Policies Towards Foreign Direct Investment

The GoB publicly emphasizes the importance of attracting (FDI) and drafted an investment facilitation law recommended by the 2014 Organisation for Economic Co-operation and Development (OECD) Investment Review. The draft was completed in 2016 with technical assistance from UNCTAD but was never enacted. The GoB plans to revise the draft in 2020 before presenting it to Parliament. The GoB has launched initiatives to promote economic activity and foreign investment in specific areas, such as the establishment of a diamond hub which has brought more value-added businesses (i.e., cutting and polishing), into the country. Additional investment opportunities in Botswana include large water, electricity, transportation, and telecommunication infrastructure projects.  Economists have also noted Botswana’s considerable potential in the mining, mineral processing, cattle, tourism, and financial services sectors.  BITC assists foreign investors with projects intended to diversify export revenue, create employment, and transfer skills to Botswana citizens. The High Level Consultative Council (HLCC), chaired by the president, and an Exporter Roundtable organized by BITC and Botswana’s Exporters and Manufacturers Association (BEMA), are mechanisms employed by the GoB to maintain a focus on a healthy businesses environment for FDI.    

Limits on Foreign Control and Right to Private Ownership and Establishment

Botswana’s 2003 Trade Act reserves licenses in 35 sectors for citizens, including butcheries, general trading establishments, gas stations, liquor stores, supermarkets (excluding chain stores), bars (other than those associated with hotels), certain types of restaurants, boutiques, auctioneers, car washes, domestic cleaning services, curio shops, fresh produce vendors, funeral homes, hairdressers, various types of rental/hire services, laundromats, specific types of government construction projects under a certain dollar amount, certain activities related to road and railway construction and maintenance, and certain types of manufacturing activities including the production of furniture for schools, welding, and bricklaying.  The law allows foreigners to participate in these sectors as minority joint venture partners in medium-sized businesses.  Foreigners can hold the majority share if they obtain written approval from the trade minister.

The Ministry of Investment, Trade, and Industry (MITI), which administers the citizen participation initiative, has taken an expansive interpretation of the term chain stores, so that it encompasses any store with more than one outlet.  This broad interpretation has resulted in the need to apply exemptions to certain supermarkets, simple specialty operations, and general trading stores.  These exceptions were generally granted prior to 2015 and many large general merchandise markets, restaurants, and grocery networks are owned by foreigners as a result. Since 2015, the GoB has denied some exception requests, but reports they have approved some based on localization agreements directly negotiated between the ministry and the applying company.  These agreements reportedly include commitments to purchase supplies locally and capacity building for local workers and industry.  BITC conducts due diligence on companies that are looking to invest in the country and the Directorate of Intelligence Services (DIS) handles background checks for national security.

Other Investment Policy Reviews

In December of 2014, the OECD released an Investment Policy Review on Botswana. (http://www.oecd-ilibrary.org/finance-and-investment/oecd-investment-policy-reviews-botswana-2014_9789264203365-en ).

Botswana has been a World Trade Organization (WTO) member since 1995. As a member of the Southern African Customs Union, the WTO last conducted a trade policy review in 2016. (https://www.wto.org/english/tratop_e/tpr_e/tp322_e.htm )

Business Facilitation

To operate a business in Botswana, one needs to register a company with the GoB’s CIPA through the OBRS at: https://www.cipa.co.bw/home.html 

According to CIPA, the company registration process can be completed in a day and is integrated with BURS which allows for a fast-tracked tax registration in 30 days. Additional work is required to open bank accounts and obtain necessary licenses and permits.  The World Bank ranked Botswana 159 out of 190 in the ease of starting a business category.

BITC (www.bitc.co.bw ), the GoB’s investment promotion agency, was designed to serve as a one-stop shop to assist investors in setting up a business and finding a location for operation.  BITC’s ability to streamline procedures varies based on GoB entity and bureaucratic requirements.  The organization’s criteria for support for investment projects is whether the project will diversify the economy away from dependence on diamond mining, and whether it will create jobs for, and transfer skills to, Batswana citizens.  BITC also hosts the Botswana Trade Portal (https://www.botswanatradeportal.org.bw ) that is designed to ease trade across borders.  It is a single point of contact for all information relating to import and export to and from Botswana, and represents a number of ministries and parastatals.

Botswana has several incentives and preferences for both citizen-owned and locally based companies.  Foreign-owned companies can benefit from local procurement preferences which are usually required for government tenders.  MITI instituted a program in 2015 to give locally based small companies a 15 percent preferential price margin in GoB procurement, with mid-sized companies receiving a 10 percent margin, and large companies a five percent margin.  Under this policy, MITI defines small companies as having less than five million pula in annual revenue reflected in their financial statements, medium companies with 5,000,001 to 19,999,999 pula in revenue, and large companies with 20 million pula or more. The directive applies to 27 categories of goods and services ranging from textiles, chemicals, and food, in addition to a broad range of consultancy services.

For Companies Act registration purposes, enterprises are classified as follows: Micro Enterprises – less than six employees including owner and annual turnover of up to 60,000 pula; Small Enterprises – less than 25 employees and annual revenue between 60,000 and 1,500,000 pula; Medium Enterprises – less than 100 employees and annual revenue between 1,500,000 and 5,000,000 pula; Large Enterprises – more than 100 employees and annual revenue of 5,000,000 pula or more.  This classification system permits foreigner participation as minority shareholders in medium-sized enterprises in the 35 business sectors reserved for citizens.

Outward Investment

The GoB neither promotes nor restricts outward investment.

Transparency of the Regulatory System

Bureaucratic procedures necessary to start and maintain a business tend to be open, though slow, and regulatory procedures can be cumbersome to navigate.  In 2018, Botswana launched a Regulatory Impact Assessment Strategy that will work to improve the regulatory environment and ensure legislation is necessary and cost effective, reduce administrative burdens imposed by the regulatory environment to businesses, improve transparency, consultation, and government accountability.  Foreign investor complaints generally focus on the inefficiency and/or unresponsiveness of mid- and low-level government bureaucrats.  The GoB has introduced a Performance Management System to improve the service and accountability of its employees.  Unfair business practices or conduct can be reported to the Competition Authority, which seeks to level the playing field for all business operators and foster a conducive environment for business.  Bills in Botswana, including investment laws, go through a public consultation process and are available for public comment.  Bills are also debated in Parliament, whose sessions are open to the public.

The Companies Act of 2004 requires all companies registered in Botswana to prepare annual financial statements on the basis of generally accepted accounting principles.  It further requires every public company, including non-exempt private companies, to prepare their Financial Statement in accordance with the International Financial Reporting Standards.

The Public Procurement and Asset Disposal Board (PPADB) oversees all government tenders. Prospective government contractors are required to register with the PPADB.  The PPADB maintains a process by which tender decisions can be challenged; bidders can also challenge a tender procedure in the courts.  The PPADB publishes its decisions concerning awarded tenders, prequalification lists, and newly registered contractors. Since 2014, PPADB has partnered with the United States Trade and Development Agency (USTDA) in the Global procurement Initiative, a shared commitment to utilizing best-value determination procurement practices and promoting professionalization in procurement.

PPADB successfully implemented the Integrated Procurement Management System (IPMS) to level the procurement playing field by automating contractor registration, e-bidding and other operations.  This has enabled them to introduce a Procurement Plan Platform where government entities list all their procurement plans for the year, allowing companies to plan ahead.  An e-bidding system, still being developed, will allow companies to compete for and submit tenders online.

Online services are available at: www.ppadb.co.bw/Pages/Publications.aspx#WebPartWPQ3 

The PPADB Act calls for preferential procurement of citizen-owned contractors for works, service, and supplies, as well as specific, disadvantaged women’s communities, though it states that such preferences must be time-bound, phased in and out as necessary, and consistent with the country’s external obligations and its “market-oriented, macroeconomic framework.”  When a procuring entity wishes to reserve a tender for citizen-only participation, it is required to publish a notice to that effect either in the bid document or the pre-qualification notice.

Health and safety laws, embodied in the Factories Act of 1973, provide basic protection for workers from unsafe working conditions.  Minimum working conditions required on work premises include cleanliness of the premises, adequate ventilation and sanitation, sufficient lighting, and the provision of safety precautions.  Health inspectors and the Botswana Bureau of Standards carry out periodic checks at both new and operating factories.

International Regulatory Considerations

Botswana is a member of SACU and SADC.  Neither has authority over member state national regulatory systems.  Botswana is a member of the World Trade Organization (WTO) and notifies all draft technical regulations to the WTO’s Technical Barriers to Trade (TBT) Committee.

Legal System and Judicial Independence

The Constitution provides for an independent judiciary system.  Botswana’s legal system is based on Roman-Dutch law as influenced by English common law. This type of system exists with legislation, judicial decisions, and local customary law.  The courts enforce commercial contracts, and the judicial system is widely regarded as being fair.  Both foreign and domestic investors have equal access to the judicial system.  Botswana does not have a dedicated commercial court.  The Industrial Court, set up by the Trade Dispute Act of 2004, primarily addresses labor matters.

The GoB is planning to create a corps of commercially specialized judges within the civil court system.  Under the new system, commercial cases will be overseen by these commercial judges in order to expedite handling and ensure relevant expertise.  The country already has a specialized anti-corruption court that handles all corruption cases.

Some U.S. litigants have reported that the time to obtain and enforce a judgment in a commercial dispute is unreasonably long.  The turnaround time for civil cases is approximately two years.  In an effort to create more efficient adjudications, the GoB has established a land tribunal, and industrial, small claims, and corruption courts.  During the past several years, some dockets have improved, but progress has been uneven.

Local laws are accessible through the Botswana Attorney General’s Office website (www.laws.gov.bw ). It can take up to 24 months for a law, once passed, to appear on the website.

Laws and Regulations on Foreign Direct Investment

Under Botswana’s Company Act, foreigners who wish to operate a business are required to register, as well as obtain, the relevant licenses and permits as prescribed by the Trade Act of 2008.

Licenses are required for a wide spectrum of businesses, including banking, non-bank financial services, transportation, medical services, mining, energy provision, and alcohol sales.  Although amendments to the Trade Act have eliminated the catchall miscellaneous business license category, investors have reported on local authorities insisting a business apply for a license even when it does not fall within the established categories.  In addition, some businesses have observed the enforcement of licenses, as well as the time taken for inspections to comply with licensing requirements, varies widely across local government authorities.

Competition and Anti-Trust Laws

Botswana has developed anti-trust legislation and policies to ensure appropriate competition in the business environment.  Under the Competition Act, the Competition Authority (CA) is now monitoring mergers and acquisitions.  During the year 2018/2019 the CA dealt with a few cases to address the non-competitive business conduct and for the first time it dealt with cases relating to the conduct of resale price maintenance (vertical agreements). The CA is empowered to reject mergers deemed not to be in the public best interest.  It has interpreted this ability to mean that it can prohibit mergers that result in the concentration of most shares in the hands of foreign investors.

Expropriation and Compensation

Section 8 of the country’s Constitution prohibits the nationalization of private property.  The GoB has never pursued a policy of forced nationalization and is highly unlikely to adopt one.  The Acquisition of Property Act provides a process for any expropriation, including parameters to determine market value and receive compensation.  The 2007 Amendment to the Electricity Supply Act allows the GoB to revoke an Independent Power Producer’s license and confiscate the operations, with compensation, for public interest purposes.

Dispute Settlement

ICSID Convention and New York Convention

GoB has ratified the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).  GoB is also a member state to the International Centre for Settlement of Investment Disputes (ICSID convention), and the Multilateral Investment Guarantee Agency (MIGA).

Investor-State Dispute Settlement

There are no known investment disputes involving U.S. persons.  Botswana accepts international arbitration to settle investment disputes.  Judgments by foreign courts recognized by the GoB are enforceable under the local courts where the appropriate bilateral agreements between the countries exist.

International Commercial Arbitration and Foreign Courts

There are no known complaints about transparency or discrimination by local courts in Botswana.

Bankruptcy Regulations

Botswana’s commercial and bankruptcy laws are comprehensive.  Secured and unsecured creditors enjoy similar rights under bankruptcy proceedings as those they would enjoy in the United States.

Investment Incentives

Botswana has several mechanisms in place to attract FDI.  BITC assists local and foreign investors.  BITC is responsible for promoting FDI, investor aftercare, and the promotion of locally manufactured goods in export markets.  It assists investors with company registration, land acquisition, factory shells, utility connections, and work and residence permits for essential staff.  Investors’ requests for support from BITC and other agencies are evaluated based on the extent to which the proposed project assists in the GoB’s diversification efforts, contributes to the growth of priority sectors, and provides employment and training to Botswana citizens.  The GoB also makes grants available to investors who partner with citizens and will extend credit to investors presenting proposals that have undergone appropriate due diligence and that have completed a feasibility study.  Foreign investors are encouraged to transfer technology to Botswana and skills to Botswana citizens with a view to preparing them for promotion into management positions.

Botswana offers a relatively low tax rate of 22 percent on corporate taxable income and 7.5 percent withholding tax on all dividends distributed.  MITI can grant manufacturing companies the reduced level of 15 percent taxable income.  Companies can pay the reduced rate of 15 percent of profit with accreditation from the Innovation Hub or the International Financial Services Centre on approved operations.

The Minister of Finance and Economic Development has the authority to issue development approval orders that are used for specific projects, which include providing tax holidays, education, and training grants.  The Minister must be satisfied the proposed project will be beneficial to Botswana’s economy.  Any firm, local or foreign, may apply for a Development Approval Order through the Permanent Secretary at the finance ministry.  Applications are evaluated against the following criteria: job creation for Botswana citizens; the company’s training plans for Botswana citizens; the company’s plans to localize non-citizen positions; Botswana citizen participation in company management; amount of equity held by Botswana citizens in the company; the location of the proposed investment; the project’s effect on the stimulation of other economic activities; and the project’s effect on reducing local consumer prices.  MITI also offers rebates on imported materials for manufacturers that produce products for export.

In 2017, Parliament approved and implemented a special incentive package for Selebi-Phikwe geared to promote economic growth and diversification.  Some of the incentives include reduced corporate tax of five percent for the first five years and 10 percent thereafter (versus the 22 percent national tax rate), zero customs duty on imported raw materials, rebates for customs duty and value-added tax for any exports outside the SACU, and a minimum of 50 years on land leases (instead of the standard lease of 25 years).

Foreign Trade Zones/Free Ports/Trade Facilitation

Parliament established a new parastatal organization, the Special Economic Zones Authority (SEZA), with the mandate to develop and operate special economic zones around the country.  It has earmarked five geographic areas with a total of eight zones, though they are not yet fully operational.  In 2015, Parliament approved a Special Economic Zones (SEZ) law to streamline investment in sector-targeted geographic areas in the country including two Gaborone area SEZs (multi-use, diamond processing, and financial services); two Selebi-Phikwe SEZs (mineral processing and horticulture); and additional SEZs in Lobatse (beef, leather, biogas); Palapye (energy); Pandamatenga (agriculture); and Francistown (mining and logistics).  The Special Economic Zones Act is available for sale in hard copy at the GoB bookshop.  SEZA has prioritized four SEZs—Lobatse (leather park), Gaborone Fairgrounds (Financial Services), Gaborone Sir Seretse Khama Airport (Diamond and Logistics) and Pandamatenga (Agriculture)—and is actively recruiting investors, private developers, and manufacturers.  BURS has also introduced an electronic Customs Management System to replace the Automated System for Customs Data and launched the National Single Window, an electronic trade platform that makes trading more secure and efficient.

Performance and Data Localization Requirements

Performance requirements are not imposed as a condition for establishing, maintaining, or expanding an investment in Botswana.  Foreign investors are encouraged, but not compelled, to establish joint ventures with citizens or citizen-owned companies.

Foreign investors wishing to invest in Botswana are required to register the company in accordance with the Companies Act and comply with other applicable legislation.  Investors are encouraged, but not required, to purchase from local sources.  The GoB does not require investors to locate in specific geographical areas, use a specific percentage of local content, permit local equity in projects, manufacture substitutes for imports, meet export requirements or targets, or use national sources of financing for private-sector investments.  However, GoB entities, including BITC, use the criteria of diversifying the economy, creating employment, and transferring skills to Botswana citizens in determining whether to assist foreign investors.

As a matter of policy, the GoB encourages foreign firms to hire qualified Botswana nationals rather than expatriates.  The granting of work permits for foreign workers may be made contingent upon establishment of demonstrable localization efforts.  The government may additionally require evidence that a local is being trained to assume duties currently being fulfilled by a foreign worker, specially focused at the middle-management level.  The GoB offers incentives to companies that train local employees, including the deduction of 200 percent of training expenses when an accredited institution conducts the training.

Business leaders cite difficulty securing work permits combined with local skills deficits and constrained labor productivity as one of the foremost business constraints in Botswana. However, since President Masisi assumed power in April 2018, GoB reports suggest permits for foreign workers have increased with approval rates in excess of 90 percent.  Select grants are available to foreign investors who partner with Botswana citizens.  The Citizen Entrepreneurial Development Agency has established a venture capital fund to provide equity to citizens and ventures between citizens and foreign investors.  The majority of GoB loans and grants are designed specifically for citizen-owned contracting firms or for small enterprises and are therefore not available to foreign investors.

The GoB, the largest procuring entity in the country, has directed central government, local authorities, and state-owned enterprises to purchase all products and services from locally based manufacturers and service providers if the goods and services are locally available, competitively priced, and meet tender specifications in terms of quality standards as certified or recognized by the Botswana Bureau of Standards.  Local preferences arise from numerous sources.  In 2015, MITI instituted a program to give locally based small companies a 15 percent preferential price margin in GoB procurement, with mid-sized companies receiving a 10 percent margin, and large companies a five percent margin.  The directive applies to 27 categories of goods and services ranging from textiles to chemicals, and food, in addition to a broad range of consultancy services.  In 2014, the GoB and the Chamber of Mines created a committee to oversee the purchasing of mining supplies with a 10 percent preference towards those produced locally.  The 2012 Citizen Economic Empowerment Policy also emphasized the preference for local companies and the GoB’s PPADB registers citizen-owned companies for preference purposes. In 2020, the GoB announced new policy that all government contracts less than ~USD 900,000 were reserved for Motswana-owned businesses.

For a foreign firm to qualify with the Department of Industrial Affairs as a locally-based manufacturer or service provider to sell goods or services to the GoB, the firm must first be registered with the Registrar of Companies and possess a relevant license or waiver letter.  These procedures can be completed online, however, companies may choose to engage the services of a Company Secretary to perform these and other required documentation services.  Tenders are generally designed based on the products available in the local market and with locally-based companies in mind.  In addition, many tenders require local registration as a prerequisite for bids and the GoB frequently breaks up large-scale projects into a series of tenders.  All of these factors make it difficult to compete for tenders from outside Botswana.   

Real Property

Property rights are enforced in Botswana.  The World Bank ranks Botswana 82 out of 190 in the Registering Property category.  There are three main categories of land in Botswana: freehold, state land, and tribal land.  Tribal and state land cannot be sold to foreigners.  There are no restrictions on the sale of freehold land, but only an approximate five percent of land in Botswana is freehold. All minerals in Botswana, even those on private lands, are viewed as property of the State. In the capital city of Gaborone, the number of freehold plots is limited.  In 2019, the GoB increased the rate of Transfer Duty on the sale and transfer of property to non-citizens (both individuals and companies) from five percent to 30 percent.

State land represents about 25 percent of land in Botswana.  On application to the Department of Lands, both foreign-owned and local enterprises registered in Botswana may lease state land for industrial or residential use.  Commercial use leases are for 50 years and residential leases are for 99 years.  Waiting periods tend to be long for leasehold applications, but subleases from current leaseholders are available.  In 2014, the GoB changed its implementing regulation to allow companies with less than five employees to operate in residential areas if their operations do not pose a health or safety risk to residents.

Tribal land represents 70 percent of land in Botswana.  To obtain a lease for tribal land, the investor must approach the relevant local Land Board.  Processes are unlikely to be streamlined or consistent across Land Boards.

Since independence, the trend in Botswana has been to increase the area of tribal land at the expense of both state and freehold land.  Landlord-tenant law in Botswana tends to be moderately pro-landlord.

In addition to helping investors who meet its criteria obtain appropriate land leaseholds, BITC has also built factory units for lease to industrialists with the option to purchase at market value.

Intellectual Property Rights

Botswana’s legal intellectual property rights (IPR) structure is adequate, although some improvements are needed.  The key challenge facing the GoB is effective implementation. CIPA was established in 2014 and is comprised of three offices: the Companies and Business Office, the Industrial Property Office, and the Copyright Office.  Intellectual property is registered through CIPA.  This organizations’s priorities n are to strengthen and implement Botswana’s IPR regime and improve interagency cooperation.  IPR infringement occurs in Botswana primarily through the sale of counterfeit items in low-end sales outlets.  According to CIPA, targeted raids by local law enforcement have reduced the availability of counterfeit goods across the country.   In 2019, CIPA and the Botswana Police Service seized 3,888 counterfeit CDs and DVDs valued at USD 30,000 compared to nearly 13,000 counterfeits valued at over USD 107,000 seized in 2017.  The U.S. government continues to work with the GoB to modernize and improve enforcement of IPR.

IPR is protected under the Industrial Property Act of 2010, which provides protections on patents, trademarks, utility designs, handicrafts, traditional knowledge, and geographic indicators.  The 2000 Copyright and Neighboring Rights Act also protects art and literary works, and the 1975 Registration of Business Names Act oversees corporate name and registration procedures.  Other IPR-related laws include the Competition Act, the Value Added Tax Act, the Botswana Penal Code, the Customs and Excise Duty Act, the Monuments and Relics Act, the Broadcasting Act, and the Societies Act.

Botswana is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

Botswana is a signatory to the Beijing Treaty on Audiovisual Performances, the Hague Agreement Concerning the International Deposit of Industrial Designs, the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, the Convention establishing the World Intellectual Property Organization (WIPO), the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty, the Patent Cooperation Treaty, the Berne Convention for the Protection of Literary and Artistic Works, and the Paris Convention for the Protection of Industrial Property.

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

Resources for Rights Holders

Goitseone Montsho
Economic/Commercial Specialist
MontshoG@state.gov
+267 373-2431

Local lawyers’ list: https://bw.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/

Capital Markets and Portfolio Investment

The government encourages foreign portfolio investment, although there are limits on foreign ownership in certain sectors.  It also embraces the establishment of new and diverse financial institutions to support increased foreign and domestic investment and to fill existing gaps where finance is not commercially available.  There are nine commercial banks, one merchant bank, one offshore bank, two statutory deposit-taking institutions, and one credit union operating in Botswana.  All have corresponding relationships with U.S. banks. Additional financial institutions include various pension funds, insurance companies, microfinance institutions, stock brokerage companies, asset management companies, statutory finance institutions, collective investment undertakings, and statutory funds. Historically, commercial banks have accounted for 92 percent of total deposits and 98 percent of total loans in Botswana.  A large portion of the population does not participate in the formal banking sector.

Money and Banking System

The central bank, the Bank of Botswana, acts as banker and financial advisor to the GoB and is responsible for the management of the country’s foreign exchange reserves, the administration of monetary and exchange rate policies, and the regulation and supervision of financial institutions in the country.  Monetary policy in Botswana is widely regarded as prudent, and the GoB has successfully managed to maintain a sensible exchange rate and a stable inflation rate, generally within the target of three to six percent.

Banks may lend to non-resident-controlled companies without seeking approval from the Bank of Botswana.  Foreign investors usually enjoy better access to credit than local firms do.  In July 2014, USAID’s Development Credit Authority (now DFC – U.S. International Development Finance Corporation), in collaboration with ABSA (formerly Barclays Bank of Botswana), implemented a program to allow small and medium-sized enterprises (SME) to access up to USD 15 million in loans in an effort to diversify the economy.

At the end of 2019, there were 25 companies on the Domestic Board and eight companies on the Foreign Equities Board of the Botswana Stock Exchange (BSE).  In addition, there were 46 listed bonds and three exchange traded funds listed on the Exchange.  The total market capitalization for listed companies at year-end 2019 was USD 37 billion, though one company constitutes the majority of that figure, Anglo-American plc, which has a market capitalization of approximately USD 30 billion. The BSE is still highly illiquid compared to larger African markets and is dominated by mining companies which adds to index volatility.  Laws prohibiting insider trading and securities fraud are clearly stipulated under Section 35 – 37 of the Securities Act, 2014 and charges for contravening these laws are listed under Section 54 of the same Act.

The government has legitimized offshore capital investments and allows foreign investors, individuals and corporate bodies, and companies incorporated in Botswana, to open foreign currency accounts in specified currencies.  The designated currencies are U.S. Dollar, British Pound sterling, Euro, and the South African Rand.  There are no known practices by private firms to restrict foreign investment participation or control in domestic enterprises.  Private firms are not permitted to adopt articles of incorporation or association which limit or prohibit foreign investment, participation, or control.

In general, Botswana exercises careful control over credit expansion, the pula exchange rate, interest rates, and foreign and domestic borrowing.  Banking legislation is largely in line with industry norms for regulation, supervision, and payments.  However, the country failed to meet compliance requirements of the Financial Action Task Force (FATF) resulting in a grey listing in October 2018.  Botswana is currently implementing an action plan to remedy the situation. The Non-Bank Financial Institutions Regulatory Authority (NBFIRA) was established in 2008 and provides regulatory oversight for the non-banking sector.  It extends know-your-customer practices to non-banking financial institutions to help deter money laundering and terrorist financing.  NBFIRA is also responsible for regulating the International Financial Services Centre, a hub charged with promoting the financial services industry in Botswana.

Foreign Exchange and Remittances

Foreign Exchange

There are no foreign exchange controls in Botswana or restrictions on capital outflows through financial institutions.  Commercial banks are required to ensure customers complete basic forms indicating name, address, purpose and other details prior to processing funds transfer requests or loan applications.  The finance ministry monitors data collected on the forms for statistical information on capital flows, but the form does not require government approval prior to the processing of a transaction and does not delay capital transfers.

To encourage portfolio investment, develop domestic capital markets, and diversify investment instruments, non-residents are able to trade in and issue Botswana pula-denominated bonds with maturity periods of more than one year, provided such instruments are listed on the Botswana Stock Exchange (BSE).  Only Botswana citizens can purchase Botswana’s Letlole National Savings Certificate (equivalent to a U.S. Treasury bond).  Foreigners can hold shares in BSE-listed Botswana companies.

Travelers are not restricted to the amount of currency they may carry, but they are required to declare to customs at the port of departure any cash amount in excess of 10,000 pula (~USD 950).  There are no quantitative limits on foreign currency access for current account transactions.

Bank accounts denominated in foreign currency are allowed in Botswana.  Commercial banks offer accounts denominated in U.S. Dollars, British Pounds, Euros and South African Rand.  Businesses and other bodies incorporated or registered domestically may open accounts without prior approval from the Bank of Botswana.  The GoB also permits the issuance of foreign currency denominated loans.

Upon disinvestment by a non-resident, the non-resident is allowed immediate repatriation of all proceeds including profits, rents, and fees.

The Botswana Pula has a crawling peg exchange rate and is tied to a basket of currencies of major trading partner countries.  In 2018 the weights of the Pula basket currencies were maintained at 45 percent for the South African Rand and 55 percent for the Special Drawing Rights (consisting of the U.S. Dollar, the Euro, British Pound, Japanese Yen, and Chinese Renminbi) respectively.  Movements of the South African Rand against the U.S. Dollar heavily influence the Pula.  There is no difficulty in obtaining foreign exchange.  Shortages of foreign exchange that would lead banks to block transactions are highly unlikely.

Remittance Policies

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment.

Sovereign Wealth Funds

The Bank of Botswana maintains a long-term sovereign wealth fund, known as the Pula Fund, in addition to a regular foreign reserve account providing basic import cover. The Pula Fund, with an estimated value of some USD 4.74 billion as of 2018, was established under the Bank of Botswana Act and forms part of the country’s foreign exchange reserves, which are primarily funded by diamond revenues.  The Pula Fund is wholly invested in foreign currency-denominated assets and is managed by the Bank of Botswana Board with input from recognized international financial management and investment firms.  All realized market and currency gains or losses are reported in the Bank of Botswana’s income statement.  Botswana is among the founding members of the International Forum of Sovereign Wealth Fund and was one of the architects of the Santiago Principles in 2008.  More information is available at: http://www.bankofbotswana.bw/assets/uploaded/BOTSWANA percent20PULA percent20FUND percent20- percent20SANTIAGO percent20PRINCIPLES percent20(2).pdf 

State-owned enterprises (SOEs), known as “parastatals,” are majority or 100 percent owned by the GoB.  There is a published list of SOEs at the GoB portal (www.gov.bw) with profiles of financial and development SOEs. Some SOEs are state-sanctioned monopolies, including the Botswana Meat Commission, the Water Utilities Corporation, Botswana Railways, and the Botswana Power Corporation.

The same business registration and licensing laws govern private and government-owned enterprises.  No law or regulation prohibits or restricts private enterprises from competing with SOEs.  Botswana law requires SOEs to publish annual reports, and private sector accountants or the Auditor General audits SOEs depending on how they are constituted.  GoB ministries together with their respective SOEs are compelled on an annual basis to appear before the Parliamentary Public Accounts Committee to provide reports and answer questions regarding their performance.  Some SOEs are not performing well and have been embroiled in scandals involving alleged fraud and mismanagement.

Botswana is not party to the Government Procurement Agreement within the framework of the WTO.

Privatization Program

The GOB has committed to privatization on paper.  It established a task force in 1997 to privatize all of its state-owned companies and formed a Public Enterprises Evaluation and Privatization Agency (PEEPA) to oversee this process.  Implementation of its privatization commitments has been limited to the January 2016 sale offer of 49 percent of the stock of the state-owned Botswana Telecommunications Corporation to Botswana citizens only.  In February 2017, the GoB issued an Expressions of Interest for the privatization of its national airline, but progress stopped due to the decision to re-fleet the airline before privatization.  In early 2019, President Masisi announced the Botswana Meat Commission was being placed in the hands of a private management company prior to privatization. Conversely, the GoB has created new SOEs such as the Okavango Diamond Company, the Mineral Development Company, and Botswana Oil Limited in recent years.

The GoB, some foreign and local firms, and customers, recognized and embraced Responsible Business Conduct (RBC), although Botswana is not an adherent of the OECD’s RBC Guidelines for Multinational Enterprises and has not specified its definition of RBC.  Large companies in the mining, communications technology, food supply, and financial services sectors have established RBC programs, sponsor projects, and support local nonprofit concerns.  However, the ethos has not taken hold in many smaller firms.  The U.S. Embassy worked with the local chamber of commerce, Business Botswana, on the issue of corporate social responsibility and ethical compliance, to help enlist companies to sign onto a Corporate Code of Conduct that covers, among other things, conflicts of interest, bribery, political interference, political party funding, procurement and bidding, and issues surrounding residence and work permits.  To date more than 300 firms have signed the Code of Conduct.

The Companies Act also sets out the expectations of business conduct and governance for directors and shareholders for both private and public companies.  Botswana is not a member of the Extractive Industries Transparency Initiative.  Botswana’s Mines and Minerals Act and associated regulations govern mineral contracts and licenses.  Botswana’s laws and procedures for awarding mining contracts are fairly well developed.  Mining licenses are required to undergo a public comment period before they are awarded, and that rule is followed.

Botswana has a reputation for a relative lack of corruption and a willingness to prosecute corrupt officials.  Transparency International ranks Botswana as the least corrupt country in Africa (34th worldwide).  Investors with experience in other developing nations describe the relative lack of obstruction or interference by law enforcement or other government agents as among the country’s most important assets.  Nevertheless, private sector representatives note rising corruption levels in government tender procurements.

The major corruption investigation body is the Directorate on Corruption and Economic Crime (DCEC).  Anecdotal reports on the DCEC’s effectiveness vary.  The DCEC has embarked on an education campaign to raise public awareness about the cost of corruption and is also working with GoB departments to reform their accountability procedures. Corruption is punishable by a prison term of up to 10 years, a fine of USD 50,000, or both.  The GoB has prosecuted high-level officials.  Corruption allegations have surfaced recently around pension fund management and government procurement procedures and are still under investigation.

The 2000 Proceeds of Serious Crime Act expanded the DCEC’s mandate to include combatting money laundering.  The 2009 Financial Intelligence Act provides a comprehensive legal framework to address money laundering and establishes a financial intelligence agency (FIA).  The FIA, which operates under the Ministry of Finance and Development Planning, cooperates with various institutions, such as Directorate of Public Prosecutions, Botswana Police Service, Bank of Botswana, the Non-Banking Financial Institutions Regulatory Authority, the DCEC, and foreign FIAs to uncover and investigate suspicious financial transactions.  Botswana is a member of the Eastern and Southern Africa Anti-Money Laundering Group, a regional standards-setting body for ensuring appropriate laws, policies, and practices to fight money laundering and the financing of terrorism.  In October 2018, Botswana was “gray-listed” by the Financial Action Task Force and is currently implementing an action plan to address shortcomings that led to the listing.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Botswana is not a party to the OECD Anti-Bribery Convention, but is a party to the 2005 United Nations Convention against Corruption.

Resources to Report Corruption

Contacts for agencies responsible for combating corruption:

Name: Brigadier Joseph Mathambo
Tittle: Director General
Organization: Directorate on Corruption and Economic Crime
Address: Madirelo Extension 6, Gaborone, Botswana
Telephone Number: +267 3914002/+267 3604200
Email:  dcec@gov.bw

Name: Mr. Elijah Motshidi
Tittle: Executive Director
Organization: Public Procurement and Asset Disposal Board
Address: Private Bag 0058, Gaborone, Botswana
Telephone Number: +267 3602000
Email:  webmaster@ppadb.co.bw

Name: Mr. Abraham Sethibe
Tittle: Director
Organization: Financial Intelligence Agency
Address: Private Bag 0190, Gaborone, Botswana
Telephone Number: +267 3998400
Email:  asethibe@gov.bw

One can also reach out to the Minister of the relevant Ministry for a particular tender and provide a copy of the complaint to the Public Procurement and Asset Disposal Board (PPADB) Executive Director.

The threat of political violence is low in Botswana.  Public demonstrations are rare and seldom turn violent.  The last large-scale strikes, which involved public sector employees, occurred April-June 2011 and were not violent. In September 2015, roughly 200 people participated in a peaceful march organized by an opposition political party to protest water shortages in the capital.  In August 2016, police forcefully dispersed a small demonstration protesting unemployment outside the National Assembly.  In February and March 2017, some student-led protests occurred at tertiary institutions necessitating police deployment but were not overtly political.  There were multiple reports of police brutality, including the use of rubber whips and rubber bullets.  Another peaceful march against corruption was held in March 2018.  This followed allegations of embezzlement of the National Petroleum Fund by a company charged with the management of the funds together with some GoB officials.  In late 2019, following general election, the Umbrella for Democratic Change (UDC) held a peaceful march of no more than 200 people protesting the election results.

Botswana has a high unemployment rate and a constricted worker skills base.  The latest statistics released in late 2019 showed an increase of unemployment from 17.7 percent to just over 20 percent, although the real rate is suspected to be higher due to the way the GoB counts who is included in the statistic.  Employers can expect to engage in significant training efforts, depending on the industry.  Retention of workers and absenteeism can pose problems.  In addition, managers often cite workforce productivity as a point of frustration.  The lack of trained local citizen professionals is generally addressed by contracting expatriates if they can secure work permits.  There is minimal labor strife in Botswana.  In 2015, there were a handful of small and peaceful strikes, the most notable of these was by a portion of BURS officials, but as with most unions across sectors, only a portion of BURS officials were unionized, allowing the GoB to maintain customs operations.

The Employment Act provides basic guidelines for employment in Botswana.  The legislation sets requirements for a minimum wage, length of the workweek, annual and maternity leave, hiring and termination.  Standards set by the Act are consistent with international best practice as described by International Labour Organization (ILO) model legislation and guidelines.

Employment-related litigation occurs and is both an example of trust in the court system and a cost to doing business in Botswana.  Employers avoid considerable expense and frustration if they observe the provisions of the Employment Act, relevant labor regulations, and prudence in advance of potential litigation.  Before a potential litigant goes to one of 11 labor courts, the parties must attempt mediation through the Department of Labor.  Court cases offering severance terms for employees laid off due to fluctuating market conditions are also common.  Section 25 of the Employment Act allows employers to terminate contracts for reducing the size of their work force, known as redundancy, using the first-in-last-out principle.  This method of terminating contracts is separate from firing for serious misconduct as specified by Section 26 of the Act. The GoB has social safety net programs in place to assist the unemployed and destitute.

Collective bargaining is common in government and the private sector and the Labor Commissioner can grant collective bargaining authority upon request.  The largest unions are comprised of public sector workers.

In August 2016 Parliament passed a Trade Disputes Act with a list of services deemed “essential” and barred from striking that exceeds international labor standards. The Ministry of Employment, Labour Productivity, and Skills Development is coordinating with the ILO and other partners to review labor laws to ensure they align with ILO standards.  The review process is ongoing and Ministry sources claim they plan to conclude a draft bill and present it to Parliament by July 2020.

The DFC has a presence in Botswana through its previous Overseas Private Investment Corporation (OPIC) and the Development Credit Authority (DCA) programs. OPIC has a USD 250 million loan guarantee facility for the local diamond industry, and two separate SME loan facilities with local financial institutions. DCA also has a loan facility in place which targets SMEs.

Botswana is a member of MIGA, which offers investors protection against inconvertibility, or transfer of currency, expropriation, breach of contract, and war and civil disturbance.

The Export Credit Insurance & Guarantee Company (Botswana) Pty. Ltd. allows investors to purchase coverage against certain events and losses such as the insolvency and inability of buyers to pay for purchases, unanticipated import restrictions, or the blockage by the buyer’s country of foreign exchange transfer.

According to the Bank of Botswana, investment in Botswana totaled 80.5 billion Pula in 2017, of which 28.9 billion Pula were non-FDI investments.  Africa (36 percent) and Europe (56 percent) accounted for most of the 51.64 billion Pula influx of FDI.  Within these regions, South Africa and the United Kingdom were the predominant players, accounting for 10.6 and 26.3 billion Pula respectively.  Little data on FDI sources is available for countries and regions with limited investments in Botswana.  Mining accounted for 35.1 percent of Foreign Investment inflows in 2017.

Goitseone Montsho
Economic/Commercial Specialist
+267 395-3982 / 373-2431
MontshoG@state.gov

Policies Towards Foreign Direct Investment

The Government of the Kingdom of Eswatini (GKoE) regards foreign direct investment (FDI) as one of the five pillars of its Sustainable Development and Inclusive Growth (SDIG) Program, and a means to drive the country’s economic growth, obtain access to foreign markets for its exports, and improve international competitiveness. While the government has strongly encouraged foreign investment over the past 15 years, it only recently adopted a formal strategy for achieving measurable progress. Eswatini does not have a unified policy on investment. Instead, individual ministries have their own investment facilitation policies, which include policies on Small and Medium Enterprises (SME), agriculture, energy, transportation, mining, education, and telecommunications. Calls for more concerted action on these policies have intensified in the last few years as Eswatini has suffered from drought, fiscal challenges, and general economic recession.

The Swati constitution states, generally, that non-citizens and/or companies with a majority of non-citizen shareholders may not own land unless they were vested in their ownership rights before the constitution entered into force in 2006. On the other hand, the constitution’s general prohibition “may not be used to undermine or frustrate an existing or new legitimate business undertaking of which land is a significant factor or base.” Furthermore, non-citizens and non-citizen majority-owned companies may hold long-term (up to 99 years) leases on Title and Swati Nation Land. Besides land ownership laws, there are no laws that discriminate against foreign investors. In 2019, the government listed some of its title deed land to make it available for long-term leasing for commercial purposes.

In practice, most successful foreign investors associate local partners to navigate Eswatini’s complex bureaucracy. Most of the country’s land is Swati Nation Land held by the king “in trust for the Swati Nation” and cannot be purchased by foreign investors. Foreign investors that require significant land for their enterprise must engage the Land Management Board to negotiate long-term leases.

The Eswatini Investment Promotion Authority (EIPA) is the state-owned enterprise (SOE) charged with designing and implementing strategies for attracting desired foreign investors.

Eswatini’s Investment Policy and policies that support the business environment are online at https://investeswatini.org.sz/legal-and-regulatory-framework/  (EIPA is currently functional and helpful, but it is not yet a one-stop-shop for foreign investors. EIPA services include: – Attract and promote local and foreign direct investments

• Attract and promote local and foreign direct investments
• Identify and disseminate trade and investment opportunities
• Provide investor facilitation and aftercare services
• Promote internal and external trade
• Undertake research and policy analysis
• Facilitate company registration and business licenses/permits
• Facilitate work permits and visas for investors
• Provide a one stop shop information and support facility for businesses
• Export product development
• Facilitation of participation in external trade fairs
• BuyerSeller Missions

The GKoE continues its attempts to improve the ease of doing business in the country through the Investor Roadmap Unit (IRU). The IRU engages with businesses and government to review and report on the progress and implementation of the investor roadmap reforms.

EIPA has an aftercare division for purposes of investment retention, which is a direct avenue for investors to communicate concerns they may have. Most investors who stay beyond the initial period during which the GKoE offers investment incentives have opted to remain long-term.

Limits on Foreign Control and Right to Private Ownership and Establishment

Both foreign and domestic private entities have a right to establish businesses and acquire and dispose of interest in business enterprises. Foreign investors own several of Eswatini’s largest private businesses, either fully or with minority participation by Swati institutions.

There are no general limits on foreign ownership and control of companies, which can be 100 percent foreign owned and controlled. The only exceptions on foreign ownership and control are in the mining sector and in relation to land ownership. The Mines and Minerals Act of 2011 requires that the King (in trust for the Swati Nation) be granted a 25-percent equity stake in all mining ventures, with another 25 percent equity stake granted to the GKoE. There are also sector-specific trade exclusions that prohibit foreign control, which include business dealings in firearms, radioactive material, explosives, hazardous waste, and security printing.

Foreign investments are screened only through standard background and credit checks. Under the Money Laundering and Financing of Terrorism (Prevention) Act of 2011, investors must submit certain documents including proof of residence and source of income for deposits. EIPA also conducts general screening of FDI monies through credit bureau checks and Interpol. This screening is not a barrier to investing in Eswatini. There are no discriminatory mechanisms applied against US foreign direct investors.

Other Investment Policy Reviews

In 2015, the WTO performed a Trade Policy Review of the Southern African Customs Union, which included Namibia, Botswana, Eswatini, South Africa, and Lesotho. In 2016, the Trade facilitation agreement was ratified Eswatini’s portion of that review is available online: https://www.wto.org/english/news_e/archive_e/country_arc_e.htm?country1=SWZ 

Business Facilitation

Eswatini does not have a single overarching business facilitation policy. Policies that address business facilitation are spread across the spectrum of relevant ministries. The IRMU is the public entity responsible for the review and monitoring of business environment reforms. EIPA facilitates foreign and domestic investment opportunities and has a fairly modern, up-to-date website: https://investeswatini.org.sz / . Certain GKoE application forms are available online at the EIPA website. Recent developments in the business facilitation space include the online registration of companies via the link www.online.gov.sz . However, some of the steps (payment of statutory fees and registration fee) still must be completed offline. According to the Doing Business Report, the process of registering a company in Eswatini takes approximately 10 days. In practice, the process can take much longer for foreign investors.

The main organization representing the private sector is Business Eswatini (www.business-eswatini.co.sz ), which represents more than 80 percent of large businesses in Eswatini, works on a wide range of issues of interest to the private sector, and seeks to build partnerships with the government to promote commercial development. Through Business Eswatini, the private sector is represented in a number of national working committees, including the National Trade Negotiations Team (NTNT).

Outward Investment

Transparency of the Regulatory System

In general, the laws of the country are transparent, including laws to foster competition. The Swaziland Competition Act came into force in 2007, and the Competition Commission Regulations came into effect in 2011. The Swaziland Competition Commission (SCC) is a statutory body charged with the administration and enforcement of the Competition Act of 2007. The legal and regulatory environment is underdeveloped, but currently growing as the GKoE has recently established additional regulatory bodies in the financial, energy, communications, and construction procurement sectors. These bodies generally attempt to emulate the regulatory practices of South Africa or Britain.

Eswatini’s rule-making and regulatory authority lies with the central government and may be delegated by the relevant line ministry to a department, parastatal, or board. The primary custodian of policy and regulation is the minister responsible for the relevant law. All laws, regulations, and policies are applied at a national level. There are no regulatory processes managed by nongovernmental organizations or private sector associations. Regulatory enforcement actions can be reviewed through the court system, and court rulings are publicly available.

Adherence to the International Financial Reporting Standard (IFRS) is required for listed companies, financial institutions, and government-owned companies. It remains optional for small and medium enterprises.

Proposed laws and regulations are published in the government Gazette and have a public comment period of thirty days prior to a bill’s presentation to parliament. Ministries sometimes consult with selected members of the public and private sectors through stakeholder meetings. Most draft regulations are not available online, but can be acquired in hard copy through the government printing office for a fee. Regulations are generally developed and reviewed through various stakeholder consultations. The use of science and data to inform regulatory reform is not widespread.

Foreign investors coming into the country can join Business Eswatini on equal footing with Eswatini nationals. Business Eswatini often serves as the link between the private sector and the government. There are no informal regulatory processes that apply to foreign investors.

Eswatini public finance and debt obligations are published online through the budget estimates book as well as the Central Bank of Eswatini’s annual report.

International Regulatory Considerations

Eswatini is part of four distinct economic blocks: the Common Monetary Area (CMA), the Southern African Customs Union (SACU), the Southern African Development Community (SADC), and the Common Market for Eastern and Southern Africa (COMESA). The standards of membership in these blocks are primarily based on British law and have been domesticated accordingly into each context.

Eswatini is a member of the WTO and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade. Eswatini signed and ratified the Trade Facilitation Agreement (TFA) in 2016 and has begun implementing its requisites. The TFA entered into force in February 2017 and requires prompt and transparent publication of trade-related information. Eswatini developed a trade portal in partnership with the World Bank to make reliable trade-related information accessible to the private sector. The GKoE approved the portal, which now is at the data collection stage.

Legal System and Judicial Independence

Eswatini has a dual legal system consisting of a set of courts that follow Roman-Dutch law and a set of national courts that follow Swati law and custom. The former consists of a Court of Appeals (Supreme Court) and a High Court, in addition to magistrate’s courts in each of the four districts. The traditional courts deal with minor offenses and violations of traditional Swati law and custom. Sentences in traditional courts are subject to appeal and review at the Court of Appeals and High Court. The western-style court system enforces contracts and property rights.

The country has various written commercial and contractual laws. Commercial and contractual disputes are handled in the magistrate court or High Court depending on the amount in controversy. There are currently no specialized commercial courts; however, the government is in the process of establishing a Small Claims Bench. Specialized Industrial Courts hear industrial relations matters.

The constitution and law provide for an independent judiciary, and the courts are generally independent of executive control or influence in nonpolitical criminal and civil cases not involving the royal family or government officials. The current judicial process is procedurally competent, fair, and reliable, although the capacity of the judiciary to handle cases in a timely manner is extremely limited, creating significant case backlogs.

Enforcement of laws and regulations is appealable up to the Supreme Court.

Laws and Regulations on Foreign Direct Investment

The Swaziland Investment Promotion Act of 1998 established EIPA and provides for the freedom of investment, protection of investment, and non-discrimination on the part of the government with respect to investors. The Competition Act of 2007 proscribes anti-competitive trade practices and specifies requirements for mergers and acquisitions, and protection of consumer welfare. The new economic recovery strategy (Revised National Development Strategy) has emphasized the need to promote further reforms in order to facilitate investment.

In February 2018, the GKoE enacted the Special Economic Zones (SEZ) Act in an effort to attract foreign direct investment. The benefits for an SEZ investor include: a 20-year exemption from all corporate taxation, followed by taxation at the rate of 5 percent; full refunds of customs duties, value-added tax, and all other taxes payable in respect of goods purchased for use as raw material, equipment, machinery, and manufacturing; unrestricted repatriation of profits; and full exemption from foreign exchange controls for all operations conducted within the SEZ.

Competition and Anti-Trust Laws

The Swaziland Competition Commission (SCC) was established in 2007 to encourage competition in Eswatini’s economy by controlling anti-competitive trade practices, mergers, and acquisitions; protecting consumer welfare; and providing an institutional mechanism for implementing these objectives. The Swaziland Competition Act (http://www.compco.co.sz/documents/Competition%20Act%202007%20scanned18%20Februry%202010.pdf ) and Competition Commission Regulations (http://www.compco.co.sz/documents/Competition%20Commission%20Regulations%20Notice%202010.pdf ) are available online. All entities must submit their merger and acquisition plans to the SCC for prior approval. The SCC has the power to not only investigate and regulate, but also to issue administrative decisions relating to mergers, competition, and anti-trust. There have been no rulings against foreign investors since the establishment of the Swaziland Competition Commission.

Expropriation and Compensation

The law prohibits expropriation and nationalization. The Swati constitution narrowly limits the GKoE’s powers to deprive a landowner of “property or any interest in or right over property,” except where “necessary,” conducted pursuant to a court order, and compensated by the “prompt payment of fair and adequate compensation.” Anyone whose property interests are threatened by expropriation is also expressly granted due process rights under the constitution. There have been no recent cases of foreign-owned businesses being expropriated, and, when disputes have arisen in the past, there has been due process through Swati institutions and/or international tribunals.

Dispute Settlement

ICSID Convention and New York Convention

Eswatini is a member state of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). It is not a signatory to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. There is no specific legislation providing for enforcement of awards under international conventions, but the Swati legal system has effectively enforced court decisions and international arbitration awards in the past.

Investor-State Dispute Settlement

Eswatini is a member state of the International Centre for the Settlement of Investment Disputes (ICSID Convention) and the Multilateral Investment Guarantee Agency (MIGA). Eswatini, as a member of SACU, signed a Trade, Investment and Development Cooperative Agreement in 2008 with the United States. There have been no claims under this agreement.

There have been at least two major investment disputes involving foreign investors in the past ten years, but none involving U.S. citizens.

The Eswatini government accepts binding international arbitration of investment disputes between foreign investors and the state. All government agreements with international investors/parties include venue and choice of law provisions. Local courts recognize and enforce foreign arbitral awards issued against the government, but do not have jurisdiction against the king, who is constitutionally protected.

Eswatini has not had any reported incidents of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

The only alternative dispute resolution (ADR) mechanism available to settle disputes between two private parties is in the labor sector. The Conciliation, Mediation and Arbitration Commission (CMAC), which is governed by the Industrial Relations Act of 2000, resolves employer-employee disputes. Eswatini does not have a domestic arbitration body to deal with investment or commercial disputes.

Local courts recognize and enforce foreign arbitral awards and judgments of foreign courts.

SOEs are rarely involved in investment disputes. In the last 10 years, there has been only one such dispute involving an SOE (telecommunications), and it was a trade restraint matter in which the SOE lost the case. There have not been any complaints about the court processes, and court records are available online for public scrutiny at: https://www.swazilii.org/ .

Bankruptcy Regulations

The Insolvency Act of 1955 is the law that governs bankruptcy in Eswatini. The insolvent debtor or his agent petitions the court for the acceptance of the surrender of the debtor’s estate for the benefit of his creditors. Creditors need to petition with the court and provide documents supporting their claim. Bankruptcy is only criminalized if the debtor, trustee, or sole owner does not comply with the requirements of the creditor. For example, if he/she fails to submit documents or declare assets, or if he/she obstructs or hinders a liquidator appointed under the Act in the performance of his functions, then he/she could be found guilty of an offense.

The most widely used credit bureau in Eswatini is Transunion.

In the World Bank’s 2020 Doing Business Report, Eswatini ranks 121 out of 190 economies for ease of resolving insolvency.

Investment Incentives

SEZ investors have access to numerous investment incentives more fully described above in “Laws and Regulations on Foreign Direct Investment” and below in “Foreign Trade Zones/Free Ports/Trade Facilitation.” For non-SEZ investors, the Minister of Finance has the discretion to apply a reduced tax rate of 10 percent for the first ten-year period of operation, which is available for businesses that qualify under the Development Approval Order. Capital goods imported into the country for productive investments are exempt from import duties. Raw materials imported into the country to manufacture products to be exported outside the SACU area are also exempt from import duties. The law allows for repatriation of profits and dividends including salaries for expatriate staff and capital repayments. The Central Bank of Eswatini guarantees loans raised by investors for export markets. There is also provision of loss cover that a company can carry over in case it incurs a loss in the year of assessment. Eswatini has a human resources training rebate that offers a tax credit for 150 percent of the cost of training.

The GKoE issues guarantees for key sectors like transportation and energy. There have been no reports of government jointly financing FDI projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

In February 2018, the GKoE enacted the Special Economic Zones (SEZ) Act in an effort to attract foreign direct investment. The Act establishes two designated SEZs: the Royal Science and Technology Park and King Mswati III International Airport. According to the Act, investors may establish additional SEZs outside of these designated areas by satisfying the minimum requirements and submitting an application to the Minister of Commerce. Under the Act, foreign-owned firms have the same investment opportunities as Swati entities.

To operate within an SEZ, a beneficiary company must meet the following minimum requirements (among others): at least 90 percent of its employees must be paid at or above the threshold for income taxation (approximately USD 330/month); at least two thirds of its employees must be Swati citizens; and the minimum capital investment must be E30 million (USD 2.1 million) for sole companies and E70 million (USD 5 million) for joint ventures. The benefits for an SEZ investor include: a 20-year exemption from all corporate taxation, followed by taxation at the rate of 5 percent; full refunds of customs duties, value-added tax, and all other taxes payable in respect of goods purchased for use as raw material, equipment, machinery, and manufacturing; unrestricted repatriation of profits; and full exemption from foreign exchange controls for all operations conducted within the SEZ.

Performance and Data Localization Requirements

The Ministry of Labor and Social Security’s Training and Localization Unit requires the hiring of qualified Swati workers where possible, even at executive positions. The mandate of the Unit is to ensure the maximum utilization of local manpower resources and to formulate training plans in conjunction with industries so as to maximize employment. It also facilitates and provides information on the process of obtaining work permits. Foreign investors are required to apply for residence and work permits. Although they are generally awarded, business people complain that the process is cumbersome.

There are no government-imposed conditions on permission to invest. The government does not follow a “forced localization” policy. However, in the manufacturing sector, if a company plans to label a product for export as “Made in Eswatini,” the government requires that the local content of such export be at least 25 percent.

There are no requirements for foreign IT providers to turn over source code or provide access to encryption. The technology industry in Eswatini is still in its infancy.

Real Property

There are two major categories of land tenure: Swati Nation Land (SNL) and Title Deed Land (TDL), each subject to different rules and procedures. More than 60 percent of Eswatini’s territory is SNL, governed by the country’s traditional structures. SNL is “held in trust for the Swati people” by the King, who appoints chiefs to oversee its use. The chiefs keep records of who “owns” or resides on land in their chiefdom. For TDL, the Eswatini government recognizes and enforces secured interest in property and there is a reliable system of recording security interests. The Constitution protects the right to own property, but most rural land is SNL and is not covered by this constitutional protection. Most urban property, on the other hand, is TDL. The law allows for eminent domain in limited circumstances, but requires prompt payment of adequate compensation.

In the World Bank’s 2020 Doing Business Report, Eswatini ranks 104 out of 190 economies for ease of registering property. This ranking refers to property in periurban areas, where TDL is widely available. SNL is not titled, and lending institutions are reluctant to use it as collateral. Though foreign or non-resident individuals generally may not own land (with some exceptions), foreign-owned businesses are able to own or lease land. Legally purchased property cannot revert to other owners (must be “willing buyer, willing seller”).

Intellectual Property Rights

Protection for patents, trademarks, and copyrights is currently inadequate under Swati law. Patents are currently protected under a 1936 act that automatically extends patent protection, upon proper application, to products that have been patented in either South Africa or Great Britain. Trademark protection is addressed in the Trademarks Act of 1981. Copyright protections are addressed under four statutes, dated 1912, 1918, 1933, and 1936.

Laws enacted in 2018 have updated Eswatini’s intellectual property legal framework. The Copyright and Neighboring Rights Act of 2014 (replacing the Copyright Act of 1912) protects literary, musical, artistic, audio-visual, sound recordings, broadcasts, and published editions. It also criminalizes illicit recording and false representation of someone else’s work. The Act also gives the duration of copyright among other things. The Swaziland Intellectual Property Tribunal Act of 2015 establishes an Intellectual Property Tribunal, which will be responsible for hearing all matters and disputes involving intellectual property in Eswatini.

The Trademarks (Amendment) Act of 2015 brings the (1981) Trademarks Act into compliance with provisions of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), the Madrid Agreement concerning International Registration of Marks, and the Banjul Protocol on Trademarks.

Eswatini does not track and report on seizures of counterfeit goods. Eswatini is not listed on theUnited States Trade Representative (USTR) Special 301 Report or the 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/ .

Capital Markets and Portfolio Investment

Eswatini’s capital markets are closely tied to those of South Africa and operate under conditions generally similar to the conditions in that market. In 2010, the GKoE passed the Securities Act to strengthen the regulation of portfolio investments. The Act was primarily intended to facilitate and develop an orderly, fair, and efficient capital market in the country.

Eswatini has a small stock exchange with only a handful of companies currently trading. In 2010, the Financial Services Regulatory Authority (FSRA) was established. This institution governs non-bank financial institutions including capital markets, insurance firms, retirement funds, building societies, micro-finance institutions, and savings and credit cooperatives. The royal wealth fund and national pension fund invest in the private equity market, but otherwise there are few professional investors.

Existing policies neither inhibit nor facilitate the free flow of financial resources. The demand is simply not present. The Central Bank respects International Monetary Fund (IMF) Article VIII. Credit is allocated on market terms. Foreign investors are able to get credit and equity from the local market. A variety of credit instruments are available to the private sector including Central Bank of Eswatini loan guarantees for the export markets and for small businesses.

Money and Banking System

54 percent of the Swati adult population is banked. Despite a slow rate of economic growth, the Swati banking sector remains stable and financially sound. Asset quality improved as the ratio of non-performing loans (NPLs) to gross loans, moved from 8.2 percent in 2017 to 7.7 percent in 2018.

54 percent of the Swati adult population is banked. Despite a slow rate of economic growth, the Swati banking sector remains stable and financially sound. Asset quality improved as the ratio of non-performing loans (NPLs) to gross loans, moved from 8.2 percent in 2017 to 7.7 percent in 2018.

The estimated total assets for the country’s banks is estimated at E19.4 billion (USD 1.4 billion) as at June 2018, up from E17.9 billion (USD 1.3 billion) in March 2017. Eswatini has a central bank system. Eswatini’s banks are primarily subsidiaries of South African banks. Standard Bank is the largest bank by capital assets and employs about 400 workers. In 2018, the Central Bank of Eswatini under the Financial Institutions Act of 2005 awarded a new commercial banking license to Farmer’s Bank.

Eswatini’s financial sector is liberalized and allows foreign banks or branches to operate under the supervision of the Central Bank’s laws and regulations (http://www.centralbank.org.sz/financialregulation/banksupervision/index.php ). Foreigners may establish a bank account in Eswatini if they have residency in one of the CMA countries (Eswatini, South Africa, Lesotho, Namibia).

There have been no bank closures or banks in jeopardy in the last three years. Hostile takeovers are uncommon.

Foreign Exchange and Remittances

Foreign Exchange

There are no limitations on the inflow or outflow of funds for remittances. Dividends derived from current trading profits are freely transferable on submission of appropriate documentation to the Central Bank, subject to provision for the non-resident shareholder tax of 15 percent. Local credit facilities may not be utilized for paying dividends. Eswatini is part of the Common Monetary Area (CMA), which also includes South Africa, Namibia, and Lesotho. All capital transfers into Eswatini from outside the CMA require prior approval of the Central Bank to avoid problems in the subsequent repatriation of interest, dividends, profits, and other income accrued. Otherwise, there are no restrictions placed on the transfers.

Eswatini mainly deals with three international currencies: the U.S. Dollar, the Euro, and the British Pound. The Swati Lilangeni is pegged 1:1 to the South African Rand, which is accepted as legal tender throughout Eswatini. To obtain foreign currency other than Rand, one must apply through an authorized dealer, and a resident who acquires foreign currency must sell it to an authorized dealer for the local currency within ninety days. No person is permitted to hold or deal in foreign currency other than authorized dealers, namely, First National Bank (FNB), Nedbank, Standard Bank, or Swazi Bank.

Because the Lilangeni is pegged to the Rand, its value is determined by the monetary policy of the CMA, which is heavily influenced by the South African Reserve Bank.

Remittance Policies

There have been no recent changes to investment remittance policies. There are no specified time limitations on remittances. Once documentation is complete (e.g., latest company financial statements) and relevant taxes paid, SWIFT transfers require an average of one week, and other electronic transfers can take less than a week (SWIPPS offers real-time transactions).

SWIPSS, Eswatini’s Real Time Gross Settlement System, is an advanced interbank electronic payment system that facilitates the efficient, safe, secure and real-time transmission of high-value funds in the banking sector. Direct access to SWIPSS is limited to only the four commercial banks, and these banks act as intermediaries for other financial institutions.

As part of the government policy to attract foreign investment, dividends derived from current trading profits are freely transferable on submission of documentation (including latest annual financial statements of the company concerned) subject to provision for non-resident shareholders tax. The Eswatini government does not issue dollar-denominated bonds. Otherwise, there are no limitations on the inflow and outflow of funds for remittances of profits or revenue.

Sovereign Wealth Funds

In 1968, the late King Sobhuza II created a Royal Charter that governs the Sovereign Wealth Fund (SWF) in Eswatini, Tibiyo TakaNgwane. This fund is not subject to government or parliamentary oversight and does not provide information on assets or financial performance to the public. Tibiyo TakaNgwane publishes an annual report with financials, but it is not required by law to do so as it is not registered under the Companies Act of 1912. The annual reports are not made public or submitted to any other state organ for debate or review. The SWF obtains independent audits at the discretion of its Board of Directors.

Tibiyo TakaNgwane states in its objectives that it supports the government in fostering economic independence and self-sufficiency. It widely invests in the economy and holds shares in most major industries, e.g., sugar, real estate, beverages, dairy, hotels, and transportation. For its social responsibility practices, it provides some scholarships to students. The SWF and the government co-invest to exercise majority control in many instances. Tibiyo TakaNgwane invests entirely in the local economy and local subsidiaries of foreign companies. It has shares in a number of private companies. Sometimes foreign companies can form partnerships with Tibiyo, especially if the foreign company wants to raise capital and can manage the project on its own.

Eswatini has over 30 SOEs, which are active in agribusiness, information and communication, energy, automotive and ground transportation, health, housing, travel and tourism, building education, business development, finance, environment, and publishing, media, and entertainment .

The Swati government defines SOEs as private enterprises, separated into two categories. Category A represents SOEs that are wholly owned by government. Category B represents SOEs in which government has a minority interest, or which monitor other financial institutions or a local government authority. These categories are further broken down into profit-making SOEs with a social responsibility focus, those that are profit-making and developmental, those that are regulatory, and those that are regulatory but developmental. SOEs purchase and supply goods and services to and from the private sector including foreign firms. Those in which government is a minority shareholder are subject to the same tax burden and tax rebate policies as the private sector. The Public Enterprise Act governs SOEs. The Boards of the respective SOEs review their budgets before tabling them to the relevant line ministry, which, in turn, tables them to Parliament for scrutiny by the Public Accounts Committee. The Ministry of Finance’s Public Enterprise Unit (PEU) maintains a published list of SOEs, available on request from the PEU. SOEs do not receive non-market based advantages from government.

Eswatini SOEs generally conform to the OECD Guidelines on Corporate Governance for SOEs. Senior managers of SOEs report to the board and, in turn, the board reports to a line minister. The minister then works with the Standing Committee on Public Enterprise (SCOPE), which is composed of cabinet ministers. SOEs are governed by the Public Enterprises Act, which requires audits of the SOEs and public annual reports. Government is not involved in the day-to-day management of SOEs. Boards of SOEs exercise their independence and responsibility. The Public Enterprise Unit provides regular monitoring of SOEs. The line minister of the SOE appoints the board and, in some cases, the appointments are politically motivated. In some cases, the king appoints his own representative as well. Generally, court processes are nondiscriminatory in relation to SOEs.

A published list of SOEs can be found on: http://www.gov.sz/index.php/component/content/article/141-test/1995-swaziland-enterprise-parastatals?Itemid=799 

Eswatini SOEs operate primarily in the domestic market.

Privatization Program

The International Monetary Fund (IMF) has long advised the Eswatini government to privatize SOEs, particularly in the telecommunications sector and the electricity sector. In response, the government has passed several laws, and privatization efforts have begun to advance. The past two years have seen the launch of several private telecommunications companies such as Swazi Mobile, which has lowered prices and improved mobile and data offerings in the country.

Sectors and timelines have not been prioritized for future privatization, although it is likely that some SOEs following the public launch of the Revised National Development Strategy.

The government is working to reduce the country’s dependence on foreign electricity by promoting renewable energy production. Eswatini imports the bulk of its electricity from South Africa and Mozambique, reaching 100 percent importation during a recent drought, since domestic production comes predominantly from hydropower. With assistance from USAID’s Southern Africa Energy Program (SAEP), the government has developed a National Grid Code and a Renewable Energy and Independent Power Producer (RE&IPP) Policy to provide a framework for the sector and incentivize investors. SAEP is currently providing technical assistance on a 10-megawatt photovoltaic projects that are projected to integrate into the grid by late 2020.

The Swati government encourages foreign and local enterprises to follow generally accepted responsible business conduct (RBC) principles. Multinational enterprises in the country have robust standards for RBC, and consumers often recognize their efforts; however, smaller domestic companies are less likely to have RBC programs. The Development Approval Order, which is part of the income tax law, allows a company to receive a tax rate discounted by up to 10 percent if it makes significant RBC investments. Government enforcement is sporadic, but generally does not vary based on whether a company is domestic or foreign. Requirements are not waived to attract foreign investment. The government does not have corporate governance, accounting, and executive compensation standards to protect shareholders. There are no independent NGOs monitoring RBC.

The local courts are responsible for ensuring human rights, labor rights, consumer protection, environmental protections, and other laws/regulations intended to protect individuals from adverse business impacts. The courts have not demonstrated a bias against foreign-owned corporations.

The mining sector of Eswatini does not have enough economic significance to warrant special consideration by the government. It is treated consistently with other sectors of similar size.

The law provides criminal penalties for corruption by officials, but the government does not implement the law effectively. Officials sometimes engage in corrupt practices with impunity. Corruption continues to be a problem, most often involving personal relationships and bribes being used to secure government contracts on large capital projects.

The Prevention of Corruption Act and the Swaziland Public Procurement Act are the two laws that combat corruption by all persons, including public officials. The Public Procurement Act prohibits public sector workers and politicians from supplying the government with goods or services; however, this prohibition does not extend to family members of officials. The Eswatini Public Procurement Agency (ESPPRA) conducted capacity building exercises nationwide with both public and private companies to increase knowledge and encourage adoption of universally practiced purchasing systems. According to Section 27 of the Public Procurement Regulations, suppliers are prohibited from offering gifts or hospitality, directly or indirectly, to staff of a procuring entity, members of the tender board, and members of the ESPPRA. While avoiding conflict of interest and establishing codes of conduct are policies that are encouraged, they are not effectively enforced. Some companies use internal controls and audit compliance programs to try to track and prevent bribery.

Eswatini is a signatory to the African Union Convention on Preventing and Combating Corruption and Related Offenses and the SADC Protocol against Corruption. Eswatini has signed and ratified the UN Anticorruption Convention, but it is not party to the OECD Anti-Bribery Convention.

The Anti-Corruption Commission (ACC) is legally allowed to investigate corruption, and does so. The ACC does not provide protection to NGOs involved in investigating corruption. Given the Commission’s current capacity, “government procurement” is the most likely area to find corruption in Eswatini. The global competitiveness report ranks Swaziland 79 of 140 countries on incidence of corruption. Transparency International reports Eswatini as the 14th least corrupt country in Africa

Though no US firms have cited corruption, the 2015 Africa Competitiveness report found that 12.8% of business owners saw corruption as a hurdle to doing business in Eswatini, impacting profits, contracts, and investment decisions for their companies. There is a public perception of corruption in the executive and legislative branches of government and a consensus that the government does little to combat it. There have been credible reports that a person’s relationship with government officials influenced the awarding of government contracts; the appointment, employment, and promotion of officials; recruitment into the security services; and school admissions. Authorities rarely took action on reported incidents of nepotism.

Resources to Report Corruption

Contact at government agency responsible for combating corruption:

Dan Dlamini
Commissioner
Eswatini Anti-Corruption Commission
3rd Floor, Mbandzeni House, Mbabane +268-2404-3179/0761
+268-2404-3179/0761
anticorruption@realnet.co.sz

There are few incidents of politically motivated violence. In 2017, the Swati government enacted a new Public Order Act and amendments to the Suppression of Terrorism Act that have dramatically reduced restrictions on assembly, association, and expression. Through April 2020, the GKoE has done a fairly good job of honoring the newly expanded legal freedoms. There are no examples from the past ten years of damage to projects or installations. Overall, Eswatini has a long record of political stability with sporadic nonviolent protest; however, poor living and working conditions, widespread poverty, income inequality, and a large and growing youth population continue to yield a political environment conducive to unrest.

The structure of the labor market and economic fundamentals in Eswatini are better developed than in many other Sub-Saharan African countries. For example, GDP per capita is higher, the informal sector is smaller, exports are more diversified, the overall education level is higher, and the labor pool is predominantly domestic. Nevertheless, although Eswatini is considered a middle-income country, it has many characteristics of a low-income country. The minimum wage is low, inequality is high (0.51 Gini coefficient), poverty is widespread, the middle class is small, overall unemployment (especially youth unemployment) is high, and female representation is low.

Eswatini has a shortage of technically skilled labor. The government has identified several sectors as priorities in terms of building skilled labor capacity: agricultural engineering, ICT, medicine, medical imaging, and occupational health. Other priority fields that the government may sponsor include physiotherapy, paramedic studies, forestry, special education, clinical and dental science, and pharmacy.

The law requires that employers give first preference to Swati nationals unless they cannot find candidates with the necessary qualifications.

The Employment Act states that if an employer contemplates adjusting employment to respond to fluctuating market conditions, the employer must give no less than one month’s notice to the Labor Commissioner and the trade union. The employer must provide the number of employees to be affected, their occupations and remuneration, the reasons for the adjustment, the effective date, financial statements and audited accounts of the company, and options that have been considered to avert the situation. Section 34 of the Employment Act says if the services of an employee are terminated other than being fired, a severance allowance amounting to ten working days’ wages for each completed year in excess of one year continuously employed by that employer is due. Layoffs are defined as temporary absences from work that are necessitated by the employer facing certain difficulties that are temporary in nature, while firing refers to the sacking of an employee. There are no social safety net programs for workers who are laid off.

Labor laws are not waived in order to attract or retain investment. In 2018, Eswatini enacted the Special Economic Zones (SEZ) Act in an effort to attract foreign direct investment. In order to operate within an SEZ, a beneficiary company must meet the following minimum requirements (among others): at least 90 percent of its employees must be paid at or above the threshold for income taxation (approximately USD 330/month); at least two thirds of its employees must be Swati citizens; and the minimum capital investment must be E30 million (USD 2.1 million) for sole companies and E70 million (USD 5.0 million) for joint ventures.

The law provides that workers, except for those in essential services, have the right to form and join independent unions, conduct legal strikes, and bargain collectively. Labor unions practice collective bargaining, but there are few industry associations and bargaining is conducted largely with individual employers in the private sector. Collective bargaining is common in the financial and textile sectors.

The Conciliation, Mediation and Arbitration Commission (CMAC) serves as Eswatini’s labor dispute resolution mechanism. Labor disputes generally start at CMAC with mediation and arbitration. Either party can refuse arbitration and bring the case to the Industrial Court; however, due to severe backlogs at the court, the matter may not be heard for several years. According to the Industrial Relations Act, workers can engage in a strike action if there is an unresolved dispute.

Although the law permits strikes, the right to strike is strictly regulated, and the administrative requirements to register a legal strike made striking difficult. Strikes and lockouts are prohibited in essential services, and the minister’s power to modify the list of these essential services provides for broad prohibition of strikes in nonessential sectors, including postal services, telephone, telegraph, radio, and teaching. The procedure for announcing a strike action requires advance notice of at least seven days. The law details the steps to be followed when disputes arise and provides penalties for employers who conduct unauthorized lockouts. When disputes arise with civil servant unions, the government often intervenes to reduce the chances of a strike action, which may not be called legally until all avenues of negotiation are exhausted and a secret ballot of union members conducted.

Eswatini has ratified the eight core ILO conventions; however, compliance gaps with international labor standards continue to remain in both law and practice. The law provides that workers, except for those in essential services, have the right to form and join independent unions, conduct legal strikes, and bargain collectively. The law provides for the registration of unions and federations but grants far-reaching powers to the labor commissioner with respect to determining eligibility for registration. Unions must represent at least 50 percent of employees in a workplace and submit their constitutions to be automatically recognized. The law also gives employers discretion to recognize a union as a collective employee representative if it has less than 50 percent membership, and furthermore, allows employers to set conditions for such recognition. The Department of Labor has inspectors who verify whether companies adhere to labor regulations, health and safety standards, and wage laws. The Minister of Labor sets minimum wages through the Wages Councils.

In 2018, Eswatini enacted a new Public Order Act that substantially loosened restrictions on public gatherings, including eliminating the requirement for prior consent for gatherings of fewer than 50 persons and completely removing restrictions on private gatherings. A gathering no longer requires permission, but instead only requires notice that provides basic information as to time, place, date, and logistics. Demonstrators no longer have to provide information as to the content of their planned speech.

Political/Economic Officer
U.S. Embassy Eswatini +268-2417-9663
+268-2417-9663
Mbabane-Pol-Econ@state.gov

Policies Towards Foreign Direct Investment

Mauritius actively seeks foreign investment.  The Investment Office (formerly the Board of Investment) of the Economic Development Board (EDB) is the single-gateway government agency responsible for promoting investment in Mauritius, and for helping guide investors through the country’s legal and regulatory requirements.

According to a number of surveys and metrics, Mauritius is among the freest and most business-friendly countries in Africa.  The 2020 Index of Economic Freedom, published by the Heritage Foundation, ranks Mauritius first in the Sub-Saharan Africa region among 43 countries and 21st globally.  For the 12th consecutive year, the World Bank’s 2020 Doing Business report ranked Mauritius first among African economies, and 13th worldwide, in terms of overall ease of doing business.

There is no formal ongoing dialogue with investors.  However, one-to-one meetings are usually held with investors while the government prepares its annual budget.

Limits on Foreign Control and Right to Private Ownership and Establishment

A non-citizen can hold, purchase, or acquire real property under the Non-Citizens (Property Restriction) Act, or NCPRA, subject to government approval.  A foreigner can acquire residential property and apartments under the government-regulated Property Development Scheme (PDS) http://www.edbmauritius.org/schemes/property-development-scheme .  The NCPRA was amended in December 2016 to allow foreigners to purchase certain types of properties, as long as the amount paid is over six million Mauritian rupees (approximately USD 172,000).  A non-citizen is eligible for a residence permit upon the purchase of a house under the PDS if the investment made is more than USD 500,000. More information is available at http://dha.pmo.govmu.org/English/Mandate/Pages/Non-Citizens-Property-Restriction.aspx.  

Regarding business activities, the GoM generally does not discriminate between local and foreign investment.  There are, however, some business activities where foreign involvement is restricted.  These include television broadcasting, sugar production, newspaper or magazine publishing, and certain operations in the tourism sector.

In 2019, the Independent Broadcasting Authority (IBA) Act was amended to increase the allowable equity participation of a foreign company investing in broadcasting to 49.9 percent from 20 percent.  Similarly, control by foreign nationals in broadcasting was limited to 49.9 percent.   Furthermore, a foreign investor cannot hold 20 percent or more of a company that owns or controls any newspaper or magazine, or any printing press publishing such publications.  The IBA Act can be accessed via http://www.iba.mu/legal.htm.  

In the sugar sector, no foreign investor is allowed to make an investment that would result in 15 percent or more of the voting capital of a Mauritian sugar company being held by foreign investors.  More information can be accessed at https://www.stockexchangeofmauritius.com/media/2124/securities-investment-by-foreign-investors-rules-2013.pdf.  

In the tourism sector, there are conditions on investment by non-citizens in guesthouse/tourist accommodation, pleasure crafts, scuba diving, and tour operators.  Generally, the limitations refer to a minimum investment amount, number of rooms, or a maximum equity participation, depending on the business activity.  Details of the restrictions can be accessed via http://www.tourismauthority.mu/en/licence-categories-11/tourist-accommodation-certificate-30.html.  

In the construction sector, foreign consultants or contractors are required to register with the Construction Industry Development Board (CIDB).  Details on registration procedures are available at https://www.cidb.mu/registration/contractors .

The Investment Office of the EDB screens foreign investment proposals and provides a range of services to potential investors.  The EDB is a useful resource for investors exploring business opportunities in Mauritius and provides assistance with occupation permits, licenses, and clearances by coordinating with relevant local authorities.  In 2019, U.S. Embassy Port Louis did not receive negative comments from U.S. businesses regarding the fairness of the government’s investment screening mechanisms.

The Investment Office of the EDB reviews proposals for economic benefit, environmental impact, and national security concerns.  EDB then advises the potential investor on specific permits or licenses required, depending on the nature of the business.  Foreign investors can also apply through the EDB for necessary permits.  In the event an investment fails review, the prospective investor may appeal the decision within the EDB or to the relevant government ministry.

Other Investment Policy Reviews

Mauritius’ most recent third-party investment policy reviews through multilateral organizations were completed in 2014.  In June 2014, the GoM conducted an investment policy review with the Organization for Economic Cooperation and Development (OECD).  The review can be accessed via http://www.oecd.org/daf/inv/investment-policy/mauritius-investment-policy.htm .  The review concluded that, while policies and legislation in Mauritius support private sector development, incentive schemes tend to bias investment towards real estate and property development.  In October 2014, the GoM also conducted a trade policy review with the World Trade Organization (WTO), which can be accessed at https://www.wto.org/english/tratop_e/tpr_e/tp404_e.htm .  A new trade policy review was expected to start in May 2020.

Business Facilitation

The GoM recognizes the importance of a good business environment to attract investment and achieve a higher growth rate.  In 2019, the Business Facilitation (Miscellaneous Provisions) Act entered into force.  The main reforms brought about by this legislation were expediting trade fee payments, reviewing procedures for construction permits, reviewing fire safety compliance requirements, streamlining of business licenses, and implementing numerous trade facilitation measures.  The act can be accessed at https://www.edbmauritius.org/resources/legislations.  

The incorporation of companies and registration of business activities falls under the provisions of The Companies Act of 2001  and The Business Registration Act of 2002 .  All businesses must register with the Registrar of Companies.  As a general rule, a company incorporated in Mauritius can be 100 percent foreign-owned with no minimum capital.  According to the World Bank 2020 Doing Business report, while the procedures for registering a company takes less than a day, actually starting a business takes between four and five days.

After the Registrar of Companies issues a certificate of incorporation, foreign-owned companies must register their business activities with the EDB.  The company can then apply for occupation permits (work and residence permits) and incentives offered to investors.  EDB’s investment facilitation services are available to all investors, domestic and foreign.

In partnership with the Corporate and Business Registration Department (a division of the Ministry of Finance and Economic Development), the Mauritius Network Services (MNS) has implemented the Companies and Business Registration Integrated System, a web-based portal that allows electronic submission for incorporation of companies and application for the Business Registration Number, file statutory returns, pay yearly fees, register businesses, and search for business information.  Applicants can register with MNS at https://portalmns.mu/cbris.   In March 2019, the National Electronic Licensing System (NELS), which is co-financed by the European Union, was officially launched.  NELS is a single point of entry for the processing of permits and licenses needed to start and operate a business.  It can be accessed at https://business.edbmauritius.org .

Outward Investment

The GoM imposes no restrictions on capital outflows.  Due to the small size of the Mauritian economy, the government encourages Mauritian entrepreneurs to invest overseas, particularly in Africa, to expand and grow their businesses.  As part of its Africa Strategy, the government has established the Mauritius Africa Fund:  a public company with USD 13.8 million capitalization to support Mauritian investment in Africa.  Through the Fund, the government participates as an equity partner up to 10 percent of the seed capital invested by Mauritian investors in projects targeted towards Africa.  The government has signed agreements with Senegal, Madagascar, and Ghana establishing and managing Special Economic Zones (SEZ) in these countries and has invited local and international firms to set up operations in the SEZs.  As per the 2018 Finance Act, Mauritian companies collaborating with the Mauritius-Africa Fund for development of infrastructure in the SEZs benefit from a five-year tax holiday.  To further facilitate investment, Mauritius has also signed Investment Promotion and Protection Agreements and Double Taxation Avoidance Agreements with African states.

Since 2012, the Board of Investment (now restructured as the Investment Office of the EDB) has been operating an Africa Center of Excellence, a special office dedicated to facilitating investment from Mauritius into Africa.  It acts as a repository of business information for Mauritian entrepreneurs about investment opportunities in different sectors in Africa.

In 2018, the most recent year for which the Central Bank of Mauritius has published data, gross direct investment flows abroad (excluding the global business sector) amounted to USD 106 million.  The top three sectors for outward investment were manufacturing (38 percent), finance and insurance activities (30 percent), and accommodation and food service activities (10 percent).  Investment abroad was mainly geared toward developing countries, and Africa was the biggest recipient region of foreign direct investment, amounting to USD 44 million.  Kenya was the top recipient country with USD 31 million. Data on outward investment can be obtained at https://www.bom.mu/publications-and-statistics/statistics/external-sector-statistics/direct-investment-flows .

Transparency of the Regulatory System

Since 2006, the GoM has reformed trade, investment, tariffs, and income tax regulations to simplify the framework for doing business.  Trade licenses and many other bureaucratic hurdles have been reduced or abolished.  With a well-developed legal and commercial infrastructure and a tradition that combines entrepreneurship and representative democracy, Mauritius is one of Africa’s most successful economies.  Business Mauritius, the coordinating body of the Mauritian private sector, participates in discussions with and presents papers to government authorities on laws and regulations affecting the private sector.

Regulatory agencies do not request comments on proposed bills from the general public.  Both the notice of the introduction of a government bill and a copy of the bill are distributed to every member of the Legislative Assembly and published in the Government Gazette before enactment.  Bills with a “certificate of urgency” can be enacted with summary process.  All proposed regulations are published on the Legislative Assembly’s website, which is publicly accessible via http://mauritiusassembly.govmu.org/English/bills/Pages/default.aspx.  

Companies in Mauritius are regulated by the Companies Act of 2001, which incorporates international best practices and promotes accountability, openness, and fairness.  To combat corruption, money laundering and terrorist financing, the government also enacted the Prevention of Corruption Act, the Prevention of Terrorism Act, and the Financial Intelligence and Anti-Money Laundering Act.  While Mauritius does not have a freedom of information act, members of the public may request information by contacting the permanent secretary of the relevant ministry.

Budget documents, including the executive budget proposal, enacted budget, and end-of-year report, are publicly available and provide a substantially full picture of Mauritius’ planned expenditures and revenue streams.  Information on debt obligations is also at http://mof.govmu.org/English/Public%20Debt/Pages/Debt-Data.aspx .

International Regulatory Considerations

Mauritius is a member of the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA).  It is a signatory to the African Continental Free Trade Area (AfCFTA), which entered into force in May 2019, and the COMESA-EAC-SADC Tripartite Free Trade Area.  As at April 2020, the Tripartite FTA has yet to enter into force.  The GoM implements its commitments to these regional economic institutions with domestic legal and regulatory adjustments, as appropriate.

Mauritius has been a member of the World Trade Organization (WTO) since 1995.  The GoM reports that they notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade to the extent possible.  In July 2014, Mauritius notified its category A commitments to the WTO, among the first African countries to do so.  Mauritius was the fourth country to submit its instrument of acceptance for the Trade Facilitation Agreement (TFA).  In 2019, Mauritius notified its category B and C commitments and their corresponding dates of implementation.

Of TFA’s 36 measures, Mauritius has classified 27 as category A, five as B, and four as C.  Discussions with donors to obtain technical assistance to finance trade facilitation projects listed under category C are ongoing and Mauritius secured assistance from the World Bank and the World Customs Organization.

To coordinate efforts to implement the TFA, in 2015 Mauritius set up a National Committee on Trade Facilitation, co-chaired by representatives from government and the private sector.  Members include Customs, the Ministry of Agro-Industry and Food Security, the Ministry of Finance and Economic Development, and the Mauritius Chamber of Commerce and Industry.  The committee has met 10 times since.  Discussion topics include identification of sources of financing for category C commitments and resolution of non-tariff barriers in Mauritius.

Legal System and Judicial Independence

Mauritius draws legal principles from both French civil law and British common law traditions.  Its procedures are largely derived from the English system, while its substance is based on the Napoleonic Code of 1804.  Commercial and contractual law is also based on the civil code.  However, some specialized areas of law are comparable to other jurisdictions.  For example, its company law is practically identical to that of New Zealand.  Mauritian courts often resolve legal disputes by drawing on current legislation, the local legal tradition, and by means of a comparative approach utilizing various legal systems.  The highest court of appeal is the judicial committee of the Privy Council of England.  Mauritius is a member of the International Court of Justice.  Mauritius established a Commercial Court in 2009 to expedite the settlement of commercial disputes.

Contracts are legally enforceable and binding.  Ownership of property is enforced with the registration of the title deed with the Registrar-General and payment of the registration duty.  Mauritian courts have jurisdiction to hear intellectual property claims, both civil and criminal.  The judiciary is independent and the domestic legal system is generally non-discriminatory and transparent.  The Embassy is not aware of any recent cases of government or other interference in the court system affecting foreign investors.

Laws and Regulations on Foreign Direct Investment

The 2017 Economic Development Board Act governs investment in Mauritius, while the 2001 Companies Act contains the regulations governing incorporation of businesses.  The Corporate and Business Registration Department (CBRD) of the Ministry of Finance and Economic Development administers the 2001 Companies Act, the 2002 Business Registration Act, the 2009 Insolvency Act, the 2011 Limited Partnerships Act, and the 2012 Foundations Act.  Information regarding the various acts can be accessed via the CBRD’s website: http://companies.govmu.org/English/Legislation/Pages/default.aspx  

All laws and regulations related to foreign investment can be found on the EDB’s website: http://www.edbmauritius.org/resources/legislations/ .

Competition and Anti-Trust Laws

The Competition Commission of Mauritius (CCM) is an independent statutory body established in 2009 to enforce the Competition Act of 2007.  It is mandated to safeguard competition by preventing and remedying anti-competitive business practices in Mauritius.  Anti-competitive business practices, also called restrictive business practices, may be in the form of cartels, abuse of monopoly situations, and mergers that reduce competition.

The institutional design of the CCM houses both an adjudicative and an investigative organ under one body.  While the Executive Director has power to investigate restrictive business practices (the Investigative Arm), the Commissioners determine the cases (the Adjudicative Arm) on the basis of reports from the Executive Director.

Since it began operations, the CCM has undertaken 54 investigations, of which 44 have been completed and 10 are ongoing as of May 2020.  To date, the CCM has conducted 266 enquiries, which are preliminary research exercises prior to proceeding to investigations.  The results of completed investigations are available on the CCM’s website:  http://www.ccm.mu.  

Since 2018, the CCM has initiated a process to review and amend the Competition Act of 2007 to enable more effective enforcement.  The process was expected to be completed in 2020.

Expropriation and Compensation

The Constitution includes a guarantee against nationalization. However, in 2015, the government passed the Insurance (Amendment) Act to enable the Financial Services Commission (FSC) to appoint special administrators in cases where there is evidence that the liabilities of an insurer and its related companies exceed assets by 1 billion rupees (approximately USD 26 million) and that such a situation “is likely to jeopardize the stability and soundness of the financial system of Mauritius.”  The special administrators are empowered to seize and sell assets.  The government enacted this law in the immediate aftermath of the financial scandal explained below.

In April 2015, the Bank of Mauritius, the central bank, revoked the banking license of Bramer Bank, the banking arm of Mauritian conglomerate British American Investment (BAI) Group, citing an inadequate capital reserve ratio.  As a result, Bramer Bank entered receivership and by May 2015 the receiver had transferred the assets and liabilities of Bramer Bank to a newly created state-owned bank, the National Commercial Bank Ltd., thus effectively nationalizing Bramer Bank.  In January 2016, the Mauritian government merged the National Commercial Bank Ltd. with another government-owned bank resulting in Maubank, a new bank dedicated mainly to servicing small- and medium-sized enterprises.  The GoM owns over 99 percent of Maubank shares.  Efforts to privatize the bank in 2018 did not produce any results.

The government likewise took over much of Bramer’s parent, the BAI Group.  The FSC placed the BAI Group in conservatorship, alleging fraud and corporate mismanagement in BAI’s insurance business.  Following passage of the Insurance (Amendment) Act in 2015, the FSC created the National Insurance Company, which took over the BAI Group’s core insurance business, and the National Property Fund, which took over other BAI Group assets, including a hospital and several retail outlets.  CIEL Healthcare, a local private company, bought the hospital in 2017.

In 2015, BAI’s former chairman filed a dispute against the GoM with the United Nations Commission on International Trade Law (UNCITRAL), alleging that the government illegally appropriated BAI’s assets.  The former chairman, who is a Mauritian-French dual national, claimed that Mauritius had breached the Mauritius-France bilateral investment treaty and requested the restitution of his assets and payment of compensation.  The tribunal concluded that it lacked jurisdiction over the dispute and ruled in favor of the GoM.  The former chairman has appealed this decision.  In May 2019, the former chairman filed a case in the Supreme Court to challenge the appointment of the liquidator for the Bramer Banking Group.

Dispute Settlement

Mauritius is a member of the International Center for the Settlement of Investment Disputes and a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards Act.  Mauritius is also a member of the Multilateral Investment Guarantee Agency of the World Bank.

Investor-State Dispute Settlement

Mauritius does not have a bilateral investment treaty or free trade agreement with the United States.

The embassy is aware of a dispute between a U.S. company that operates in Mauritius and a parastatal partner.  After an apparent commercial impasse, in early 2020 the parastatal filed a criminal complaint against the CEO of the U.S. company, who is a U.S. citizen.  The accused, whom police did not take into custody but forbade to leave the country pending investigation, alleged that the parastatal filed the complaint to gain leverage in the commercial dispute.

As explained above, the former chairman of BAI, a dual French-Mauritian national, filed a dispute against the government of Mauritius with UNCITRAL alleging that the government illegally appropriated BAI’s assets.  The tribunal ruled in favor of the government and the former chairman has appealed.

In 2017, the Supreme Court rendered a judgment in a major unfair competition case lodged in 2005 by Emtel Ltd., a local telecommunications firm, against Mauritius Telecom, a parastatal entity, and the former regulator Telecommunications Authority.  Emtel was engaged in a joint venture with U.S. majority-owned Millicom Enterprises, but Emtel bought all the shares of Millicom in 2014.  The court awarded over USD 16 million in damages to Emtel.

A Malaysian power company, CT Power, is challenging the government’s decision to cancel a proposed energy project, which they had been negotiating with the previous government. The Supreme Court ruled in favor of CT Power in July 2016.  The Ministry of Energy and Public Utilities, supported by the Central Electricity Board, appealed to the Privy Council, which overturned the ruling in June 2019.

Another dispute involves local company Betamax against the State Trading Corporation (STC) for breach of contract.  In 2009, Betamax received a long-term contract with a previous government for the transportation of petroleum products from an oil refinery in India to Mauritius.  A different government elected in 2014 tried at first to negotiate Betamax out of the transportation contract on the grounds that the contract had been awarded unlawfully.  After negotiations failed, the government decided to rescind the contract.  Betamax took the case to the Singapore International Arbitration Center (SIAC).  In 2017, SIAC decided in favor of Betamax and ordered the STC to pay approximately USD 133 million in damages to Betamax for breach of contract.  STC petitioned the Supreme Court of Mauritius to set aside the verdict, which it did in May 2019, concluding that the contract violated local procurement regulations and public policy.  In June 2019, Betamax appealed to the Privy Council, which has not yet heard the appeal.

The Association des Hoteliers et Restaurateurs of Mauritius (AHRIM), which promotes the interests of hotels and restaurants in Mauritius, has challenged the GoM’s issuance of an environmental impact assessment license to Growfish International Ltd., a company involved in aquaculture.  AHRIM is concerned about the impact the fish farm can have on tourism and the marine environment.  Growfish is a company incorporated in Mauritius and financed by investors from South Africa and Norway.  In April 2019, the tribunal ruled in favor of AHRIM.

International Commercial Arbitration and Foreign Courts

In 2011, the GoM, the London Court of International Arbitration (LCIA), and the Mauritius International Arbitration Center (MIAC) established a new arbitration center in Mauritius called the LCIA-MIAC Arbitration Center.  LCIA-MIAC offered all services offered by the LCIA in the United Kingdom.  In July 2018, the LCIA and GoM terminated the partnership, after which the MIAC began operating as an independent organization.  The organization’s website is http://miac.mu.  

Additionally, the Mauritius Chamber of Commerce and Industry’s (MCCI) Arbitration and Mediation Center (MARC) was established in 1996 as an initiative of the MCCI to provide the business community with alternative forms of dispute resolution using internationally accepted arbitration and mediation standards.  More information is available at https://www.marc.mu/en.  

As mentioned above, state-owned STC asked a Mauritian court to set aside a decision by the Singapore International Arbitration Center.  The court ruled in favor of the STC.  The plaintiff has appealed to the Privy Council.

Bankruptcy Regulations

Bankruptcy is not criminalized in Mauritius.  The 2009 Insolvency Act amended and consolidated the law relating to insolvency of individuals and companies and the distribution of assets in the case of insolvency and related matters.  Most notably, the act introduced administration procedures, providing creditors the option of a more orderly reorganization or restructuring of a business than in liquidation.  A bankrupt individual is automatically discharged from bankruptcy three years after adjudication, but may apply to be discharged earlier.  The act draws on the Model Law on Cross-Border Insolvency adopted by the United Nations Commission on International Trade Law in 1997.  The act can be found  at https://www.fscmauritius.org/media/1155/insolvency-act-2009-130114.pdf.   

In April 2020, the Insolvency (Administration) (Equal Treatment to Classes of Creditors) Regulations were issued to ensure equal treatment to creditors classified in the same category.  The regulations can be accessed at https://bit.ly/2WwTIev .  According to the World Bank’s 2020 Doing Business report, Mauritius ranked 28th out of 190 countries in terms of resolving insolvency.

Investment Incentives

Mauritius applies investment incentives uniformly to both domestic and foreign investors.  The incentives are outlined in the Income Tax Act, the Customs Act, and the Value Added Tax Act.  In the 2018-2019 national budget, a number of incentives were implemented to attract investors to Mauritius.  These include: (i) reduced corporate tax rate of three percent for companies engaged in global trading activities; (ii) investment tax credit of five percent over three years on the cost of new plant and machinery excluding motor vehicles; (iii) five year tax holiday for Mauritian companies collaborating with the Mauritius Africa Fund with respect to investment in the development of infrastructure in Special Economic Zones, and; (iv) five year tax holiday on income derived from smart parking solutions or other green initiatives.

Mauritius offers prospective investors a low-tax jurisdiction and a number of other fiscal incentives, including the following: (i) flat corporate and income tax rate of 15 percent; (ii) 100 percent foreign ownership permitted; (iii) no minimum foreign capital required; (iv) no tax on dividends or capital gains; (v) free repatriation of profits, dividends, and capital; (vi) accelerated depreciation on acquisition of plant, machinery, and equipment; (vii) exemption from customs duty on imported equipment; and (viii) access to an extensive network of double taxation avoidance treaties.

Additionally, the government has established a Property Development Scheme (PDS) to attract high net worth non-citizens who want to acquire residences in Mauritius.  Buyers of a residential unit valued over USD 500,000 in certain projects are eligible to apply for a residence permit in Mauritius.  The residential unit can be leased or rented out by the owner.  More details on the PDS and other investment schemes are available via http://www.edbmauritius.org/schemes.  

The Regulatory Sandbox License (RSL), announced in the 2016-2017 national budget, is intended to promote innovation by eliminating barriers to investment in cutting-edge technology.  An RSL gives an investor fast-track authorization to conduct business activity in a sector even if there is not yet a legal or regulatory framework in place for the sector.  Further details on the RSL can be accessed via http://www.edbmauritius.org/schemes/regulatory-sandbox-license/ .

Foreign Trade Zones/Free Ports/Trade Facilitation

The Mauritius Freeport, a free trade zone, was established in 1992 and is a customs-free zone for goods destined for re-export.  The Freeport has grown dramatically in its 26-year history:  Developed space has increased from 5,000 square meters in 1993 to over 300,000 square meters in 2018.  The government’s objective is to promote the country as a regional warehousing, distribution, marketing, and logistics center for eastern and southern Africa and the Indian Ocean rim.  Through its membership in COMESA, SADC, and the IOC, Mauritius offers preferential access to a market of over 600 million consumers, representing an import potential of USD 100 billion.  Companies operating in the Freeport are exempt from corporate tax.  Foreign-owned firms operating in the Freeport have the same investment incentives and opportunities as local entities.

Activities carried out in the Freeport include warehousing and storage, breaking bulk, sorting, grading, cleaning and mixing, labeling, packing, repacking and repackaging, minor processing and light assembly, manufacturing activity, ship building, repairs and maintenance of ships, aircrafts, and heavy-duty equipment, storage, maintenance and repairs of empty containers, export-oriented seaport and airport based activities, freight forwarding services, quality control and inspection services, and vault activity for storing precious stones and metals, works of art, and the like.  Approximately 3,800 people are employed at the Freeport.

In 2019, trade value at the Freeport was 29.7 billion rupees (approximately USD 825 million) and volume was 517,000 metric tons.  This is a decrease from 2018, when trade value was 44 billion rupees and volume was 542,000 metric tons.  Top trading partners for import in 2019 were the United Kingdom, India, Taiwan, Malaysia, and China.  Top trading partners for export in 2019 were Reunion (France), South Africa, Kenya, Seychelles, and United Arab Emirates.  Top goods traded through the Freeport included mineral products, live animals, foodstuffs and beverages, and plastic and metal products.

Per the 2019 Finance Act, a Freeport operator engaged in manufacturing inside the Freeport is allowed to apply as a private Freeport developer to build, develop, and manage its own infrastructural activities, provided that it carries out the same manufacturing activity.  A Freeport operator or private Freeport developer engaged in the manufacture of goods pays a 3 percent tax rate on profits derived from the sale of goods on the local market.

Existing manufacturing companies with a Freeport certificate must employ a minimum of five employees and incur an annual expenditure exceeding 3.5 million rupees (USD 880,000).  Freeport operators must pay Corporate Social Responsibility tax on the sale of goods on the local market.

Performance and Data Localization Requirements

The GoM does not impose local employment requirements on foreign investors.  A foreign national can apply for an Occupation Permit (OP), which is a combined work and residence permit, subject to certain conditions such as minimum investment, salary, and/or business turnover.  The OP allows foreign nationals to work and reside in Mauritius under three specific categories, namely: (i) investor, (ii) professional, or (iii) self-employed.  Also, foreign nationals above the age of 50 years may choose to retire in Mauritius under a Residence Permit (RP).  An OP or an RP is issued for a maximum period of three years and the permit holder may submit a new application upon expiry of the permit.  Dependents of an OP or RP holder may also apply for residence permits for a duration not exceeding that of the OP or RP holder.  Details on the minimum investment, salary, and turnover amounts required to qualify for an OP or RP are available via http://www.edbmauritius.org/work-and-live-in-mauritius/occupation-permitresidence-permit.  

The 2017 Data Protection Act (DPA) is the law that governs the protection of personal data in Mauritius.  Effective January 15, 2018, the DPA aimed to align with the European Union’s General Data Protection Regulation (GDPR).  The GoM established the Data Protection Office (http://dataprotection.govmu.org/English/Pages/default.aspx ) in 2009.  The Data Protection Commissioner is responsible for upholding the rights of individuals set forth in the DPA and for enforcing the obligations imposed on data controllers and processors.

In 2016, Mauritius ratified the Council of Europe’s Convention for Protection of Individuals with regard to Automatic Processing of Personal Data (Convention 108).  Mauritius is the second non-European country and the first African country to sign the convention.  The agreement gives individuals the right to protection of their personal data.  The Ministry of Information Technology, Communication and Innovation has started the ratification process of Convention 108 with the Council of Europe.

Mauritius’ DPA applies only when processing of personal data is concerned.  Failure to comply with Section 28 of the DPA, which establishes the lawful purposes for which personal data may be processed, can result in a fine and up to five years imprisonment.  Section 29 sets requirements for processing special categories of data, such as ethnic origin, political adherence, and mental health condition.

There are no enforcement procedures for investment performance requirements.

Real Property

Real property rights are respected in Mauritius.  A non-citizen can hold, purchase, or acquire immovable property under the Non-Citizens (Property Restriction) Act, subject to the government’s approval.  Ownership of property is memorialized with the registration of the title deed with the Registrar-General and payment of the registration duty.  The recording system of mortgages and liens is reliable.  Traditional use rights are not an issue in Mauritius as there were no indigenous peoples present at the time of European colonization.  According to the World Bank’s 2020 Doing Business Report, Mauritius ranks 23rd out of 190 countries for the ease of registering property.

Intellectual Property Rights

Intellectual property rights (IPR) in Mauritius are protected by two pieces of legislation, namely     the 2014 Copyrights Act and the 2019 Industrial Property Act of 2019.  In August 2019, the new Industrial Property bill was enacted. (http://www.mauritiustrade.mu/ressources/pdf/industrial-property-act-2019.pdf)  It consolidates different elements of industrial property (patents, utility models, layout-designs of integrated circuits, breeder’s rights, industrial designs, marks, trade names, and geographical indications).  The 2019 act also makes provisions for Mauritius to adhere to treaties that the World Intellectual Property Organization (WIPO) administers,, such as the Patent Cooperation Treaty (PCT) for the international registration of patents, the Hague Agreement Concerning the International Registration of Industrial Designs, and the Madrid Protocol to facilitate the registration of trademarks.

In 2017, the Copyright Act was amended to redefine and better safeguard the interests of copyright owners and to put in place a new regulatory framework for the Mauritius Society of Authors (MASA).  MASA is responsible for collection of copyright fees and for administering the economic rights of copyright owners.  Amendments to the Copyright Act can be accessed on the Supreme Court website: https://supremecourt.govmu.org/_layouts/CLIS.DMS/Legislations/SearchLegislations.aspx.  

Mauritius is a member of WIPO and party to the Paris Convention for the Protection of Industrial Property the Berne Convention for the Protection of Literary and Artistic Works, and the Universal Copyright Convention.  The Industrial Property Act complies with the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).  A trademark is initially registered for 10 years and may be renewed for another 10 years.  A patent expires 20 years after the application filing date.

While IPR legislation in Mauritius is consistent with international norms, enforcement is relatively weak. According to a leading IPR law firm, police will normally only take action against IPR infringement in cases where the rights-holder has an official representative in Mauritius because the courts require a representative to testify that the products seized are counterfeit.

The Customs Department of the Mauritius Revenue Authority is the primary agency responsible for safeguarding Mauritian borders against counterfeit goods and piracy.  The Customs Department requires owners or authorized users of patents, industrial designs, collective marks, marks, or copyrights to apply in writing to the Director General to suspend clearance of goods suspected of infringing intellectual property rights.  Once an application is approved, it remains valid for two years.  There are no administrative costs to pay for an application.  An application can also be filed as a preventive measure.  Further details on the documents required to apply can be found at  https://www.mra.mu/download/BrochureIPR.pdf.  

Customs may act upon its own initiative to suspend clearance if there is evidence of IPR infringement..  Customs will then contact the owner or authorized user for follow-up actions.  IPR owners  are recommended to join the World Customs Organization’s Interface Public-Members tool, which allows Customs officers to access operational data input by rights holders concerning their products, thus facilitating the identification of counterfeit goods.

The Customs Department keeps a record of counterfeit goods seized.  Customs has authority to seize and destroy counterfeit goods.  In 2019, the Customs Department carried out seizures of a total of 261,267 goods valued at USD 2.3 million. The infringing party is responsible for paying for the storage and/or destruction of the counterfeit goods.

Mauritius is not listed in the U.S. Trade Representative (USTR) Special 301 Report or the Notorious Market List.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at https://www.wipo.int/directory/en/details.jsp?country_code=MU 

Embassy Contact for IPR:

Smita Bheenick
Economic/Commercial Section
U.S. Embassy Port Louis, Mauritius
Tel: +230 202 4430; Fax: +230 208 9534
Email:bheenicks@state.gov

Some IPR Law Firms in Mauritius:

Law firms are listed for convenience and should not be taken to imply U.S. government endorsement.

Sanjeev Ghurburrun
Director, Geroudis
27-29, Dr. Lesur Street
Beau Bassin, Mauritius
Tel: +230 210 3838; Fax: + 230 210 3912
sanjeev@geroudis.com 
www.geroudis.com 

Marc Hein
Chairman, Juristconsult Chambers (DLA Piper Africa)
Level 12 Nexteracom Tower II, Ebene Cyber City
Ebene, Mauritius
Tel: +230 465 0020; Fax: +230 465 0021
mhein@juristconsult.com
www.juristconsult.com

Michael Hough
CEO, Eversheds Sutherland
Suite 310, 3rd Floor Barkly Wharf, Le Caudan Waterfront
Port Louis, Mauritius
Tel: +230 211 0550; fax: +230 211 0780
Email: michaelhough@eversheds-sutherland.mu
https://www.eversheds-sutherland.com/global/en/where/africa/mauritius/offices/index.page 

Capital Markets and Portfolio Investment

The GoM welcomes foreign portfolio investment.  The Stock Exchange of Mauritius (SEM) was opened to foreign investors following the lifting of foreign exchange controls in 1994.  Foreign investors do not need approval to trade shares, except for when doing so would result in their holding more than 15 percent in a sugar company, a rule detailed in the Securities (Investment by Foreign Investors) Rules of 2013.  Incentives to foreign investors include no restrictions on the repatriation of revenue from the sale of shares and exemption from tax on dividends for all resident companies and for capital gains of shares held for more than six months.

The SEM currently operates two markets:  the Official Market and the Development and Enterprise Market (DEM).  As of December 2019, the shares of 62 companies (local, global business, and foreign companies) were listed on the Official Market, representing a market capitalization of USD 9.8 billion.  Unique in Africa, the SEM can list, trade, and settle equity and debt products in U.S. dollars, euros, pounds sterling, South African rand, as well as Mauritian rupees.  A variety of new asset classes of securities such as global funds, depositary receipts, mineral companies, and specialist securities including exchange-traded funds and structured products have also been introduced on the SEM.  The DEM was launched in 2006 and the shares of 37 companies are currently listed on this market with a market capitalization of USD 1.4 billion.  Foreign investors accounted for 39.5 percent of trading volume on the exchange for the financial year 2018-2019.  Standard & Poor’s, Morgan Stanley, Dow Jones, and FTSE have included the Mauritius stock market in a number of their stock indices.  Since 2005, the SEM has been a member of the World Federation of Exchanges.  The SEM is also a partner exchange of the Sustainable Stock Exchanges Initiative.  In 2018, in line with its strategy to digitalize its investor services, SEM launched the mySEM mobile application.

The government respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.  A variety of credit instruments is available to local and foreign investors through the banking system.

Money and Banking System

Mauritius has a sophisticated banking sector.  As of April 2020, 20 banks are licensed to undertake banking business, of which five are local banks, nine are foreign-owned subsidiaries, one is a joint venture, four are branches of foreign banks, and one is licensed as a private bank.  One bank conducts solely Islamic banking.  Further details can be obtained at https://www.bom.mu/financial-stability/supervision/licensees/list-of-licensees .  On April 1, 2020, the Bank of Mauritius appointed a conservator for BanyanTree Bank.  Details were scarce, but the law allows the central bank to appoint a conservator to protect the bank’s assets.

According to the Banking Act of 2004, all banks are free to conduct business in all currencies.  There are also six non-bank deposit-taking institutions, as well as 12 money changers and foreign exchange dealers.  There are no official government restrictions on foreigners opening bank accounts in Mauritius, but banks may require letters of reference or proof of residence for their due diligence.  The Bank of Mauritius, the country’s central bank, carries out the supervision and regulation of banks as well as non-bank financial institutions authorized to accept deposits.  The Bank of Mauritius has endorsed the Core Principles for Effective Banking Supervision as set out by the Basel Committee on Banking Supervision.

The banking system is dominated by two long-established domestic entities:  the Mauritius Commercial Bank (MCB) and the State Bank of Mauritius (SBM), which together constitute about 60 percent of the total domestic market.  Maubank, the third-largest bank in the country, became operational in 2016 following a merger between the Mauritius Post & Cooperative Bank and the National Commercial Bank.  The Bank of China started operations in Mauritius in 2016.  Other foreign banks present in Mauritius include HSBC, Barclays Bank, Bank of Baroda, Habib Bank, BCP Bank (Mauritius), Standard Bank, Standard Chartered Bank, State Bank of India, and Investec Bank.  As of February 2020, commercial banks’ total assets amounted to USD 41.7 billion.

According to the Bank of Mauritius 2019 Annual Report, the banking sector remained healthy with an average capital adequacy ratio of 19 percent as of June 2019.  Banks’ asset quality was unchanged from end-June 2018 to end-June 2019 and is generally considered to be sound.  Non-performing loans as a ratio to total outstanding loans stood at 5.5 per cent in June 2019.

In July 2017, the Banking Act was amended to double the minimum capital requirement to USD 11.2 million from USD 5.8 million.  The Central Bank began reporting the liquidity coverage ratio in 2017 to improve the liquidity profile of banks and their ability to withstand potential liquidity disruptions.  The latest International Monetary Fund Article IV report highlights that banks have increased exposure to the region and that the Bank of Mauritius has strengthened cross-border supervision and cooperation with foreign regulators.  The IMF report also recommends that additional steps be taken to strengthen financial stability, including lowering the high non-performing loans stock through a more stringent approach to writing-off legacy exposures, and by safeguarding the longer-term forex funding needs stemming from banks’ swift expansion abroad.

The Covid-19 crisis is expected to heavily impact banks’ profitability due to increased defaults and delayed loan repayments.  As part of its Covid-19 response, the Bank of Mauritius has made USD 132 million available through commercial banks as special relief funds to help meet cash flow and working capital requirements.  The cash reserve ratio applicable to commercial banks was reduced from 9 percent to 8 percent.  The Bank of Mauritius also put on hold the Guideline on Credit Impairment Measurement and Income Recognition, which was effective since January 2020.

In July 2019, the Bank of Mauritius Act was amended to allow the Bank of Mauritius to use special reserve funds in exceptional circumstances and with approval of the central bank’s board for the repayment of central government external debt obligations, provided that repayments would not adversely affect the bank’s operations.  This provision was used in January 2020 to repay government debt worth USD 450 million, raising concerns about the central bank’s independence.

Most major banks in Mauritius have correspondent banking relationships with large banks overseas.  In recent years, according to industry experts, no banks have lost correspondent banking relationships and none report being in jeopardy of doing so as of April 2020.

In January 2019, the Central Bank signed a memorandum of cooperation with the Mauritius Police Force on financial crimes and illicit activities relating to the financial services sector.  In February 2020, the Financial Action Task Force (FATF) named Mauritius as a jurisdiction under increased monitoring, commonly known as the Grey List.  At that time, Mauritius made a high-level political commitment to work with the FATF and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) to strengthen the effectiveness of its AML/CFT regime.  Since the completion of its Mutual Evaluation Report in 2018, Mauritius has made progress on a number of its recommended actions to improve technical compliance and effectiveness, including amending the legal framework to require legal persons and legal arrangements to disclose of beneficial ownership information and improving the processes of identifying and confiscating proceeds of crimes.  Mauritius is working to implement its action plan, including (i) demonstrating that the supervisors of its global business sector and Designated Non-Financial Businesses and Professions implement risk-based supervision; (ii) ensuring the access to accurate basic and beneficial ownership information by competent authorities in a timely manner; (iii) demonstrating that law enforcement agencies have capacity to conduct money laundering investigations, including parallel financial investigations and complex cases; (iv) implementing a risk based approach for supervision of its non-profit sector to prevent abuse for terrorism financing purposes, and (v) demonstrating the adequate implementation of targeted financial sanctions through outreach and supervision.

In May 2020, the European Commission added Mauritius to its list of AML-CTF high-risk jurisdictions, pending approval from the European Council and European Parliament, and not to take effect until October 2020.

In February 2018, the Fintech and Innovation-driven Financial Services (FIFS) Regulatory Committee held its first meeting at the Financial Services Commission, the regulator for the non-banking financial services, to assess the regulatory framework concerning FIFS regulations in Mauritius and to identify priority areas within the regulatory space of fintech activities.  In May 2018, the Committee submitted recommendations for regulating the fintech sector to authorities.  A National Regulatory Sandbox License (RSL) Committee was set up to assess all fintech applications requiring a sandbox license for business activities without an existing legal framework.  Guidelines to apply to the RSL for fintech projects can be found at https://www.edbmauritius.org/opportunities/financial-services/fs-fintech-and-innovation.    

Effective March 2019, the Financial Services Commission allows businesses that provide custodial services for digital assets.  According the Bank of Mauritius 2019 Annual Report, the FIFS committee has initiated work on approaches to regulate Fintech tools such as artificial intelligence, big data, distributed ledger technologies, and biometrics.

Foreign Exchange and Remittances

Foreign Exchange 

The government of Mauritius abolished foreign exchange controls in 1994.  Consequently, no approval is required for converting, transferring, or repatriating profits, dividends, or capital gains earned by a foreign investor in Mauritius.  Funds associated with any form of investment can be freely converted into any world currency.

The exchange rate is generally market-determined, though the Bank of Mauritius, the central bank, occasionally intervenes.  Between January 2019 and December 2019, the Mauritian rupee depreciated against the U.S. dollar by 6.4 percent, the pound by 8.3 percent, and the euro by 3.6 percent.  Due to the Covid-19 crisis, the Bank of Mauritius intervened regularly on the domestic foreign exchange market in early 2020.

Remittance Policies

There are no time or quantity limits on remittance of capital, profits, dividends, and capital gains earned by a foreign investor in Mauritius.  Mauritius has a well-developed and modern banking system.  There is no legal parallel market in Mauritius for investment remittances.  The Embassy is unaware of any proposed changes by the government to its investment remittance policies.

Sovereign Wealth Funds

The government of Mauritius does not have a Sovereign Wealth Fund.

The government’s stated policy is to act as a facilitator to business, leaving production to the private sector.  The government, however, still controls key services directly or through parastatal companies in the power and water, television broadcasting, and postal service sectors.  The complete list of SOEs can be found at https://www.icac.mu/wp-content/uploads/2019/08/The-Declaration-of-Assets-Stated-owned-Enterprises.pdf.   

The government also holds controlling shares in the State Bank of Mauritius, Air Mauritius (the national airline), and Mauritius Telecom.  These state-controlled companies have Boards of Directors on which seats are allocated to senior government officials.  The government nominates the chairperson and CEO of each of these companies.  In April 2020, Air Mauritius requested voluntary administration, similar to Chapter 11 bankruptcy in the United States, because it could not comply with financial obligations.

The government also invests in a wide variety of Mauritian businesses through its investment arm, the State Investment Corporation.  The government is also the owner of Maubank and the National Insurance Company.

Two parastatal entities are involved in the importation of agricultural products:  the Agricultural Marketing Board (AMB) and the State Trading Corporation (STC).  The AMB’s role is to ensure that the supply of certain basic food products is constant and their prices remain affordable.  The STC is the only authorized importer of petroleum products, liquefied petroleum gas, and flour.  SOEs purchase from or supply goods and services to private sector and foreign firms through tenders.

Audited accounts of SOEs are published in their annual reports.  Mauritius is part of the OECD network on corporate governance of state-owned enterprises in southern Africa.

Privatization Program

The government has no specific privatization program.  In 2017, however, as part of its broader water reform efforts, the government agreed to a World Bank recommendation to appoint a private operator to maintain and operate the country’s potable water distribution system.  Under the World Bank’s proposed public-private partnership, the Central Water Authority (CWA) would continue to own distribution and supply assets, and will be responsible for business planning, setting tariffs, capital expenditure, and monitoring and enforcing the private operator’s performance.

In March 2018, despite protest by trade unions and consumer associations, the Minister of Energy and Public Utilities reiterated his intention to engage by the end of the year a private operator as a strategic partner to take over the water distribution services of the CWA.  To date, this has not materialized.  The government has said for years it planned to sell control of Maubank, into which it has injected about USD 173 million since it nationalized the bank in 2015.  In the 2019-2020 budget speech, the prime minister said the government would sell non-strategic assets to reduce government debt.  His office never identified a list of assets, but in parliament the prime minister has mentioned Maubank, the National Insurance Company, and Casinos of Mauritius as possible divestments.

The National Committee for Corporate Governance (NCCG) was established under Section 63 of the Financial Reporting Act (2004) and is the coordinating body responsible for all matters pertaining to corporate governance in Mauritius. The purpose of the Committee is to: (i) establish principles and practices of corporate governance; (ii) promote the highest standards of corporate governance; (iii) promote public awareness about corporate governance principles and practices; and (iv) act as the national coordinating body responsible for all matters pertaining to corporate governance.  The latest Code of Corporate Governance for Mauritius (2016) was launched on February 13, 2017, and can be accessed at http://www.miod.mu/info-centre/new-code-of-corporate-governance-for-mauritius-2016 . The Financial Reporting Council (FRC), also set up under the Financial Reporting Act (2004), aims to advocate for the provision of high-quality reporting of financial and non-financial information by public interest entities and to improve the quality of accountancy and audit service.

The Ministry of Financial Services and Good Governance was established following the December 2014 elections.  Its mandate is to provide guidance and support for enforcement of good governance and the eradication of corruption.  The Mauritius Institute of Directors (MIoD) is an independent, private sector-led organization that also promotes high standards and best practices of corporate governance, with additional information available at http://www.miod.mu.  

In 2017, the government set up a National Corporate Social Responsibility (CSR) Foundation, which operated under the Ministry of Social Integration and Economic Empowerment.  In 2019, this foundation became the National Social Inclusion Foundation (NSIF).  The NSIF is managed by a council consisting of members from the private and public sectors, civil society, and academia.  Under the 2016 Finance Act, every company registered in Mauritius must set up a CSR fund and contribute each year the equivalent of 2 percent of its taxable income from of the previous year.  In 2017 and 2018, companies were required to remit at least 50 percent of their CSR funds to tax authorities for the National CSR Foundation.  The required contribution increased in 2019 to 75 percent.  The NSIF is supposed to channel the money to NGO projects in priority areas identified by the government.  These priority areas are poverty alleviation, educational support, social housing, family protection, people with severe disabilities, and victims of substance abuse.  Further details can be found on the NSIF website: https://www.nsif.mu.

The prevalence of corruption in Mauritius is low by regional standards, but graft and nepotism nevertheless remain concerns and are increasingly a source of public frustration. Several high-profile cases involving corruption have reinforced the perception that corruption exists at the highest political levels, despite the fact that Mauritian law provides for criminal penalties for corruption by officials.  A former prime minister was arrested in 2015 on allegations of money laundering although courts have since dismissed all charges.  The state prosecutors appealed the last dismissal in late 2019 and the appeal is pending.  A minister in the previous government had to step down in 2016 on allegations of bribery.  In March 2017, allegations surfaced concerning possible political interference in the Financial Services Commission’s issuance of an investment banking license to an Angolann billionaire, who is being investigated for alleged corruption in Portugal.  In March 2018, the president of Mauritius resigned after press reported that she bought apparel, jewelry, and a laptop computer with a credit card provided by an NGO financed by the same Angolan businessman.

Investors should know that while the constitution and law require arrest warrants to be based on sufficient evidence and issued by a magistrate, police may detain an individual for up to 21 days under a “provisional charge” based on a reasonable suspicion, with the concurrence of a magistrate.  Two French businessmen claimed that in February 2015 authorities held them against their will.  A U.S. investor has been unable to leave Mauritius since February 1, 2020, without charges filed against him.

In 2002, the government adopted the Prevention of Corruption Act, which led to the establishment of an Independent Commission Against Corruption (ICAC).  ICAC has the power to investigate corruption and money laundering offenses and can also seize the proceeds of corruption and money laundering.  The Director of ICAC is nominated by the prime minister.  The Good Governance and Integrity Reporting Act of 2015 was announced as a measure to recover “unexplained wealth” and came into force in early 2016.  Critics of the act dislike its presumption of guilt, requiring the accused to demonstrate a lawful source of questionable assets, as well as the application of the law retroactively for seven years. The 2018 Declaration of Assets Act (DoA) entered into force in June 2019 and defines which public officials are required to declare assets and liabilities to the ICAC.  These public officials include members of the National Assembly, mayors, chairpersons and chief executive officers of state-owned enterprises and statutory bodies, among others.

Mauritius is the 52nd least-corrupt nation out of 175 countries, according to the 2019 Corruption Perceptions Index reported by Transparency International, up from 51st in 2018 and down from 54th in 2017.  However, Mauritius retained its first rank in overall governance in Africa for the 12th consecutive year, according to the 2018 Ibrahim Index of African Governance.

Although Mauritius’ generally positive reputation for transparency and accountability has been hurt by some high-profile scandals.  U.S. investors, in conversations with embassy personnel, have not identified corruption as an obstacle to investment in the country.  They have, however, encountered attempts for bribery.

Resources to Report Corruption:

Navin Beekharry
Director-General
Independent Commission Against Corruption
Reduit Triangle, Moka, Mauritius
+230 402 6600
icacoffice@intnet.mu

Contact at watchdog organization:

Rajen Bablee
Director
Transparency Mauritius
4th Floor, Fon Sing Building, 12 Edith Cavell Street, Port Louis, Mauritius
+ 230 213 0796
transparency.mauritius@gmail.com

Mauritius has a long tradition of political and social stability.  Civil unrest and political violence are uncommon.  Free and fair national elections are held every five years with the last general elections held in November 2019.  Those most recent elections took place without incident.  The incumbent prime minister, who as finance minister in January 2017 was appointed prime minister when his father resigned (in accordance with the constitution), won the elections.

Crime rates are low but petty and violent crime can occur.  Visitors should keep track of their belongings at all times due to the potential for pick-pocketing and purse-snatching, especially in crowded and tourist areas.  Visitors should also avoid walking alone, particularly on isolated beaches and at night, and should avoid demonstrations.

According to the Mauritian government, total employment stood at 551,300 in 2019, an increase from 543,700 in 2018.  The unemployment rate decreased to 6.7 percent in 2019 from 6.9 percent in 2018, with a high jobless rate among youth and women.  In the fourth quarter of 2019, the youth unemployment rate was 23 percent, and 62 percent of the total 37,900 unemployed people were women.

The labor market remains restricted by rising unemployment among graduates and low-skilled workers, and a high number of unemployed women.  It is further characterized by a persistent mismatch between qualifications of the unemployed and the skills required in an increasingly services-oriented economy.  Government labor market programs aimed at building human capital have been extended, with policies to develop skills of the unemployed focusing on apprenticeships and placements.  In November 2016, the government introduced the National Skills Development Program (NSDP), a fully-funded  technical training program for youth, which was still running as of April 2020.  The NSDP is managed by the Human Resource Development Council (HRDC), which operates under the Ministry of Education and is responsible for promoting the development of the labor force in Mauritius.  The HRDC, with technical and financial support from the French development agency, is also devising a National Skills Development Strategy (NSDS) for 2020-2024.  The aim of the NSDS is to improve the effectiveness and efficiency of skills development programs.  In 2018, the government introduced the SME Employment Scheme, which allows SMEs to employ recent graduates and the government pays the graduates a monthly stipend for one year.  In 2019, the government opened the scheme to diploma holders as well.

In 2017, the National Assembly passed the National Employment Act.  The object of the act was to repeal the Employment and Training Act and introduce a modern legislative framework.  The act provides the labor market with information on supply and demand of skills, job seekers, and training institutions; promotes placement and training of job seekers, including young persons and persons with disabilities; and promotes labor migration and home-based work.  In November 2017, the Equal Opportunities Act was amended to protect prospective employees with criminal records from discrimination when being considered for recruitment or promotion.

In 2018, the government introduced a minimum monthly wage of 9,000 Mauritian rupees (approximately USD 255) for all workers, affecting over 100,000 low-paid workers.  In November 2019, the cabinet, following a recommendation from the National Wage Consultative Council, increased the  minimum wage again to 10,200 rupees (USD 284), effective January 2020.  Workers’ rights are protected under the 2019 Workers’ Rights Act, taking effect in January 2020.  The legislation provides for a portable retirement gratuity fund, fair compensation in case of termination, harmonization of working conditions in different sectors, the flexibility to request the right to work from home either on a full- or part-time basis, and equal remuneration for equal work, among others.  The act also adds to the Equal Opportunities Act through several measures against discrimination in employment and occupation.

Trade unions are independent of government and employers.  Mauritius has an active trade union movement, representing about 25 percent of the workforce, and labor-management relations are generally positive.  A list of trade unions is available at http://labour.govmu.org/English/Publications/Pages/Reports-and-publications.aspx .  The last major strike affecting the economy took place in 1979.  The government generally seeks to avoid strikes through a system that promotes settlement through negotiation or arbitration by the Employment Relations Tribunal and the National Remuneration Board.  Mauritius participates actively in the annual International Labor Organization (ILO) conference in Geneva, Switzerland, and adheres to ILO core conventions protecting workers’ rights.

In December 1997, Mauritius signed an investment incentive agreement with OPIC: https://www.state.gov/wp-content/uploads/2019/02/12912-Mauritius-Finance-Guarantees-12.15.1997.pdf.  Mauritius, being classified as an upper-middle income country, is not a priority for DFC programs, but may be considered for programs that address key agency priorities.   Mauritius is also a member of the World Bank’s Multilateral Investment Guarantee Agency.  Countries with significant government-financed investment in Mauritius include India, France, and China.

*Source: National Accounts 2018, Statistics Mauritius, http://statsmauritius.govmu.org/English/StatsbySubj/Documents/Digest/National%20Accounts/Digest_NA_Yr18.pdf 

Smita Bheenick
Economic/Commercial Section
U.S. Embassy Port Louis, Mauritius
Tel: +230 202 4430; Fax: +230 208 9534
Email: bheenicks@state.gov

Policies Towards Foreign Direct Investment

The Namibian government welcomes increased foreign investment to help develop the national economy and benefit its population.  The Foreign Investment Act of 1993 (FIA) currently governs FDI in Namibia and guarantees equal treatment for foreign investors and Namibian firms, including the possibility of fair compensation in the event of expropriation, international arbitration of disputes between investors and the government, the right to remit profits, and access to foreign exchange.  Investment and tax incentives are also available for the manufacturing sector.  The government prioritizes investment retention and maintains ongoing dialogue with investors including through investment conferences.  The government is cognizant that some of its bureaucratic processes (such as the time it takes to get a business visa) impede the ease of doing business and is working to address outstanding challenges.  The Namibian Investment Promotion Act as been under review since 2016 to replace the FIA.

The Namibia Investment and Promotion Board (NIPB) – formerly called the Namibia Investment Center (NIC) – now housed in the Office of the President, serves as Namibia’s official investment promotion and facilitation office.  Often the first point of contact for potential investors, the NIPB offers comprehensive services from the initial inquiry stage through to operational stages.  The NIPB also provides general information packages, coordinates trade delegations, and assists with advice on investment opportunities, incentives, and procedures.  The NIPB is tasked with assisting investors in minimizing bureaucratic red tape, including obtaining work visas for foreign investors, by coordinating with government ministries as well as regulatory bodies.

Limits on Foreign Control and Right to Private Ownership and Establishment

Under FIA, foreign and domestic entities may establish and own business enterprises and engage in all forms of remunerative activities.  The Ministry of Home Affairs, Immigration, Safety and Security grants renewable and non-renewable temporary employment permits for a period of up to 12 months for skills not locally or readily available.  However, work permits and long-term residence permits are subject to bureaucratic hurdles and are hard to obtain for jobs that could be performed by a Namibian.  Complaints about delays in renewing visas and work permits are common.

Foreigners must pay a 10 percent non-resident shareholder tax on dividends.  There are no capital gains or marketable securities taxes, although certain capital gains are taxed as normal income.  As a member of the Common Monetary Area, the Namibian dollar (NAD) is pegged at parity with the South African rand.

There are no general mandatory limits on foreign ownership, but some sectors have a mandatory joint ownership between a local firm and foreign firm, such as in the natural resources sector.  Government procurements usually also require a variable percentage of local ownership.

Other Investment Policy Reviews

Namibia has not undergone any third party investment policy reviews in the last three years by the OECD, WTO, or UNCTAD.  The Southern Africa Customs Union (SACU), of which Namibia is a member, was last reviewed by the WTO in 2015.

Business Facilitation

Foreign and domestic investors may conduct business in the form of a public or private company, branch of a foreign company, closed corporation, partnership, joint venture, or sole trader.  Companies are regulated under the 2004 Companies Act, which covers both domestic companies and those incorporated outside Namibia but traded through local branches.  To operate in Namibia, businesses must also register with the relevant local authorities, the Workmen’s Compensation Commission, and the Social Security Commission.

Most investors find it helpful to have a local presence or a local partner in order to do business in Namibia, although this is not currently a legal requirement, except in sectors that require a joint venture partner.  Companies usually establish business relationships before tender opportunities are announced.  The World Bank’s Doing Business 2020 report notes that it takes ten steps and an average of 37 days to start a business in Namibia.  Some accounting and law firms provide business registration services.

In 2014, the Namibian government established the Business and Intellectual Property Authority (BIPA) to improve service delivery and ensure effective administration of business and intellectual property rights (IPRs) registration.  BIPA serves as a one-stop-center for all business and IPR registrations and related matters.  It also provides general advisory services and information on business registration and IPRs.  Website: http://www.bipa.gov.na/. 

According to the Business and Intellectual Property Authority Act of 2016, the functions of BIPA include:

• regulate and administer the registration of business and industrial property under the applicable legislation;
• consolidate the offices involved in the registration and administration of business and intellectual property;
• maintain information concerning business and intellectual property; and
• facilitate the flow of relevant information between BIPA and the business community, users of business and intellectual property, general public, and other regulatory authorities and government institutions.

Outward Investment

Namibia provides incentives for outward investment mainly aimed at stimulating manufacturing, attracting foreign investment to Namibia, and promoting exports.  To take advantage of the incentives, companies must be registered with MIT and the Ministry of Finance.  Tax and non-tax incentives are accessible to both existing and new manufacturers.  The NIPB maintains a list of investment incentives on its website: http://investnamibia.gov.na/incentives-regime/. 

Namibia currently has an Export Processing Zone (EPZ) regime that offers favorable conditions for companies wishing to manufacture and export products.  The EPZ scheme is due to be phased out, possibly in 2020, and replaced by Special Economic Zones, outlined in the Income Tax Amendment Bill, which the Minister of Finance tabled in Parliament on February 19, 2020.  There is a moratorium on new applications under the existing EPZ regime.  In 2019, there were 19 EPZ companies in operation, most of which were closely linked to minerals beneficiation, including Namzinc (which produces Special High Grade zinc at the Skorpion zinc mine), Namibia Custom Smelters (which produces blister copper from imported copper concentrates), and a variety of diamond cutting and polishing operations (which cut and polish locally and internationally sourced rough diamonds).

Transparency of the Regulatory System

Namibia’s legal, regulatory, and accounting systems are relatively transparent and consistent with international norms.  Draft bills, proposed legislation, and draft regulations are normally not available for public comment and are not required to be, although there are consultations on such documents throughout the government.  Depending on the topic, bills are customarily drafted within the relevant ministry with minimal stakeholder or public consultation and then presented to the parliament for debate.  Comments on draft legislation and regulations may also be solicited through public meetings or targeted outreach to stakeholder groups.  Such comments are also not required to be made public and generally are not.  There is no formal process of appeal or reconsideration of published regulations.  Approved legislation and regulations are publicly available and published in the Government Gazette, the official journal of the government of Namibia.

Public finances are generally transparent, with the annual budget and mid-term budget reviews published on the Ministry of Finance’s website and in the Government Gazette.  The Bank of Namibia publishes the government of Namibia’s debt position – including explicit and contingent liabilities – in its annual reports and quarterly bulletins.

International Regulatory Considerations

The national coordinating bureau for standards is the Namibian Standards Institution.  Namibia is also a member of the International Organization for Standardization.  As a member of SACU and SADC, Namibia’s national regulations conform to both regional agreements.  Namibia is a member of the World Trade Organization (WTO) and notifies the Committee on Technical Barriers to Trade on draft technical regulations.

Legal System and Judicial Independence

The Namibian court system is independent and is widely perceived to be free from government interference.  Namibia’s legal system, based on Roman Dutch law, is similar to that of South Africa.  The system provides effective means to enforce property and contractual rights, but the speed of justice is generally very slow due to a backlog of cases across the judicial spectrum.  Regulation and enforcement actions are appealable.

Laws and Regulations on Foreign Direct Investment

The Foreign Investment Act (FIA) provides for liberal foreign investment conditions and equal treatment of foreign and local investors.  With limited exceptions, all sectors of the economy are open to foreign investment.  There is no local participation requirement in the FIA, but the Namibian government is increasingly emphasizing the need for investors to partner with Namibian-owned companies and/or to have a majority of local employees in order to operate in the country.

The FIA reiterates the protection of investment and property provided for in the Namibian Constitution.  It also provides for equal treatment of foreign investors and Namibian firms, including the possibility of fair compensation in the event of expropriation, international arbitration of disputes between investors and the government, the right to remit profits, and access to foreign exchange.

The Business and Intellectual Property Agency (BIPA) acts as a one-stop-shop for business registrations and provides information on relevant laws, rules, procedures, and reporting requirement for investors. More information is available at: http://www.bipa.gov.na/ .

The FIA will be replaced by the revised NIPA once revisions are complete and approved by Parliament.  The NIPA provides for transparent admission procedures for investors, the reservation of certain categories of business and sectors, and the establishment of an Integrated Client Service Facility or one-stop-shop for investors.

Competition and Anti-Trust Laws

The Competition Act of 2003 establishes the legal framework to “safeguard and promote competition in the Namibian market.”  The Competition Act establishes a legal and regulatory framework that attempts to safeguard competition while boosting the prospects for Namibian businesses and recognizing the role of foreign investment.  The act is intended to promote:

• The efficiency, adaptability, and development of the Namibian economy;
• Competitive prices and product choices for customers;
• Employment and advancement of the social and economic welfare of Namibians;
• Expanded opportunities for Namibian participation in world markets;
• Participation of small enterprises in the economy by ensuring a level playing field; and
• Greater enterprise ownership particularly among the historically disadvantaged.

The Act established the Namibia Competition Commission (NaCC), which was officially launched in December 2009.  The NaCC has the mandate to review any potential mergers and acquisitions that might limit the competitive landscape or adversely impact the Namibian economy.  The Minister of Industrialisation and Trade is the final arbiter on merger decisions and may accept or reject a NaCC decision.  Any investor can file an appeal with the ministry, though no formal process for doing so has been established.

Expropriation and Compensation

The Namibian Constitution enshrines the right to private property but allows the state to expropriate property in the public interest subject to the payment of just compensation.  The Agricultural (Commercial) Land Reform Act 6 of 1995 (ACLRA) is the primary legal mechanism allowing for expropriation, but the government has adhered to a “willing seller/willing buyer” policy as part of land reform programs.  In 2004, the government announced it would proceed with land expropriations after much criticism about the slow pace of land reform.  To date the government has only expropriated farms from a small number of owners, and in each instance ultimately either compensated the owner or returned the land.  In March 2008 Namibia’s High Court ruled against the government in Gunter Kessl v. Ministry of Lands and Resettlement in the sole instance in which appropriation was legally challenged, and in doing so established a strong legal precedent protecting individual land rights.  Non-binding resolutions adopted at the Second National Land Conference in 2018 resolved to abolish the “willing seller/willing buyer” policy and bar foreign-ownership of agricultural land; however, no legislation formalizing these resolutions has been proposed.  The Namibian Constitution makes pragmatic provision for different types of economic activity and a “mixed economy” (Article 98), accepts the importance of foreign investment (Article 99), and enshrines the principle that the ownership of natural resources is vested in the Namibian state (Article 100).  Section 11 of the FIA reiterates the commitment to market compensation in the case of expropriation in terms of Article 16 of the Constitution.  Holders of a Certificate of Status Investment must be compensated in foreign currency and can opt for international arbitration if any disputes arise.

Dispute Settlement

ICSID Convention and New York Convention

Namibia signed but has not ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID).  The ICSID and New York Convention are therefore not applicable.

Investor-State Dispute Settlement

The FIA allows for the settlement of disputes by international arbitration for investors that have obtained a Certificate of Status Investment (CSI) that includes a provision for international arbitration.  The FIA stipulates that arbitration “shall be in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law in force at the time when the Certificate was issued” unless the CSI stipulated another form of dispute resolution.

International Commercial Arbitration and Foreign Courts

As the envisioned “one-stop-shop” for investors, the  Namibia Investment and Promotion Board (NIPB) should be the body that first learns of an investment dispute between a foreign investor and a domestic enterprise.  The NIPB has not yet received a report of an investment dispute involving U.S. entities.  Investment disputes can be handled by the courts.

There is no domestic arbitration body in Namibia.  Investors without a CSI that encounter a dispute have to address their dispute in the Namibian courts or in the court system which has jurisdiction according to the investor’s contract.  The Namibian court system is independent and is widely perceived to be free from government interference, including when SOEs are involved in investment disputes.

Bankruptcy Regulations

The Companies Act of 1973, amended in 2004, governs company and corporate liquidations while the Insolvency Act 12 of 1936, as amended by the Insolvency Amendment Act of 2005, governs insolvent individuals and their estates.  The Insolvency Act details sequestration procedures and the rights of creditors.  Through the law, all debtors (whether foreign or domestic) may file for both liquidation and reorganization, and a creditor may file for both liquidation and reorganization.  As reorganization (judicial management) is rarely successful; however, the most likely insolvency procedure is liquidation.  International credit monitoring agency TransUnion is a licensed credit bureau in Namibia.  The World Bank’s Doing Business Report ranks Namibia’s resolution of insolvency at 127 out of 190.

Investment Incentives

Incentives are mainly aimed at stimulating manufacturing, attracting foreign investment to Namibia, and promoting exports.  To take advantage of the incentives, companies must be registered with MIT and the Ministry of Finance.  Tax and non-tax incentives are accessible to both existing and new manufacturers. MIT has produced a brochure on Special Incentives for Manufacturers and Exporters that is available from the Namibia Investment and Promotion Board.

The Namibian Government aims to stimulate economic growth and employment and to establish Namibia as a gateway location in the Southern African region.  To this end, the government has introduced numerous incentives that are largely concentrated on stimulating manufacturing in Namibia and prompting exports into the region and to the rest of the world.  General tax regulations that are indicative of the government’s commitment are:

• Non–resident Shareholders’ Tax is only 10%;
• Dividends accruing to Namibian companies or resident shareholders are tax-exempt;
• Plant, machinery and equipment can be fully written off over a period of three years;
• Buildings of non-manufacturing operations can be written off, 20% in the first year and the balance at 4% over the ensuing 20 years;
• Import or purchase of manufacturing machinery and equipment is exempted from Value Added Tax (VAT); and,
• Preferential market access to EU, USA, and other markets for manufacturers is provided.

The government does issue guarantees, but reluctantly.  Joint financing for foreign direct investment is occasionally implemented through the Namibia Development Corporation or another, sector-relevant state-owned enterprise.

Foreign Trade Zones/Free Ports/Trade Facilitation

Namibia has an Export Processing Zone (EPZ) regime that offers favorable conditions for companies wishing to manufacture and export products.  The government of Namibia has announced plans to repeal the EPZ Act and replace it with Special Economic Zones.  Existing EPZ users will be accommodated, but there is a moratorium on new applications under the current regime.  The Minister of Finance tabled a proposal for the Special Economic Zones on 19 February 2020, which is due to be debated in Parliament.

There are 19 EPZ companies in operation, most of which were closely linked to minerals beneficiation, including Namzinc (which produces Special High Grade zinc at the Skorpion zinc mine), Namibia Custom Smelters (which produces blister copper from imported copper concentrates), and a variety of diamond cutting and polishing operations (which cut and polish locally and internationally sourced rough diamonds).

Under the EPZ regime, the government offered a package of tax and non-tax special incentives, applicable to both existing and new manufacturing enterprises, exporters, and EPZ enterprises. Companies operating under the EPZ regime are free to locate their operations anywhere in Namibia. Through the Offshore Development Company (ODC), EPZ enterprises also have access to factory facilities rented at economical rates.

Current EPZ incentives are:

• Corporate tax holiday;
• Exemption from import duties on imported intermediate and capital goods;
• Exemption from sales tax, stamp and transfer duties on goods and services required for EPZ activities;
• Reduction in foreign exchange controls;
• Guarantee of free repatriation of capital and profits;
• Permission for EPZ investors to hold foreign currency accounts locally;
• Access to streamlined regulatory service (‘one stop shop’);
• Refund of up to 75% of costs of pre-approved training of Namibian citizens;
• No strike or lock-outs allowed in EPZs;
• Provision of factory facilities for rent at economical rates.

Performance and Data Localization Requirements

The government actively encourages partnerships with historically disadvantaged Namibians.  The Equity Commission requires all firms to develop an affirmative action plan for management positions and to report annually on its implementation.  Namibia’s Affirmative Action Act strives to create equal employment opportunities, improve conditions for the historically disadvantaged, and eliminate discrimination.  The Equity Commission facilitates training programs, provides technical and other assistance, and offers expert advice, information, and guidance on implementing affirmative action in the work place.

In certain industries, the government has employed specific techniques to increase Namibian participation.  In the fishing sector, for example, companies pay lower quota fees if they operate Namibian-flagged vessels based in Namibia with crews that are predominantly Namibian.

The lengthy and administratively burdensome process of obtaining and renewing work permits in Namibia is among investors’ greatest complaints.  Although the government cites the country’s high unemployment rate as its motivation for a strict policy on work permits, Namibia’s labor force does not yet meet many of the skills needed to fill jobs that foreigners currently hold.

Economic empowerment legislation for previously disadvantaged groups, called the New Equitable Economic Empowerment Framework (NEEEF), is under consideration in the legislature.  A bill is expected to be introduced in 2020 and is expected to contain provisions relating to ownership, management, value addition, human resource capacity building, job creation, and corporate social responsibility.

The Namibian government does not have “forced localization” requirements for data storage.  Domestic content is encouraged. State owned enterprises are including local ownership/participation.

Real Property

The Namibian Constitution guarantees all persons the right to acquire, own, and dispose of all forms of property throughout Namibia, but also allows Parliament to make laws concerning expropriation of property (see Expropriation and Compensation Section) and to regulate the right of foreign nationals to own or buy property in Namibia.  There are no restrictions on the establishment of private businesses, size of investment, sources of funds, marketing of products, source of technology, or training in Namibia.  All deeds of sales are registered with the Deeds Office. Property is usually purchased through real estate agents and most banks provide credit through mortgages.  The Namibian Constitution prohibits expropriation without just compensation.  The World Bank’s Doing Business Report ranks Namibia 173 out of 190 for the ease of registering property.

Intellectual Property Rights

Namibia is a party to the World Intellectual Property Organization (WIPO) Convention, the Berne Convention for the Protection of Literary and Artistic Works, and the Paris Convention for the Protection of Industrial Property.  Namibia is also a party to the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks and the Patent Cooperation Treaty.  Namibia is a signatory to the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty.

The responsibility for intellectual property rights (IPR) protection is divided among three government ministries.  The MIT oversees industrial property and is responsible for the registration of companies, private corporations, patents, trademarks, and designs through its Business and Intellectual Property Authority (BIPA).  The Ministry of Information and Communication Technology (MICT) manages copyright protection, while the Ministry of Environment, Forestry and Tourism (MEFT) protects indigenous plant varieties and any associated traditional knowledge of these plants.

Two copyright organizations, the Namibian Society of Composers and Authors of Music (NASCAM) and the Namibian Reproduction Rights Organization (NAMRRO), are the driving forces behind the government’s anti-piracy campaigns.  NASCAM administers IPR for authors, composers, and publishers of music.  NAMRRO protects all other IPR, including literary, artistic, broadcasting, satellite, traditional knowledge, and folklore.

Namibia is not included in the United States Trade Representative (USTR) Special 301 Report or the 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/ .

Capital Markets and Portfolio Investment

There is a free flow of financial resources within Namibia and throughout the Common Monetary Area (CMA) countries of the South African Customs Union (SACU), which include Namibia, Botswana, Swaziland, South Africa, and Lesotho.  Capital flows with the rest of the world are relatively free, subject to the South African currency exchange rate.  The Namibia Financial Institutions Supervisory Authority (NAMFISA) registers portfolio managers and supervises the actions of the Namibian Stock Exchange (NSX) and other non-banking financial institutions.

Although the NSX is the second-largest stock exchange in Africa, this ranking is largely because many South African firms listed on the Johannesburg exchange are also listed (dual listed) on the NSX.  By law, Namibia’s government pension fund and other Namibian funds are required to allocate a certain percentage of their holdings to Namibian investments.  Namibia has a world-class banking system that offers all the services needed by a large company.  Foreign investors are able to get credit on local market terms.

There are no laws or practices by private firms in Namibia to prohibit foreign investment, participation, or control; nor are there any laws or practices by private firms or government precluding foreign participation in industry standards-setting consortia.

Money and Banking System

Namibia’s central bank, the Bank of Namibia (BON), regulates the banking sector.  Namibia has a highly sophisticated and developed commercial banking sector that is comparable with the best in Africa.  There are eight commercial banks: Standard Bank, Nedbank Namibia, Bank Windhoek, FNB Namibia, Trustco Bank, Letshego Bank Limited, Banco BIC, and Banco Atlantico.  Bank Windhoek and Trustco Bank are the only locally-owned banks, and Trustco Bank specializes in micro-finance.  Standard Bank, Nedbank, and FNB are South African subsidiaries, Banco BIC and Banco Atlantico are Angolan.  A significant proportion of bank loans come in the form of bonds or mortgages to individuals.  There is little or no investment banking activity.

The Development Bank of Namibia (DBN) and Agribank are Namibian government-owned banks with a mandate for development project financing. Agribank’s mandate is specifically in the agriculture sector.

While there are no restrictions on foreigners’ ability to open bank accounts, a non-resident must open a “non-resident” account at a Namibian commercial bank to facilitate loan repayments.  This account would normally be funded from abroad or from rentals received on the property purchased, subject to the bank holding the account being provided with a copy of any rental.  Non-residents who are in possession of a valid Namibian work permit/permanent residency are considered to be residents for the duration of their work permit and are therefore not subject to borrowing restrictions placed on non-residents without the necessary permits.

The BON does not recognize cryptocurrencies, such as Bitcoin, as legal tender in Namibia.  The BON is reluctant to allow the implementation of blockchain technologies in banking transactions.

Foreign Exchange and Remittances

Foreign Exchange

The Namibian dollar is pegged at parity to the South African rand, and rand are accepted as legal tender in Namibia.  The FIA offers investors meeting certain eligibility criteria the opportunity to obtain a Certificate of Status Investment (CSI).  A “status investor” is entitled to:

• Preferential access to foreign exchange to repay foreign debt, pay royalties and similar charges, and remit branch profits and dividends;
• Preferential access to foreign currency in order to repatriate proceeds from the sale of an enterprise to a Namibian resident;
• Exemption from regulations which might restrict certain business or categories of business to Namibian participation;
• Right to international arbitration in the event of a dispute with the government; and
• Payment of just compensation without undue delay and in freely convertible currency in the event of expropriation.

Remittance Policies

According to World Bank Development Indicators, remittances to Namibia have been consistently less than 0.15 percent of GDP for at least the last decade.  The majority of remittances are processed through commercial banks.  There have been no plans to change investment remittance policies in recent times.

Sovereign Wealth Funds

Namibia does not have a Sovereign Wealth Fund (SWF).  The Government Institution Pension Fund (GIPF) provides retirement and benefits for employees in the service of the Namibian government as well as institutions established by an act of the Namibian Parliament.

While Namibian companies are generally open to foreign investment, government-owned enterprises have generally been closed to all investors (Namibian and foreign), with the exception of joint ventures discussed below.  More than 90 State Owned Enterprises (SOEs, also known as parastatals) include a wide variety of commercial companies, financial institutions, regulatory bodies, educational institutions, boards, and agencies.  Generally, employment at SOEs is highly sought after because their remuneration packages are not bound by public service constraints.  Parastatals provide most essential services, such as telecommunications, transport, water, and electricity.  A list of SOEs can be found on the Ministry of Public Enterprises’ website: www.mpe.gov.na .  The following are the most prominent SOEs:

• Air Namibia (air carrier)
• Namibia Airports Company (airport management company)
• Namibia Institute of Pathology (medical laboratories)
• Namibia Wildlife Resorts (tourism)
• Namport (maritime port authority)
• Nampost (postal and courier services)
• Namwater (water sanitation and provisioning)
• Roads Contractor Company
• Telecom Namibia (primarily fixed-line) and MTC (mobile communications)
• TransNamib (rail company)
• NamPower (electricity generation and transmission)
• Namcor (national petroleum company)
• Epangelo (mining)

The government owns numerous other enterprises, from media ventures to a fishing company.  Parastatals own assets worth approximately 40 percent of GDP and most receive subsidies from the government. Most SOEs are perennially unprofitable and have only managed to stay solvent with government subsidies.  In industries where private companies compete with SOEs (e.g., tourism and fishing), SOEs are sometimes perceived to receive favorable concessions from the government.  Foreign investors have participated in joint ventures with the government in a number of sectors, including mobile telecommunications and mining. In 2015, the Namibian President created a new Ministry of Public Enterprises intended to improve the management and performance of SOEs.  Legislation to shift oversight of commercial SOEs from line ministries to the Ministry of Public Enterprises was passed by Parliament in 2019.

Privatization Program

Namibia does not have a privatization program, but discussions have begun within the government to consider privatizing certain SOEs.

Most large firms, including SOEs, have well defined (and publicized) social responsibility programs that provide assistance in areas such as education, health, environmental management, sports, and SME development.  Many firms include Black Economic Empowerment (BEE) programs within their larger Corporate Social Responsibility (CSR) programs.  Firms operating in the mining sector – Namibia’s most important industry – generally have visible CSR programs that focus on education, community resource management, environmental sustainability, health, and BEE.  Many Namibian firms have HIV/AIDS workplace programs to educate their employees about how to prevent contracting and spreading the virus/disease.  Some firms also provide anti-retroviral treatment programs beyond what may be covered through government and private insurance systems.

Namibia’s mining sector is considered a leader in the region for its sound mining policy and responsible business conduct.  Namibia ranked as the best jurisdiction in Africa on its mining policy in a 2019 Fraser Institute survey.  Namibia is also a member of the U.S. Department of State’s Energy Resource Governance Initiative that seeks to promote sound mining governance and resilient energy mineral supply chains.  Namibia is not a member of the Extractive Industries Transparency Initiative (EITI).

The Anti-Corruption Act of 2003 created an Anti-Corruption Commission (ACC), which began operations in 2006.  The ACC attempts to complement civil society’s anti-corruption programs and support existing institutions such as the Ombudsman’s Office and the Office of the Attorney General. Anti-corruption legislation is in place to combat public corruption.  In a nationwide survey commissioned by the ACC and released in 2016, corruption was listed at the third-most important development challenge facing Namibia (6 percent, after unemployment at 37 percent and poverty at 30 percent). 78 percent of survey respondents rated corruption as “very high” in Namibia. The highest result comes from those in rural areas.

In 2019, Namibia was embroiled in a fishing industry corruption scandal in which government ministers and business leaders were charged and imprisoned for allegedly co-opting the national fishing quota system for personal gain.  The scandal allegedly cost Namibia billions of U.S. dollars.  The accused are in prison awaiting trial.  The scandal has resulted in Namibia and its ACC taking a closer look at other industries susceptible to corruption.

Namibia has signed and ratified the UN Convention against Corruption and the African Union’s African Convention on Preventing and Combating Corruption.  Namibia has also signed the Southern African Development Community’s Protocol against Corruption.

Resources to Report Corruption

Paulus Noa
Director
Namibia Anti Corruption Commission
Corner of Montblanc & Groot Tiras Street, Windhoek
+264-61-370-600
anticorruption@accnamibia.org

Namibia is a stable multiparty and multiracial democracy.  The protection of human rights is enshrined in the Namibian Constitution, and the government generally respects those rights. Political violence is rare and damage to commercial projects and/or installations as a result of political violence is unlikely.  The State Department’s Country Report on Human Rights for Namibia provides additional information.

Namibian law allows for the formation of independent trade unions to protect workers’ rights and to promote sound labor relations and fair employment practices.  The law provides for the right to form and join independent unions, conduct legal strikes, and bargain collectively; however, the law prohibits workers in certain sectors, such as the police, military, and correctional facilities, from joining unions. Except for workers in services designated as essential services, such as public health and safety, workers may strike once mandatory conciliation procedures are exhausted and 48 hours’ notice is given to the employer and labor commissioner.  Workers may take strike actions only in disputes involving specific worker interests, such as pay raises.

Namibia has ratified all of the International Labor Organization’s fundamental conventions.  Businesses operating within export processing zones are required to adhere to the Labor Act.  The 2007 Labor Act contained a provision that prohibited the hiring of temporary or contract workers (“labor hire”), but the provision was ruled unconstitutional by the Supreme Court.  The Labor Amendment Act of 2012 introduced strict regulations with respect to the use of temporary workers, according to which temporary workers must generally receive equal compensation and benefits as non-temporary workers.

Child labor in Namibia may occur in certain sectors, such as domestic work, but its occurrence and prevalence is difficult to verify.  Although Namibia has ratified all key international conventions concerning child labor, there continue to be gaps in Namibia’s domestic legal framework.

There is a shortage of specialized skilled labor in Namibia.  Employers often cite labor productivity and the shortage of skilled labor as the biggest obstacles to business growth.  The 2019 Global Competitiveness Report ranked Namibia 94th out of 141 economies.  An inadequately educated workforce, access to financing, and low innovation capability are listed in the report as the most problematic factors for doing business.

The government offers manufacturing companies special tax deductions of up to 25 percent if they provide technical training to employees.  The government will also reimburse companies for costs directly related to employee training under approved conditions.

As of April 1, 2014, the Namibian government implemented a Vocational Education and Training (VET) levy to facilitate and encourage vocational education and training.  The levy, which is payable to the Namibia Training Authority (NTA), is imposed on every employer with an annual payroll of at least NAD 1,000,000 (approximately USD 54,000), at the rate of one percent of the employer’s total annual payroll.  The NTA will collect and administer the levy and will use the funds to provide financial and technical assistance to employers, vocational training providers, employees, students, and other bodies to promote vocational education and training.  In addition, companies can get a rebate from NTA of up to fifty percent of training costs for their employees.

The United States has had an Investment Incentive Agreement with Namibia since 1990.  The Development Finance Corporation (DFC) replaces the Overseas Private Investment Corporation (OPIC) as the USG entity that provides political risk insurance and credit facilities to qualified U.S. investors in Namibia.  Namibia is also a member of the World Bank’s Multilateral Investment Guarantee Agency (MIGA).

* Source for Host Country Data: Namibia Statistics Agency

Table 4: Sources of Portfolio Investment
Data not available.

Tabitha Snowbarger
Political, Economic, and Commercial Section Deputy Chief
14 Lossen Street, Windhoek, Namibia
+264-61-295-8500
Econ_Comm_Windhoek@state.gov

Policies Towards Foreign Direct Investment

Over the past decade, the GOR has undertaken a series of policy reforms intended to improve the investment climate, wean Rwanda’s economy off foreign assistance, and increase FDI levels.   Rwanda enjoyed strong economic growth up until March 2020, averaging over seven percent  annually over the last decade, high rankings in the World Bank’s Doing Business report (38 out of 190 economies in 2020, and second best in African, compared to 29 in 2019 and 41 in 2018), and a reputation for low corruption.  GDP growth in 2020 is expected to be negative due to the dampening economic effects of COVID-19.  The RDB was established in 2006 to fast track investment projects by integrating all government agencies responsible for the entire investor experience under one roof.  This includes key agencies responsible for business registration, investment promotion, environmental compliance clearances, export promotion and other necessary approvals.  New investors can register online at the RDB’s website and receive a certificate in as fast as six hours, and the agency’s “one-stop shop” helps investors secure required approvals, certificates, and work permits.  RDB states its investment priorities are: innovation and technology, particularly ICT and green innovation; tourism and real estate; agriculture and food security; energy and infrastructure; and mining.

In 2020, The World Bank Ease of Doing Business report indicated that Rwanda made doing business easier by exempting newly formed small and medium businesses from paying for a trading license during their first two years of operation.  In addition, the GOR reduced the time to obtain water and sewage connections in order to facilitate construction permits and improved building controls by requiring construction professionals to obtain liability insurance.  The country also upgraded its power grid infrastructure and improved its regulations on weekly rest, working hours, severance pay and reemployment priority rules.

A number of investors have said a top concern affecting their operations in Rwanda is that tax incentives included in deals negotiated or signed by the RDB are not fully honored by the RRA.   Investors further cite the inconsistent application of tax incentives and import duties as a significant challenge to doing business in Rwanda.  For example, a few investors have said that local customs officials have attempted to charge them duties based on their perception of the value of an import, regardless of the actual purchase price.

Under Rwandan law, foreign firms should receive equal treatment with regard to taxes, as well as access to licenses, approvals, and procurement.  Foreign firms should receive VAT tax rebates within 15 days of receipt by the RRA, but firms complain that the process for reimbursement can take months, and occasionally years.  Refunds can be further held up pending the results of RRA audits.  A number of investors cited punitive retroactive fines following audits that were concluded after many years.  RRA aggressively enforces tax requirements and imposes penalties for errors – deliberate or not – in tax payments.  Investors cited lack of coordination among ministries, agencies and local government (districts) leading to inconsistencies in implementation of promised incentives and other facilitation.  Others pointed to lack of clarity on who the regulator is on certain matters.  The U.S. Treasury Department’s Office of Technical Assistance (OTA) has provided tax consultants to RRA to review auditing practices in Rwanda.  The OTA program concluded in 2020 and produced a standardized tax audit handbook for RRA’s auditors to use.

Limits on Foreign Control and Right to Private Ownership and Establishment

Rwanda has neither statutory limits on foreign ownership or control nor any official economic or industrial strategy that discriminates against foreign investors.  Local and foreign investors have the right to own and establish business enterprises in all forms of remunerative activity.

Foreign nationals may hold shares in locally incorporated companies.  The GOR has continued to privatize state holdings, although the government, ruling party, and military continue to play a dominant role in Rwanda’s private sector.  Foreign investors can acquire real estate but with a general limit on land ownership.  While local investors can acquire land through leasehold agreements that extend to a maximum of 99 years, foreign investors can be restricted to leases up to 49 years with the possibility of renewal.  The government published a new Investment Code in 2015 aimed at providing tax breaks and other incentives to boost FDI.  The Investment Code includes equal treatment for foreigners and nationals with regard to certain operations, free transfer of funds, and compensation against expropriation.  In April 2018, Rwanda introduced new laws to curb capital flight.  Management, loyalty and technical fees a local subsidiary can remit to its related non-residential companies (parent company) are capped at two percent of turnover.  Companies resolving to go beyond the cap are subject to a 30 percent corporate tax on turnover, in addition to 15 percent withholding tax and 18 percent reserve charge.

Other Investment Policy Reviews

In February 2019, The World Trade Organization (WTO) published a Trade Policy Review for the East African Community (EAC) covering Burundi, Kenya, Rwanda, Tanzania and Uganda.  The report is available at: https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol=%20wt/tpr/s/*)%20and%20((%20@Title=%20rwanda%20)%20or%20(@CountryConcerned=%20rwanda))&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true# 

The Rwanda annex to the report is available at:   https://docs.wto.org/dol2fe/Pages/FE_Search/ExportFile.aspx?Id=251521&filename=q/WT/TPR/S384-04.pdf 

https://docs.wto.org/dol2fe/Pages/FE_Search/ExportFile.aspx?Id=251521&filename=q/WT/TPR/S384-04.pdf 

Business Facilitation

RDB offers one of the fastest business registration processes in Africa.  New investors can register online at RDB’s website (http://org.rdb.rw/busregonline ) or register in person at RDB offices in Kigali.  Once a certificate of registration is generated, company tax identification and employer social security contribution numbers are automatically generated.  The RDB “One Stop Center” assists firms in acquiring visas and work permits, connections to electricity and water, and support in conducting required environmental impact assessments.

RDB is prioritizing additional reforms to improve the investment climate.  By 2020, it hopes to amend the land policy to merge issuance of freehold titles and occupancy permits; introduce online notarization of property transfers; implement small claims procedure to allow self-representation in court and reduce attorney costs; launch electronic auctioning to reduce time to enforce judgments, reducing court fees and allowing payments electronically; and establish a commercial division at the Court of Appeal to fast-track commercial dispute resolution.

Rwanda promotes gender equality and has pioneered a number of projects to promote women entrepreneurs, including the creation of the Chamber of Women Entrepreneurs within the Rwanda Private Sector Federation (PSF).  Both men and women have equal access to investment facilitation and protections.

Outward Investment

The government does not have a formal program to provide incentives for domestic firms seeking to invest abroad, but there are no restrictions in place limiting such investment.

Transparency of the Regulatory System

The GOR generally employs transparent policies and effective laws largely consistent with international norms.  Rwanda is a member of the U.N. Conference on Trade and Development’s international network of transparent investment procedures.  The Rwanda eRegulations system is an online database designed to bring transparency to investment procedures in Rwanda.  Investors can find further information on administrative procedures at:  https://businessprocedures.rdb.rw/.

Rwandan laws and regulations are published in the Government Gazette and online at http://primature.gov.rw/index.php?id=97 .  Government institutions generally have clear rules and procedures, but implementation can sometimes be uneven.  Investors have cited breach of contracts and incentive promises, and the short time given to comply with changes in government policies, as hurdles to comply with regulations.  For example, in 2019 the GOR submitted a draft law that was passed by Parliament the same year, banning single use plastic containers.  Investors in the beverage and agro-processing sectors expressed concern that the law would have a serious impact on their operations, that alternative packaging was not available in some cases, and that the GOR did not consult effectively with stakeholders before submitting it.  The law built on a ban on the manufacture and use of polyethylene bags introduced in 2008.

There is no formal mechanism to publish draft laws for public comment, although civil society sometimes has the opportunity to review them.  There is no informal regulatory process managed by nongovernmental organizations.  Regulations are usually developed rapidly in an effort to achieve policy goals and sometimes lack a basis in scientific or data-driven assessments.  Scientific studies, or quantitative analysis (if any) conducted on the impact of regulations, are not generally made publicly available for comment.  Regulators do not publicize comments they receive.  Public finances and debt obligations are generally made available to the public before budget enactment.  Finances for State Owned Enterprises (SOE) are not publicly available but may be requested by civil society organizations with a legitimate reason.

There is no government effort to restrict foreign participation in industry standards-setting consortia or organizations.  Legal, regulatory, and accounting systems are generally transparent and consistent with international norms but are not always enforced.  The Rwanda Utility Regulation Agency (RURA), the Office of the Auditor General (OAG), the Anticorruption Division of the RRA, the Rwanda Standards Board (RSB), the National Tender Board, and the Rwanda Environment Management Authority also enforce regulations.  Consumer protection associations exist but are largely ineffective.  The business community has been able to lobby the government and provide feedback on some draft government policies through the PSF, a business association with strong ties to the government.  In some cases, the PSF has welcomed foreign investors to positively influence government policies.  However, some investors have criticized the PSF for advocating to businesses about government policies rather than advocating business concerns to the government.

The American Chamber of Commerce launched in November 2019, and a European Chamber of Commerce launched in March 2020.  Both are coordinating policy advocacy efforts to improve the business environment for American, European and other foreign firms in Rwanda.  The Chinese also have a Chamber of Commerce registered in China and active in Rwanda.

International Regulatory Considerations

Rwanda is a member of the EAC Standards Technical Management Committee. Approved EAC measures are generally incorporated into the Rwandan regulatory system within six months and are published in the National Gazette like other domestic laws and regulations.  Rwanda is also a member of the standards technical committees for the International Standardization Organization, the African Organization for Standardization, and the International Electrotechnical Commission. Rwanda is a member of the International Organization for Legal Metrology and the International Metrology Confederation. The Rwanda Standards Board represents Rwanda at the African Electrotechnical Commission. Rwanda has been a member of the WTO since 22 May 1996 and notifies the WTO Committee on Technical Barriers to Trade on draft technical regulations.

Legal System and Judicial Independence

The Rwandan legal system was originally based on the Belgian civil law system. However, since the renovation of the legal framework in 2002, the introduction of a new constitution in 2003, and the country’s entrance to the Commonwealth in 2009, there is now a mixture of civil law and common law (hybrid system). Rwanda’s courts address commercial disputes and facilitate enforcement of property and contract rights. Rwanda’s judicial system suffers from a lack of resources and capacity but continues to improve. Investors occasionally state that the government takes a casual approach to contract sanctity and sometimes fails to enforce court judgments in a timely fashion. The government generally respects judicial independence, though domestic and international observers have noted that outcomes in high-profile politically sensitive cases appeared predetermined.

In August 2018, the GOR created a Court of Appeal in an attempt to reduce backlogs and expedite the appeal process without going to the Supreme Court. The new Court of Appeal arbitrates cases handled by the High Court, Commercial High Court, and Military High Court. The Supreme Court continues to decide on cases of injustice filed from the Ombudsman Office and on constitutional interpretation. Based on Article 15 of Law 76/2013 of 11/09/2013, the Office of the Ombudsman has the authority to request that the Supreme Court reconsider and review judgments rendered at the last instance by ordinary, commercial, and military courts, if there is any persistence of injustice.  More information on the review process can be found at https://ombudsman.gov.rw/en/?Court-Judgement-Review-Unit-1375 . A Tax Court is yet to be established in Rwanda. In 2019, the RDB announced the government’s intent to create a commercial division at the Court of Appeal to fast-track resolution on commercial disputes.

Laws and Regulations on Foreign Direct Investment

National laws governing commercial establishments, investments, privatization and public investments, land, and environmental protection are the primary directives governing investments in Rwanda.  Since 2011, the government reformed tax payment processes and enacted additional laws on insolvency and arbitration.  The 2015 Investment Code establishes policies on FDI, including dispute resolution (Article 9).  The RDB keeps investment-related regulations and procedures at:  http://businessprocedures.rdb.rw .

According to a WTO policy review report dated January 2019, Rwanda is not a party to any countertrade and offsetting arrangements, or agreements limiting exports to Rwanda.

A new property tax law was passed in August 2018.  The new law removes the provision that taxpayers must have freehold land titles to pay property taxes.  Small and medium enterprises (SMEs) will receive a two-year tax trading license exemption upon establishment.

In April 2018, the GOR passed a new law to streamline income tax administration and to clarify the law.  The new law can be accessed here: http://www.primature.gov.rw/media-publication/publication/latest-offical-gazettes.html?no_cache=1&tx_drblob_pi1%5BdownloadUid%5D=464 .

Competition and Anti-Trust Laws

Since 2010, a Competition and Consumer Protection Unit was created at the Ministry of Trade and Industry (MINICOM) to address competition and consumer protection issues.  The government is setting up the Rwanda Inspectorate, Competition and Consumer Protection Authority (RICA), a new independent body with the mandate to promote fair competition among producers.  The body will reportedly aim to ensure consumer protection and enforcement of standards.  To read more on competition laws in Rwanda, please visit:  http://www.minicom.gov.rw/index.php?id=136.

Market forces determine most prices in Rwanda, but, in some cases, the GOR intervenes to fix prices for items considered sensitive in Rwanda.  RURA, in consultation with relevant ministries, sets prices for petroleum products, water, electricity, and public transport.  MINICOM and the Ministry of Agriculture have fixed farm gate prices, or the market value of a cultivated product minus the selling costs, for agricultural products like coffee, maize, and Irish potatoes from time to time.  On international tenders, a 10 percent price preference is available for local bidders, including those from regional economic integration bodies in which Rwanda is a member.

Some U.S. companies have expressed frustration that while authorities require them to operate as a formal enterprise that meets all Rwandan regulatory requirements, some local competitors are informal businesses that do not operate in full compliance with all regulatory requirements.  Other investors have claimed unfair treatment compared to SOEs, ruling party-aligned or politically connected business competitors in securing public incentives and contracts.

More information on specific types of agreements, decisions and practices considered to be anti-competitive, or abuse of dominant position, in Rwanda can be found here: https://rura.rw/fileadmin/Documents/docs/ml08.pdf 

Expropriation and Compensation

The 2015 Investment Code forbids the expropriation of investors’ property in the public interest unless the investor is fairly compensated.  A new expropriation law came into force in 2015, which included more explicit protections for property owners.

A 2017 study by Rwanda Civil Society Platform argues that the government conducts expropriations on short notice and does not provide sufficient time or support to help landowners fairly negotiate compensation.  The report includes a survey that found only 27 percent of respondents received information about planned expropriation well in advance of action.  While mechanisms exist to challenge the government’s offer, the report notes that landowners are required to pay all expenses for the second valuation, a prohibitive cost for rural farmers or the urban poor.  Media have reported that wealthier landowners have the ability to challenge valuations and have received higher amounts.  Political exiles and other embattled opposition figures have been involved in taxation lawsuits that resulted in their “abandoned properties” being sold at auction, allegedly at below market values.

Dispute Settlement

ICSID Convention and New York Convention

Rwanda is signatory to the International Center for Settlement of Investment Disputes (ICSID) and the African Trade Insurance Agency (ATI).  ICSID seeks to remove impediments to private investment posed by non-commercial risks, while ATI covers risk against restrictions on import and export activities, inconvertibility, expropriation, war, and civil disturbances.

Rwanda ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 2008.

Investor-State Dispute Settlement

Rwanda is a member of the East African Court of Justice for the settlement of disputes arising from or pertaining to the EAC.  Rwanda has also acceded to the 1958 New York Arbitration Convention and the Multilateral Investment Guarantee Agency convention.  Under the U.S.-Rwanda BIT, U.S. investors have the right to bring investment disputes before neutral, international arbitration panels.  Disputes between U.S. investors and the GOR in recent years have been resolved through international arbitration, court judgments, or out of court settlements.  Judgments by foreign courts and contract clauses that abide by foreign law are accepted and enforced by local courts, though they lack capacity and experience to adjudicate cases governed by non-Rwandan law.  There have been a number of private investment disputes in Rwanda, though the government has yet to stand as complainant, respondent, or third party in a WTO dispute settlement.  Rwanda has been a party to two cases at ICSID since Rwanda became a member in 1963; one of these cases is an ongoing case brought by an American investor against Rwanda.  SOEs are also subject to domestic and international disputes.  SOEs and ruling party-owned companies party to suits have both won and lost judgments in the past.

International Commercial Arbitration and Foreign Courts

In 2012, the GOR launched the Kigali International Arbitration Center (KIAC).   KIAC case handling rules are modeled on the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules.  By July 2019, KIAC reviewed 115 cases worth USD 64 million in claims involving petitions from 19 different nationalities since 2012.  Some businesses report being pressured to use the Rwanda-based KIAC for the seat of arbitration in contracts signed with the GOR.  Because KIAC has a short track record and its domiciled in Rwanda, these companies would prefer arbitration take place in a third country, and some have reported difficulty in securing international financing due to KIAC provision in their contracts.

Bankruptcy Regulations

Rwanda ranks 38 out of 190 economies for resolving insolvency in the World Bank’s 2020 Doing Business Report and is number two in Africa.  It takes an average of two and a half years to conclude bankruptcy proceedings in Rwanda.  The recovery rate for creditors on insolvent firms was reported at 19.3 cents on the dollar, with judgments typically made in local currency.

In April 2018, the GOR instituted a new Insolvency and Bankruptcy Law.  One major change is the introduction of an article on “pooling of assets” allowing creditors to pursue parent companies and other members of the group, in case a subsidiary is in liquidation.  The new law can be accessed here:  http://org.rdb.rw/wp-content/uploads/2018/06/Insolvency-Law-OGNoSpecialbisdu29April2018.pdf 

Investment Incentives

The 2015 Investment Code offers a package of benefits and incentives to both domestic and foreign investors under certain conditions, including:

• For an international company with its headquarters or regional office in Rwanda, a preferential corporate income tax rate of 0 percent;
• For any investor, a preferential corporate income tax rate of 15 percent;
• Corporate income tax holiday of up to seven years;
• Exemption of customs tax for products used in Export Processing Zones (EPZ);
• Exemption of capital gains tax;
• VAT refund;
• Accelerated depreciation; and
• Immigration incentives.

Further details on benefits under the Investment Code can be accessed here:  http://businessprocedures.rdb.rw/media/Investiment_promotion_law.pdf .

Poorly coordinated efforts between the RDB, RRA, MINICOM, and the Directorate of Immigration and Emigration can lead to inconsistent application of incentives, according to investors.  Investors reported that tax incentives included in deals signed by the RDB are not honored by the RRA in all cases or sometimes not in a timely manner.  Additionally, investors continue to face challenges receiving payment for services rendered for GOR projects, VAT refund delays, and/or expatriation of profits.  In 2016, the GOR instituted a law governing public-private partnership (PPPs) as a step toward courting investments in key development projects.  The law provides a legal framework concerning establishment, implementation, and management of PPPs.  Detailed guidelines for the law can be accessed here:  http://rdb.rw/wp-content/uploads/2018/08/PPP-Guidelines.pdf 

Foreign Trade Zones/Free Ports/Trade Facilitation

Rwanda has established the Kigali Special Economic Zone (KSEZ), which was set up through the merger of former Kigali Free Trade Zone and the Kigali Industrial Park projects.  SEZs in Rwanda are regulated by the SEZ Authority of Rwanda (SEZAR), based at the RDB.  Land in KSEZ is acquired through Prime Economic Zone Secretariat, a private developer, under the regulations of SEZAR.  The price per square meter is USD 62, and the minimum size that can be acquired is one hectare.  Bonded warehouse facilities are now available both in and outside of Kigali for use by businesses importing duty-free materials.  The GOR has established a number of benefits for investors operating in the SEZs, including tax and land ownership advantages.  A company basing itself in the SEZ can also opt to be a part of the Economic Processing Zone.  A number of criteria must be satisfied in order to qualify, such as extensive records on equipment, materials and goods, suitable offices, security provisions, and a number of property constraints.

Holding an EPZ license will exempt a company from VAT, import duties, and corporate tax.  The company is then obliged to export a minimum of 80 percent of production.  Even after considering savings due to these government incentives, a few investors reported that land in the SEZs was significantly more expensive than land outside the zones.  The GOR has stated that there are no fiscal, immigration, or customs incentives beyond those provided in the 2015 Investment Code, though media has occasionally speculated that certain investors received additional incentives.  The negative list of goods prohibited under the EAC Customs Management Act applies in SEZs.  In November 2018, the GOR approved the Bugesera Special Economic Zone (BSEZ), located 45 minutes from Kigali.  Procedural information and cost involved in operating in SEZs can be accessed here: https://businessprocedures.rdb.rw/procedure/238/189?l=en .  The SEZ policy was revised in 2018.  Under the new policy, foreigners and locals may only lease land (formerly, foreign investors were able to purchase land outright in SEZ).  To read more on the new policy, please see: http://www.minicom.gov.rw/fileadmin/minicom_publications/documents/SEZ_Policy_-_January_2018_v2.pdf 

Rwanda created the Export Growth Facility (EGF) in 2015, with an initial capital of RWF 500 million, administered by the Development Bank of Rwanda (BRD).  German KfW Development Bank injected EUR 8.5 million in support of the fund.  The pilot program targets SMEs with export sales below USD 1 million.  Priority sectors include horticulture, agro-processing, and manufacturing.  The facility has three windows: an investment catalyst fund, a matching grant fund for market entry costs, and an export guarantee facility.  Investment catalyst funds support private sector investments in export-orientated production through a 6.5 percent subsidy on market interest rates (normally between 16-20 percent).  The matching grant fund provides grants (50 percent of the need) for expenditure on specific market entry costs (export strategy elaboration, export promotion, compliance with standards, etc.).  The export guarantee fund provides short-term guarantees to commercial banks financing exporters’ pre- and post-shipment operations.  The export guarantee component is not yet operational.  The facility supports both locally and foreign-owned companies in Rwanda; at least one American company has already received a loan.  Rwanda created the Business Development Fund (BDF) in 2011 to provide support to SMEs in credit guarantees, matching grants, asset leasing, and advisory services.  BDF works with banks to provide guarantees between 50-75 percent of required collaterals.  The maximum guarantee is RWF 500 million for agriculture projects and RWF 300 million for other sectors, for a maturity period of up to 10 years.

The GOR also manages the Rwanda Green Fund (FONERWA) to spur investment in green innovation.  The UK Aid Department for International Development, KFW, and other donors have invested in the fund.  FONERWA claims projects it supports have created more than 137,000 green jobs.

Performance and Data Localization Requirements

There is no legal obligation for nationals to own shares in foreign investments or requirement that shares of foreign equity be reduced over time.  However, the government strongly encourages local participation in foreign investments.   There is no requirement for private companies to store their proprietary data in Rwanda.  There is also no requirement for foreign IT providers to turn over source code and/or provide access to encryption technology.  IT companies dealing with government data cannot store it outside Rwanda or transfer it without GOR approval. Rwandans private data must be stored in Rwanda. There is no formal requirement that a certain number of senior officials or board members be citizens of Rwanda.  Under the 2015 Investment Code, the government allows registered those who invest a minimum of USD 250,000 to hire up to three expatriate employees, without the need to conduct a labor market test in Rwanda.  Investors who wish to hire more than three expatriate employees must conduct a labor market test, unless the available position is listed on Rwanda’s “Occupations in Demand” list.  The Directorate General of Immigration and Emigration does not always honor the employment and immigration commitments of investment certificates and deals, according to a number of investors.

While the government does not impose conditions on the transfer of technology, it does encourage foreign investors, without legal obligation, to transfer technology and expertise to local staff to help develop Rwanda’s human capital.  There is no legal requirement that investors must purchase from local sources or export a certain percentage of their output, though the government offers tax incentives for the latter.  Unless stipulated in a contract or memorandum of understanding characterizing the purchase of privatized enterprises, performance requirements are not imposed as a condition for establishing, maintaining, or expanding other investments.  Such requirements are imposed chiefly as a condition to tax and investment incentives.  The GOR is not involved in assessing the type and source of raw materials for performance, but the RSB determines quality standards for some product categories.

Real Property

The law protects and facilitates acquisition and disposition of all property rights.  Investors involved in commercial agriculture have leasehold titles and are able to secure property titles, if necessary.  The 2015 Investment Code states that investors shall have the right to own private property, whether individually or in association with others.  Foreign investors can acquire real estate, though there is a general limit on land ownership.  While local investors can acquire land through leasehold agreements that extend to 99 years, the lease period for foreigners has been as limited to 49 years, in some cases.  Such leases are theoretically renewable, but the law is new enough that foreigners generally have not yet attempted to renew a lease.  Mortgages are a nascent but growing financial product in Rwanda, increasing from 770 properties in 2008 to 13,394 in 2017, according to the RDB.

Intellectual Property Rights

The 2015 Investment Code guarantees protection of investors’ intellectual property rights (IPR), and legitimate rights related to technology transfer.  IPR legislation covering patents, trademarks, and copyrights was approved in 2009.  A Registration Service Agency, which is part of the RDB, was established in 2008 and has improved IPR t protection by registering all commercial entities and facilitating business identification and branding.  The RDB and the RSB are the main regulatory bodies for Rwanda’s intellectual property rights law.  The RDB registers intellectual property rights, providing a certificate and ownership title.  Every registered IPR title is published in the Official Gazette.  The fees payable for substance examination and registration of IPR apply equally to domestic and foreign applicants.  Since 2016, any power of attorney that a non-resident grants to a Rwandan-based industrial property agent must be notarized. (Previously, a signature would have been sufficient.)

Registration of patents and trademarks is on a first time, first right basis, so companies should consider applying for trademark and patent protection in a timely manner.  It is the responsibility of the copyright holders to register, protect, and enforce their rights where relevant, including retaining their own counsel and advisors.  Through the RSB and the RRA, Rwanda has worked to increase IPR protection, but many goods that violate patents, especially pharmaceutical products, make it to market nonetheless.  As many products available in Rwanda are re-exports from other EAC countries, it may be difficult to prevent counterfeit goods without regional cooperation.  Also, investors reported difficulties in registering patents and having rules against infringement of their property rights enforced in a timely manner.

Rwanda conducts anti-counterfeit goods campaigns on a regular basis, but statistics on IPR enforcement are not publicly available.  A few companies have expressed concern over inappropriate use of their intellectual property.  While the government has offered rhetorical support, enforcement has been mixed.  In some cases, infringement has stopped, but in other cases, companies have been frustrated with the slow pace of receiving judgment or of receiving compensation after successful legal cases.

As a COMESA member, Rwanda is automatically a member of African Regional Intellectual Property Organization.  Rwanda is also a member of the World Intellectual Property Organization (WIPO) and is working toward harmonizing its legislation with WTO Agreement on the Trade-Related Aspects of Intellectual Property (TRIPS).  Rwanda has yet to ratify WIPO Internet Treaties, though the government has taken steps to implement and enforce TRIPS Agreement. In addition to TRIPS, Rwanda is a party to the following treaties and conventions:  the Paris Convention; the Berne Convention; the Patent Cooperation Treaty; the Madrid Protocol; the Hague Agreement; and the Brussels Convention.   Rwanda is not a party to the following treaties and conventions: the Beijing Treaty; the Budapest Treaty; Locarno Agreement; the Marrakesh Treaty; the Nairobi Treaty; the Nice Agreement; the Phonograms Convention; the Singapore Treaty; the Strasbourg Agreement ; the Trademark Law Treaty; the Vienna Convention; the WIPO Copyright Treaty; and the WIPO Performance and Phonograms Treaty.

Rwanda is not included in the United States Trade Representative (USTR)Special 301 Report or the Notorious Markets List.

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

Capital Markets and Portfolio Investment

Rwanda’s capital markets are relatively immature and lack complexity.  Only eight companies have publicly listed and traded equities in Rwanda.  The Rwanda Capital Market Authority was established in 2017 to regulate the capital market, commodity exchange and related contracts, collective investment schemes, and warehouse receipts.  Most capital market transactions are domestic.  While offers can attract some international interests, they are rare.  Rwanda is one of a few sub-Saharan African countries to have issued sovereign bonds.  In 2019, the National Bank of Rwanda issued five new bonds including a 20-year bond, the longest tenor ever issued by the country.  During the same year, seven existing bonds were reopened. Rwandan government bonds and other debt securities are highly oversubscribed and bond yields average 12 percent.  BNR, the country’s Central Bank, has implemented reforms in recent years that are helping to create a secondary market for Rwandan treasury bonds.  Secondary market continue go growth from low base.  In 2019, BNR reported that deals and turn overs increased by 47.0 percent and 106.5 percent respectively following intense awareness campaigns and increased number of products (new issuances and re-openings).  In January 2020, the IMF completed its first review of Rwanda’s economic performance under the Policy Coordination Instrument and Monetary Policy Consultation, which can be found here:  https://www.imf.org/en/Publications/CR/Issues/2020/01/17/Rwanda-First-Review-Under-the-Policy-Coordination-Instrument-and-Monetary-Policy-48956  

https://www.imf.org/en/Publications/CR/Issues/2020/01/17/Rwanda-First-Review-Under-the-Policy-Coordination-Instrument-and-Monetary-Policy-48956  

Money and Banking System

Many U.S. investors express concern that local access to affordable credit is a serious challenge in Rwanda.  Interest rates are high for the region ranging from 15 percent to 20 percent, banks offer predominantly short-term loans, collateral requirements can be higher than 100 percent of the value of the loan, and Rwandan commercial banks rarely issue significant loan values.  The prime interest rate is 16-18 percent.  Large international transfers are subject to authorization.  Investors who seek to borrow more than USD 1 million must often engage in multi-party loan transactions, usually leveraging support from larger regional banks.  Credit terms generally reflect market rates, and foreign investors are able to negotiate credit facilities from local lending institutions if they have collateral and “bankable” projects.  In some cases, preferred financing options may be available through specialized funds including the Export Growth Fund, BRD, or FONERWA.

Rwanda’s financial sector remains highly concentrated.  The share of the three largest Banks’s assets increased from 46.5 percent in December 2018 to 48.4 percent in December 2019.  The largest, partially state-owned, Bank of Kigali (BoK), holds more than 30 percent of all assets.  The banking sector holds more than 65 percent of total financial sector assets in Rwanda.  Non-performing loans dropped from 6.4 percent in December 2018 to 4.9 percent in December 2019.  Foreign banks are permitted to establish operations in Rwanda, with several Kenyan-based banks in the country.  Atlas Mara Limited acquired a majority equity stake in Banque Populaire du Rwanda (BPR) in 2016.  BPR/Atlas Mara has the largest number of branch locations and is Rwanda’s second largest bank after BoK.  In total, Rwanda’s banks have assets of more than USD 3 billion, which increased 12.5 percent between  December 2018 and 2019, according to BNR.  The IMF gives BNR high marks for its effective monetary policy.  BNR introduced a new monetary policy framework in 2019, which shifts toward inflation-targeting monetary framework in place of a quantity-of-money framework.

In 2019, BNR reported that commercial banks liquidity ratio was 49 percent (compared to BNR’s required minimum of 20 percent), suggesting reluctance toward making loans.  The capital adequacy ratio grew to 24.1 percent from 21.4 percent over the year, well above the minimum of 15 percent, suggesting the Rwanda banking sector continues to be generally risk averse.  Local banks often generate significant revenue from holding government debt and from charging a variety of fees to banking customers.  Credit cards are becoming more common in major cities, especially at locations frequented by foreigners, but are not used in rural areas.  Rwandans primarily rely on cash or mobile money to conduct transactions.

During the COVID-19 pandemic local banks deferred loan payments from customers.  Despite this, the banking sector was confident that they had sufficient liquidity until July 2020 due to the favorable economic conditions prior to COVID-19.  In March 2020, the IMF disbursed USD 109 Million to Rwanda under the Rapid Credit Facility and the World Bank approved a USD 14.25 million immediate funding in the form of an International Development Association credit to support Rwanda’s response to the COVID-19 pandemic.  At the same time, the BNR arranged a 50 Billion Rwandan Franc (USD 53.4 Million) liquidity fund for local banks.  By December 2019, the number of debit cards in the country grew eight percent year over year to 945,000, and the number of mobile banking customers grew 22 percent to 1,266,000. The total number of bank and MFI accounts increased from 7.1 million to 7.7 million between 2018-2019. The number of retail point of sale (POS) machines grew from 2,801 to 3,477 while POS transactions grew by 53 percent in volume and 29 percent in value between 2019 and 2018 according to BNR.

Foreign Exchange and Remittances

Foreign Exchange

In 1995, the government abandoned a dollar peg and established a floating exchange rate regime, under which all lending and deposit interest rates were liberalized.  BNR publishes an official exchange rate on a daily basis, which is typically within a two percent range of rates seen in the local market.  Some investors report occasional difficulty in obtaining foreign exchange.  Rwanda generally runs a large trade deficit, estimated at more than 10 percent of GDP in 2019. Transacting locally in foreign currency is prohibited in Rwanda.  Regulations set a ceiling on the foreign currency that can leave the country per day.  In addition, regulations specify limits for sending money outside the country; BNR must approve any transaction that exceed these limits.

Most local loans are in local currency.  In December 2018, BNR issued a new directive on lending in foreign currency which requires the borrow to have a turnover of at least RWF 50 million or equivalent in foreign currency, have a known income stream in foreign currency not below 150 percent of the total installment repayments, and the repayments must be in foreign currency.  The collateral pledged by non-resident borrowers must be valued at 150 percent of the value of the loan.  In addition, BNR requires banks to report regularly on loans granted in foreign currency.

Remittance Policies

Investors can remit payments from Rwanda only through authorized commercial banks.  There is no limit on the inflow of funds, although local banks are required to notify BNR of all transfers over USD 10,000 to mitigate the risk of potential money laundering.  A withholding tax of 15 percent to repatriate profits is considered high by a number of investors given that a 30 percent tax is already charged on profits, making the realized tax burden 45 percent.  Additionally, there are some restrictions on the outflow of export earnings.  Companies generally must repatriate export earnings within three months after the goods cross the border.  Tea exporters must deposit sales proceeds shortly after auction in Mombasa, Kenya.  Repatriated export earnings deposited in commercial banks must match the exact declaration the exporter used crossing the border.

Rwandans working overseas can make remittances to their home country without impediment.  It usually takes up to three days to transfer money using SWIFT financial services.  The concentrated nature of the Rwandan banking sector limits choice, and some U.S. investors have expressed frustration with the high fees charged for exchanging Rwandan francs to dollars.

Sovereign Wealth Funds

In 2012, the Rwandan government launched the Agaciro Development Fund (ADF), a sovereign wealth fund that includes investments from Rwandan citizens and the international diaspora.  By September 30, 2019, the fund was worth 194.3 billion RWF in assets (around USD 204 million).  The ADF operates under the custodianship of BNR and reports quarterly and annually to the Ministry of Finance and Economic Planning, its supervisory authority.  ADF is a member of the International Forum of Sovereign Wealth Funds and is committed to the Santiago Principles.  ADF only operates in Rwanda.  In addition to returns on investments, citizens and private sector voluntary contributions, and other donations, ADF receives RWF 5 billion every year from tax revenues and 5 percent of proceeds from every public asset that is privatized.  The fund also receives 5 percent of royalties from minerals and other natural resources each year.  The government has transferred a number of its shares in private enterprises to the management of ADF including those in the BoK, Broadband Systems Corporation (BSC), Gasabo 3D Ltd, Africa Olleh Services (AoS), Korea Telecom Rwanda Networks (KTRN), and the One and Only Nyungwe Lodge.  ADF invests mainly in Rwanda.  While the fund can invest in foreign non-fixed income investments, such as publicly listed equity, private equity, and joint ventures, the AGDF Corporate Trust Ltd (the fund’s investment arm) held no financial assets and liabilities in foreign currency, according to the 2018 annual report.

Rwandan law allows private enterprises to compete with public enterprises under the same terms and conditions with respect to access to markets, credit, and other business operations.  Since 2006, the GOR has made efforts to privatize SOEs; reduce the government’s non-controlling shares in private enterprises; and attract FDI, especially in the ICT, tourism, banking, and agriculture sectors, but progress has been slow.  Current SOEs include water and electricity utilities, as well as companies in construction, ICT, aviation, mining, insurance, agriculture, finance, and other investments.  Some investors complain about competition from state-owned and ruling party-aligned businesses.  SOEs and utilities appear in the national budget, but the financial performance of most SOEs is only detailed in an annex that is not publicly available.  The most recent state finances audit report of the OAG also covers SOEs and has sections criticizing the management of some of the organizations.   SOEs are governed by boards with most members having other government positions.

State-owned non-financial corporations include Ngali Holdings, Horizon Group Ltd, REG, Water and Sanitation Corporation, RwandAir, National Post Office, Rwanda Printery Company Ltd, King Faisal Hospital, Muhabura Multichoice Ltd, Prime Holdings, Rwanda Grain and Cereals Corporation, Kinazi Cassava Plant, and the Rwanda Inter-Link Transport Company.  State-owned financial corporations include the NBR, Development Bank of Rwanda, Special Guarantee Fund, Rwanda National Investment Trust Ltd, ADF, BDF and the Rwanda Social Security Board.  The GOR has interests in the BoK, Rwanda Convention Bureau, BSC, CIMERWA, Gasabo 3D Ltd, AoS, KTRN, Dubai World Nyungwe Lodge, and Akagera Management Company, among others.

Privatization Program

Rwanda continues to carry out a privatization program that has attracted foreign investors in strategic areas ranging from telecommunications and banking to tea production and tourism.  As of 2017 (latest data available), 56 companies have been fully privatized, seven were liquidated, and 20 more were in the process of privatization.  RDB’s Strategic Investment Department is responsible for implementing and monitoring the privatization program. Some observers have questioned the transparency of certain transactions, as a number of transactions were undertaken through mutual agreements directly between the government and the private investor, some of whom have personal relationships with senior government officials, rather than public offerings.

There is a growing awareness of corporate social responsibility (CSR) within Rwanda, and several foreign-owned companies operating locally implement CSR programs.  Rwanda implements the OECD’s Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.  Rwanda also implements the International Tin Supply Chain Initiative tracing scheme.  In 2016, the Better Sourcing Program (currently RCS Global Group) began an alternative mineral tracing scheme in Rwanda.  Rwanda also has guidelines on corporate governance by publicly listed companies.  In recognition of the firm’s strong commitment to CSR, the U.S. Department of State awarded Sorwathe, a U.S.-owned tea producer in Kinihira, Rwanda, the Secretary of State’s 2012 Award for Corporate Excellence for Small and Medium Enterprises.  In 2015, the U.S. firm Gigawatt Global was also a finalist for the Secretary of State’s Award for Corporate Excellence in the environmental sustainability category.  Rwanda is not a member of the Extractive Industries Transparency Initiative (EITI).

Rwanda is ranked among the least corrupt countries in Africa, with Transparency International’s 2019 Corruption Perception Index putting the country among Africa’s four least corrupt nations and 51st in the world.  The government maintains a high-profile anti-corruption effort, and senior leaders articulate a consistent message emphasizing that combating corruption is a key national goal.  The government investigates corruption allegations and generally punishes those found guilty.  High-ranking officials accused of corruption often resign during the investigation period, and many have been prosecuted.  Rwanda has ratified the UN Anticorruption Convention.  It is a signatory to the OECD Convention on Combating Bribery.  It is also a signatory to the African Union Anticorruption Convention.  U.S. firms have identified the perceived lack of government corruption in Rwanda as a key incentive for investing in the country.  There are no local industry or non-profit groups offering services for vetting potential local investment partners, but the Ministry of Justice keeps judgments online, making it a source of information on companies and individuals in Rwanda at www.judiciary.gov.rw/home/ .  The Rwanda National Public Prosecution Authority issues criminal records on demand to applicants at www.nppa.gov.rw .

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

Mr. Anastase Murekezi, Chief Ombudsman , Ombudsman (Umuvunyi)
P.O Box 6269, Kigali, Rwanda
Telephone: +250 252587308
omb1@ombudsman.gov.rw / sec.permanent@ombudsman.gov.rw

Mr. Felicien Mwumvaneza, Commissioner for Quality Assurance Department (Anti-Corruption Unit) Rwanda Revenue Authority
Avenue du Lac Muhazi, P.O. Box 3987, Kigali, Rwanda
Telephone: +250 252595504 or +250 788309563
felicien.mwumvaneza@rra.gov.rw / commissioner.quality@rra.gov.rw

Mr. Obadiah Biraro, Auditor General, Office of the Auditor General
Avenue du Lac Muhazi, P.O. Box 1020, Kigali, Rwanda
Telephone: +250 78818980 , oag@oag.gov.rw

Contact at “watchdog” organization

Mr. Apollinaire Mupiganyi , Executive Director , Transparency International Rwanda
P.O: Box 6252 Kigali, Rwanda
Telephone: +250 788309563,
amupiganyi@transparencyrwanda.org / mupiganyi@yahoo.fr

Rwanda is a stable country with relatively little violence.  According to a 2017 report by the World Economic Forum, Rwanda is the ninth safest country in the world.   Gallup’s Global Law and Order Index report of 2018 ranked Rwanda 2nd safest place in Africa.  Investors have cited the stable political and security environment as an important driver of investments.  A strong police and military provide a security umbrella that minimizes potential criminal activity.

The U.S. Department of State recommends that U.S. citizens exercise caution when traveling near the Rwanda-Democratic Republic of the Congo (DRC) border, given the possibility of fighting and cross-border attacks involving the Democratic Forces for the Liberation of Rwanda (FDLR) and other groups opposed to the GOR.  Relations between Burundi and Rwanda are tense, and there is a risk of cross-border incursions and armed clashes.  Since 2018, there have been a few incidents of sporadic fighting in districts bordering Burundi and in Nyungwe National Park.

Grenade attacks aimed at the local populace occurred on a recurring basis between 2008 and 2014 in Rwanda.  There have been several cross-border attacks in Western Rwanda on Rwandan police and military posts reportedly since 2016.  Despite occasional violence along Rwanda’s borders with the DRC and Burundi, there have been no incidents involving politically motivated damage to investment projects or installations since the late 1990s.  Relations with Uganda are also tense, but leaders continue to emphasize they are seeking a political solution.  Rwanda has not allowed commercial traffic to cross the Rwandan-Ugandan border since February 2019 forcing most, if not all, commercial traffic to the Rwandan-Tanzanian border.  In May 2020, the Rwandan-Tanzania border crossings were negatively impacted due to the influx of Tanzanian truck drivers infected with COVID-19.

Please see the following link for State Department Country Specific Information:   https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/Rwanda.html 

General labor is available, but Rwanda suffers from a shortage of skilled labor, including accountants, lawyers, engineers, tradespeople, and technicians.  Higher institutes of technology, private universities, and vocational institutes are improving and producing more and highly-trained graduates each year.  The Rwanda Workforce Development Authority sponsors programs to support both short and long-term professional trainings targeting key industries in Rwanda.  Carnegie Mellon University opened a campus in Kigali in 2012–its first in sub-Saharan Africa–and currently offers a Master of Science in Electrical and Computer Engineering and Master of Science in Information Technology.  In 2013, the nonprofit university program, Kepler, was established for students to work toward a U.S.-accredited degree through online learning and in-person seminars through a relationship with Southern New Hampshire University.  Oklahoma Christian University offers an online Master of Business Administration program with on-site support in Kigali.  The African Institute of Mathematics, University of Global Health Equity and African Leadership University campuses in Rwanda offer college level and advanced degrees in many fields.    Investors are strongly encouraged to hire Rwandan nationals whenever possible.  According to the Investment Code, a registered investor who invests an equivalent of at least USD 250,000 may recruit three foreign employees.  However, a number of foreign investors reported difficulties importing qualified staff in accordance with the Investment Code due to Rwandan immigration rules and practices.  In some cases, these problems occurred even though investors had signed agreements with the government regarding the number of foreign employees.

Investors are strongly encouraged to hire Rwandan nationals whenever possible.  According to the Investment Code, a registered investor who invests an equivalent of at least USD 250,000 may recruit three foreign employees.  However, a number of foreign investors reported difficulties importing qualified staff in accordance with the Investment Code due to Rwandan immigration rules and practices.  In some cases, these problems occurred even though investors had signed agreements with the government regarding the number of foreign employees.

Rwanda has ratified all of the International Labor Organization’s eight core conventions.  Policies to protect workers in special labor conditions exist, but enforcement remains inconsistent.  The government encourages, but does not require, on-the-job training and technology transfer to local employees.  The law restricts voluntary collective bargaining by requiring prior authorization or approval by authorities and requiring binding arbitration in cases of non-conciliation.  The law provides some workers the right to conduct strikes, subject to numerous restrictions, but strikes are very rare. There is no unemployment insurance or other social safety net programs for workers laid off for economic reasons.  The minimum wage remains at 100 Rwandan Franc per day  (less than USD 0.10 per day) and has not been changed since the 1974.   The legal framework for employment rights for disabled persons is not as strong as in the United States, but the government and some employers are making efforts to offer reasonable accommodations. In 2000, the government revised the national labor code to eliminate gender discrimination, restrictions on the mobility of labor, and wage controls.   Private firms are responsible for their local employees’ income tax payments and Rwanda Social Security Board pension contributions.  For full-time workers, these payments amount to more than 30 percent of take-home pay, which can be a disadvantage if competing firms are in the informal economy and not compliant with these requirements.  Labor laws are not waived in order to attract or retain investment.  There are no labor law provisions in SEZs or industrial parks, which differ from national labor laws.  Collective bargaining is not common in Rwanda.  Few professional associations fix minimum salaries for their members and some investors have expressed concern that labor law enforcement is uneven or opaque.  The minimum wage has not changed since 1974 and is 100 Rwandan francs (USD 0.10) per day.

The legal framework for employment rights for disabled persons is not as strong as in the United States, but the government and some employers are making efforts to offer reasonable accommodations. In 2000, the government revised the national labor code to eliminate gender discrimination, restrictions on the mobility of labor, and wage controls.   Private firms are responsible for their local employees’ income tax payments and Rwanda Social Security Board pension contributions.  For full-time workers, these payments amount to more than 30 percent of take-home pay, which can be a disadvantage if competing firms are in the informal economy and not compliant with these requirements.  Labor laws are not waived in order to attract or retain investment.  There are no labor law provisions in SEZs or industrial parks, which differ from national labor laws.  Collective bargaining is not common in Rwanda.  Few professional associations fix minimum salaries for their members and some investors have expressed concern that labor law enforcement is uneven or opaque.  The minimum wage has not changed since 1974 and is 100 Rwandan francs (USD 0.10) per day.

DFC (Former Overseas Private Investment Corporation) has provided financing and political risk insurance to more than a dozen U.S. projects in Rwanda since 1975.  DFC officials have expressed interest in expanding the corporation’s portfolio in Rwanda and are currently evaluating potential projects.  The Export-Import Bank continues its program to ensure short-term export credit transactions involving various payment terms, including open accounts that cover the exports of consumer goods, services, commodities, and certain capital goods.  The 1965 U.S.-Rwanda Investment Incentive Agreement remains in force; Rwanda and the United States are discussing potential updates to this agreement.

*Host country source: https://www.statistics.gov.rw/file/8442/download?token=pcrJ3_Fj 

Table 4: Sources of Portfolio Investment
Data on Rwanda equity security holdings by nationality is not available.  According to a 2018 BNR report, portfolio investment remains the lowest component of foreign investment in Rwanda mainly due to the low level of financial market development.  Portfolio investment stock amounted to $109.3 million in 2018, a 5 percent increase from 2017 levels.  In 2018, Rwanda recorded foreign portfolio inflows of $5.4 million compared to $2.5 million in 2017.

Jonathan Scott
Economic and Commercial Officer
United States Embassy
2657 Avenue de la Gendarmerie, P.O. Box 28 Kigali, Rwanda
+250-252-596-538
KigaliEcon@state.gov

Policies Towards Foreign Direct Investment

Seychelles has a favorable attitude toward most foreign direct investment, though the GOS reserves certain types of business activities for domestic investors only. The Seychelles Investment (Economic Activities) Regulations provide a detailed list of 65 types of business in which only Seychellois may invest, available here: https://www.investinseychelles.com/component/edocman/si-71-seychelles-investment-economic-activities/download?Itemid=0 . The Regulations also provide details on the limitations on foreign equity for certain types of businesses and a list of economic activities in which need-based investment may be allowed by a foreigner. In June 2015, Seychelles implemented a moratorium on the construction of large hotels of 25 rooms and above in the island. In 2017, the President announced the decision to extend the moratorium until the end of 2020.

The Seychelles Investment Board (SIB) is the national single gateway agency for the promotion and facilitation of investment in Seychelles. The government’s objective is to promote economic and commercial relationships to diversify the economy, as well as to sustain its tourism and fishing industries, which are currently the main drivers of economic growth. The SIB organizes sector specific meetings with investors periodically and hosts a National Business Forum every two years to engage with the private sector.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Seychelles Investment Act of 2010 and Seychelles Investment (Economic Activities) Regulations 2014 govern foreign direct investment (FDI) in Seychelles and are available at: https://www.investinseychelles.com/investors-guide/policies-guidelines-acts . Since the financial crisis of 2008 and the implementation of subsequent IMF reforms, Seychelles has successfully attracted FDI. According to the Central Bank of Seychelles, gross FDI inflows in 2019 amounted to $246 million, representing a decrease of $62 million compared to 2018. This decrease is principally due to delays in the implementation of a number of tourism projects that were not affected by the 2015-2020 moratorium on large tourism developments. The SIB advises foreign investors on the laws, regulations, and procedures for their activities in Seychelles.

The Seychelles Investment (Economic Activities) Regulations of 2014 lists the economic activities in which only Seychellois can invest. This regulation is currently being reviewed to convert the list into a list of foreign activities in which foreigners can invest to allow for increased transparency and better governance. Seychelles also places financial limits on foreign equity in certain types of resident companies – these limits are detailed in the Seychelles Investment (Economic Activities) Regulations 2014. The Regulations also provide a list of economic activities in which need-based foreign investment may be allowed. While SIB and the GOS encourage foreign investors to collaborate with a local partner, there is no formal requirement.

SIB also assists in screening potential investment projects in cooperation with other government agencies. For a business to operate, investors need to apply for a license from the Seychelles Licensing Authority. The GOS established an Investment Appeal Panel in 2012 to provide an appeal mechanism for investors to challenge GOS decisions regarding investments or proposed investments in Seychelles. More information is available in the Seychelles Investment Act 2010: https://seylii.org/sc/Act%2031%20of%202010%20Seychelles%20Investment%20Act%20%5BNo%20subsidiary%5D.pdf 

Other Investment Policy Reviews

To date, Seychelles has not conducted an investment policy review through the Organization for Economic Cooperation and Development (OECD) or the World Trade Organization (WTO). Seychelles became the 161st WTO member in April 2015. UNCTAD is currently conducting an investment policy review in Seychelles and the report is expected to be finalized by the end of 2020.

Business Facilitation

The GOS committed to improving the business environment through measures such as using public-private partnerships (PPP) to upgrade the country’s infrastructure. The GOS announced a draft PPP law in 2018; as of March 2020, the National Assembly had not yet voted on the measure. In his 2018 budget speech, the Minister of Finance announced that the Customs Department would be restructured to modernize its activities and facilitate trade. Seychelles reviewed its Customs Management Tariff Classification of Goods Regulations and adopted the 2017 version of the Harmonized System of classification in 2018. The GOS is also currently reviewing the Companies Act of 1972.

Seychelles is ranked 100th in the World Bank’s 2020 Ease of Doing Business Report. On average, it takes eight days to obtain a certificate of incorporation and 14 days to obtain a business license. Details on starting a business in Seychelles are available on the World Bank website: https://www.doingbusiness.org/en/data/exploreeconomies/seychelles#.

Information on registering a business in Seychelles can be obtained on the SIB website: https://www.investinseychelles.com/investors-guide/start-your-business. Companies, including those foreign-owned, can register business names online through the business registration portal: http://www.sqa.sc/BizRegistration/WebBusinessRegsitration.aspx . However, part of the registration process, such as payment of fees, still must be completed in-person.

The Enterprise Seychelles Agency (ESA) is responsible for providing business development services to improve the performance of micro, small, and medium enterprises in Seychelles. Services provided by ESA include business planning, training, marketing expertise, and identification of business opportunities for SMEs.

Outward Investment

The GOS does not promote or incentivize outward investment. However, it does not restrict local investors from investing abroad.

Transparency of the Regulatory System

Although the government has made considerable efforts to liberalize the economy, Seychelles continues to suffer from overregulation. Concerns over government corruption have focused on the lack of transparency in the privatization and allocation of government-owned land and businesses. However, following the last election in 2016, the new government, pressed by the opposition majority in parliament, has taken a number of measures to combat corruption and nepotism. For example, an Anti-Corruption Commission has been set up, the Auditor General’s Office has begun more frequently publishing special audits of questionable government transactions, and the President appointed opposition supporters to many boards of national organizations and important positions.

In an attempt to promote transparency in the public procurement system, Seychelles’ National Tender Board publishes all tenders both on its website (http://www.ntb.sc ) and in local newspapers. It publicizes contracts that have been awarded and includes the name of successful bidders and bid amounts. The government has also set up a Procurement Oversight Unit, which serves as a public procurement policy and monitoring body (http://www.pou.gov.sc/ ).

During the September 2016 parliamentary elections, the opposition alliance won a majority in the National Assembly for the first time in 40 years, resulting in significant procedural changes. In 2017, there was considerably more legislative debate about the 2017 budget than in prior years. Similarly, in preparation for budgets since 2017, a series of focus group discussions were held with stakeholders such as the business community and NGOs.

Proposed laws and regulations, as well as final laws, are published in the Official Gazette on a monthly basis. Regulatory transparency has improved with the new administration which has proposed several new laws, including a Freedom of Information Act. Additionally, ministries are now required to submit white papers and consult with stakeholders before legislation is adopted.

Seychelles’ budget is easily accessible to the general public: http://www.finance.gov.sc/national-budget/35 . Budget documents, including the executive budget proposal and the enacted budget, provide a substantially full picture of Seychelles’ planned expenditures and revenue streams. Publicly available budgets included expenditures broken down by ministry and revenues broken down by source and type. Information on debt obligations is also readily available. In 2019, for the first time, the government included a fiscal risk statement, which identified substantial fiscal risks emanating from public enterprises in Seychelles. Details on explicit and contingent liabilities are available in the fiscal risk statement, which is available on the following link: http://www.finance.gov.sc/uploads/national_budget/Fiscal%20Risk%20Statement%202019.pdf .

International Regulatory Considerations

Seychelles has signed trade agreements with regional blocs such as COMESA, SADC, and the iEPA. Seychelles has also signed the Tripartite Free Trade Agreement (TFTA) and the African Continental Free Trade Agreement (AfCFTA) but has not yet ratified these agreements. In January 2019, four Eastern and Southern African (ESA) countries including Seychelles signed the UK-ESA Economic Partnership Agreement, which would safeguard trade preferences currently enjoyed under iEPA after Brexit.

Seychelles joined the WTO in 2015, becoming the 161st member. Seychelles does notify draft technical regulations to the WTO Committee on Technical Barriers to Trade. In 2016, Seychelles ratified the Trade Facilitation Agreement (TFA). Further details on Seychelles’ TFA notifications to the WTO can be found here: https://tfadatabase.org/members/seychelles/measure-breakdown 

Legal System and Judicial Independence

Seychelles’ legal system is a blend of English common law, the Napoleonic Code, and customary law. Civil matters, such as contracts and torts, are governed by the Civil Code of Seychelles, which is derived from the French Napoleonic Code. However, the company law and criminal laws are based on British law. In both civil and criminal matters, the procedural rules derive from British law. Seychelles does not maintain a specialized commercial court. Judgments of foreign courts are governed by Section 3 of the Foreign Judgments (Reciprocal Enforcement) Act of 1961. The World Bank ranked Seychelles 128th out of 190 countries in enforcing contracts in its 2020 Ease of Doing Business Report. Under the current government, the perception among Seychellois is that the judiciary is no longer influenced by the executive.

Laws and Regulations on Foreign Direct Investment

The GOS established the SIB (https://www.investinseychelles.com/ ) as a one-stop shop for all matters relating to business and investment in Seychelles. The SIB’s main functions are to promote investment and facilitate the investment process within the country’s administrative and legal framework. The SIB also assists in screening potential investment projects in cooperation with other government agencies. The GOS is keen to ensure that business activities are not conducted at the expense of Seychelles’ natural environment. For a business to operate, investors need to apply for a license from the Seychelles Licensing Authority (http://www.sla.gov.sc/ ). The GOS established an Investment Appeal Panel in 2012 to provide an appeal mechanism for investors to challenge GOS decisions regarding investments or proposed investments in Seychelles.

Competition and Anti-Trust Laws

The SIB only reviews competition cases initiated by other government authorities, private sector entities, or investors. Current legislation does not empower SIB to sua sponte review all transactions for competition related concerns. The Fair Trading Commission (http://ftc.sc/ ) is responsible for investigating competition-related concerns. Such investigations may be initiated by the Commission or may be carried out following a complaint.

Expropriation and Compensation

The Lands Acquisition Act 1978, last amended in 1990, states that when the government takes possession of property, it must pay prompt and full compensation for the property. The GOS may expropriate property in cases of public interest or for public safety. Following the 1977 coup, the GOS engaged in expropriation of land for redistribution or for use by the state. With the return of a multi-party political system in 1993, the GOS compensated some of those who had lost land to expropriation/redistribution in the late 1970s. In 2017, Seychelles set up a Land Compensation Tribunal to look into cases where compulsory land acquisition was made by Government without adequate compensation. Seychellois whose land was taken by the government from 1977 to 1993 have until June 2020 to make their claims. The Land Compensation Tribunal also works in close collaboration with the Truth Reconciliation and National Unity Commission (TRNUC) which is investigating cases of human rights abuses prior and after the 1977 coup. Illegal land acquisition by the government also forms part of the TRNUC’s mandate. The Embassy does not anticipate major expropriations in the near future, nor is it aware of any pattern of discrimination against U.S. persons.

Dispute Settlement

ICSID Convention and New York Convention

In 1978, Seychelles joined the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). In February 2020, Seychelles deposited its instrument of accession to the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention), which will enter into force in May 2020.

Investor-State Dispute Settlement

The Embassy is aware of at least one investor-government dispute in the reporting period. The dispute involves the operation of a large hotel resort by a company with U.S. shareholders that the GOS also had a small stake in. In 2008, the GOS sought to wind up the company on the grounds that it “had disappeared in its ability to operate as a hotel resort” arguing that the hotel resort had been allowed to fall into disrepair, and resulted in the cancellation of its operating license. The liquidation and subsequent sell-off of the hotel, formerly the country’s second largest hotel, raised suspicions of government corruption among many local press outlets and business institutions, including the chamber of commerce. The former owner of the hotel claimed that he was threatened into selling the hotel by a businessman with ties to the government. The purchasers of the hotel were the lowest bidder, a newly formed group allegedly led by the same businessman with close government ties who threatened the previous owner. In October 2019, the Supreme Court recommended that a Commission of Inquiry be set up to inquire into the matters pertaining to the sale of the hotel. As of June 2020, President Faure appointed a Commission of Inquiry to look into the dispute and a report is expected in six months.

Parties involved in investment disputes are encouraged to resolve their disputes through arbitration and negotiation. The Seychelles Investment Act created an Investment Appeal Panel to which aggrieved investors may appeal for a review of a decision made by a public sector agency with regard to their investments or proposed investments in Seychelles. In addition, investors may appeal to the Court of Appeal in the event they are not satisfied with the decision of the Investment Appeal Panel. Seychelles has effected the accession to the New York Convention on the recognition and enforcement of foreign arbitral awards. The convention entered into force on May, 3 2020. In the World Bank’s 2020 Ease of Doing Business Report, Seychelles ranked 143rd out of 190 countries for protecting minority investors.

International Commercial Arbitration and Foreign Courts

Due to Seychelles’ small size and relatively short recent history with foreign direct investment, there is no precedent for international arbitration in Seychelles, although the legal framework exists through the Seychelles Investment Act.

Bankruptcy Regulations

Bankruptcy in Seychelles is governed under the Insolvency Act of 2013 (https://www.seylii.org/sc/legislation/act/2013/4 ). According to the Act, an individual may be discharged from bankruptcy three years from the date of its declaration. Bankruptcy is not criminalized in Seychelles. According to the 2020 World Bank Doing Business Report, Seychelles ranks 75th out of 190 countries on the resolving insolvency index. It takes on average two years to complete a bankruptcy.

Investment Incentives

The GOS enacted legislation providing incentives for investment in several sectors. Examples include the Agriculture and Fisheries (Incentives) Act 2005, the Tourism Incentives Act, the Seychelles International Trade Zone Act, and fiscal incentives under the Investment Code. Incentives under these laws most often take the form of tax credits, tax holidays, duty-free access for the import of materials required for initial investment, and expedited work permits for foreign employees who move to Seychelles.

The SIB has the mandate to promote investment in Seychelles and assists in screening potential investments. In 2018, the GOS announced an investment policy guided by the following principles: (i) creation of a conducive and transparent environment to attract investment and operate business; (ii) modernization of the legal framework for investment; (iii) application of international best practices and standards for investment; and (iv) respect for the environment and sociocultural fabric of the country. The investment policy statement is available on the following link: https://www.investinseychelles.com/downloads/investment-policy/seychelles-investment-policy/download .

According to the SIB, the GOS does not issue investment guarantees, but Seychelles’ Public Private Partnership framework allows public and private sector entities to jointly finance foreign direct investment projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Seychelles International Trade Zone (SITZ) Act of 1995  provides for the establishment of free trade zones, which aim to combine the benefits of a freeport and an export processing zone. A number of locations have been declared International Trade Zones under this regime. Updated in 2018, the list of concessions available to SITZ license holders includes the following:

• Exemption from customs duties on certain capital equipment to be used in the SITZ;
• Exemption from certain taxes;
• Exemption from fees with respect to work permits;
• Entitlement to full foreign ownership;
• Entitlement to employ 100 percent foreign labor; and
• Exemption from national labor laws.

Activities of the SITZ are regulated by the Seychelles Financial Services Authority, formerly known as the Seychelles International Business Authority. Foreign-owned firms benefit from the same incentives as local firms operating in the SITZ. In order to meet the requirements of the Base Erosion and Profit Shifting (BEPS) standard of the Organization for Economic Cooperation and Development (OECD), licensable export services activities under the International Trade Zone Act have been amended. Under the revised regime, the holder of an export services license will not be allowed to provide services other than repair and reconditioning of goods, warehousing and rental of storage space, or logistical services, provided that these activities relate to goods physically handled in the zone in Seychelles.

Export services operators licensed on or before October 16, 2017 will still enjoy all concessions and exemptions accorded under the International Trade Zone Act until June 30, 2021, provided that the benefits do not extend to assets or activities introduced on or after October 17, 2017. In his 2020 budget speech, the President announced that further amendments will be made to the tax regime governing manufacturing activities under the International Trade Zone and a grandfathering period, which will not extend beyond December 31, 2022, will be applied for the new regime. In his 2020 State-of-the-Nation Address, President Faure announced that foreign workers will pay into the Seychelles Pension Fund and recover only 25 percent of their pension payment when they leave the country.

Performance and Data Localization Requirements

The government of Seychelles does not mandate local employment, nor are there local employment mandates for senior management or directors. Visa, residence, and work permit requirements are not excessively onerous. The GOS has announced that the Gainful Occupation Permit (GOP) fees for foreign workers working in Seychelles for more than 12 years as well as for top management level jobs in big companies will increase this year.

Investors operating in Seychelles are expected to abide by the following obligations:

• Comply with the provisions of the governing laws on investment procedures and carry out investment activities correctly in accordance with the approvals granted. This includes the responsibility of the investor for accuracy and truthfulness in materials submitted in investment proposals and registration;
• Fully discharge their financial obligations, including taxation, in accordance with the law;
• Carry out the provisions of the laws on accounting and auditing;
• Carry out the provisions of the laws on registration of companies and other legal entity; and
• Carry out the provisions of the employment laws and regulations.

Seychelles does not have a single comprehensive law that addresses the collection and use of personal data. The Data Protection Act (DPA) was enacted in 2003 to provide individuals with privacy rights regarding processing of their personal data, but as of February 2020 it has not entered into force. Other sectoral laws that include data protection provisions are: Civil Code of Seychelles (1976), Computer Misuse Act (1998), Electronic Transactions Act (2001), Financial Institutions Act (2004), Central Bank of Seychelles Act (2004), Anti-Money Laundering and Combating the Financing of Terrorism Act (2020), Financial Services Authority Act (2013), Anti-Corruption Act (2016), and International Business Companies Act (2016).

Currently there is no legal requirement obliging foreign IT providers to hand over their source code or provide access to the encryption utilized. Seychelles does not have any legal instrument that prevents or restricts companies from transmitting customer or business-related data outside the country. Consequently, at the moment there are no Government agencies involved in enforcing any rules or regulations with regards to local data storage in Seychelles.

The Embassy is not aware of any investment performance requirements.

Real Property

The courts enforce interests in real property. Mortgages and liens are enforced, and the land registrar resolves land disputes. All lands in Seychelles are either publicly or privately held. According to the World Bank’s 2020 Doing Business Report, Seychelles ranked 65th out of 190 countries in the Registering Property index. In 2014, the GOS discontinued selling state land to non-Seychellois.

The Immovable Property Tax Act, which was enacted in December 2019, introduced an annual tax of 0.25 percent on the assessed market value of residential property owned by all foreigners.

Intellectual Property Rights

The GOS has measures in place to enforce intellectual property rights (IPR) but awareness of IPR is limited and enforcement is weak. Seychelles joined the World Intellectual Property Organization (WIPO) in March 2000. The country became a contracting party to the Paris Convention for the Protection of Industrial Property and the Patent Cooperation Treaty (PCT) in November 2002. The Cabinet of Ministers has approved plans for Seychelles to accede to the Madrid Protocol .  Seychelles also signed the Beijing Treaty on Audiovisual Performances in June 2012. and ratified the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization (ABS) to the Convention on Biological Diversity (CBD) in October 2014.  Additionally, the Cabinet of Ministers approved Seychelles’ membership in the African Regional Intellectual Property Organization (ARIPO) by way of acceding to the Harare Protocol on Patents and Industrial Designs.

The Copyright Act 2014 and the Industrial Property Act 2014 contain provisions that set forth the laws relating to infringement of intellectual property rights. The Customs Management (Border Measures) Regulations 2014 provides enforcement measures at the border with respect to counterfeit goods.  There is currently no legislation for plant variety protection. As required by WTO principles, Seychelles IP law treats foreign nationals and Seychellois citizens equally. Enforcement of IPR protection laws is limited since very few international brands and trademarks have local or even regional representatives.

In 2017, the Cabinet of Ministers established a National Intellectual Property Committee to serve as a coordinating body for consultations with stakeholders on IP matters. The Committee, which falls under the purview of the Trade Division of the Ministry of Finance, Trade, and Economic Planning, comprises representatives from government, non-governmental organizations, and the private sector and meets on a monthly basis. In the 2018 budget speech, the Minister of Finance announced that that Government would develop a modernized Intellectual Property Office that would serve as a “one stop shop” for IP issues. While the Registrar General’s Office services as the one-stop-shop for both copyright and intellectual property, a new facility is expected to be built in the future.

Chapter 13 of the Customs Management (Border Measures) Regulations 2014 provides for enforcement measures at the border with respect to counterfeit and/or pirated goods. Furthermore, the Trade Division has, in consultation with the Customs Division, developed Procedural Guidelines on Border Measures for the Protection of Intellectual Property Rights (https://www.src.gov.sc/resources/Guides/2018/IPRs.pdf ) to counter the import and export of counterfeit and pirated goods. While no statistics are available, the Seychelles Revenue Commission’s customs officials monitor incoming shipments for counterfeit goods. However, their focus is on counterfeit products that pose a public health risk, such as medications and electrical appliances. Counterfeit apparel, CDs, and DVDs are widely available in Seychelles markets.

Seychelles is neither listed on the United States Trade Representative (USTR) Special 301 Report nor the 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/ .

Embassy Contact for IPR:

Smita Bheenick
Economic/Commercial Specialist
U.S. Embassy
Port Louis, Mauritius
+230 202 4430
bheenicks@state.gov

Some Law Firms in Seychelles also handling IPR:*

KAREN DOMINGUE
Room 8, Trinity House
Huteau Lane 41
Victoria, Mahe
Seychelles
+248 422 6243
icsey@sechelles.net

A.G. AMESBURY
Room 104, Premier Building
Victoria, Mahe
Seychelles
+248 423 28 41
a.g.amesburyattorney@gmail.com

ANTONY G. DERJACQUES
Suite 5 & 6, Trinity House
Huteau Lane
Victoria, Mahe
Seychelles
+248 432 19 00
dec@seychelles.net

FRANK ALLY LAW CHAMBERS
Suite 213, Premier Bldg.,
Albert Street
Victoria, Mahe
Seychelles
+248 432 30 80
frankally@seychelles.net

*List for convenience only, not intended to imply endorsement by the U.S. Government.

Capital Markets and Portfolio Investment

Seychelles welcomes foreign portfolio investment. The Seychelles Securities Act (https://www.fsaseychelles.sc/wp-content/uploads/2019/08/Consolidated-Securities-Act-2007-to-20th-December-2018.pdf ) provides the legal framework for the Seychelles stock market. The Seychelles Securities Exchange, owned by South Africa’s Quote Africa Group, has operated since 2012. The exchange, which was previously known as Trop-X, was rebranded MERJ in 2019. Listing and trading are available in U.S. Dollars, Euros, Pounds Sterling, Seychelles Rupees, and South African Rand. In August 2019, the exchange listed its own security tokens on its main board. This was followed by an initial public offering (IPO) in September, where 16 percent of the company’s tokenized shares were offered to the general public. Portfolio investment in Seychelles is limited by the small size of the economy and banking sector. The buying and selling of sizeable positions may have an outsized impact on the Seychelles Rupee and the economy in general. There are no restrictions on trading by foreigners. By the end of February 2020, there were 38 equity listings with a total market capitalization of $1.244 billion and two debt listings with a market capitalization of EUR 205 million. MERJ is also a partner exchange of the Sustainable Stock Exchanges Initiative.

Existing policies facilitate the free flow of financial resources in and out of the economy. The GOS respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions. Foreign investors are able to obtain credit on the local market and through the Seychelles banking system, and a variety of credit instruments are available to both local and foreign investors.

Money and Banking System

Seychelles has a two-tier banking system that separates the central and commercial bank functions and roles. Commercial banks, both domestic and foreign, are regulated and supervised by the Central Bank of Seychelles (CBS). According to the Central Bank of Seychelles Act 2004, the CBS is responsible for the formulation and implementation of Seychelles’ Monetary and Exchange Rate policies. The CBS is the only administrative body responsible for receiving applications for banking licenses, whether domestic or offshore, and issuing the corresponding licenses.

As of February 2020, there were eight commercial banks in operation: Absa Bank, Bank of Baroda, Mauritius Commercial Bank (Seychelles), Nouvobanq, Seychelles Commercial Bank, Al Salam Bank Seychelles Ltd, Bank of Ceylon, and the State Bank of Mauritius (SBM) (Seychelles). According to a 2016 report by the CBS, 94 percent of Seychellois use banks. Seychelles also has three non-banking financial institutions: the Seychelles Credit Union, a savings and credit cooperative society; the Development Bank of Seychelles, which provides flexible financing for businesses and projects to promote economic growth and employment; and the Housing Finance Corporation, a government-owned company that provides financing to Seychellois for the purchase of land, the construction of homes, and financing home improvements.

Seychelles has a number of laws that govern the financial services sector: Financial Institutions Act 2004, Anti-Money Laundering and Combating the Financing of Terrorism Act 2020, Data Protection Act, Mutual and Hedge Fund Act 2007, and Central Bank Act 2004. The Seychelles banking sector is generally healthy, though it is limited by small size and reliance on correspondent bank relationships. Due to concerns about money-laundering and illicit finance in the Seychellois financial sector, some local banks have lost their correspondent banking relationship with foreign banks, a phenomenon known as de-risking, making it difficult for local banks to perform international transactions. In 2017, the CBS and the Financial Services Authority visited foreign financial centers to address de-risking. The government is actively working with international experts, including the World Bank and International Monetary Fund, to ensure Seychelles is not perceived as high-risk jurisdiction. In February 2020, the European Union added Seychelles to the list of non-cooperative jurisdictions for tax purposes as Seychelles had not implemented the tax reforms by the agreed deadline of December 2019 to which it had committed. Two months earlier, France added Seychelles to its blacklist of tax havens for not providing adequate information on French offshore entities operating in the island nation’s jurisdiction. On March 5, 2020, the President signed the National Assembly passed the Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) Act 2020 and the Beneficial Ownership (BO) Act 2020. These two pieces of legislation address the deficiencies identified in the 2018 Mutual Evaluation Report of the Eastern and Southern Africa Anti Money Laundering Group (ESAAMLG).

According to the CBS, in February 2020 non-performing loans to total gross loans in the Seychelles banking sector stood at 2.99 percent, and foreign currency deposits totaled 8,059 million Seychelles Rupees ($573 million).

A wide range of financial services such as checking accounts, savings accounts, loans, transactions in foreign currencies, and foreign currency accounts are available in the banking system. Foreigners and foreign/offshore firms must establish residency or proof of business registration to obtain a bank account.

Foreign Exchange and Remittances

Foreign Exchange

Since the IMF reform package of 2008-2013, the GOS places no restrictions or limitations on foreign investors converting, transferring, or repatriating funds associated with investment. Funds are freely converted. Seychelles maintains a floating exchange rate for the Seychelles Rupee (SCR), which has mostly fluctuated between SCR 12 and SCR 14.5 to $1 over the past five years. In 2019, the SCR remained fairly stable against the USD with an average exchange rate of SCR 14.1 to $1. Between March and April 2020, the SCR depreciated by 27 percent with the rate at the end of April being SCR 17.9 to $1. Due to the Covid-19 crisis, there has been a notable decrease in foreign exchange inflows and the CBS has intervened by disbursing $10 million in the domestic market.

Remittance Policies

Foreign exchange controls were removed in 2008 and foreign investors are free to repatriate their profits and other incomes. The Embassy is unaware of any planned changes to remittance policies, time limits on remittances, or use of any legal parallel market.

Sovereign Wealth Funds

Seychelles does not maintain any sovereign wealth funds. However, in his State of the Nation address in March 2018, the President said that a law would be presented to the National Assembly later during the year to establish a sovereign wealth fund. As of April 2020, this had not materialized.

Seychelles is one of 14 countries participating in the State-Owned Enterprises (SOE) Network for Southern Africa, which was launched in 2007 to support, in collaboration with the OECD, southern African countries in their efforts to improve the performance of SOEs.

According to the Public Enterprise Monitoring Commission Regulations 2019 there are currently 34 state-owned commercial public enterprises,  which have either been established using public financial resources or in which the government has a significant shareholding. These government-owned organizations are responsible for the delivery of both commercial and social objectives. They offer a range of essential services, including electricity, water, roads, seaports, fuel supply, import/export, retail, transport, civil aviation, housing, and tourism. In his 2019 State of the Nation Address, President Faure announced that the government would inject $6 million into Air Seychelles each year for the next five years. At the end of 2018, total assets of SOEs amounted to $2 billion, representing 189 percent of total GDP while the total net income was $89 million.

SOEs are generally free to purchase and/or supply goods and services from private sector and foreign firms. However, there is a growing concern in the business community that SOEs such as the Seychelles Trading Company (STC) have been allowed to exceed their explicit mandate and compete unfairly. For example, STC has expanded its operations in the retail business with the opening of a hypermarket, a hardware store, and a luxury goods department selling perfumes and designer bags. Most SOEs and parastatal bodies maintain a board of directors and make regular reports to the corresponding ministry. The President and the responsible Minister have authority over the size and composition of the boards of SOEs. The Public Enterprise Monitoring Commission (PEMC), set up in 2013 through the PEMC Act, is an independent institution responsible for monitoring financial, governance, and transparency issues related to public enterprises. Governance and operational assessments of six major SOEs were conducted in 2016 with World Bank assistance. On this basis, an implementation plan for governance and operational review of public enterprises for the period 2017-2019 was prepared and approved by the Cabinet of Ministers.

Audited financial statements of SOEs are published annually on the PEMC website (https://www.pemc.sc/reports ). The GOS has published a Code of Governance for Public Entities to provide guidelines to improve the governance, monitoring and control of public entities in Seychelles. The Code, which was developed by the PEMC along with other stakeholders, can be accessed on its website: https://www.pemc.sc/resource-centre.

Privatization Program

In his 2018 budget speech, the Minister of Finance announced that his Ministry will call on private sector investors to enter into public-private partnership initiatives or partial privatization of the following SOEs: (i) L’Union Estate Company, (ii) Indian Ocean Tuna, (iii) Land Marine Ltd., (iv) European Investment Bank’s shares in Development Bank of Seychelles, and (v) Agence Francaise de Developpement’s shares in Development Bank of Seychelles. In his March 2018 State of the Nation address, the President announced that 20 percent of the Seychelles Petroleum Corporation would be privatized beginning November 2018, but this decision was later withdrawn. Similar privatization plans were announced in previous years, but progress has been slow. The Embassy is not aware of any other formal legal barriers to foreign investors participating in privatization.

Seychellois society has a high level of awareness of Corporate Social Responsibility (CSR), especially in environmental protection and social programs, but CSR is generally regarded as a function of government. Since 2013, the Seychelles Revenue Commission has been collecting a CSR tax of 0.5 percent on monthly turnover for businesses with an annual turnover of SCR 1 million or more. More information on the CSR tax is available via the following link: https://www.src.gov.sc/pages/csr/csr.aspx . Officially, there are no waivers available for foreign investors with regard to labor law, employment rights, consumer protection, or environmental standards.

The Citizens Engagement Platform Seychelles (CEPS), an umbrella organization for Seychelles’ NGOs, provides a list of NGOs active in the country to the Ministry of Finance, which then decides which organizations would benefit most from the CSR tax revenues. The GOS revised the CSR guidelines in January 2017, with focus on programs linked to social needs. In particular, the following sectors benefit from the CSR fund: environment; health and society; community, youth, sports and arts; and drug rehabilitation and substance abuse. It was announced again in the 2020 budget that all CSR contributions from public enterprises will be used to build an elder care facility.

Seychelles currently has no production in the extractive sector, but international companies have undertaken petroleum exploration activities offshore. The Extractive Industries Transparency Initiative (EITI) accepted Seychelles as a candidate country in August 2014 and Seychelles’ validation against the standard began in January 2018. The 2017 EITI annual progress report published in July 2018 can be accessed at: https://eiti.org/document/seychelles-eiti-annual-progress-report-2016 . In October 2018, the EITI Board assessed Seychelles as having achieved “meaningful progress” against the EITI standard.

Ruling with transparency and accountability are stated priorities of the current government. In 2016, the government established the Anti-Corruption Commission of Seychelles (ACCS) under the Anti-Corruption Act, which gives it authority to investigate, detect, and prevent corrupt practices. The ACCS is now functional and, though small, has carried out a number of investigations. A local chapter of Transparency International, Seychelles Transparency Initiative (TI), was set up in 2017. TI’s focus is currently on increasing transparency in tourism, fisheries, finance and construction.

In his March 2018 State of the Nation address, the President stated that the government will review anti-corruption laws and provide more resources to the ACCS so it can fulfill its mandate. The Anti-Corruption (Amendment) Bill  (https://seylii.org/sc/legislation/bill/2020/4 ) was voted in by the National Assembly in 2019 giving the ACCS investigative and arresting powers similar to that of the police.

Seychelles signed the UN Convention against Corruption in February 2004 and ratified it in March 2006. Seychelles is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

In 2003, the GOS published the Public Service Code of Ethics and Conduct, the stated purpose of which is to provide guidance to public sector employees on the standards of behavior required of them. The Public Officer’s Ethics Act of 2008 prohibits personal enrichment through public office, defines and outlaws bribery, provides guidelines for avoiding conflict of interest, and mandates declaration of financial assets for public officials including members of the National Assembly. The government does not require private companies to establish internal codes of conduct.

Resources to Report Corruption

Anti-Corruption Commission
May De Silva
Chief Executive Officer
Victoria House,
State House Avenue
Victoria, Mahe

Nicole Tirant-Gherardi
Ombudsperson
Office of the Ombudsperson
Room 306, Aarti Chambers, Mont Fleuri, Mahe
+248 225147
ombuds@seychelles.net

The constitution provides citizens the right to change their government peacefully, and citizens exercise this right in practice through periodic elections based on universal suffrage. Seychelles has not experienced large-scale political violence since the late 1970s. The United Seychelles party, formerly known as Parti Lepep, governed Seychelles following the 1977 coup and won every election from the introduction of multi-party democracy in 1993 until 2016, when a coalition of opposition parties won the majority of the National Assembly seats. Shortly afterward, President James Michel resigned in favor of his Vice President, Danny Faure. The current era of divided government, with one party in the Presidency and another in control of the legislature, has so far resulted in political stability.

The national unemployment rate for the year 2019 was 2.7 percent, 2.9 percentage points lower than in 2018. In the fourth quarter of 2019, 61.9 percent of the unemployed population were male. The annual youth unemployment rate fell from 10.5 percent in 2018 to 9.4 percent in 2019.

The private sector accounted for 67 percent of formal employment in the fourth quarter of 2019. Within the private sector, the largest categories of employment were accommodation and food services activities (27 percent) and construction (19 percent). Major challenges that persist in the labor market include difficultly recruiting locals for certain jobs and low productivity level.

Seychelles has long been an importer of foreign labor due to its small population and low human resource base. The share of foreign labor to total employment in the private sector is approximately 40 percent, with the majority working in the fishing and construction sectors. Since 2014, a quota system has applied to industries for which demand for foreign labor is high.

Seychelles has been a member of the International Labor Organization (ILO) since 1977 and has ratified all fundamental International Labor Organization (ILO) conventions. Under Seychellois law, all workers, with the exception of police, military, prison, and firefighting personnel, have the right to form and organize unions of their own choosing, to participate in collective bargaining, and to conduct legal strikes. However, these rights are limited or restricted by other provisions of law. Although collective bargaining is legal, it rarely happens because the law gives the right to the government to review and approve all collective bargaining agreements in both the private and public sector. Strikes are illegal in Seychelles unless all other arbitration procedures have been exhausted. About 15 percent of the workforce is unionized.

In January 2020, the President raised the minimum wage to SCR 5,804 ($426) per month. In 2017, the government re-introduced the Unemployment Relief Scheme (URS) for Seychellois aged above 18 and who are dependent on welfare. In the event of layoffs where there is no employee misconduct, the employer must provide the worker with one month’s notice or the equivalent of one month’s salary. Additionally, for workers that have been employed for five years or more, the employer must pay one day’s pay for each month that the employee has worked for the employer. For severance calculation, there is no distinction between layoffs and firing with severance.

The Employment Tribunal handles employment disputes for private-sector employees. The Public Service Appeals Board handles employment disputes for public-sector employees, and the Financial Services Authority deals with employment disputes of workers in the Seychelles International Trade Zone. The law authorizes the Ministry of Employment, Immigration and Civil Status to establish and enforce employment terms, conditions, and benefits, and workers frequently obtain recourse against their employers through the Employment Tribunal.

The GOS introduced the Occupational Safety and Health Decree in 2012 and the Prohibition of Trafficking in Persons Act in 2014. Seychelles Police and Customs personnel have traveled to U.S. Government-led training at the International Law Enforcement Academy in Gaborone, Botswana. However, there are very few health or labor inspectors in Seychelles and they are limited by meager public resources and the vast ocean distances they are expected to cover.

In November 2011, Seychelles and the ILO signed the 2011-2015 Decent Work Country Program, which seeks to address such issues as employment creation, consolidation and protection of workers’ rights, enhancing social protection, and strengthening social dialogue. Compliance with international labor standards has in recent years been sufficient such that business in the country should not pose a reputational risk to investors.  Concerns about trafficking in persons, however, do exist.

* Source for Host Country Data: Annual National Accounts 2018, National Bureau of Statistics: https://www.nbs.gov.sc/downloads/economic-statistics/annual-national-accounts 

https://www.nbs.gov.sc/downloads/economic-statistics/annual-national-accounts 

Chelsea Bergesen
Political and Economic Officer
Mauritius
+230 202 4465
BergesenCR@state.gov

Smita Bheenick
Economic and Commercial Specialist
Mauritius
+230 202 4430
BheenickS@state.gov

Policies Towards Foreign Direct Investment

The GOT is working to improve the business climate and attract FDI.  The GOT prioritizes attracting and retaining investment, particularly in the underdeveloped interior regions, and reducing unemployment.  More than 3,350 foreign companies currently operate in Tunisia, and the government has historically encouraged export-oriented FDI in key sectors such as call centers, electronics, aerospace and aeronautics, automotive parts, textile and apparel, leather and shoes, agro-food, and other light manufacturing.  In 2019, the sectors that attracted the most FDI were energy (37 percent), services (12 percent), the electrical and electronic industry (20.6 percent), the mechanical industry (8.5 percent), and agro-food products (4 percent).  Inadequate infrastructure in the interior regions results in the concentration of foreign investment in the capital city of Tunis and its suburbs (40.4 percent), the northern coastal region (20.5 percent), and the eastern coastal region (26.1 percent).  Internal western and southern regions attracted only 13 percent of foreign investment despite special tax incentives for those regions.

The Tunisian Parliament passed an Investment Law (#2016-71) in September 2016 that went into effect April 1, 2017 to encourage the responsible regulation of investments.  The law provided for the creation of three major institutions:

• The High Investment Council, whose mission is to implement legislative reforms set out in the investment law and decide on incentives for projects of national importance (defined as investment projects of more than 50 million dinars and 500 jobs).
• The Tunisian Investment Authority, whose mission is to manage investment projects of more than 15 million dinars and up to 50 million dinars. Investment projects of less than 15 million dinars are managed by the Foreign Investment Promotion Agency (FIPA).
• The Tunisian Investment Fund, which will fund foreign investment incentive packages.

These institutions were all launched in 2017.  However, the Foreign Investment Promotion Agency (FIPA) continues to be Tunisia’s principal agency to promote foreign investment.  FIPA is a one-stop shop for foreign investors.  It provides information on investment opportunities, advice on the appropriate conditions for success, assistance and support during the creation and implementation of the project, and contact facilitation and advocacy with other government authorities.

Under the 2016 Investment Law (article 7), foreign investors have the same rights and obligations as Tunisian investors.  Tunisia encourages dialogue with investors through FIPA offices throughout the country.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investment is classified into two categories:

• “Offshore” investment is defined as commercial entities in which foreign capital accounts for at least 66 percent of equity, and at least 70 percent of the production is destined for the export market.  However, investments in some sectors can be classified as “offshore” with lower foreign equity shares.  Foreign equity in the agricultural sector, for example, cannot exceed 66 percent and foreign investors cannot directly own agricultural land, but agricultural investments can still be classified as “offshore” if they meet the export threshold.
• “Onshore” investment caps foreign equity participation at a maximum of 49 percent in most non-industrial projects.  “Onshore” industrial investment may have 100 percent foreign equity, subject to government approval.

Pursuant to the 2016 Investment Law (article 4), a list of sectors outlining which investment categories are subject to government authorization (the “negative list”) was set by decree on May 11, 2018.  The sectors include natural resources; construction materials; land, sea and air transport; banking, finance, and insurance; hazardous and polluting industries; health; education; and telecommunications.  Per the decree, if the relevant government decision-making body does not respond to an investment request within a specified period, typically 60 days, the authorization is automatically granted to the applicant.  The decree went into effect on July 1, 2018.

Other Investment Policy Reviews

The WTO completed a Trade Policy Review for Tunisia in July 2016.  The report is available here:  https://www.wto.org/english/tratop_e/tpr_e/tp441_e.htm .

The OECD completed an Investment Policy Review for Tunisia in November 2012.  The report is available here:  http://www.oecd.org/daf/inv/investment-policy/tunisia-investmentpolicyreview-oecd.htm .

Business Facilitation

In May 2019, the Tunisian Parliament adopted law 2019-47, a cross-cutting law that impacts legislation across all sectors.  The law is designed to improve the country’s business climate and further improve its ranking in the World Bank’s Doing Business Report.  Moreover, the law simplified the process of creating a business, permitted new methods of finance, improved regulations for corporate governance, and provided the private sector the right to operate a project under the framework of a public-private partnership (PPP).

This legislation and previous investment laws are all referenced on the United Nations Conference on Trade and Development (UNCTAD) website: https://investmentpolicy.unctad.org/country-navigator/221/tunisia .

The World Bank Doing Business 2020 report ranks Tunisia 19  in terms of ease of starting a business.  In the Middle East and North Africa, Tunisia ranked second after the UAE, and first in North Africa ahead of Morocco (53), Egypt (114), Algeria (157), and Libya (186):  https://www.doingbusiness.org/en/data/exploreeconomies/tunisia#DB_sb .

The Agency for Promotion of Industry and Innovation (APII) and the Tunisia Investment Authority (TIA) are the focal point for business registration.  Online project declaration for industry or service sector projects for both domestic and foreign investment is available at:  www.tunisieindustrie.nat.tn/en/doc.asp?mcat=16&mrub=122 .

The new online TIA platform allows potential investors to electronically declare the creation, extension, and renewal of all types of investment projects.  The platform also allows investors to incorporate new businesses, request special permits, and apply for investment and tax incentives. https://www.tia.gov.tn/ .

APII has attempted to simplify the business registration process by creating a one-stop shop that offers registration of legal papers with the tax office, court clerk, official Tunisian gazette, and customs.  This one-stop shop also houses consultants from the Investment Promotion Agency, Ministry of Employment, National Social Security Authority (CNSS), postal service, Ministry of Interior, and the Ministry of Trade.  Registration may face delays as some agencies may have longer internal processes.  Prior to registration business must first initiate an online declaration of intent, to which APII provides a notification of receipt within 24 hours.

The World Bank’s Doing Business 2020 report indicates that business registration takes an average of 9 days and costs about USD 90 (253 Tunisian dinars):   http://www.doingbusiness.org/en/data/exploreeconomies/tunisia#DB_sb .

For agriculture and fisheries, business registration information can be found at:  www.apia.com.tn .

In the tourism industry, companies must register with the National Office for Tourism at: http://www.tourisme.gov.tn/en/investing/administrative-services.html .

The central point of contact for established foreign investors and companies is the Foreign Investment Promotion Agency (FIPA):  http://www.investintunisia.tn .

Outward Investment

The GOT does not incentivize outward investment, and capital transfer abroad is tightly controlled by the Central Bank.

Tunisia has signed 55 bilateral investment treaties, of which 39 are in force: http://investmentpolicyhub.unctad.org/IIA/CountryBits/213#iiaInnerMenu .

The 2002 Trade and Investment Framework Agreement (TIFA) between Tunisia and the United States remains active.  A meeting of the Bilateral Trade and Investment Council in May 2019 helped promote engagement and cooperative reform efforts.  A Bilateral Investment Treaty (BIT) between Tunisia and the United States entered into force in 1993, and a bilateral agreement on avoidance of double taxation has been effective since January 1990.

In December 2019, Tunisia’s Ministry of Finance issued general public note no. 27/2019 to assist foreign companies, including those from the U.S., to use bilateral taxation treaties to avoid double taxation, penalties, or extra taxes imposed on companies residing in privileged tax territories, such as the State of Delaware, for example

Tunisia and the United States signed an Intergovernmental Agreement on the Foreign Account Tax Compliance Act (FATCA), which went into force in September 2019.  FATCA requires foreign financial institutions to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

Tunisia has multilateral and bilateral trade agreements with approximately 127 countries, including its neighbors, Libya and Algeria.  Tunisia acceded to the Common Market for Eastern and Southern Africa (COMESA) in July 2018,  and is seeking membership into the Economic Community of West African States (ECOWAS), and is a signatory of the African Continental Free Trade Area (AfCFTA).  In January 2008, Tunisia’s Association Agreement with the EU went into effect, eliminating tariffs on industrial goods.  Tunisia and the EU are negotiating a full-fledged free-trade agreement, but it has not yet been concluded.  In addition, Tunisia is a signatory to the World Bank’s Multilateral Investment Guarantee Agency (MIGA), which offers private sector political risk insurance.  Tunisia is a member of the World Trade Organization and maintains bilateral agreements with Turkey and the member states of the European Free Trade Association (EFTA), as well as a multilateral agreements with other Arab League states.

In 2013, the Tunisian Parliament adopted the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

In April 2020, the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes rated Tunisia “Largely Compliant” on the standard of exchange of information on request (EOIR).  https://www.oecd-ilibrary.org/fr/taxation/global-forum-on-transparency-and-exchange-of-information-for-tax-purposes-tunisia-2020-second-round_fdeb6766-en 

Transparency of the Regulatory System

As stipulated in the 2014 constitution, Tunisia has adopted a semi-parliamentary political system whereby power is shared among the Parliament, the Presidency of the Republic, and the Government, which is composed of a ministerial cabinet led by a Prime Minister (Head of Government).  The Presidency and the Government fulfill executive roles. The Government creates the majority of laws and regulations; however, the Presidency of the Republic and Parliament also develop and propose laws.

The Parliament debates and votes on the adoption of legislation.  Draft legislation is accessible to the public via the Parliament’s website.

Ministerial decrees and other regulations are debated at the level of the Government and adopted by a Ministerial Council headed by the Prime Minister.

After adoption, all laws, decrees, and regulations are published on the website of the Official Gazette and enforced by the Government at the national level.

The Government takes few proactive steps to raise public awareness of the public consultation period for new draft laws and decrees.  Civil society, NGOs, and political parties are all pushing for increased transparency and inclusiveness in rule-making.  Many draft bills, such as the budget law, were reviewed before submission for a final vote under pressure from civil society.  Business associations, chambers of commerce, unions, and political parties reviewed the 2016 Investment Law prior to final adoption.

In January 2019, the Tunisian Parliament passed the Organic Budget Law, which is a foundational law defining the parameters for the government’s annual budgeting process.  The law aimed to bring the budget process in line with principles expressed in the 2014 constitution by enlarging Parliament’s role in the budgetary process and strengthening the financial autonomy of the legislative and judiciary branches.  The law required the government to organize its budget by policy objective, detail budget projections over a three-year timeframe, and revise its accounting system to ensure greater transparency.

Not all accounting, legal, and regulatory procedures are in line with international standards.  Publicly listed companies adhere to national accounting norms.

The Parliament has oversight authority over the GOT but cannot ensure that all administrative processes are followed.

The World Bank Global Indicators of Regulatory Governance  for Tunisia are available here: http://rulemaking.worldbank.org/en/data/explorecountries/tunisia .

Tunisia is a member of the Open Government Partnership, a multilateral initiative that aims to secure concrete commitments from governments to promote transparency, empower citizens, fight corruption, and harness new technologies to strengthen governance:  http://www.opengovpartnership.org/country/tunisia .

Most of Tunisia’s public finances and debt obligations are debated and voted on by the Parliament.

International Regulatory Considerations

As part of its negotiations toward a comprehensive free-trade agreement with the EU, the GOT is considering incorporating a number of EU standards in its domestic regulations.

Tunisia became a member of the WTO in 1995 and is required to notify the WTO regarding draft technical regulations on Technical Barriers to Trade (TBT).  However, in October 2018 the Ministry of Commerce released a circular that temporarily restricted the import of certain goods without going through the WTO notification process, which negatively impacted some business operations without forewarning.

Tunisia has yet to ratify the WTO Trade Facilitation Agreement (TFA) that would improve processes at the port of entry.  However, Tunisia submitted a “Category A” notification in September 2014 and a “Category C” notification in September 2019, which should have required the GOT to implement TFA measures by February 2017.

Legal System and Judicial Independence

The Tunisian legal system is secular and based on the French Napoleonic code and meets EU standards.  While the 2014 Tunisian constitution guarantees the independence of the judiciary, constitutionally mandated reforms of courts and broader judiciary reforms are still ongoing.

Tunisia has a written commercial law but does not have specialized commercial courts.

Regulations or enforcement actions can be appealed at the Court of Appeals.

Laws and Regulations on Foreign Direct Investment

The 2016 Investment Law directs tax incentives towards regional development promotion, technology and high value-added products, research and development (R&D), innovation, small and medium-sized enterprises (SMEs), and the education, transport, health, culture, and environmental protection sectors.  Foreign investors can apply for government incentives online through the Tunisian Investment Authority (TIA) website:  https://www.tia.gov.tn/en .

The primary one-stop-shop webpage for investors looking for relevant laws and regulations is hosted at the Investment and Innovation Promotion Agency website, http://www.tunisieindustrie.nat.tn/en/doc.asp?mcat=12&mrub=209 .  The 2016 Investment Law (article 15) calls for the creation of an Investor’s Unique Point of Contact within the Ministry of Development, Investment, and International Cooperation to assist new and existing investors to launch and expand their projects.

In addition, the Parliament has adopted a number of economic reforms since 2015, including laws concerning renewable energy, competition, public-private partnerships, bankruptcy, and the independence of the Central Bank of Tunisia, as well as a Start-Up Act to promote the creation of new businesses and entrepreneurship.

Competition and Anti-Trust Laws

The 2015 Competition Law established a government appointed Competition Council to reduce government intervention in the economy and promote competition based on supply and demand.

This law voided previous agreements that fixed prices, limited free competition, or restricted the entry of new companies as well as those that controlled production, distribution, investment, technical progress, or supply centers.  While the law ensures free pricing of most products and services, there are a few protected items, such as bread and electricity, for which the GOT can still intervene in pricing.  Moreover, in exceptional cases of large increases or collapses in prices, the Ministry of Commerce reserves the right to regulate prices for a period of up to six months.  The Ministry of Commerce also reserves the right to intervene in sectors to ensure free and fair competition.  However, the Competition Council can make exceptions to its anti-trust policies if it deems it necessary for overall technical or economic progress.

The Competition Council also has the power to investigate competition-inhibiting cases and make recommendations to the Ministry of Commerce upon the Ministry’s request.

Expropriation and Compensation

There are no outstanding expropriation cases involving U.S. interests.  The 2016 Investment Law (article 8) stipulates that investors’ property may not be expropriated except in cases of public interest.  Expropriation, if carried out, must comply with legal procedures, be executed without discrimination on the basis of nationality, and provide fair and equitable compensation.

U.S. investments in Tunisia are protected by international law as stipulated in the U.S.-Tunisia Bilateral Investment Treaty (BIT).  According to Article III of the BIT, the GOT reserves the right to expropriate or nationalize investments for the public good, in a non-discriminatory manner, and upon advance compensation of the full value of the expropriated investment.  The treaty grants the right to prompt review by the relevant Tunisian authorities of conformity with the principles of international law.  When compensation is granted to Tunisian or foreign companies whose investments suffer losses owing to events such as war, armed conflict, revolution, state of national emergency, civil disturbance, etc., U.S. companies are accorded “the most favorable treatment in regards to any measures adopted in relation to such losses.”

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

U.S. investments in Tunisia are protected by international law as stipulated in the U.S.-Tunisia Bilateral Investment Treaty (BIT).  The BIT stipulates that procedures shall allow an investor to take a dispute with a party directly to binding third-party arbitration.

Disputes involving U.S. persons are relatively rare.  Over the past 10 years, there were three dispute cases involving U.S. investors; two were settled and one is still ongoing.  U.S. firms have generally been successful in seeking redress through the Tunisian judicial system.

The Tunisian Code of Civil and Commercial Procedures allows for the enforcement of foreign court decisions under certain circumstances, such as arbitration.

There is no pattern of significant investment disputes or discrimination involving U.S. or other foreign investors.

International Commercial Arbitration and Foreign Courts

The Tunisian Arbitration Code brought into effect by Law 93-42 of April 26, 1993, governs arbitration in Tunisia.  Certain provisions within the code are based on the United Nations Commission on International Trade Law (UNCITRAL) model law.  Tunisia has several domestic dispute resolution venues.  The best known is the Tunis Center for Conciliation and Arbitration.  When an arbitral tribunal does not adhere to the rules governing the process, either party can apply to the national courts for relief.  Unless the parties have agreed otherwise, an arbitral tribunal may, on the request of one of the parties, order any interim measure that it deems appropriate.

Bankruptcy Regulations

Parliament adopted in April 2016 a new bankruptcy law that replaced Chapter IV of the Commerce Law and the Recovery of Companies in Economic Difficulties Law.  These two laws had duplicative and cumbersome processes for business rescue and exit and gave creditors a marginal role.  The new law increases incentives for failed companies to undergo liquidation by limiting state collection privileges.  The improved bankruptcy procedures are intended to decrease the number of non-performing loans and facilitate access of new firms to bank lending.

According to the World Bank Doing Business 2020 report, Tunisia’s recovery rate (how much creditors recover from an insolvent firm at the end of insolvency proceedings) is about 51.3 cents on the dollar, compared to 27.3 cents for MENA and 70.2 cents for OECD high-income countries.

Investment Incentives

Preferential status is usually linked to the percentage of foreign corporate ownership, percentage of production for the export market, and investment location.  The 2016 Investment Law provides investors with a broad range of incentives linked to increased added value, performance and competitiveness, use of new technologies, regional development, environmental protection, and high employability.

To incentivize the employment of new university graduates, the GOT assumes the employer’s portion of social security costs (16 percent of salary) for the first seven years of the investment, with an extension of up to 10 years in the interior regions.  Investments with high job-creation potential may benefit from the purchase of state-owned land at the price of one Tunisian dinar per square meter.  Investors who purchase companies in financial distress may also benefit from tax breaks and social security assistance.  These advantages are determined on a case-by-case basis.

Further benefits are available for offshore investments, such as tax exemptions on profits and reinvested revenues, duty-free import of capital goods with no local equivalents, and full tax and duty exemption on raw materials, semi-finished goods, and services necessary for operation.

On March 9, 2017, the GOT adopted decree no. 2017-389 on financial incentives to investment in priority sectors, economic performance areas, and regional development.  Investors have to declare their projects through the regional FIPA and APII offices to receive incentives.  Investors can also request incentives online through the Tunisian Investment Authority (TIA) website:  https://www.tia.gov.tn/en .

According to the World Bank’s Doing Business 2020 report, Tunisia’s overall ranking improved to 78 out of 190 countries, from 80 the previous year.

Foreign Trade Zones/Free Ports/Trade Facilitation

Tunisia has free-trade zones, officially known as “Parcs d’Activités Economiques,” in Bizerte and Zarzis.  While the land is state-owned, a private company manages the free-trade zones.  They enjoy adequate public utilities and fiber-optic connectivity.  Companies established in the free-trade zones are exempt from taxes and customs duties and benefit from unrestricted foreign exchange transactions, as well as limited duty-free entry into Tunisia of inputs for transformation and re-export.  Factories operate as bonded warehouses and have their own assigned customs personnel.

For example, companies in Bizerte’s free-trade zone may rent space for three Euros per square meter annually –  a level unchanged since 1996 – plus a low service fee.  Long-term renewable leases, up to 25 years, are subject to a negotiable 3 percent escalation clause.  Expatriate personnel are allowed duty-free entry of personal vehicles.  During the first year of operations, companies within the zone must export 100 percent of their production.  Each following year, the company may sell domestically up to 30 percent of the previous year’s total volume of production, subject to local customs duties and taxes.  Lease termination has not been a problem, and all companies that desired to depart the zone reportedly did so successfully.

Performance and Data Localization Requirements

Foreign resident companies face restrictions related to the employment and compensation of expatriate employees.  The 2016 Investment Law limits the percentage of expatriate employees per company to 30 percent of the total work force (excluding oil and gas companies) for the first three years and to 10 percent starting in the fourth year.  There are somewhat lengthy renewal procedures for annual work and residence permits, and the GOT has announced its intention to ease them in the future.  Although rarely enforced, legislation limits the validity of expatriate work permits to two years.

Central Bank regulations impose administrative burdens on companies seeking to pay for temporary expatriate technical assistance from local revenue.  For example, before it receives authorization to transfer payment from its operations in Tunisia, a foreign resident company that utilizes a foreign accountant must document that the service is necessary, fairly valued, and unavailable in Tunisia.  This regulation hinders a foreign resident company’s ability to pay for services performed abroad.

The host government does not follow “forced localization,” but encourages the use of domestic content.

There are no requirements for foreign information technology (IT) providers to turn over source code that is protected by the intellectual property law; however, they are required to inform the Ministry of Communication Technologies and Digital Economy about encrypted equipment.

Public companies and institutions are prohibited by the Ministry of Communication Technologies and Digital Economy from freely transmitting and storing personal data outside of the country.

Private and public institutions must comply with the recommendations of the National Authority for Personal Data Protection (INPDP) when handling personal data, even if it is business-related.  The National Institute of Office Automation and Micro-computing (INBMI) enforces the rules on local data storage.

Until recently, performance requirements were generally limited to investment in the petroleum sector.  Now, such requirements are in force in sectors such as telecommunications and for private sector infrastructure projects on a case-by-case basis.  These requirements tend to be specific to the concession or operating agreement (e.g., drilling a certain number of wells, or producing a certain amount of electricity).

Real Property

Secured interests in property are enforced in Tunisia.  Mortgages and liens are in common use, and the recording system is reliable.

Foreign and/or non-resident investors are allowed to lease any type of land, but can only acquire non-agricultural land.

A large portion of privately held land, especially agriculture land, has no clear title, and the government is investing a great deal of effort to encourage people to clear and register their properties.  For the past ten years, it has been estimated that privately held land accounts for approximately 45 percent.

Properties legally purchased must be duly registered to ensure they remain the property of their actual owners, even if they have been unoccupied for a long time.

According to the World Bank’s Doing Business 2020 report, registering a property in Tunisia is done in five steps, takes 35 days, and costs around 6.1 percent of the total property cost. In North Africa, Tunisia ranks second after Morocco but is ahead of Egypt, Algeria, and Libya.

Intellectual Property Rights

Tunisia is a member of the World Intellectual Property Organization (WIPO) and signatory to the United Nations Agreement on the Protection of Patents and Trademarks.  The agency responsible for patents and trademarks is the National Institute for Standardization and Industrial Property (INNORPI — Institut National de la Normalisation et de la Propriété Industrielle).  Tunisia also is party to the Madrid Protocol for the International Registration of Marks.  Foreign patents and trademarks should be registered with INNORPI.

Tunisia’s patent and trademark laws are designed to protect owners duly registered in Tunisia.  In the area of patents, foreign businesses are guaranteed treatment equal to that afforded to Tunisian nationals.  Tunisia updated its legislation to meet the requirements of the WTO agreement on Trade-Related Aspects of Intellectual Property (TRIPS).

Copyright protection is the responsibility of the Tunisian Copyright Protection Organization (OTDAV — Office Tunisien des Droits d´Auteurs et des Droits Voisins), which also represents foreign copyright organizations.

The 2009 Intellectual Property law greatly expanded the current scope of protections.  The minimum fine for counterfeiting is 10,000 Tunisian dinars (approximately USD 3,800), and copyright protection is valid for the holder’s lifetime.  Customs agents have the authority to seize suspected counterfeit goods immediately.  Tunisia’s 2014 constitution enshrined intellectual property protection in article 41.

If customs officials suspect a copyright violation, they are permitted to inspect and seize suspected goods.  For products utilizing foreign trademarks registered at INNORPI, the Customs Code empowers customs agents to enforce intellectual property rights (IPR) throughout the country.  Tunisian copyright law applies to literary works, art, scientific works, new technologies, and digital works.  Its application and enforcement, however, have not always been consistent with foreign commercial expectations.  Print, audio, and video media are particularly susceptible to copyright infringement in Tunisia.  Smuggling of illegal items takes place through Tunisia’s porous borders.

In 2015, the GOT issued a decree defining registration and arbitration procedures for trade and service marks, and establishing a national trademark registry.  The new decree contained provisions governing the registration of trademarks under the Madrid Protocol and included improvements such as the extension of the deadline for opposition to the registration of trademarks, as well as the electronic filing of applications for trademarks registration.

In March 2020, the Tunisian Parliament approved the government’s request for Tunisia to host the headquarters of the Pan-African Intellectual Property Body (PAIPO).  Tunisia is waiting for at least 14 African countries to ratify the formation of PAIPO in order for it to enter into force.

The registration of pharmaceutical drugs in Tunisia requires that the product is both registered and marketed in the country of origin.  In 2005, Tunisia removed its restriction on pharmaceutical imports where there are similar generic products manufactured locally.

Resources for Rights Holders 

Peter Mehravari
Intellectual Property Attaché for the Middle East and North Africa
U.S. Embassy Kuwait City, Kuwait
U.S. Department of Commerce Global Markets
U.S. Patent and Trademark Office
Tel: +965 2259 1455
peter.mehravari@trade.gov

AmCham Tunisia:  http://www.amchamtunisia.org.tn/ 

Attorneys list: https://tn.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/

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

Capital Markets and Portfolio Investment 

Tunisia’s financial system is dominated by its banking sector, with banks accounting for roughly 85 percent of financing in Tunisia.  Overreliance on bank financing impedes economic growth and stronger job creation.  Equity capitalization is relatively small; Tunisia’s stock market provided 13.2 percent of corporate financing in 2017 according to the Financial Market Council annual report.  Other mechanisms, such as bonds and microfinance, contribute marginally to the overall economy.

Created in 1969, the Bourse de Tunis (Tunis stock exchange) listed 82 companies as of December 2019.  The total market capitalization of these companies was USD 8.41 billion, equivalent to 23.1% of the GDP.  During the last five years, the exchange’s regulatory and accounting systems have been brought more in line with international standards, including compliance and investor protections.  The exchange is supervised and regulated by the state-run Capital Market Board.  Most major global accounting firms are represented in Tunisia.  Firms listed on the stock exchange must publish semiannual corporate reports audited by a certified public accountant.  Accompanying accounting requirements exceed what many Tunisian firms can, or are willing to, undertake.  GOT tax incentives attempt to encourage companies to list on the stock exchange.  Newly listed companies that offer a 30 percent capital share to the public receive a five-year tax reduction on profits.  In addition, individual investors receive tax deductions for equity investment in the market.  Capital gains are tax-free when held by the investor for two years.

Foreign investors are permitted to purchase shares in resident (onshore) firms only through authorized Tunisian brokers or through established mutual funds.  To trade, non-resident (offshore) brokers require a Tunisian intermediary and may only service non-Tunisian customers.  Tunisian brokerage firms may have foreign participation, as long as that participation is less than 50 percent.  Foreign investment of up to 50 percent of a listed firm’s capital does not require authorization.

Money and Banking System

According to the Central Bank of Tunisia (CBT) annual report on banking supervision published in January 2020, Tunisia hosts 30 banks, of which 23 are onshore and seven are offshore.  Onshore banks include three Islamic banks, two microcredit and SME financing banks, and 18 commercial universal banks.

Domestic credit to the private sector provided by banks stood at 68 percent of GDP in 2018.   According to the World Bank, this level is higher than the MENA region average of 56.7 percent.  In the World Bank’s Doing Business 2020 survey, Tunisia’s ranking in terms of ease of access to credit went down from 99 in 2019 to 104 in 2020.  Tunisia’s banking system penetration has grown by four percent annually for the past five years.  87 percent of banks are located in the coastal regions, with about 41 percent in the greater Tunis area alone.  Tunisia’s banking system activity is mainly within the 23 onshore banks, which accounted for 92 percent of assets, 93 percent of loans, and 97 percent of deposits in 2018.  They offer identical services targeting Tunisia’s larger corporations.  Meanwhile, SMEs and individuals often have difficulty accessing bank capital due to high collateral requirements.

Foreign banks are permitted to open branches and establish operations in Tunisia under the offshore regime and are subject to the supervision of the Central Bank.

Government regulations control lending rates.  This prevents banks from pricing their loan portfolios appropriately and incentivizes bankers to restrict the provision of credit.  Competition among Tunisia’s many banks has the effect of lowering observed interest rates; however, banks often place conditions on loans that impose far higher costs on borrowers than interest rates alone.  These non-interest costs may include collateral requirements that come in the form of liens on real estate.  Often, collateral must equal or exceed the value of the loan principal.  Collateral requirements are high because banks face regulatory difficulties in collecting collateral, thereby adding to costs.  According to the CBT banking supervision report, nonperforming loans (NPLs) were at 13.4 percent of all bank loans in 2018, mostly in the agriculture (27.1 percent) and tourism (46 percent) sectors.

Beyond the banks and stock exchange, few effective financing mechanisms are available in the Tunisian economy.  A true bond market does not exist, and government debt sold to financial institutions is not re-traded on a formal, transparent secondary market.  Private equity remains a niche element in the Tunisian financial system.  Firms experience difficulty raising sufficient capital, sourcing their transactions, and selling their stakes in successful investments once they mature.  The microfinance market remains underexploited, with non-governmental organization Enda Inter-Arabe the dominant lender in the field.

The GOT recognizes two categories of financial service activity:  banking (e.g., deposits, loans, payments and exchange operations, and acquisition of operating capital) and investment services (reception, transmission, order execution, and portfolio management).  Non-resident financial service providers must present initial minimum capital (fully paid up at subscription) of 25 million Tunisian dinars (USD 8.5 million) for a bank, 10 million dinars (USD 3.4 million) for a non-bank financial institution, 7.5 million dinars (USD 2.6 million) for an investment company, and 250,000 dinars (USD 85,200) for a portfolio management company.

Foreign Exchange and Remittances

Foreign Exchange 

The Tunisian Dinar can only be traded within Tunisia, and it is illegal to move dinars out of the country.  The dinar is convertible for current account transactions (export-import operations, remittances of investment capital, earnings, loan or lease payments, royalties, etc.).  Central Bank authorization is required for some foreign exchange operations.  For imports, Tunisian law prohibits the release of hard currency from Tunisia as payment prior to the presentation of documents establishing that the merchandise has been shipped to Tunisia.

In 2019, the dinar depreciated 10 percent against the dollar and 5 percent against the Euro.

Non-residents are exempt from most exchange regulations.  Under foreign currency regulations, non-resident companies are defined as having:

• Non-resident individuals who own at least 66 percent of the company’s capital, and
• Capital fully financed by imported foreign currency.

Foreign investors may transfer funds at any time and without prior authorization.  This applies to principal as well as dividends or interest capital.  The procedures for repatriation are complex, however, and within the discretion of the Central Bank.  The difficulty in the repatriation of capital and dividends is one of the most frequent complaints of foreign investors in Tunisia.

There are no limits to the amount of foreign currency that visitors can bring to Tunisia to exchange into local currency.  However, amounts exceeding the equivalent of 25,000 dinars (USD 8,500) must be declared to customs at the port of entry.  Non-residents must also report foreign currency imports if they wish to re-export or deposit more than 5,000 dinars (USD 1,700).  Tunisian customs authorities may require currency exchange receipts on exit from the country.

Remittance Policies

Tunisia’s 2016 Investment Law enshrines the right of foreign investors to transfer abroad funds in foreign currency with minimal interference from the Central Bank.  Ministerial decree no. 417 of May 2018 stipulates that the Central Bank of Tunisia must decide on foreign currency remittance requests within 90 days.   In case of no response, the investor may contact the Higher Investment Authority, which will give final approval within 30 days.

Sovereign Wealth Funds

By decree no.85-2011, the GOT established a sovereign wealth fund, “Caisse des Depots et des Consignations” (CDC), to boost private sector investment and promote small and medium enterprise (SME) development.  It is a state-owned investment entity responsible for independently managing a portion of the state’s financial assets.  The CDC was set up with support from the French CDC and the Moroccan CDG (Caisse de Depots et de Gestion) and became operational in early 2012.  The original impetus for the creation of the CDC was to manage assets confiscated from the former ruling family as independently as possible in order to serve the public interest.  More information is available about the CDC at www.cdc.tn .  As of June 2019, CDC had 7.7 billion dinars (USD 2.6 billion) in assets and 317 million dinars (USD 110 million) in capital.

All CDC investments are made locally, with the objective of boosting investments in the interior regions and promoting SME development.

The CDC is governed by a supervisory committee composed of representatives from different ministries and chaired by the Minister of Finance.

State-owned enterprises (SOEs) are still prominent throughout the economy.  Many compete with the private sector, in industries such as telecommunications, banking, and insurance, while others hold monopolies in sectors considered sensitive by the government, such as railroad transportation, water and electricity distribution, and port logistics.  Importation of basic food staples and strategic items such as cereals, rice, sugar, and edible oil also remains under SOE control.

The GOT appoints senior management officials to SOEs, who report directly to the ministries responsible for the companies’ sector of operation.  SOE boards of directors include representatives from various ministries and personnel from the company itself.  Similar to private companies, the law requires SOEs to publish independently audited annual reports, regardless of whether corporate capital is publicly traded on the stock market.

The GOT encourages SOEs to adhere to OECD Guidelines on Corporate Governance, but adherence is not enforced.  Investment banks and credit agencies tend to associate SOEs with the government and consider them as having the same risk profile for lending purposes.

Privatization Program

The GOT allows foreign participation in its privatization program.  A significant share of Tunisia’s FDI in recent years has come from the privatization of state-owned or state-controlled enterprises.  Privatization has occurred in many sectors, such as telecommunications, banking, insurance, manufacturing, and fuel distribution, among others.

In 2011, the GOT confiscated the assets of the former regime.  The list of assets involved every major economic sector.  According to the Commission to Investigate Corruption and Malfeasance, a court order is required to determine the ultimate handling of frozen assets.

Because court actions frequently take years –and with the government facing immediate budgetary needs – the GOT allowed privatization bids for shares in Ooredoo (a foreign telecommunications company of which 30 percent of shares were confiscated from the previous regime), Ennakl (car distribution), Carthage Cement (cement), City Cars (car distribution), and Banque de Tunisie and Zitouna Bank (banking).  The government is expected to sell some of its stakes in state-owned banks; however, no clear plan has been adopted or communicated so far due to fierce opposition by labor unions.

Tunisia adopted law no. 35 in June 2018 to encourage Corporate Social Responsibility (CSR).  The law requires companies to allocate a portion of their budgets to finance CSR projects such as those in sustainable development, green economy, and youth employment.  According to the law, an organization in charge of monitoring CSR projects will be created to ensure that the projects comply with the principles of good governance and sustainable development.  Tunisia is an adherent to the OECD Guidelines for Multinational Enterprises.

Since 1989, the public sector has been subject to a government procurement law that requires labor, environmental, and other impact studies for large procurement projects.  All public institutions are subject to audits by the Court of Auditors (Cour des Comptes).

The Tunisian Central Bank issued a circular in 2011 setting guidelines for sound and prudent business management and guaranteeing and safeguarding the interests of shareholders, creditors, depositors and staff.  The circular also established policies on recruitment, appointment, and remuneration, as well as dissemination of information to shareholders, depositors, market counterparts, regulators, and the general public.

In May 2019, the Parliament adopted law no. 2019-47, which introduced in Chapter 5 a set of articles designed to improve corporate governance and increase transparency.  For example, the new legislation required that all companies listed on Tunisia’s stock exchange have on  their board of directors at least two independent members, and separate individuals serving as the chairman of the board and the chief executive officer.

The national point of contact for OECD for Multinational Enterprises guidelines is:

Ministry of Development, Investment, and International Cooperation
Avenue Mohamed V
1002 Tunis
Tel: +216 7184 9596
Fax: +216 7179 9069

Tunisia has not yet joined the Extractive Industries Transparency Initiative (EITI).  However, Tunisia participated in the eighth world conference of the EITI in Paris, France, in 2019.

Per Tunisia’s 2014 constitution, projects related to commercial development of oil, natural gas, or minerals are subject to Parliamentary approval.

Most U.S. firms involved in the Tunisian market do not identify corruption as a primary obstacle to foreign direct investment.  However, some have reported that routine procedures for doing business (customs, transportation, and some bureaucratic paperwork) are sometimes tainted by corrupt practices.  Transparency International’s Corruption Perceptions Index 2019 gave Tunisia a score of 43 out of 100 and a rank of 74 among 180 countries which was the same as in 2018.  Regionally, Tunisia is ranked 7 for transparency among MENA countries and first in North Africa, ahead of Morocco, Algeria, Egypt, and Libya.  Transparency International expressed concern that Tunisia’s score has not improved in recent years despite advances in anti-corruption legislation, including laws to protect whistleblowers, improve access to information, and encourage asset declarations by public officials or individuals with public trust roles.

Recent government efforts to combat corruption include:  the seizure and privatization of assets belonging to Ben Ali’s family members; assurances that price controls on food products, and gasoline are respected; enhancement of commercial competition in the domestic market; establishment of a Minister in Charge of Public Service, Good Governance, Anti-corruption; arrests of corrupt businessmen and officials; and harmonization of Tunisian corruption laws with those of the European Union.

The constitution requires those holding high government offices to declare assets “as provided by law.”  In 2018 parliament adopted the Assets Declaration Law, identifying 35 categories of public officials required to declare their assets upon being elected or appointed and upon leaving office.  By law the National Authority for the Combat Against Corruption (INLUCC) is then responsible for publishing the lists of assets of these individuals on its website.  In addition the law requires other individuals in specified professions that have a public role to declare their assets to INLUCC, although this information would not be made public.  This provision applies to journalists, media figures, civil society leaders, political party leaders, and union officials.  The law also enumerates a “gift” policy, defines measures to avoid conflicts of interest, and stipulates the sanctions that apply in cases of illicit enrichment.  In 2019, Tunisia’s newly elected government officials declared their assets, including the 217 Members of Parliament.

In February 2017, Parliament passed law no. 2017-10 on corruption reporting and whistleblower protection.  The legislation was a significant step in the fight against corruption, as it establishes the mechanisms, conditions, and procedures for denouncing corruption.  Article 17 of the law provides protection for whistleblowers, and any act of reprisal against them is considered a punishable crime.  For public servants, the law also guarantees the protection of whistleblowers against possible retaliation from their superiors.  In September 2017, the GOT established the Independent Access to Information Commission.  This authority was prescribed in the 2016 Access to Information Law to proactively encourage government agencies to comply with the new law and to adjudicate complaints against the government for failing to comply with the law.  Following the passage of the access to information and whistleblower protection laws, the government initiated an anti-corruption campaign led by then prime minister Youssef Chahed.  A series of arrests and investigations targeted well-known businesspersons, politicians, journalists, police officers, and customs officials.  Preliminary charges included embezzlement, fraud, and taking bribes.

Tunisia’s penal code devotes 11 articles to defining and classifying corruption and assigns corresponding penalties (including fines and imprisonment).  Several other regulations also address broader concepts of corruption.  Detailed information on the application of these laws and their effectiveness in combating corruption is not publicly available, and there are no GOT statistics specific to corruption. The Independent Commission to Investigate Corruption, created in 2011, handled corruption complaints from 1987 to 2011.  The commission referred 5 percent of cases to the Ministry of Justice.  In 2012, the commission was replaced by the National Authority to Combat Corruption (INLUCC), which has the authority to forward corruption cases to the Ministry of Justice, give opinions on legislative and regulatory anti-corruption efforts, propose policies and collect data on corruption, and facilitate contact between anti-corruption efforts in the government and civil society.

During a March 16, 2019 press conference, INLUCC president Chawki Tabib said that it takes seven to 10 years on average for corruption cases to be processed in the judicial system.  In 2018 the Tunisian Financial Analysis Committee, which operates under the auspices of the Central Bank as a financial intelligence unit, announced that it froze approximately 200 million dinars ($70 million) linked to suspected money-laundering transactions.  The committee received approximately 600 reports of suspicious transactions related to corruption and illicit financial flows during the year.

Since 1989, a comprehensive law designed to regulate each phase of public procurement has governed the public sector.  The GOT also established the Higher Commission on Public Procurement (HAICOP) to supervise the tender and award process for major government contracts.  The government publicly supports a policy of transparency.  Public tenders require bidders to provide a sworn statement that they have not and will not, either by themselves or through a third party, make any promises or give gifts with a view to influencing the outcome of the tender and realization of the project.  Starting September 2018, the government imposed by decree that all public procurement operations be conducted electronically via a bidding platform called Tunisia Online E-Procurement System (TUNEPS).  Despite the law, competition on government tenders appears susceptible to corrupt behavior.  Pursuant to the Foreign Corrupt Practices Act (FCPA), the U.S. Government requires that American companies requesting U.S. Government advocacy certify that they do not participate in corrupt practices.

Resources to Report Corruption

Contacts at agencies responsible for combating corruption:

Chawki Tabib
President
The National Anti-Corruption Authority (Instance Nationale de Lutte Contre la Corruption – INLUCC)
http://www.inlucc.tn 
71 Avenue Taieb Mhiri, 1002 Tunis Belvédère – Tunisia
+216 71 840 401 / Toll Free: 80 10 22 22
contact@inlucc.tn

“Watchdog” organization

Achraf Aouadi
President
I WATCH Tunisia
14 Rue d’Irak 1002 Lafayette, Tunisia
+ 216 71 844 226
contact@iwatch.tn

In September and October 2019, Tunisia held presidential and parliamentary elections, the country’s first since its post-revolution constitution was ratified in 2014, which were widely regarded as well-executed and credible.  The transition of power was smooth and without incident, following a clear procedure outlined by the 2014 constitution.  Newly elected President Kais Saied designated former Minister of Finance Elyes Fakhfakh to form a new coalition government, which he did on February 27.  In the nine years since the revolution, Tunisia has made significant progress in the areas of civil society and rights-based reforms, but economic indicators continue to lag and have been a major driver of frequent protests.  Public opinion polls indicated that corruption, poor economic conditions, and persistently high unemployment fuel public discontent with the political class.  While ideological differences with respect to religion dominate much of the political discord, differing economic ideologies – whether Tunisia will follow a statist economic model or a liberal one – have more tangible effects on policy.  The country’s first municipal elections, held in May 2018, were a critical first step in the decentralization process, which should help alleviate some of the economic disparity between the relatively wealthy coastal areas and the relatively poor interior of the country.

Two major terrorist attacks targeting the tourism sector occurred in 2015, killing dozens of foreign tourists at the Bardo National Museum in Tunis and a beach hotel in Sousse.  Security conditions have markedly improved since then.  Travelers are urged to visit www.travel.state.gov  for the latest travel alerts and warnings regarding Tunisia.

Tunisia has a labor force of approximately 5.4 million.  The official 2019 unemployment rate was 15.5 percent.  However, the registered unemployment for the fourth quarter of 2019 was 14.9 percent.  Approximately 28.2 percent of the unemployed are university graduates, of which three quarters are women.  Official statistics do not count underemployment or provide disaggregated data by geography.  As Tunisia works on creating a sustainable economy for its new democracy, professionals, such as IT engineers, doctors, and professors, continue to seek employment abroad.  Tunisian interlocuters maintain that around 70 percent of Tunisian young professionals seek employment in other countries after graduation.  Additionally, a World Bank study estimated that 41.5 percent of the Tunisian workforce is employed in the parallel economy.  Official statistics do not count underemployment.

Over the past two decades, the structure of the workforce remained relatively stable, and as of the last quarter of 2019, it stood at 13.8 percent in agriculture and fishing, 33.9 percent in industry, and 51.8 percent in commerce and services.  Tunisia has developed its industrial sector and created low-skilled employment, although several manufacturers struggle to find qualified technical workers.   Tunisian law provides workers with the right to organize, form and join unions, and bargain collectively.  The law prohibits anti-union discrimination by employers and retribution against strikers.  The government generally enforces applicable laws.  Currently, four national labor confederations operate in Tunisia.  The oldest and largest is the General Union of Tunisian Workers (UGTT — Union Générale des Travailleurs Tunisiens).  The others are the General Confederation of Tunisian Workers (CGTT — Confederation Générale des Travailleurs Tunisiens), the Tunisian Labor Union (UTT — Union Tunisienne du Travail), created in May 2011, and the Tunisian Labor Organization (OTT — Organisation Tunisienne du Travail), created in August 2013.  UGTT claims about one third of the salaried labor force as members, although more are covered under UGTT-negotiated contracts.  Wages and working conditions are established through triennial collective bargaining agreements between the UGTT, the national employers’ association (UTICA — Union Tunisienne de l’Industrie, du Commerce, et de l’Artisanat), and the GOT.  These tripartite agreements set industry standards and generally apply to about 80 percent of the private sector labor force, regardless of whether individual companies are unionized.  The regional tripartite commissions also arbitrate labor disputes.

Public Wage Increase:  On February 7, 2019, the GOT and UGTT reached an agreement to increase salaries for civil servants commensurate with the October 20, 2018 increase for SOE employees.  Depending on grades and positions, increases ranged from 66 to 90 dinars per month, retroactively covering calendar years 2017 and 2018.  In July and August 2019, the GOT and UGTT negotiated a general pay increase for civil servants, to include a special increase for skilled professionals, covering the 2019 calendar year.  Negotiated increases ranged from 70 to 90 dinars a month depending on the grade and position.

Minimum Wage Increase:  On July 14, 2018, former Prime Minister Youssef Chahed decided to raise the minimum wage (SMIG) by 6 percent retroactively, starting from May 2018, for the 48- and 40-hour work week regimes.  For the 48-hour regime, the minimum wage is 378.56 dinars per month.  For the 40-hour regime, it is 323.43 dinars per month.  In May 2019, Chahed approved an increase in the monthly minimum wage for industrial and agricultural workers to 403 dinars.  The minimum wage exceeds the poverty income level of 180 dinars per month.

The Development Finance Corporation (DFC), a new U.S. government agency, provides financing for private development projects.  Created by the Better Utilization of Investments Leading to Development (BUILD) Act of 2018, the DFC consolidated and modernized the former Overseas Private Investment Corporation (OPIC) and Development Credit Authority (DCA) of the United States Agency for International Development (USAID).  In addition to the existing capabilities of OPIC and DCA, the DFC has an investment cap of USD 60 billion, more than double that of OPIC, and new financial tools.  These tools include equity financing; technical assistance; feasibility studies; the ability to use local currency loans and first-loss guarantees to reduce risks; a “preference” for U.S. investors, rather than a requirement, thereby expanding partnership opportunities with foreign investors; and, a prioritization of low- and lower-middle income countries.

Outside of energy infrastructure projects in Europe and Eurasia, high income countries (as defined by the World Bank) generally do not qualify for DFC support.  OPIC was active in Tunisia since 1963 and executed a number of investments and debt transactions.  From the prior OPIC portfolio in Tunisia, the DFC currently has an active $50-million credit-guarantee facility with local banks to increase access to finance for small and medium-sized enterprises.

*Source: Tunisia’s Foreign Investment Promotion Agency (FIPA) yearend December 2018 published in June 2019.
FIPA, which is the host country statistical source for FDI stock, does not track the stock of foreign investment in energy and uses statistics that are constant 2010.

*Sources: Tunisia’s Foreign Investment Promotion Agency (FIPA) yearend December 2019 published in February 2020.  Central Bank of Tunisia (CBT) yearend December 2019 published in February 2020.

*Source: Tunisia’s Foreign Investment Promotion Agency (FIPA) yearend December 2019 published in February 2020.
Central Bank of Tunisia
*Tunisia was not covered by the IMF’s Coordinated Portfolio Investment Survey (CPIS).

Embassy Tunis Commercial Section
Commercial Officer
U.S. Embassy Tunis, Les Berges du Lac, 1053, Tunisia
+216 71 107 000
TunisCommercial@state.gov