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Kenya

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Kenya has enjoyed a steadily improving environment for FDI. Foreign investors seeking to establish a presence in Kenya generally receive the same treatment as local investors, and multinational companies make up a large percentage of Kenya’s industrial sector. The government’s export promotion programs do not distinguish between goods produced by local or foreign-owned firms. The primary regulations governing FDI are found in the Investment Promotion Act (2004). Other important documents that provide the legal framework for FDI include the 2010 Constitution of Kenya, the Companies Ordinance, the Private Public Partnership Act (2013), the Foreign Investment Protection Act (1990), and the Companies Act (2015). GOK membership in the World Bank’s Multilateral Investment Guarantee Agency (MIGA) provides an opportunity to insure FDI against non-commercial risk. In November 2019, the Kenya Investment Authority (KenInvest), the country’s official investment promotion agency, launched the Kenya Investment Policy (KIP) and the County Investment Handbook (CIH) ( http://www.invest.go.ke/publications/ ) which aim to increase foreign direct investment in the country. The KIP intends to guide laws being drafted to promote and facilitate investments in Kenya.

Investment Promotion Agency

KenInvest’s ( http://www.invest.go.ke/ ) mandate is to promote and facilitate investment by helping investors understand and navigate local Kenya’s bureaucracy and regulations. KenInvest helps investors obtain necessary licenses and developed eRegulations, an online database, to provide businesses with user-friendly access to Kenya’s investment-related regulations and procedures ( https://eregulations.invest.go.ke/?l=en ).

KenInvest prioritizes investment retention and maintains an ongoing dialogue with investors. All proposed legislation must pass through a period of public consultation, which includes an opportunity for investors to offer feedback. Private sector representatives can serve as board members on Kenya’s state-owned enterprises. Since 2013, the Kenya Private Sector Alliance (KEPSA), the country’s primary alliance of private sector business associations, has had bi-annual round table meetings with President Kenyatta and his cabinet. President Kenyatta also chairs a cabinet-level committee focused on improving the business environment. The American Chamber of Commerce has also increasingly engaged the GOK on issues regarding Kenya’s business environment.

Limits on Foreign Control and Right to Private Ownership and Establishment

The government provides the right for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity. To encourage foreign investment, in 2015, the GOK repealed regulations that imposed a 75 percent foreign ownership limit for firms listed on the Nairobi Securities Exchange, allowing such firms to be 100 percent foreign owned. However, also in 2015, the government established regulations requiring Kenyan ownership of at least 15 percent of the share capital of derivative exchanges, through which derivatives, such as options and futures, can be traded.

Kenya’s National Information and Communications Technology (ICT) policy guidelines, published in August 2020, increased the requirement for Kenyan ownership in foreign ICT companies from 20 to 30 percent, and broadened its applicability within the telecommunications, postal, courier, and broadcasting industries. Affected companies have 3 years to comply with the new requirement. The Mining Act (2016) restricts foreign participation in the mining sector. The Mining Act reserves mineral acquisition rights to Kenyan companies and requires 60 percent Kenyan ownership of mineral dealerships and artisanal mining companies. The Private Security Regulations Act (2016) restricts foreign participation in the private security sector by requiring at least 25 percent Kenyan ownership of private security firms. The National Construction Authority Act (2011) and the 2014 National Construction Authority regulations impose local content restrictions on “foreign contractors,” defined as companies incorporated outside Kenya or with more than 50 percent ownership by non-Kenyan citizens. The act requires foreign contractors enter into subcontracts or joint ventures assuring that at least 30 percent of the contract work is done by local firms and locally unavailable skills transferred to a local person. The Kenya Insurance Act (2010) limits foreign capital investment in insurance companies to two-thirds, with no single person holding more than a 25 percent ownership share.

Other Investment Policy Reviews

In 2019, the World Trade Organization conducted a trade policy review for the East Africa Community (EAC), of which Kenya is a member ( https://www.wto.org/english/tratop_e/tpr_e/tp484_e.htm ).

Business Facilitation

In 2011, the GOK established KenTrade to address trading partners’ concerns regarding the complexity of trade regulations and procedures. KenTrade’s mandate is to facilitate cross-border trade and to implement the National Electronic Single Window System. In 2017, KenTrade launched InfoTrade Kenya (infotrade.gov.ke), which provides a host of investment products and services to prospective investors. The site documents the process of exporting and importing by product, by steps, by paperwork, and by individuals, including contact information for officials responsible for relevant permits or approvals.

In February 2019, Kenya implemented a new Integrated Customs Management System (iCMS) that includes automated valuation benchmarking, release of green-channel cargo, importer validation and declaration, and linkage with iTax. The iCMS enables customs officers to efficiently manage revenue and security related risks for imports, exports and goods on transit and transshipment.

The Movable Property Security Rights Bill (2017) enhanced the ability of individuals to secure financing through movable assets, including using intellectual property rights as collateral. The Nairobi International Financial Centre (NIFC) Act (2017) seeks to provide a legal framework to facilitate and support the development of an efficient and competitive financial services sector in Kenya. The act created the Nairobi International Financial Centre Authority to establish and maintain an efficient financial services sector to attract and retain FID. The Kenya Trade Remedies Act (2017) provides the legal and institutional framework for Kenya’s application of trade remedies consistent with World Trade Organization (WTO) law, which requires a domestic institution to receive complaints and undertake investigations in line with WTO Agreements. To date, however, Kenya has implemented only 7.5 percent of its commitments under the WTO Trade Facilitation Agreement, which it ratified in 2015. In 2020, Kenya launched the Kenya Trade Remedies Agency to investigate and enforce anti-dumping, countervailing duty, and trade safeguards, to protect domestic industries from unfair trade practices.

The Companies (Amendment) Act (2017) clarified ambiguities in the original act and ensures compliance with global trends and best practices. The act amended provisions on the extent of directors’ liabilities and disclosures and strengthens investor protections. The amendment eliminated the requirements for small enterprises to hire secretaries, have lawyers register their firms, and to hold annual general meetings, reducing regulatory compliance and operational costs.

The Business Registration Services (BRS) Act (2015) established the Business Registration Service, a state corporation, to ensure effective administration of laws related to the incorporation, registration, operation, and management, of companies, partnerships, and firms. The BRS also devolves certain business registration services to county governments, such as registration of business names and promoting local business ideas/legal entities- reducing registration costs. The Companies Act (2015) covers the registration and management of both public and private corporations.

In 2014, the GOK established a Business Environment Delivery Unit to address investors’ concerns. The unit focuses on reducing the bureaucratic steps required to establish and do business. Its website ( http://www.businesslicense.or.ke/ ) offers online business registration and provides detailed information regarding business licenses and permits, including requirements, fees, application forms, and contact details for the respective regulatory agencies. In 2013, the GOK initiated the Access to Government Procurement Opportunities program, requiring all public procurement entities to set aside a minimum of 30 percent of their annual procurement spending facilitate the participation of youth, women, and persons with disabilities ( https://agpo.go.ke/ ).

Kenya’s iGuide, an investment guide to Kenya ( http://www.theiguides.org/public-docs/guides/kenya/about# , developed by UNCTAD and the International Chamber of Commerce, provides investors with up-to-date information on business costs, licensing requirements, opportunities, and conditions in developing countries. Kenya is a member of UNCTAD’s international network of transparent investment procedures.

Outward Investment

The GOK does not promote or incentivize outward investment. Despite this, Kenya is evolving into an outward investor in tourism, manufacturing, retail, finance, education, and media. Kenya’s outward investment has primarily been in the EAC, due to the preferential access afforded to member countries, and in a select few central African countries. The EAC allows free movement of capital among its six member states – Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda.

3. Legal Regime

Transparency of the Regulatory System

Kenya’s regulatory system is relatively transparent and continues to improve. Proposed laws and regulations pertaining to business and investment are published in draft form for public input and stakeholder deliberation before their passage into law ( http://www.kenyalaw.org/ ; http://www.parliament.go.ke/the-national-assembly/house-business/bills-tracker ). Kenya’s business registration and licensing systems are fully digitized and transparent while computerization of other government processes, aimed at increasing transparency and efficiency, and reducing corruption, is ongoing.

The 2010 Kenyan Constitution requires government to incorporate public participation before officials and agencies make certain decisions. The draft Public Participation Bill (2019) aims to provide the general framework for such public participation. The Ministry of Devolution has produced a guide for counties on how to carry out public participation; many counties have enacted their own laws on public participation. The Environmental Management and Coordination Act (1999) incorporates the principles of sustainable development, including public participation in environmental management. The Public Finance Management Act mandates public participation in the budget cycle. The Land Act, Water Act, and Fair Administrative Action Act (2015) also include provisions providing for public participation in agency actions.

Kenya also has regulations to promote inclusion and fair competition when applying for tenders. Executive Order No. 2 of 2018 emphasizes publication of all procurement information including tender notices, contracts awarded, name of suppliers and their directors. The Public Procurement Regulatory Authority publishes this information on the Public Procurement Information Portal, enhancing transparency and accountability (https://www.tenders.go.ke/website). However, the directive is yet to be fully implemented as not all state agencies provide their tender details to the portal.

Many GOK laws grant significant discretionary and approval powers to government agency administrators, which can create uncertainty among investors. While some government agencies have amended laws or published clear guidelines for decision-making criteria, others have lagged in making their transactions transparent. Work permit processing remains a problem, with overlapping and sometimes contradictory regulations. American companies have complained about delays and non-issuance of permits that appear compliant with known regulations.

International Regulatory Considerations

Kenya is a member of the EAC, and generally applies EAC policies to trade and investment. Kenya operates under the EAC Custom Union Act (2004) and decisions regarding tariffs on imports from non-EAC countries are made by the EAC Secretariat. The U.S. government engages with Kenya on trade and investment issues bilaterally and through the U.S.-EAC Trade and Investment Partnership. Kenya also is a member of COMESA and the Inter-Governmental Authority on Development (IGAD).

According to the Africa Regional Integration Index Report 2019, Kenya is the second most integrated country in Africa and a leader in regional integration policies within the EAC and COMESA regional blocs, with strong performance on regional infrastructure, productive integration, free movement of people, and financial and macro-economic integration. The GOK maintains a Department of EAC Integration under the Ministry of East Africa and Regional Development. Kenya generally adheres to international regulatory standards. It is a member of the WTO and provides notification of draft technical regulations to the Committee on Technical Barriers to Trade (TBT). Kenya maintains a TBT National Enquiry Point at http://notifyke.kebs.org . Additional information on Kenya’s WTO participation can be found at https://www.wto.org/english/thewto_e/countries_e/kenya_e.htm .

Accounting, legal, and regulatory procedures are transparent and consistent with international norms. Publicly listed companies adhere to International Financial Reporting Standards (IFRS) that have been developed and issued in the public interest by the International Accounting Standards Board. The board is an independent, non-profit organization that is the standard-setting body of the IFRS Foundation. Kenya is a member of UNCTAD’s international network of transparent investment procedures.

Legal System and Judicial Independence

Kenya’s legal system is based on English Common Law, and its constitution establishes an independent judiciary with a Supreme Court, Court of Appeal, Constitutional Court, High Court, and Environment and Land Court. Subordinate courts include: Magistrates, Kadhis (Muslim succession and inheritance), Courts Martial, the Employment and Labor Relations Court, and the Milimani Commercial Courts – the latter two have jurisdiction over economic and commercial matters. In 2016, Kenya’s judiciary instituted the Anti-Corruption and Economic Crimes Courts, focused on corruption and economic crimes. There is no systematic executive or other interference in the court system that affects foreign investors, however, the courts often face allegations of corruption, as well as political manipulation, in the form of unjustified budget cuts, which significantly impact the judiciary’s ability to fulfill its mandate. Delayed confirmation of judges nominated by the Judicial Service Commission result in an understaffed judiciary and prolonged delays in cases coming to trial and receiving judgments. The COVID-19 pandemic has also increased case backlogs, as courts reduced operations and turned to virtual hearings, particularly for non-urgent cases.

Laws and Regulations on Foreign Direct Investment

The Foreign Judgments (Reciprocal Enforcement) Act (2012) provides for the enforcement of judgments given in other countries that accord reciprocal treatment to judgments given in Kenya. Kenya has entered into reciprocal enforcement agreements with Australia, the United Kingdom, Malawi, Tanzania, Uganda, Zambia, and Seychelles. Outside of such an agreement, a foreign judgment is not enforceable in Kenyan courts except by filing a suit on the judgment. Foreign advocates may practice as an advocate in Kenya for the purposes of a specified suit or matter if appointed to do so by the Attorney General. However, foreign advocates are not permitted to practice in Kenya unless they have paid to the Registrar of the High Court of Kenya the prescribed admission fee. Additionally, they are not permitted to practice unless a Kenyan advocate instructs and accompanies them to court. The regulations or enforcement actions are appealable and are adjudicated in the national court system.

The 2018 amendment to the Anti-Counterfeit Authority (ACA) Act expanded its scope to include protection of intellectual property rights, including those not registered in Kenya. The amended law empowered ACA inspectors to investigate and seize monetary gains from counterfeit goods. The 2019 amendment to the 2001 Copyright Act (established when the country had less than one percent internet penetration), formed the independent Copyright Tribunal, ratified the Marrakesh Treaty, recognized artificial intelligence generated works, established protections for internet service providers related to digital advertising, developed a register of copyrighted works by Kenya Copyright Board (KECOBO), and protected digital rights through procedures for take down notices.

Competition and Antitrust Laws

The Competition Act of 2010 created the Competition Authority of Kenya (CAK). The law was amended in 2019 to clarify the law with regard to abuse of buyer power and empower the CAK to investigate alleged abuses of buyer power. The competition law prohibits restrictive trade practices, abuse of dominant position, and abuse of buyer power, and it grants the CAK the authority to review mergers and acquisitions and investigate and take action against unwarranted concentrations of economic power. All mergers and acquisitions require the CAK’s authorization before they are finalized. The CAK also investigates and enforces consumer-protection related issues. In 2014, the CAK established a KES one million (approximately USD 10,000) filing fee for mergers and acquisitions valued between one and KES 50 billion (up to approximately USD 500 million). The CAK charges KES two million (approximately USD 20,000) for larger transactions. Company acquisitions are possible if the share buy-out is more than 90 percent, although such transactions seldom occur in practice.

Expropriation and Compensation

The constitution guarantees protection from expropriation, except in cases of eminent domain or security concerns, and all cases are subject to the payment of prompt and fair compensation. The Land Acquisition Act (2010) governs due process and compensation related to eminent domain land acquisitions; however, land rights remain contentious and resolving land disputes is often a lengthy process. However, there are cases where government measures could be deemed indirect expropriation that may impact foreign investment. Some companies reported instances whereby foreign investors faced uncertainty regarding lease renewals because county governments were attempting to confiscate some or all of the project property.

Dispute Settlement

ICSID Convention and New York Convention

Kenya is a member of the International Centre for Settlement of Investment Disputes (ICSID) Convention, and the 1958 New York Convention on the Enforcement of Foreign Arbitral Awards. International companies may opt to seek international well-established dispute resolution at the ICSID. Regarding the arbitration of property issues, the Foreign Investments Protection Act (2014) cites Article 75 of Kenya’s constitution, which provides that “[e]very person having an interest or right in or over property which is compulsorily taken possession of or whose interest in or right over any property is compulsorily acquired shall have a right of direct access to the High Court.” In 2020, Kenya prevailed in an ICSID international arbitration case against a U.S./Canadian geothermal company, over a geothermal exploration license revocation dispute.

Investor-State Dispute Settlement

There have been very few investment disputes involving U.S. and international companies in Kenya. Commercial disputes, including those involving government tenders, are more common. The National Land Commission (NLC) settles land related disputes; the Public Procurement Administrative Review Board settles procurement and tender related disputes; and the Tax Appeals Tribunal settles tax disputes. However, private companies have criticized these institutions as having weak institutional capacity, inadequate transparency, and slow to resolve disputes. Due to the resources and time required to settle a dispute through the Kenyan courts, parties often prefer to seek alternative dispute resolution options.

International Commercial Arbitration and Foreign Courts

The government does accept binding international arbitration of investment disputes with foreign investors. The Kenyan Arbitration Act (1995) as amended in 2010 is based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law. Legislation introduced in 2013 established the Nairobi Centre for International Arbitration (NCIA), which serves as an independent, non- profit international organization for commercial arbitration and may offer a quicker alternative than the court system. In 2014, the Kenya Revenue Authority launched an Alternative Dispute Resolution mechanism aimed at providing taxpayers with an alternative, fast-track avenue for resolving tax disputes.

Bankruptcy Regulations

The Insolvency Act (2015) modernized the legal framework for bankruptcies. Its provisions generally correspond to those of the United Nations’ Model Law on Cross Border Insolvency. The act promotes fair and efficient administration of cross-border insolvencies to protect the interests of all creditors and other interested persons, including the debtor. The act repeals the Bankruptcy Act (2012) and updates the legal structure relating to insolvency of natural persons, incorporated, and unincorporated bodies. Section 720 of the Insolvency Act (2015) grants the force of law in Kenya to the United Nations Commission on International Trade Law model law on cross border insolvency.

Creditors’ rights are comparable to those in other common law countries, and monetary judgments are typically made in KES. The Insolvency Act (2015) increased the rights of borrowers and prioritizes the revival of distressed firms. The law states that a debtor will automatically be discharged from debt after three years. Bankruptcy is not criminalized in Kenya. The World Bank Group’s 2020 Doing Business report ranked Kenya 50 out of 190 countries in the “resolving insolvency” category, an improvement of six spots compared to 2019.

4. Industrial Policies

Investment Incentives

Kenya provides both fiscal and non-fiscal incentives to foreign investors ( http://www.invest.go.ke/starting-a-business-in-kenya/investment-incentives/ ). The minimum foreign investment to qualify for GOK investment incentives is USD 100,000. Investment Certificate benefits, including entry permits for expatriates, are outlined in the Investment Promotion Act (2004).

The government allows all locally-financed materials and equipment for use in construction or refurbishment of tourist hotels to be zero-rated for purposes of VAT calculation – excluding motor vehicles and goods for regular repair and maintenance. The National Treasury principal secretary, however, must approve such purchases. In a measure to boost the tourism industry, one-week employee vacations paid by employers are a tax-deductible expense. In 2018, the Kenya Revenue Authority (KRA) exempted from VAT certain facilities and machinery used in the manufacturing of goods under Section 84 of the East African Community Common External Tariff Handbook. VAT refund claims must be submitted within 12 months of purchase.

The government’s Manufacturing Under Bond (MUB) program encourages manufacturing for export. The program provides a 100 percent tax deduction on plant machinery and equipment and raw materials imported for production of goods for export. The program is also open to Kenyan companies producing goods that can be imported duty-free, goods for supply to the armed forces, or to an approved aid-funded project. Investors in manufacturing metal products and the hospitality services sectors are able to deduct from their taxes a large portion of the cost of buildings and capital machinery.

The Finance Act (2014) amended the Income Tax Act (1974) to reintroduce capital gains tax on transfer of property. Under this provision, gains derived from the sale or transfer of property by an individual or company are subject to a five percent tax. Capital gains on the sale or transfer of property related to the oil and gas industry are subject to a 37.5 percent tax. The Finance Act (2014) also reintroduced the withholding VAT system by government ministries, departments, and agencies. The system excludes the Railway Development Levy (RDL) imports for persons, goods, and projects; the implementation of an official aid-funded project; diplomatic missions and institutions or organizations gazetted under the Privileges and Immunities Act (2014).

Foreign Trade Zones/Free Ports/Trade Facilitation

Kenya’s Export Processing Zones (EPZ) and Special Economic Zones (SEZ) offer special incentives for firms operating within their boundaries. By the end of 2019, Kenya had 74 EPZs, with 137 companies and 60,383 workers contributing KES 77.1 billion (about USD 713 million) to the Kenyan economy. Companies operating within an EPZ benefit from the following tax benefits: a 10-year corporate-tax holiday and a 25 percent tax thereafter; a 10-year withholding tax holiday; stamp duty exemption; 100 percent tax deduction on initial investment applied over 20 years; and VAT exemption on industrial inputs.

About 54 percent of EPZ products are exported to the United States under AGOA. The majority of the exports are textiles – Kenya’s third largest export behind tea and horticulture – and more recently handicrafts. Eighty percent of Kenya’s textiles and apparel originate from EPZ-based firms. Approximately 50 percent of the companies operating in the EPZs are fully-owned by foreigners – mainly from India – while the rest are locally owned or joint ventures with foreigners.

While EPZs aim to encourage production for export, Special Economic Zones (SEZ) are designed to boost local economies by offering benefits for goods that are consumed domestically and for export. SEZs allow for a wider range of commercial ventures, including primary activities such as farming, fishing, and forestry. The 2016 Special Economic Zones Regulations state that the Special Economic Zone Authority (SEZA) maintain an open investment environment to facilitate and encourage business by establishing simple, flexible, and transparent procedures for investor registration. The 2019 draft regulations include customs duty exemptions for goods and services in the SEZs and no trade related restrictions on the importation of goods and services into the SEZs. The rules also empower county governments to set aside public land to establish industrial zones.

Companies operating in the SEZs receive the following benefits: all SEZ produced goods and services are exempted from VAT; the corporate tax rate for enterprises, developers, and operators reduced from 30 percent to 10 percent for the first 10 years and 15 percent for the next 10 years; exemption from taxes and duties payable under the Customs and Excise Act (2014), the Income Tax Act (1974), the EAC Customs Management Act (2004), and stamp duty; and exemption from county-level advertisement and license fees. There are currently SEZs in Mombasa (2,000 sq. km), Lamu (700 sq. km), Kisumu (700 sq. km), Naivasha (1,000 acres), Machakos (100 acres) and private developments designated as SEZs include Tatu City (5,000 acres) and Northlands (11,576 acres) in Kiambu. The Third Medium Term Plan of Kenya’s Vision 2030 economic development agenda calls for a feasibility study for an SEZ at Dongo Kundu in Mombasa, and the GOK is also considering establishing an SEZ near the Olkaria geothermal power plant.

Performance and Data Localization Requirements

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

The Public Procurement and Asset Disposal Act (2015) offers preferences to firms owned by Kenyan citizens and to products manufactured or mined in Kenya. The “Buy Kenya, Build Kenya” policy mandates that 40 percent of the value of each GOK procurement be sourced locally. Tenders funded entirely by the government, with a value of less than KES 50 million (approximately USD 500,000), are reserved for Kenyan firms and goods. If the procuring entity seeks to contract with non-Kenyan firms or procure foreign goods, the act requires a report detailing evidence of an inability to procure locally. The act also calls for at least 30 percent of government procurement contracts to go to firms owned by women, youth, and persons with disabilities. The act further reserves 20 percent of county procurement tenders to residents of that county.

The Finance Act (2017) amends the Public Procurement and Asset Disposal (PPAD) Act (2015) to introduce Specially Permitted Procurement as an alternative method of acquiring public goods and services. The new method permits state agencies to bypass existing public procurement laws under specific circumstances. Procuring entities are allowed to use this method where market conditions or behavior do not allow effective application of the 10 methods outlined in the Public Procurement and Disposal Act. The act gives the National Treasury Cabinet Secretary the authority to prescribe the procedure for carrying out specially permitted procurement. The 2020 PPAD regulations exempt government to government (G2G Exemption) procurements from PPAD Act requirements. G2G Exemption procurements must: provide a plan for local technology transfer; reserve 50 percent of the positions for Kenyans; and locally source 40 percent of inputs.

The Data Protection Act (DPA) (2019) restricts the transfer of data in and out of Kenya without consent from the Data Protection Commissioner (DPC) and the data owner, functionally requiring data localization. Entities seeking to transfer data out of Kenya must demonstrate to the DPC that the destination for the data has sufficient security and protection measures in place. The 2019 DPA gives discretion to the Ministry of Information Communication Technology Cabinet Secretary to prescribe localization requirements for data centers or servers, including strategic interests, protection of government revenue, and “certain nature of strategic processing.” The DPA authorizes the DPC to investigate data breaches and issue administrative fines of up to USD 50,000 and/or imprisonment of up to 10 years, depending on the severity of the breach.

5. Protection of Property Rights

Real Property

The constitution prohibits foreigners or foreign owned firms from owning freehold interest in land in Kenya. However, unless classified as agricultural, there are no restrictions on foreign-owned companies leasing land or real estate. The cumbersome and opaque process to acquire land raises concerns about security of title, particularly given past abuses related to the distribution and redistribution of public land. The Land (Extension and Renewal of Leases) Regulations (2017) prohibited automatic lease renewals and tied renewals to the economic output of the land, requiring renewals to be beneficial to the economy. If legally purchased property remains unoccupied, the property ownership can revert to other occupiers, including squatters.

The constitution, and subsequent land legislation, created the National Land Commission (NLC), an independent government body mandated to review historical land injustices and provide oversight of government land policy and management. The creation of the NLC also introduced coordination and jurisdictional confusion between the NLC and the Ministry of Lands. In 2015, President Kenyatta commissioned the National Titling Center and promised to significantly increase the number of title deeds. From 2013 to 2018, an additional 4.5 million title deeds have been issued, however 70 percent of land in Kenya remains untitled. Due to corruption at the NLC, land grabbing, enabled by the issuance of multiple title registrations, remains prevalent. Ownership of property legally purchased but unoccupied can revert to other parties.

Mortgages and liens exist in Kenya, but the recording system is unreliable – Kenya has only about 27,993 recorded mortgages as of 2019 in a country of 47.6 million people – and there are complaints that property rights and interests are seldom enforced. The legal infrastructure around land ownership and registration has changed in recent years, and land issues have delayed several major infrastructure projects. The 2010 Kenyan Constitution required all existing land leases to convert from 999 years to 99 years, giving the state the power to review leasehold land at the expiry of the 99 years, deny lease renewal, or confiscate the land if it determines the land had not been used productively. In 2010, the constitution also converted foreign-owned freehold interests into 99-year leases at a nominal “peppercorn rate” sufficient to satisfy the requirements for the creation of a legal contract. However, the implementation of this amendment remains somewhat ambiguous. In July 2020, the Ministry of Lands and Physical planning released draft electronic land registration regulations to guide land transactions.

Intellectual Property Rights

The major intellectual property enforcement issues in Kenya related to counterfeit products are corruption, lack of enforcement of penalties, insufficient investigations, and seizures of counterfeit goods, limited cooperation between the private sector and law enforcement agencies, and reluctance of brand owners to file a complaint with the Anti-Counterfeit Agency (ACA). The prevalence of “gray market” products – genuine products that enter the country illegally without paying import duties – also presents a challenge, especially in the mobile phone and computer sectors. Copyright piracy and the use of unlicensed software are also common. However, reflecting the improvement in Kenya’s legal framework and enforcement mechanisms for intellectual property rights protections, the 2020 International Property Rights Index, which assess intellectual and physical property rights, increased Kenya’s score from 4.3 in 2010 to 5.0, out of a possible 10, in 2020.

The Presidential Task Force on Parastatal Reforms (2013) proposed that the three intellectual property agencies – the Kenya Industrial Property Institute (KIPI), the KECOBO and the Anti-Counterfeit Authority (ACA) – be merged into one government-owned entity, the Intellectual Property Office of Kenya. A task force on the merger, comprising staff from KIPI, ACA, KECOBO, and the Ministry of Industrialization, Trade and Enterprise Development is drafting the instruments of the merger, including consolidating intellectual property laws, and updating the legal framework and processes.

To combat the import of counterfeits, the Ministry of Industrialization and the Kenya Bureau of Standards (KEBS) decreed in 2009 that all locally manufactured goods must have a KEBS import standardization mark (ISM). Several categories of imported goods, specifically food products, electronics, and medicines, must have an ISM. Under this program, U.S. consumer-ready products may enter Kenya without altering the U.S. label, but must also have an ISM. Once the product qualifies for Confirmation of Conformity, KEBS issues the ISMs for free. KEBS and the Anti-Counterfeit Agency conduct random seizures of counterfeit imports, but do not maintain a clear database of their seizures.

Kenya is not included on 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 intellectual property offices, please see the World Intellectual Property Organization’s country profiles at http://www.wipo.int/directory/en/ .

6. Financial Sector

Capital Markets and Portfolio Investment

Though relatively small by Western standards, Kenya’s capital markets are the deepest and most sophisticated in East Africa. The 2020 Morgan Stanley Capital International Emerging and Frontier Markets Index, which assesses equity opportunity in 27 emerging economies, ranked the Nairobi Securities Exchange (NSE) as the best performing exchange in sub-Saharan Africa over the last decade. The NSE operates under the jurisdiction of the Capital Markets Authority of Kenya. It is a full member of the World Federation of Exchanges, a founding member of the African Securities Exchanges Association (ASEA) and the East African Securities Exchanges Association (EASEA). The NSE is a member of the Association of Futures Markets and is a partner exchange in the United Nations-led Sustainable Stock Exchanges initiative. Reflecting international confidence in the NSE, it has always had significant foreign investor participation. In July 2019, the NSE launched a derivatives market that facilitates trading in future contracts on the Kenyan market. The bond market is underdeveloped and dominated by trading in government debt securities. The government’s domestic debt market, however, is deep and liquid. Long-term corporate bond issuances are uncommon, limiting long-term investment capital.

In November 2019, Kenya repealed the interest rate capping law passed in 2016, which had slowed private sector credit growth. There are no restrictions on foreign investors seeking credit in the domestic financial market. Kenya’s legal, regulatory, and accounting systems generally align with international norms. In 2017, the Kenya National Treasury launched the world’s first mobile phone-based retail government bond, locally dubbed M-Akiba. M-Akiba has generated over 500,000 accounts for the Central Depository and Settlement Corporation, and The National Treasury has made initial dividend payments to bond holders.

The African Private Equity and Venture Capital Association (AVCA) 2014-2019 report on venture capital performance in Africa ranked Kenya as having the second most developed venture capitalist ecosystem in sub-Saharan Africa. The report also noted that over 20 percent of the venture capital deals in Kenya, from 2014-2019, were initiated by companies headquartered outside Africa.

The Central Bank of Kenya (CBK) is working with regulators in EAC member states through the Capital Market Development Committee (CMDC) and East African Securities Regulatory Authorities (EASRA) on a regional integration initiative and has successfully introduced cross-listing of equity shares. The combined use of both the Central Depository and Settlement Corporation (CDSC) and an automated trading system has aligned the Kenyan securities market with globally accepted standards. Kenya is a full (ordinary) member of the International Organization of Securities Commissions Money and Banking System.

Kenya has accepted the International Monetary Fund’s Article VIII obligation and does not provide restrictions on payments and transfers for current international transactions.

Money and Banking System

In 2020, the Kenyan banking sector included 41 commercial banks, one mortgage finance company, 14 microfinance banks, nine representative offices of foreign banks, eight non-operating bank holdings, 69 foreign exchange bureaus, 19 money remittance providers, and three credit reference bureaus, which are licensed and regulated by the CBK. Fifteen of Kenya’s commercial banks are foreign owned. Major international banks operating in Kenya include Citibank, Absa Bank (formerly Barclays Bank Africa), Bank of India, Standard Bank, and Standard Chartered. The 12 commercial banks listed banks on the Nairobi Securities Exchange owned 89 percent of the country’s banking assets in 2019.

The COVID-19 pandemic has significantly affected Kenya’s banking sector. According to the CBK, 32 out of 41 commercial banks restructured loans to accommodate affected borrowers. Non-performing loans (NPLs) reached 14.1 percent by the end of 2020 – a two percent increase year-on-year – and are continuing to rise.

In March 2017, following the collapse of Imperial Bank and Dubai Bank, the CBK lifted its 2015 moratorium on licensing new banks. The CBK’s decision to restart licensing signaled a return of stability in the Kenyan banking sector. In 2018, Societé Generale (France) also set up a representative office in Nairobi. Foreign banks can apply for license to set up operations in Kenya and are guided by the CBK’s 2013 Prudential Guidelines.

In November 2019, the GOK repealed the interest rate capping law through an amendment to the Banking Act. This amendment has enabled financial institutions to use market-based pricing for their credit products. While this change has slightly increased the cost of borrowing for some clients, it effectively ensures the private sector uninterrupted access to credit.

The percentage of Kenya’s total population with access to financial services through conventional or mobile banking platforms is approximately 80 percent. According to the World Bank, M-Pesa, Kenya’s largest mobile banking platform, processes more transactions within Kenya each year than Western Union does globally. The 2017 National ICT Masterplan envisages the sector contributing at least 10 percent of GDP, up from 4.7 percent in 2015. Several mobile money platforms have achieved international interoperability, allowing the Kenyan diaspora to conduct financial transactions in Kenya from abroad.

Foreign Exchange and Remittances

Foreign Exchange Policies

Kenya has no restrictions on converting or transferring funds associated with investment. Kenyan law requires persons entering the country carrying amounts greater than KES 1,000,000 (approximately USD 10,000), or the equivalent in foreign currencies, to declare their cash holdings to the customs authority to deter money laundering and financing of terrorist organizations. Kenya is an open economy with a liberalized capital account and a floating exchange rate. The CBK engages in volatility controls aimed at smoothing temporary market fluctuations. In 2020, the average exchange rate was KES 106.45/USD according to CBK statistics. The foreign exchange rate fluctuated by nine percent from December 2019 to December 2020.

Remittance Policies

Kenya’s Foreign Investment Protection Act (FIPA) guarantees foreign investors’ right to capital repatriation and remittance of dividends and interest to foreign investors, who are free to convert and repatriate profits including un-capitalized retained profits (proceeds of an investment after payment of the relevant taxes and the principal and interest associated with any loan).

Foreign currency is readily available from commercial banks and foreign exchange bureaus and can be freely bought and sold by local and foreign investors. The Central Bank of Kenya Act (2014), however, states that all foreign exchange dealers are required to obtain and retain appropriate documents for all transactions above the equivalent of KES 1,000,000 (approximately USD 10,000). Kenya has 15 money remittance providers as at 2020 following the operationalization of money remittance regulations in April 2013.

The State Department’s Bureau of International Narcotics and Law Enforcement listed Kenya as a country of primary concern for money laundering and financial crimes. The inter-governmental Financial Action Task Force (FATF) removed Kenya from its “Watchlist” in 2014, noting the country’s progress in creating the legal and institutional framework to combat money laundering and terrorism financing.

Sovereign Wealth Funds

In 2019, the National Treasury published the Kenya Sovereign Wealth Fund policy and the draft Kenya Sovereign Wealth Fund Bill (2019), both of which remain pending. The fund would receive income from any future privatization proceeds, dividends from state corporations, oil and gas, and minerals revenues due to the national government, revenue from other natural resources, and funds from any other source. The Kenya Information and Communications Act (2009) provides for the establishment of a Universal Service Fund (USF). The purpose of the USF is to fund national projects that have significant impact on the availability and accessibility of ICT services in rural, remote, and poor urban areas. In 2020 during the COVID-19 pandemic, the USF committee partnered with the Kenya Institute of Curriculum Development to digitize the education curriculum for online learning.

7. State-Owned Enterprises

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

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

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

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

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

Privatization Program

The Privatization Act (2003) establishes the Privatization Commission (PC) that is mandated to formulate, manage, and implement Kenya’s Privatization Program. GOK has been committed to implementing a comprehensive public enterprises reform program to increase private sector participation in the economy. The privatization commission ( https://www.pc.go.ke/ ) is fully constituted with a board responsible for the privatization program. The PC has 26 approved privatization programs ( https://www.pc.go.ke/sites/default/files/2019-06/APPROVED%20PRIVATIZATION%20PROGRAMME.pdf ). In 2020, the GOK began the process of privatizing some state-owned sugar firms through a public bidding process, including foreign investors.

8. Responsible Business Conduct

The Environmental Management and Coordination Act (1999) establishes a legal and institutional framework for responsible environment management, while the Factories Act (1951) safeguards labor rights in industries. The Mining Act (2016) directs holders of mineral rights to develop comprehensive community development agreements that ensure socially responsible investment and resource extraction, and establish preferential hiring standards for residents of nearby communities. The legal system, however, has remained slow to prosecute violations of these policies.

The GOK is not a signatory to the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct, and it is not yet an Extractive Industry Transparency Initiative (EITI) implementing country or a Voluntary Principles Initiative signatory. Nonetheless, good examples of corporate social responsibility (CSR) abound as major foreign enterprises drive CSR efforts by applying international standards relating to human rights, business ethics, environmental policies, community development, and corporate governance.

Additional Resources

Department of State

Department of Labor

9. Corruption

Corruption is pervasive and entrenched in Kenya. Transparency International’s (TI) 2020 Global Corruption Perception Index ranked Kenya 137 out of 180 countries, an improvement of 13 places compared to 2019. However, Kenya’s score of (28 remained below the sub-Saharan Africa average of 32. TI cited lack of political will, limited progress in prosecuting corruption cases, and the slow pace of reform in key sectors as the primary drivers of Kenya’s relatively low ranking. Corruption has been an impediment to FDI, with local media reporting allegations of high-level corruption related to health, energy, ICT, and infrastructure contracts. Numerous reports have alleged that corruption influenced the outcome of government tenders, and some U.S. firms assert that compliance with the Foreign Corrupt Practices Act significantly undermines their chances of winning public procurements.

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

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

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

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

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

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

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

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

Resources to Report Corruption

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

Rev. Eliud Wabukala (Ret.)
Chairperson and Commissioner
Ethics and Anti-Corruption Commission
P.O. Box 61130 00200 Nairobi, Kenya
Phones: +254 (0)20-271-7318, (0)20-310-722, (0)729-888-881/2/3

Report corruption online: https://eacc.go.ke/default/report-corruption/ 

Contact at “watchdog” organization:

Sheila Masinde
Executive Director
Transparency International Kenya
Phone: +254 (0)722-296-589
Report corruption online: https://www.tikenya.org/ 

10. Political and Security Environment

Kenya’s 2017 national election was marred by violence, which claimed the lives of nearly 100 Kenyans, a contentious political atmosphere, which pitted the ruling Jubilee Party against the opposition National Super Alliance (NASA), as well as political interference and attacks on key institutions by both sides. In November 2017, the Kenyan Supreme Court unanimously upheld the October 2017 repeat presidential election results and President Uhuru Kenyatta’s win in an election boycotted by NASA leader Raila Odinga. In March 2018, President Kenyatta and Odinga publicly shook hands and pledged to work together to heal the political, social, and economic divides highlighted by the election. In November 2020, the Building Bridges Initiative, established by President Kenyatta in May 2018 as part of his pledge to work with Odinga, issued its final report recommending reforms to address nine areas: lack of a national ethos; responsibilities and rights of citizenship; ethnic antagonism and competition; divisive elections; inclusivity; shared prosperity; corruption; devolution; and safety and security. The report included a constitutional amendment bill that may be considered in a national referendum in 2021.

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

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

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

11. Labor Policies and Practices

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

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

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

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

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

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

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($B USD) 2019 $90.19bn 2019 $95.5bn https://data.worldbank.org/indicator/
NY.GDP.MKTP.CD?locations=KE 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2019 $353Mn BEA data available at
http://bea.gov/international/
direct_investment_multinational_
companies_comprehensive_data.htm 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2019 $-16Mn BEA data available at
http://bea.gov/international/
direct_investment_multinational_
companies_comprehensive_data.htm 
Total inbound stock of FDI as % host GDP 2019 1.2 2019 1.4 https://unctad.org/system/files/official-document/wir2020_en.pdf

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

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

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

Uganda

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Ugandan government and authorities vocally welcome FDI, and advocate for its job creation benefits. Furthermore, the country’s free market economy, liberal financial system, and close to 45-million-person consumer market attract investors. However, rampant corruption, weak rule of law, threats to open and free internet access (including a five-day complete internet shutdown for political reasons in January 2021), and an increasingly aggressive tax collection regime by the Uganda Revenue Authority (URA) create a challenging business environment.

The 2019 Investment Code Act (ICA) established both benefits and challenges to FDI. The ICA abolished restrictions on technology transfer and repatriation of funds by foreign investors, and established new incentives (e.g., tax waivers) for investment. However, the ICA also set a minimum value of $250,000 for FDI and a yet-to-be-specified minimum value for portfolio investment. Additionally, the ICA authorized the Ugandan government to alter these thresholds at any time, thereby creating potential uncertainty for investors. Under the ICA, investment licenses carry specific performance conditions varying by sector, such as requiring investors to allow the Uganda Investment Authority (UIA) to monitor operations, or to employ or train Ugandan citizens, or use Ugandan goods and services to the greatest extent possible. Further, the ICA empowers the Ugandan government to revoke investment licenses of entities that “tarnish the good repute of Uganda as an attractive base for investment.” The government has yet to revoke any investor license on this ground.

In October 2019, the Ugandan government passed the Communications Licensing Framework (CLF), which requires telecommunication (telecom) companies to list 20% of their equity on the Uganda Securities Exchange (USE), with the aim of increasing local ownership and reducing the repatriation of profits. In 2020, MTN Uganda and Airtel Uganda, which together control about 70% of mobile telecom market share, renewed their operator licenses for $100 million and $75 million respectively. In two years, both companies will start the process of listing on the USE, in compliance with the CLF.

The Uganda Investment Authority (UIA) facilitates investment by granting licenses to foreign investors, as well as promoting, facilitating, and supervising investments. It provides a “one-stop” shop online where investors can apply for a license, pay fees, register businesses, apply for land titles, and apply for tax identification numbers. In practice, investors may also need to liaise with other authorities to complete legal requirements. The UIA also triages complaints from foreign investors. The UIA’s website ( www.ugandainvest.go.ug ), the International Trade Administration’s website ( https://www.trade.gov/country-commercial-guides/uganda-market-overview ), and BidNetwork’s website, the Business in Development Network Guide to Uganda ( www.bidnetwork.org ), provide information on the laws and reporting requirements for foreign investors. In practice, investors often ultimately bypass the UIA after experiencing bureaucratic delays and corruption. For larger investments, companies have reported that political support and relationship-building from high-ranking Ugandan officials is a prerequisite.

President Museveni hosts an annual investors’ roundtable to consult a select group of foreign and local investors on increasing investment, occasionally including U.S. investors.

Every Ugandan embassy has a trade and investment desk charged with advertising investment opportunities in the country.

Limits on Foreign Control and Right to Private Ownership and Establishment

Except for land, foreigners have the right to own property, establish businesses, and make investments. Ugandan law permits foreign investors to acquire domestic enterprises and to establish green field investments. The Companies Act of 2010 permits the registration of companies incorporated outside of Uganda.

Foreigners seeking to invest in the oil and gas sector must register with the Petroleum Authority of Uganda (PAU) to be added to its National Supplier Database. More information on this process is available on the Embassy’s website (select – Registering a U.S. Firm on the National Supplier Database): ( https://ug.usembassy.gov/business/commercial-opportunities/).

The Petroleum Exploration and Development Act and the Petroleum Refining, Conversion, Transmission, and Midstream Storage Act require companies in the oil sector to prioritize using local goods and labor when possible and give the Minister of Energy and Mineral Development (MEMD) the authority to determine the extent of local content requirements in the sector.

All investors must obtain an investment license from the UIA. The UIA evaluates investment proposals based on several criteria, including potential for generation of new earnings; savings of foreign exchange; the utilization of local materials, supplies, and services; the creation of employment opportunities in Uganda; the introduction of advanced technology or upgrading of indigenous technology; and the contribution to locally or regionally balanced socioeconomic development.

Other Investment Policy Reviews

The United Nations Commission on Trade and Development (UNCTAD) issued its World Investment Report, 2020, available at: https://unctad.org/system/files/official-document/wir2020_en.pdf

The IMF issued an Article IV Consultation and Review in 2020, and its concluding statement is available at: https://www.imf.org/en/News/Articles/2020/02/03/pr2031-uganda-imf-staff-concludes-visit 

The World Trade Organization (WTO) issued its Trade Policy Review in 2019; the report is available at: https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=254764,251521,117054,95202,80262,80232,82036,106989&CurrentCatalogueIdIndex=0&FullTextHash=&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True 

Business Facilitation

The UIA one-stop shop website assists in registering businesses and investments. In practice, investors and businesses may need to liaise with multiple authorities to set up shop, and the UIA lacks the capacity to play a robust business facilitation role. According to the 2020 World Bank Doing Business report, business registration takes an average of 25 days.

Prospective investors can also register online and apply for an investment license at https://www.ebiz.go.ug/ . The UIA also assists with the establishment of local subsidiaries of foreign firms by assisting in registration with the Uganda Registration Services Bureau ( http://ursb.go.ug/ ). New businesses are required to obtain a Tax Identification Number from the URA, by clicking the “My TIN” link at https://www.ura.go.ug/  or through the UIA. Businesses must also secure a trade license from the municipality or local government in the area in which they intend to operate. Investors in specialized sectors such as finance, telecoms, and petroleum often need an additional permit from the relevant ministry in coordination with the UIA.

Under the Uganda Free Zones Act of 2014, the government continues to establish free trade zones for foreign investors seeking to produce goods for export and domestic use. Such investors receive a range of benefits including tax rebates on imported inputs and exported products. An investor seeking a free zone license may submit an application to the Uganda Free Zones Authority ( https://freezones.go.ug/ ).

Outward Investment

The Ugandan government does not promote or incentivize outward investment nor does it restrict domestic investors from investing abroad.

3. Legal Regime

Transparency of the Regulatory System

On paper, Uganda’s legal and regulatory systems are generally transparent and non-discriminatory, and they comply with international norms. In practice, bureaucratic hurdles and corruption significantly impact all investors, but with disproportionate effect on foreigners learning to navigate a parallel informal system. While Ugandan law requires open and transparent competition on government project tenders, U.S. investors have alleged that endemic corruption means that competitors not subject to the Foreign Corrupt Practices Act, or similar legislation, often pay bribes to win awards.

Ugandan law allows the banking, insurance, and media sectors to establish self-regulatory processes through private associations. The government continues to regulate these sectors, however, and the self-regulatory practices generally do not discriminate against foreign investors.

Potential investors must be aware of local, national, and supranational regulatory requirements in Uganda. For example, EAC rules on free movement of goods and services would affect an investor planning to export to the regional market. Similarly, regulations issued by local governments regarding operational hours or the location of factories would only affect an investor’s decision at the local level. Foreign investors should liaise with relevant ministries to understand regulations in the proposed sector for investment.

Uganda’s accounting procedures are broadly transparent and consistent with international norms, though full implementation remains a challenge. Publicly listed companies must comply with accounting procedures consistent with the International Auditing and Assurance Standards Board.

Governmental agencies making regulations typically engage in only limited public consultation. Draft bills similarly are subject to limited public consultation and review. Local media typically cover public comment only on more controversial bills. Although the government publishes laws and regulations in full in the Uganda Gazette, the gazette is not available online and can only be accessed through purchase of hard copies at the Uganda Printing and Publishing Corporation offices. The Uganda Legal Information Institute also publishes all enacted laws on its website ( https://ulii.org/ ).

Uganda’s court system and Inspector General of Government are responsible for ensuring the government adheres to its administrative processes, however, anecdotal reports suggest that corruption significantly undermines the judiciary’s oversight role.

In July 2020, the URA started the implementation of the amended Income Tax Act, which imposes presumptive taxes on rental income based on location using a blockchain compliance system meant to improve transparency and reduce corruption.

Generally, there is legal redress to review regulatory mechanisms through the courts, and the process is made public.

Uganda’s legislative process includes public consultations and, as needed, subject matter expert presentations before parliament; however, not all comments received by regulators are made publicly available and parliament’s decisions tend to be primarily politically driven. Formal scientific analyses of the potential impact of a pending regulation are seldom conducted.

Public finances are generally transparent and budget documents are available online. The government annually publishes the Annual Debt Statistical Bulletin, which contains the country’s debt obligations including status of public debt, cost of debt servicing, and liabilities. However, the government’s significant use of supplementary and classified budget accounts undermines parliamentary and public oversight of public finances.

International Regulatory Considerations

Per treaty, Uganda’s regulatory systems must conform to the below supranational regulatory systems. In practice, domestication of supranational legislation remains imperfect:

  • African, Caribbean, and Pacific Group of States (ACP)
  • African Union (AU)
  • Common Market for Eastern and Southern Africa (COMESA)
  • Commonwealth of Nations
  • East African Community (EAC)

Uganda, through the Uganda National Bureau of Standards (UNBS), is a member of the International Organization for Standardization (ISO), Codex Alimentarius, and International Organization of Legal Metrology (OIML). Uganda applies European Union directives and standards, but with modifications.

Uganda is a member of the WTO and notifies the WTO Committee on Technical Barriers to Trade (TBT) of all draft technical regulations through the Ugandan Ministry of Trade’s National TBT Coordination Committee.

Legal System and Judicial Independence

Uganda’s legal system is based on English Common Law. The courts are responsible for enforcing contracts. Litigants must first submit commercial disputes for mediation either within the court system or to the government-run Center of Arbitration for Dispute Resolution (CADER). Uganda does not have a singular commercial law; multiple statutes touch on commercial and contractual law. A specialized commercial court decides commercial disputes. Approximately 80% of commercial disputes are resolved through mediation. Litigants may appeal commercial court decisions and regulatory and enforcement actions through the regular national court system.

While in theory independent, in practice there are credible reports that the executive may attempt to influence the courts in high-profile cases. More importantly for most investors, endemic corruption and significant backlogs hamper the judiciary’s impartiality and efficacy.

Laws and Regulations on Foreign Direct Investment

The Constitution and ICA regulate FDI. The UIA provides an online “one-stop shop” for investors ( https://www.ugandainvest.go.ug/ ).

Competition and Antitrust Laws

Uganda does not have any specialized laws or institutions dedicated to competition-related concerns, although commercial courts occasionally handle disputes with competition elements. There was no significant competition-related dispute handled by the courts in 2020.

Expropriation and Compensation

The constitution guarantees the right to property for all persons, domestic and foreign. It also prohibits the expropriation of property, except when in the “national interest” such as eminent domain and preceded by compensation to the owner at fair market value. In 2020, the two National Telecom Operators – MTN Uganda and Airtel Uganda – renewed their licenses to operate in Uganda for 12 and 20 years respectively. One requirement of that license renewal is for the telecom companies to list 20% stakes on the Ugandan stock market within two years of being granted the license.

In 1972, then-President Idi Amin expropriated assets owned by ethnic South Asians. The expropriation was extrajudicial and was ordered by presidential decree. The government did not allow judicial challenge to the expropriations or offer any compensation to the owners. The Ugandan government has since returned the vast majority of the properties to the original owners or their descendants or representatives. There have not been any expropriations since, and government projects are often significantly delayed by judicial disputes over compensation for property the Ugandan government seeks to expropriate under eminent domain.

Dispute Settlement

ICSID Convention and New York Convention

Uganda is a party to both the ICSID Convention and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. The 2000 Domestic Arbitration and Conciliation Act incorporates the 1958 New York Convention.

Investor-State Dispute Settlement

Pursuant to the Arbitration and Conciliation Act, the courts and government in theory accept binding arbitration with foreign investors and between private parties. In practice, the overall challenges of the judiciary are likely to impede full enforcement. Uganda has not been involved in any official investment disputes with a U.S person in the last ten years; however, U.S. firms do complain about serious corruption in the award of government tenders.

Ugandan courts recognize and enforce foreign arbitral awards, including those issued against the government. The country is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Additionally, the Arbitration and Conciliation Act creates a framework for the recognition and enforcement of foreign arbitral awards, including those against the government.

Uganda has not had any experience of extrajudicial action against foreign investors. However, in 1972, the government of then-President Idi Amin extrajudicially expropriated property owned by ethnic South Asians.

International Commercial Arbitration and Foreign Courts

Ugandan law provides for arbitration and mediation of civil disputes. The legal framework on arbitration includes the Arbitration and Conciliation Act and Commercial Court Division Mediation Rules. Litigants must first submit all civil disputes to mediation before a court-appointed mediator. CADER is a statutory institution that facilitates the mediation and operates based on the UN Commission on International Trade Law (UNCITRAL) Arbitration rules. However, unrecorded private arbitration is the most effective investment dispute resolution mechanism in Uganda.

The Foreign Judgments Reciprocal Enforcement Act enables the recognition and enforcement of judgments and awards made by foreign courts.

There is no evidence that Ugandan courts favor state-owned enterprises when arbitrating or settling disputes. However, court decisions are often influenced by corruption or high-level government officials.

Bankruptcy Regulations

The Bankruptcy Act of 1931, the Insolvency Act of 2011, and the Insolvency Regulations of 2013 generally align Uganda’s legal framework on insolvency with international standards. The 2020 World Bank Doing Business Report ranked Uganda 99 out of 190 countries for resolving insolvency. On average, Uganda recovers $ 0.39 per dollar, well above the sub-Saharan average of $0.20. Bankruptcy is not criminalized.

4. Industrial Policies

Investment Incentives

The Public Private Partnership Act of 2015 creates a legal framework for the government to partner with private investors, both local and foreign, to finance investments in key sectors. The government has undertaken joint ventures with foreign investors in the oil and gas sector and for infrastructure projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Uganda Free Zones Authority (UFZA) ( https://freezones.go.ug/ ) regulates free trade zones, which offer a range of tax advantages. The government’s process in awarding free trade zone status is generally transparent. In January 2021, UFZA commissioned a $12.7 million public free zone at the Entebbe International Airport with seven production units and trade facilitation offices. This follows UFZA issuing a September 2019 license for designers and developers to launch a free zone focusing on blockchain, distributed ledger technology, and other developing technologies.

Performance and Data Localization Requirements

The ICA does not impose any direct requirements regarding local employment or specify mandatory numbers for local employment in management positions. The broadness of its provisions, however, arguably leaves the door open for enforcement of local employment requirements. The Petroleum Exploration, Development, and Production Act and the Petroleum Refining, Conversion, Transmission, and Midstream Storage Act require investors in the oil sector to contribute to the creation of a local skilled Ugandan workforce. The National Local Content Bill, which is currently undergoing parliamentary review after being rejected by President Museveni in October 2020, would require companies to petition the Ugandan government for permission to hire a non-Ugandan, on the basis of a claim that no qualified Ugandan is available. Additionally, the bill would require companies to have a Ugandan deputy for every non-Ugandan senior manager and to submit a clear plan to localize these positions to the governing authority.

While the UIA has significantly improved its processing of work permits and investment licenses for foreigners, bureaucratic hurdles, inconsistent enforcement, and corruption can still make obtaining visas and work permits onerous and expensive. All foreign investors must acquire an investment license from the UIA.

In as much as there is not yet a general localization law in Uganda, some sector-specific laws impose localization requirements. The petroleum laws require foreign oil companies to prioritize the use of local goods and labor when available, and the MEMD has the authority to determine the extent of local content requirements in the sector. The Public Procurement and Disposal of Public Assets Act, which regulates government procurements, also imposes thresholds on the contracts for which a foreign company can apply. In the petroleum laws, MEMD has the responsibility to monitor companies in the oil sector to ensure they are meeting the local content requirements. Additionally, the Office of the Auditor General carries out audits of the oil and gas sector to ensure adherence to local content requirements. These performance reviews can form grounds for granting incentives or enforcement of the restrictions. Since the 2013 oil laws were passed, no company has been punished for breaching local content rules. Investment incentives in Uganda are quite controversial because they apply on a case-by-case basis, even though the ICA lists seven grounds for granting investment incentives.

While there are no general requirements for foreign information technology (IT) providers to give the government any source code or information related to encryption, the National Information Technology Authority Act allows the Minister for Information, Communication, and Technology to order an IT provider to submit any information to the National Information Technology Authority (NITA). Similarly, the Computer Misuse Act allows the government to “compel a service provider…to co-operate and assist the competent authorities in the collection or recording of traffic data in real time, associated with specified communication transmitted by means of a computer system.” These regulatory requirements apply to all IT providers, both foreign and local. There are no measures to prevent or unduly impede companies from freely transmitting customer or other business-related data outside of Uganda. In 2017, however, the Bank of Uganda interpreted Uganda’s cyber security legislation as providing it with the mandate to require financial institutions to relocate their data centers to Uganda to provide the government with access to customers’ digital financial information. Citing customer privacy concerns, financial firms remain in negotiations with the Bank of Uganda over this policy.

5. Protection of Property Rights

Real Property

Land rights are complicated in Uganda and present a significant barrier to investment. Uganda enforces property rights through the courts; however, corruption often influences final judgments. The Mortgage Act and associated regulations make provisions for mortgages, sub-mortgages, trusts, and other forms of lien. However, due to widespread corruption and an inefficient bureaucracy, investors frequently struggle with the integrity of land transactions and recording systems.

Foreigners cannot own land directly and may only acquire leases. Such leases cannot exceed 99 years. However, foreign investors can create a Ugandan-based firm to purchase and own real estate.

The Land Act provides for four forms of land tenure: freehold, customary, “Mailo” (a form of freehold), and leasehold. Freehold, leasehold, and Mailo tenure owners hold registered titles, while customary or indigenous communal landowners – who account for up to 80% of all landowners – do not. Ugandan law provides for the acquisition of prescriptive rights by individuals who settle onto land (squatters) and whose settlement on such land is unchallenged by the owner for at least twelve years.

Intellectual Property Rights

Ugandan law provides for the protection of intellectual property rights (IPR), but enforcement mechanisms are weak. The country lacks the capacity to prevent piracy and counterfeit distribution. As a result, theft and infringement of IPR is common and widespread. Uganda did not enact any IP-related laws and regulations in the past year.

Uganda does not track seizures of counterfeit goods or prosecutions of IPR violations. Agriculture experts estimate some 20% of agriculture products under copyright in Uganda are counterfeit.

Uganda 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 https://www.wipo.int/directory/en/ .

6. Financial Sector

Capital Markets and Portfolio Investment

The government generally welcomes foreign portfolio investment and has put in place a legal and institutional framework to manage such investments. The Capital Markets Authority (CMA) licenses brokers and dealers and oversees the USE, which is now trading the stock of 17 companies. Liquidity remains constrained to enter and exit sizeable positions on the USE. Capital markets are open to foreign investors and there are no restrictions for foreign investors to open a bank account in Uganda. However, the government imposes a 15% withholding tax on interest and dividends. Foreign-owned companies may trade on the stock exchange, subject to some share issuance requirements. The government respects IMF Article VIII and refrains from restricting payments and transfers for current international transactions.

Credit is available from commercial banks on market terms and foreign investors can access credit. However, persistently high lending rates, including high yields on Ugandan government-issued securities, push up interest rates on commercial loans, undermining the private sector’s access to affordable credit. For instance, commercial lending rates averaged 19% and government 10-year bonds averaged 16% at the end of February 2021.

Money and Banking System

Formal banking participation remains low, with only 35.5% of Ugandans having access to bank accounts, many via their membership in formal savings groups. However, 16 million Ugandans have bank accounts, while more than 30 million use mobile money to conduct basic financial transactions. Uganda’s banking and financial sector is generally healthy, though non-performing loans remain a problem. According to the Bank of Uganda’s Financial Soundness Indicators, Uganda’s non-performing loan rate stood at 6% at the end of June 2020. The effects of COVID-19 on the economy triggered the rise in non-performing loans in 2020 as business slowed down due to a government-imposed lockdown, among other measures. Uganda has 26 commercial banks, with the top six controlling at least 60% of the banking sector’s total assets, valued at $9.7 billion. The Bank of Uganda regulates the banking sector, and foreign banks may establish branches in the country. In February 2020, the Financial Action Taskforce added Uganda to its “Grey List” due to the country’s insufficient implementation of its anti-money laundering and countering financing of terrorism policies. As of the end of February 2021, Uganda was still on this watch list due to seven strategic deficiencies in the implementation of AML/CFT policies. As a result, Uganda’s correspondent banking relationships face increased oversight. Uganda does not restrict foreigners’ ability to establish a bank account.

Foreign Exchange and Remittances

Foreign Exchange

Uganda keeps open capital accounts, and there are no restrictions on capital transfers in and out of Uganda. If, however, an investor benefited from tax incentives on the original investment, he or she will need to seek a “certificate of approval” to “externalize” the funds. Investors may convert funds associated with any form of investment into any world currency. The Ugandan shilling (UGX) trades on a market-based floating exchange rate.

Remittance Policies

There are no restrictions for foreign investors on remittances to and from Uganda.

Sovereign Wealth Funds

In 2015, the government established the Uganda Petroleum Fund (PF) to receive and manage all government revenues from the oil and gas sector. By law, the government must spend a portion of proceeds from the fund on oil-related infrastructure, with parliament appropriating the remainder of revenues through the normal budget procedure. As of June 2020, the PF had a balance of $24 million. Uganda does not have a sovereign wealth fund, but plans to establish a fund called the Petroleum Revenue Investment Reserve (PRIR) to ensure responsible and long-term management of revenue from Uganda’s oil resources when oil production begins. In 2019, Uganda inaugurated PRIR’s investment advisory committee. The committee is meant to advise the Ugandan government on how to invest proceeds from oil revenue and establish fund governance, but that work is ongoing.

7. State-Owned Enterprises

Uganda has thirty State Owned Enterprises (SOEs). However, the Ugandan government does not publish a list of its SOEs, and the public is unable to access detailed information on SOE ownership, total assets, total net income, or number of people employed. Uganda Airlines, the national carrier, began service in late 2019 with regional service. Despite the woes associated with the travel industry due to COVID-19, it has since expanded its fleet to six planes including two Airbus A330-800neos, and has plans to service Europe, the Middle East, and China. While there is insufficient information to assess the SOEs’ adherence to the OECD Guidelines of Corporate Governance, the Ugandan government’s 2020 Office of Auditor General report noted corporate governance issues in 18 SOEs. In February 2021, the Ugandan government embarked on a plan to merge some of the SOEs to reduce duplication of roles and costs of administration. SOEs do not get special financing terms and are subject to hard budget constraints. According to the Ugandan Revenue Authority Act, they have the same tax burden as the private sector. According to the Land Act, private enterprises have the same access to land as SOEs. One notable exception is the Uganda National Oil Company (UNOC), which receives proprietary exploration data on new oil discoveries in Uganda. UNOC can then sell this information to the highest bidder in the private sector to generate income for its operations.

Privatization Program

The government privatized many SOEs in the 1990s. Uganda does not currently have a privatization program.

8. Responsible Business Conduct

Awareness of responsible business conduct varies greatly among corporate actors in Uganda. No organizations formally monitor compliance with Corporate Social Responsibility (CSR) standards. CSR is not a requirement for an investor to obtain an investment license and CSR programs are voluntary. While government officials make statements encouraging CSR, there is no formal government program to monitor, require, or encourage CSR. In practice, endemic corruption often enables companies to engage in harmful or illegal practices with impunity. Regulations on human and labor rights, and consumer and environmental protection, are seldom and inconsistently enforced.

Uganda’s capacity and political will to regulate the mineral trade across its borders remain weak. Credible organizations allege that Uganda’s gold refining sector, led by the African Gold Refinery (AGR), relies on conflict minerals illicitly imported from neighboring countries, especially from eastern Democratic Republic of the Congo. While Uganda has no significant gold reserves, in FY 2019/2020, gold remained the country’s largest export for the second FY in a row, totaling $1.2 billion.

Due to Uganda’s rampant corruption, the Ugandan government does not adequately enforce domestic laws related to human rights, labor rights, consumer protection, environmental protections, or other laws intended to protect individuals from adverse business impacts. According to the UN Panel of Experts reports, AGR, Uganda’s largest refinery, does not adhere to OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas, and there is no indication the Ugandan government is urging it to do so. Uganda joined the Extractive Industry Transparency Initiative in August 2020. As part of the process, Uganda formed a multi-stakeholder group (MSG) composed of government, industry, and civil society. As Uganda looks to develop its oil and gas sector, the MSG will monitor transparency and accountability in the sector, including environmental impact and land rights issues. Uganda has not formally adopted the Voluntary Principles on Security and Human Rights.

Additional Resources 

Department of State

Department of Labor

9. Corruption

Uganda has generally adequate laws to combat corruption, and an interlocking web of anti-corruption institutions. The Public Procurement and Disposal of Public Assets Authority Act’s Code of Ethical Standards (Code) requires bidders and contractors to disclose any possible conflict of interest when applying for government contracts. However, endemic corruption remains a serious problem and a major obstacle to investment. Transparency International ranked Uganda 142 out of 180 countries in its 2020 Corruption Perception Index, dropping five places from 2019. While anti-corruption laws extend to family members of officials and political parties, in practice many well-connected individuals enjoy de facto immunity for corrupt acts and are rarely prosecuted in court.

The government does not require companies to adopt specific internal procedures to detect and prevent bribery of government officials. Larger private companies implement internal control policies; however, with 80% of the workforce in the informal sector, much of the private sector operates without such systems. While Uganda has signed and ratified the UN Anticorruption Convention, it is not yet party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and does not protect non–governmental organizations investigating corruption. Some corruption watchdog organizations allege government harassment.

U.S. firms consistently identify corruption as a major hurdle to business and investment. Corruption in government procurement processes remains particularly problematic for foreign companies seeking to bid on Ugandan government contracts.

Resources to Report Corruption

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

Justice George Bamugemereire
Inspector General of Government
Inspectorate of Government
Jubilee Insurance Centre, Plot 14, Parliament Avenue, Kampala
Telephone: +256-414-344-219
Website: www.igg.go.ug 

Public Procurement and Disposal of Public Assets Authority (PPDA)
UEDCL Towers Plot 39 Nakasero Road
P.O. Box 3925, Kampala Uganda
Telephone: +256-414-311100.
Email: info@ppda.go.ug 
Website: https://www.ppda.go.ug/ 

Contact at “watchdog” organization:

Anti-Corruption Coalition Uganda
Cissy Kagaba
Telephone: +256-414-535-659
Email: kagabac@accu.or.ug 
Website: http://accu.or.ug 

10. Political and Security Environment

Uganda has experienced periodic political violence associated with elections and other political activities. Security services routinely use excessive force to stop peaceful protests and demonstrations. There are no prominent examples in the past ten years of such violence leading to significant damage of projects or installations. There has been an uptick in crime over the past several years, and political tensions increased dramatically in the run up to, during, and in the wake of the 2021 general elections.

11. Labor Policies and Practices

Over 70% of Ugandans are engaged in the agriculture sector, and only 20% work in the formal sector. Statistics on the number of foreign/migrant workers are not publicly available; however, given the abundance of cheap domestic labor, there is minimal import of unskilled labor. Conversely, there is an acute shortage of skilled and specialized laborers.

While there are no explicit provisions requiring the hiring of nationals, there are broad standards requiring investors to contribute to the creation of local employment. The Petroleum Exploration, Development, and Production Act of 2013 and the Petroleum Refining, Conversion, Transmission, and Midstream Storage Act of 2013 require investors to contribute to workforce development by providing skills training for workers.

Ugandan labor laws specify procedures for termination of employment and for termination payments. Depending on the employee’s duration of employment, employers are required to notify an employee two weeks to three months prior to the termination date. Employees terminated without notice are entitled to severance wages. Ugandan law only differentiates between termination with notice (or payment in lieu of notice) and summary dismissal (termination without notice). Summary dismissal applies when the employee fundamentally violates his/her terms of employment. Uganda does not provide unemployment insurance or any other social safety net programs for terminated workers. Current law requires employers to contribute 10% of an employee’s gross salary to the National Social Security Fund (NSSF). The Uganda Retirement Benefits Regulatory Authority Act of 2011 provides a framework for the establishment and management of retirement benefits schemes for the public and private sectors and created an enabling environment for liberalization of the pension sector.

The Employment Act of 2006 does not allow waivers of labor laws for foreign investors. Ugandan law allows workers, except members of the armed forces, to form and join independent unions, bargain collectively, and conduct legal strikes. The National Organization of Trade Unions (NOTU) has 20 member unions. Its rival, the Central Organization of Free Trade Unions (COFTU), also has 20 member unions. Union officials estimate that nearly half of employees in the formal sector belong to unions. In 2014, the Government of Uganda created the Industrial Court (IC) to arbitrate labor disputes. Public sector strikes are not uncommon in Uganda; however, there were no strikes during the past year.

Uganda ratified all eight International Labor Organization fundamental conventions enshrining labor and other economic rights, and partially incorporated these conventions into the 1995 Constitution, which stipulates and protects a wide range of economic rights. Despite these legal protections, many Ugandans work in unsafe environments due to poor enforcement and the limited scope of the labor laws. Labor laws do not protect domestic, agricultural, and informal sector workers.

Uganda’s monthly minimum wage remains $1.64. In August 2019, President Museveni rejected the Minimum Wage Bill, which would have increased the monthly minimum wage to $36.00, and returned it to parliament for review. Museveni continues to argue that increasing Uganda’s minimum wage would undermine FDI and international competitiveness.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country statistical source* USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2020 $37,500 2020 $37,730 https://www.imf.org/external/
datamapper/NGDPD@WEO/UGA 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2019 $42 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A N/A N/A BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data 
Total inbound stock of FDI as % host GDP N/A N/A 2018 41% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx 
* Source for Host Country Data: Uganda Bureau of Statistics Statistical (UBO) Abstract 2020
Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $9,294 100% No Data Available
The Netherlands $3,668 40%
Australia $1,519 16.3%
United Kingdom $840 9%
Kenya $778 8%
Mauritius $654 7%
“0” reflects amounts rounded to +/- USD 500,000.

The UBOS does not publish specific country sources of inward investment so there is no effective comparison with the IMF data. The IMF data above, however, indicates that two tax havens, The Netherlands and Mauritius, are among the top five sources of inward investment in Uganda.

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

Adam Michelow
Economic Officer
U.S. Embassy Kampala
Ggaba Road
Kampala
+256 (0) 414-306-240 (office)
MichelowAL@state.gov 

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