuing drought conditions, but noted positive developments including the Government of Kenya (GOK) enhancing agricultural financing programs.  At the same time, Kenya’s medium-term economic outlook appears strong especially in the agricultural sector. There has been great interest on the part of American companies to establish or expand their business presence and engagement in Kenya, especially following President Kenyatta’s August 2018 meeting with President Trump in Washington, D.C.  Sectors offering the most opportunities for investors include: agro-processing, financial services, energy, extractives, transportation, infrastructure, retail, restaurants, technology, health care, and mobile banking.

Table 1

Morocco

Executive Summary

Morocco enjoys political stability, robust infrastructure, and a strategic location, which have contributed to its emergence as a regional manufacturing and export base for international companies.  Morocco is actively encouraging and facilitating foreign investment, particularly in export sectors like manufacturing, through macro-economic policies, trade liberalization, investment incentives, and structural reforms.  Morocco’s overarching economic development plan seeks to transform the country into a regional business hub by leveraging its unique status as a multilingual, cosmopolitan nation situated at the tri-regional focal point of Sub-Saharan Africa, the Middle East, and Europe. In recent years, this strategy increasingly influenced Morocco’s relationship and role on the African continent. The Government of Morocco has implemented a series of strategies aimed at boosting employment, attracting foreign investment, and raising performance and output in key revenue-earning sectors, such as the automotive and aerospace industries. 

Morocco attracts the fifth-most foreign direct investment (FDI) in Africa, a figure that increased 23 percent in 2017.  As part of a government-wide strategy to strengthen its position as an African financial hub, Morocco offers incentives for firms that locate their regional headquarters in Morocco, such as the Casablanca Finance City (CFC), Morocco’s flagship financial and business hub launched in 2010.  CFC intends to open a new, 28-story skyscraper in 2019, which will eventually house all CFC members. Morocco’s return to the African Union in January 2017 and the launch of the African Continental Free Trade Area (CFTA) in March 2018 provide Morocco further opportunities to promote foreign investment and trade and accelerate economic development.  In late 2018, Morocco’s long-anticipated high-speed train began service connecting Casablanca, Rabat, and the port city of Tangier. Despite the significant improvements in its business environment and infrastructure, insufficient skilled labor, weak intellectual property rights (IPR) protections, inefficient government bureaucracy, and the slow pace of regulatory reform remain challenges for Morocco.

Morocco has ratified 69 bilateral investment treaties for the promotion and protection of investments and 60 economic agreements – including with the United States and most EU nations – that aim to eliminate the double taxation of income or gains.  Morocco’s Free Trade Agreement (FTA) with the United States entered into force in 2006, eliminating tariffs on more than 95 percent of qualifying consumer and industrial goods. The Government of Morocco plans to phase out tariffs for a limited number of products through 2030.  Since the U.S.-Morocco FTA came into effect, overall annual bilateral trade has increased by more than 250 percent, making the United States Morocco’s fourth largest trading partner. The U.S. is the second largest foreign investor in Morocco and the U.S. and Moroccan governments work closely to increase trade and investment through high-level consultations, bilateral dialogue, and the annual U.S.-Morocco Trade and Investment Forum, which provides a platform to strengthen business-to-business ties.

Table 1: Key Metrics and Rankings

Mozambique

Executive Summary

The once-promising Mozambican economy, which had seen steady 8 percent growth for many years, skidded into economic crisis following the revelation of USD 2 billion in illicit government debt in 2016, causing the IMF to cancel a second tranche of its standby credit facility and donors to suspend direct budget support.  In 2016, economic growth rates fell to 3.5 percent, the local currency– the metical– devalued by over 40 percent against the U.S. dollar, and inflation rates climbed above 20 percent.  Through decisive actions, the Central Bank was able to stabilize the currency and reduce inflation rates to the single digits.  Devastated by Cyclones Idai and Kenneth in 2019, the IMF revised Mozambique’s economic growth forecasts down to 1.8 percent in 2019 and 6 percent in 2020, with growth accelerating to near 10 percent after 2023 with the advent of liquefied natural gas (LNG) exports.  Two consortiums led by ExxonMobil and Anadarko are expected to take final investment decisions (FID) in 2019, which would eventually lead to more than USD 50 billion in investment to the LNG sector in Mozambique.

The country still faces significant security challenges related to violent extremism in Cabo Delgado province, the future home of the LNG investment.  Since 2017, Islamic extremists have carried out more than 200 unprecedented attacks against government facilities and communities, killing scores of government security personnel and local villagers.  The extremists, which claim affiliation with ISIS and claim to wish to establish an Islamic state, reject secular government, secular education, and gender equality.  Most members of the extremist group appear motivated by local socio-economic grievances, income inequality, and perceptions of political favoritism and corruption.

Negotiations between the Government of Mozambique (GRM) and Renamo, the main opposition party, made significant progress towards a lasting peace.  The two sides have agreed to a decentralization package, which was incorporated into the Mozambican Constitution by Parliament in May 2018, and will allow for the first time, the election of provincial governors during the October 2019 elections.  The parties have also agreed in principle to the integration of Renamo personnel into leadership and working level positions in Mozambican security forces, and some critical appointments have already been made.  With ongoing technical and financial support from the international community, a comprehensive plan for disarmament and demobilization of Renamo military personnel and their reintegration into local communities is being developed and is scheduled to be implemented prior to the October 2019 elections.

Mozambique offers the experienced investor the potential for high returns, but remains a challenging place to do business.  Investors must factor in corruption, an underdeveloped financial system, poor infrastructure, and significant operating costs.  Transportation inside the country is slow and expensive, while bureaucracy, port inefficiencies, and corruption complicate imports.  Local labor laws remain an impediment to hiring foreign workers, even when domestic labor lacks the requisite skills.  The financial crisis also impacted the GRM’s ability to secure financing for even the most critical infrastructure projects.  Additionally, because of the economic crisis, inflation, and currency fluctuations, local Mozambican partners selling imported products in the local currency have trouble making payments in U.S. dollars to suppliers.

Natural gas development will drive economic growth in Mozambique, presenting many investment opportunities.  There are also significant opportunities for investment in the power and infrastructure sectors, particularly related to the reconstruction after Cyclones Idai and Kenneth in Manica, Sofala, and Cabo Delgado provinces.  The agriculture and tourism sectors remain underdeveloped relative to their potential, as do critical services sectors, such as the health care sector.

Table 1: Key Metrics and Rankings

Nigeria

Executive Summary

Nigeria’s economy – Africa’s largest – exited recession in 2017, assisted by the Central Bank’s more rationalized foreign exchange regime.  Growth is expected to remain weak in the near term however – the IMF forecasts growth of 2.1 percent in 2019 and 2.53 percent in 2020, still under Nigeria’s population growth rate of around 2.6 percent.  With the largest population in Africa (estimated at over 195 million), Nigeria continues to represent a large consumer market for investors and traders. A very young country with nearly two-thirds of its population under the age of 25, Nigeria offers abundant natural resources and a low-cost labor pool, and enjoys mostly duty-free trade with other member countries of the Economic Community of West African States (ECOWAS).  Nigeria’s full market potential remains unrealized because of significant impediments such as pervasive corruption, inadequate power and transportation infrastructure, high energy costs, an inconsistent regulatory and legal environment, insecurity, a slow and ineffective bureaucracy and judicial system, and inadequate intellectual property rights protections and enforcement. The Nigerian government has undertaken reforms to help improve the business environment, including making starting a business faster by allowing electronic stamping of registration documents, and making it easier to obtain construction permits, register property, get credit, and pay taxes.  In 2017, these reforms helped boost Nigeria’s ranking on the World Bank’s annual Doing Business rankings from 169th to 145th place out of 190 economies. In 2018, it dropped one spot to 146th place.

Nigeria’s underdeveloped power sector remains a particular bottleneck to broad-based economic development.  Power on the national grid currently averages 4,000 megawatts, forcing most businesses to generate much of their own electricity.  The World Bank currently ranks Nigeria 171 out of 190 countries for ease of obtaining electricity for business. Reform of Nigeria’s power sector is ongoing, but investor confidence continues to be shaken by tariff and regulatory uncertainty.  The privatization of distribution and generation companies in 2013 was based on projected levels of transmission and progress toward a fully cost reflective tariff to sustain operations and investment. However, tariff increases were reversed in 2015, and revenues have been severely impacted due to decreased transmission levels and currency devaluation, as well as high aggregate technical, commercial, and collections losses, resulting in a severe liquidity crisis throughout the power sector value chain.  The Nigerian government, in partnership with the World Bank, published a Power Sector Recovery Plan (PSRP) (approved by the Federal Executive Council) in March 2017. However, two years after its launch, differing perspective on various PSRP interventions have complicated implementation. The Ministry of Finance appears to be driving the implementation effort and has convened three Federal Government of Nigeria (FGN) committees charged with moving the process forward in the areas of regulation, policy, and finances.  Discussions between FGN and World Bank appear to going forward, but sector players report skepticism that the World Bank’s USD 1 billion loan will be enacted, though FGN may proceed without it.  The plan is ambitious and will require political will from the administration, external investment to address the accumulated deficit, and discipline in implementing plans to mitigate future shortfalls.  It is, nevertheless, a step in the right direction, and recognizes explicitly that the Nigerian economy is losing on average approximately USD 29 billion annually due to lack of adequate power.

Nigeria’s trade regime remains protectionist in key areas.  High tariffs, restricted forex availability for 43 categories of imports, and prohibitions on many other import items have the aim of spurring domestic agricultural and manufacturing sector growth.  Nigeria’s imports rose in 2018, largely as a result of the country’s continued recovery from the 2016 economic recession. U.S. goods exports to Nigeria in 2017 were USD 2.16 billion, up nearly 60 percent from the previous year, while U.S. imports from Nigeria were USD 7.05 billion, an increase of 68.7 percent.  U.S. exports to Nigeria are primarily refined petroleum products, used vehicles, cereals, and machinery. Crude oil and petroleum products continued to account for over 95 percent of Nigerian exports to the United States in 2016. The stock of U.S. foreign direct investment (FDI) in Nigeria was USD 5.8 billion in 2017 (latest data available), a substantial increase from USD 3.8 billion in 2016, but only a modest increase from 2015’s USD 5.5 billion in FDI.  U.S. FDI in Nigeria continues to be led by the oil and gas sector. There is also investment from the United States and other countries in Nigeria’s power, telecommunications, real estate (commercial and residential), and agricultural sectors.

Given the corruption risk associated with the Nigerian business environment, potential investors often develop anti-bribery compliance programs.  The United States and other parties to the Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention aggressively enforce anti-bribery laws, including the U.S. Foreign Corrupt Practices Act (FCPA).  A high-profile FCPA case in Nigeria’s oil and gas sector resulted in 2010 U.S. Securities Exchange Commission (SEC) and U.S. Department of Justice rulings that included record fines for a U.S. multinational and its subsidiaries that had paid bribes to Nigerian officials.  Since then, the SEC has charged an additional four international companies with bribing Nigerian government officials to obtain contracts, permits, and resolve customs disputes. See SEC enforcement actions at https://www.sec.gov/spotlight/fcpa/fcpa-cases.shtml.

Security remains a concern to investors in Nigeria due to high rates of violent crime, kidnappings for ransom, and terrorism.  The ongoing Boko Haram and Islamic State in West Africa (ISIS-WA) insurgencies have included attacks against civilian and military targets in the northeast of the country, causing general insecurity and a major humanitarian crisis there.  Multiple bombings (the majority linked to the insurgent groups) of high-profile targets with multiple deaths have occurred outside of Nigeria’s northeast region as well since 2010, but the pace of such attacks has dipped significantly in recent years.  In the Niger Delta region, militant attacks on oil and gas infrastructure restricted oil production and export in 2016, but a restored amnesty program and more federal government engagement in the Delta region have brought a reprieve in violence and allowed restoration of shut-in oil and gas production.  The longer-term impact of the government’s Delta peace efforts, however, remains unclear and criminal activity in the Delta – in particular, rampant oil theft– remains a serious concern. Maritime criminality in Nigerian waters, including incidents of piracy and crew kidnap for ransom, has increased in recent years and law enforcement efforts have been limited or ineffectual.  Onshore, international inspectors have voiced concerns over the adequacy of security measures at some Nigerian port facilities. Businesses report that bribery of customs and port officials remains common to avoid delays, and smuggled goods routinely enter Nigeria’s seaports and cross its land borders.

Freedom of expression and of the press remains broadly observed, with the media often engaging in open, lively discussions of challenges facing Nigeria.  However, security services detain and harass journalists in some cases, including for reporting on sensitive topics such as corruption and security. Some journalists practice self-censorship on sensitive issues.

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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