Albanian government leaders have acknowledged that private sector development and increased levels of foreign investment are critical to supporting sustainable economic development. Albania maintains a liberal foreign investment regime designed to attract FDI. The Law on Foreign Investment outlines specific protections for foreign investors and allows 100 percent foreign ownership of companies, except in the areas of domestic and international air passenger transport and television broadcasting. Albanian legislation does not distinguish between domestic and foreign investments.

The Law on Strategic Investments approved in 2015 offers incentives and fast-track administrative procedures, depending on the size of the investment and number of jobs created, to both foreign and domestic investors who apply before December 31, 2023.

The Albanian Investment Development Agency (AIDA) is the entity responsible for promoting foreign investments in Albania. Potential U.S. investors in Albania should contact AIDA to learn more about services AIDA offers to foreign investors (  http://aida.gov.al/  ). The Law on Strategic Investments stipulates that AIDA, as the Secretariat of the Strategic Investment Council, serves as a one-stop-shop for foreign investors, from filing the application form to granting the status of strategic investment/investor. Despite supporting legislation, very few foreign investors have benefited from the “Strategic Investor” status, and almost all projects have been granted to domestic companies operating in the tourism sector.

Foreign and domestic investors have equal rights of ownership of local companies, based on the principle of “national treatment.” There are only a few exemptions regarding ownership restrictions:

Domestic and international air passenger transport: foreign interest in airline companies is limited to 49 percent ownership by investors outside the Common European Aviation Zone, for both domestic and international air transportation.

Audio and audio-visual broadcasting: An entity, foreign or domestic, that has a national audio or audio-visual broadcasting license cannot hold more than 20 percent of shares in another audio or audio-visual broadcasting company. Additional restrictions apply to the regional or local audio and audio-visual licenses.

Agriculture: No foreign individual or foreign incorporated company may purchase agricultural land, though land may be leased for up to 99 years. However, if the company registers in Albania, this limitation on agricultural land does not apply.

Albania currently lacks an investment-review mechanism for inbound FDI. However, in 2017, the government introduced a new provision in the Petroleum Law, which allows the government to reject a petroleum-sharing agreement or the sale of shares in a petroleum-sharing agreement to any prospective investor due to national security concerns.

Albanian law permits private ownership and establishment of enterprises and property. To operate in certain sectors, licenses are required but foreign investors do not require additional permission or authorization beyond that required of domestic investors. Commercial property may be purchased, but only if the proposed investment is worth three times the price of the land. There are no restrictions on the purchase of private residential property. Foreigners can acquire concession rights on natural resources and resources of the common interest, as defined by the Law on Concessions and Public Private Partnerships.

Foreign and domestic investors have numerous options available for organizing business operations in Albania. The 2008 Law on Entrepreneurs and Commercial Companies and Law Establishing the National Business Center (NBC) allow for the following legal types of business entities to be established through the NBC: sole proprietorship; unlimited partnership; limited partnership; limited liability company; joint stock company; branches and representative offices; and joint ventures.

The World Trade Organization (WTO) completed a Trade Policy Review of Albania in May 2016 (  https://www.wto.org/english/tratop_e/tpr_e/tp437_e.htm   ). In November 2017, the United Nations Conference on Trade and Development (UNCTAD) completed the first Investment Policy Review of South-East European (SEE) countries, including Albania (  http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=1884   ).

The National Business Center (NBC) serves as a one-stop shop for business registration. All required procedures and documents are published online http://www.qkb.gov.al/information-on-procedure/business-registration/  . Registration may be done in person or online via the e-Albania portal. Many companies choose to complete the registration process in person, as the online portal requires an authentication process and electronic signature and is only available in the Albanian language. When a business registers in the NBC it is also automatically registered with the Tax Office, Labor Inspectorate, Customs, and the respective municipality. According to the 2020 World Bank Doing Business Report, it takes 4.5 days and five procedures to register a business in Albania.

Albania neither promotes nor incentivizes outward investment, nor does it restrict domestic investors from investing abroad.

Albania’s legal, regulatory, and accounting systems have improved in recent years, but there are still many serious challenges. Endemic corruption, uneven enforcement of legislation, cumbersome bureaucracy, distortion of competition, and a lack of transparency all hinder the business community.

Albanian legislation includes rules on disclosure requirements, formation, maintenance, and alteration of firms’ capitalization structures, mergers and divisions, takeover bids, shareholders’ rights, and corporate governance principles. The Competition Authority (  http://caa.gov.al   ) is an independent agency tasked with ensuring fair and efficient competition in the market. However, business groups have raised concerns about unfair competition and monopolies, rating the issue as one of the most concerning items damaging the business climate.

The Law on Accounting and Financial Statements includes reporting provisions related to international financial reporting standards (IFRS) for large companies, and national financial reporting standards for small and medium enterprises. Albania meets minimum standards on fiscal transparency, and debt obligations are published by the Ministry of Finance and Economy. Albania’s budgets are publicly available, substantially complete, and reliable.

In August 2020, Albania approved the law for the establishment of the register of the Ultimate Beneficiary Owners. The law aims to ensure transparency on the ultimate beneficiary owners, who directly and indirectly own more than 25 percent of shares, voting rights, or ownership interests in all entities registered to do business in Albania, and was adopted following the recommendations of MONEYVAL.

The rulemaking process in Albania meets the minimum requirements of transparency. Ministries and regulatory agencies develop forward regulatory plans that include changes or proposals intended to be adopted within a set timeframe. The law on notification and public consultation requires the GoA to publish draft laws and regulations for public consultation or notification and sets clear timeframes for these processes. Such draft laws and regulations are published at the following page:   http://www.konsultimipublik.gov.al/ . The business community frequently complains that final versions of laws and regulations fail to address their comments and concerns and that comment periods are frequently not respected.

The Albania Assembly ( www.parlament.al ) publishes a list of both proposed and adopted legislation. All laws, by-laws, regulations, decisions by the Council of Ministers (the government), decrees, and any other regulatory acts are published at the National Publication Center at the following site:  https://qbz.gov.al/

Independent agencies and bodies, including but not limited to, the Energy Regulatory Entity (ERE), Agency for Electronic and Postal Communication (AKEP), Financial Supervising Authority (FSA), Bank of Albania, Competition Authority (CA), National Agency of Natural Resources (NARN), and Extractive Industries Transparency Initiative (EITI), oversee transparency and competition in specific sectors.

Albania acceded to the WTO in 2000 and the country notifies the WTO Committee on Technical Barriers to Trade of all draft technical regulations.

Albania signed a Stabilization and Association Agreement (SAA) with the EU in 2006. The EU agreed to open accession talks on March 25, 2020, and the country is awaiting to hold the first Inter-Governmental Conference (IGC), which would mark the official opening of accession talks. Albania has long been involved in the gradual process of legislation approximation with the EU acquis. This process is expected to accelerate with the opening of accession negotiations.

The Albanian legal system is a civil law system. The Albanian constitution provides for the separation of legislative, executive, and judicial branches, thereby supporting the independence of the judiciary. The Civil Procedure Code, enacted in 1996, governs civil procedures in Albania. The civil court system consists of district courts, appellate courts, and the High Court (the supreme court). The district courts are organized in specialized sections according to the subject of the claim, including civil, family, and commercial disputes.

The administrative courts of first instance, the Administrative Court of Appeal, and the Administrative College of the High Court adjudicate administrative disputes. The Constitutional Court, reviews cases related to the constitutionality of legislation and, in limited instances, protects and enforces the constitutional rights of citizens and legal entities.

Parties may appeal the judgment of the first-instance courts within 15 days of a decision, while appellate court judgments must be appealed to the High Court within 30 days. A lawsuit against an administrative action is submitted to the administrative court within 45 days from notification and the law stipulates short procedural timeframes, enabling faster adjudication of administrative disputes.

Investors in Albania are entitled to judicial protection of legal rights related to their investments. Foreign investors have the right to submit disputes to an Albanian court. In addition, parties to a dispute may agree to arbitration. Many foreign investors complain that endemic judicial corruption and inefficient court procedures undermine judicial protection in Albania and seek international arbitration to resolve disputes. It is beneficial to U.S. investors to include binding international arbitration clauses in any agreements with Albanian counterparts. Albania is a signatory to the New York Arbitration Convention and foreign arbitration awards are typically recognized by Albania. However, the government initially refused to recognize an injunction from a foreign arbitration court in one high-profile case in 2016. The Albanian Civil Procedure Code outlines provisions regarding domestic and international commercial arbitration.

Albania does not have a specific commercial code but has a series of relevant commercial laws, including the Entrepreneurs and Commercial Companies Law, Bankruptcy Law, Public Private Partnership and Concession Law, Competition Law, Foreign Investment Law, Environmental Law, Law on Corporate and Municipal Bonds, Transport Law, Maritime Code, Secured Transactions Law, Employment Law, Taxation Procedures Law, Banking Law, Insurance and Reinsurance Law, Concessions Law, Mining Law, Energy Law, Water Resources Law, Waste Management Law, Excise Law, Oil and Gas Law, Gambling Law, Telecommunications Law, and Value-Added Law.

There is no one-stop-shop that lists all legislation, rules, procedures, and reporting requirements for investors. However, foreign investors should visit the Albania Investment Development Agency webpage (  www.aida.gov.al   ), which offers broad information for foreign investors.

Major laws pertaining to foreign investments include:

Law on Foreign Investments

Law on Strategic Investments: Defines procedures and rules to be observed by government authorities when reviewing, approving, and supporting strategic domestic and foreign investments in Albania

Law on Foreigners

Law on Concessions and Public Private Partnerships: Establishes the framework for promoting and facilitating the implementation of privately financed concessionary projects

Law on Entrepreneurs and Commercial Companies: Outlines general guidelines on the activities of companies and the legal structure under which they may operate

Law on Cross-Border Mergers: Determines rules on mergers when one of the companies involved in the process is a foreign company

Law on Protection of Competition: Stipulates provisions for the protection of competition, and the concentration of commercial companies; and

Law on Collective Investment Undertakings: Regulates conditions and criteria for the establishment, constitution, and operation of collective investment undertakings and of management companies.

The Law on Foreign Investments seeks to create a hospitable legal climate for foreign investors and stipulates the following:

No prior government authorization is needed for an initial investment.

Foreign investments may not be expropriated or nationalized directly or indirectly, except for designated special cases, in the interest of public use and as defined by law.

Foreign investors enjoy the right to expatriate all funds and contributions in kind from their investments.

Foreign investors receive most favored nation treatment according to international agreements and Albanian law.

There are limited exceptions to this liberal investment regime, most of which apply to the purchase of real estate. Agricultural land cannot be purchased by foreigners and foreign entities but may be leased for up to 99 years. Investors can buy agricultural land if registered as a commercial entity in Albania. Commercial property may be purchased, but only if the proposed investment is worth three times the price of the land. There are no restrictions on the purchase of private residential property.

To boost investments in strategic sectors, the government approved a new law on strategic investments in May 2015. Under the new law, a “strategic investment” may benefit from either “assisted procedure” or “special procedure” assistance from the government to help navigate the permitting and regulatory process. Despite supporting legislation, very few foreign investors have benefited from the “Strategic Investor” status, and almost all projects have been granted to domestic companies operating in the tourism sector.

Authorities responsible for mergers, change of control, and transfer of shares include the Albanian Competition Authority ACA:   http://www.caa.gov.al/laws/list/category/1/page/1   , which monitors the implementation of the competition law and approves mergers and acquisitions when required by the law; and the Albanian Financial Supervisory Authority FSA: http://www.amf.gov.al/ligje.asp   , which regulates and supervises the securities market and approves the transfer of shares and change of control of companies operating in this sector.

Albania’s tax system does not distinguish between foreign and domestic investors. Informality in the economy, which may be as large as 40 percent of the total economy, presents challenges for tax administration.

Visa requirements to obtain residence or work permits are straightforward and do not pose an undue burden on potential investors. Generally, U.S. passport holders are entitled to a one year stay in Albania without a residence permit, a special provision the GoA reaffirmed in March 2022. The government approved a new Law on Foreigners in July 2021, which partially aligns the domestic legislation, including that on migration, with the EU Directives. The new law introduces a single application procedure for permits in general. For investors there is a special permit called “Unique Investor Permit.” Foreign investors are issued a 2-year unique investor permit if they invest in Albania and meet certain criteria, including a quota ratio of one to five, of foreign and Albanian workers. In addition, same ratio should be preserved in the Board of Directors and other leading and supervisory structures of the company. Salaries of the Albanian workers should match the average of last year for equivalent positions. The permit can be renewed for an additional three years and after that the investor is eligible to receive a permanent permit provided that they fulfil the criteria outlined above and prove that the company is properly registers, has paid taxes and is not incurring losses. The Council of Ministers approves the annual quota of foreign workers following a needs assessment by sector and profession. However, work permits for staff that occupy key positions, among other categories, can be issued outside the annual quota.

Foreign investors can obtain the single permit by the immigration authorities following the initial approval for employment from the National Agency for Employment and Skills https://www.akpa.gov.al/ . U.S. citizens along with EU, Western Balkans, and Schengen-country citizens are exempt from this requirement. In addition, U.S., EU, and Kosovo citizens when applying for residency permit for the first time, have a term of 5 years. The new law also introduced the National Electronic Register for Foreigners (NERF), which is a state database on foreigners, who enter or intend to enter Albania, with purpose of staying, transiting, working, or studying in Albania. NERF will register data on foreign nationals, who have an entry visa, stay, or transit in the Republic of Albania, have a temporary or permanent residence permit, and have a have a unique permit (residence and employment) in Albania.

The Law on Entrepreneurs and Commercial Companies sets guidelines on the activities of companies and the legal structure under which they may operate. The government adopted the law in 2008 to conform Albanian legislation to the EU’s Acquis Communitaire. The most common type of organization for foreign investors is a limited liability company.

The Law on Public Private Partnerships and Concessions establishes the framework for promoting and facilitating the implementation of privately financed concessionary projects. According to the law, concession projects may be identified by central or local governments or through third party unsolicited proposals. To limit opportunities for corruption, the 2019 amendments prohibited unsolicited bids, beginning in July 2019, on all sectors except for works or services in ports, airports, generation and distribution of electricity, energy for heating, and production and distribution of natural gas. In addition, the 2019 amendments removed the zero to 10 percent bonus points for unsolicited proposals, which gave companies submitting unsolicited bids a competitive advantage over other contenders. Instead, if the party submitting the unsolicited proposal does not win the bid, it will be compensated by the winning company for the cost of the feasibility study, which in no case shall exceed 1 percent of the total cost of the project.

The Albanian Competition Authority http://www.caa.gov.al/?lng=en    is the agency that reviews transactions for competition-related concerns. The Law on Protection of Competition governs incoming foreign investment whether through mergers, acquisitions, takeovers, or green-field investments, irrespective of industry or sector. In the case of share transfers in insurance, banking and non-banking financial industries, the Financial Supervisory Authority (  http://amf.gov.al/   ) and the Bank of Albania https://www.bankofalbania.org/    may require additional regulatory approvals. Transactions between parties outside Albania, including foreign-to-foreign transactions, are covered by the competition law, which states that its provisions apply to all activities, domestic or foreign, that directly or indirectly affect the Albanian market. Parties can appeal the decision of the CA to the Tirana First Instance Court within 30 days of receiving the notification. The appeal does not suspend the enforcement of the decision that authorize concentrations and the temporary measures.

The Albanian constitution guarantees the right of private property. According to Article 41, expropriation or limitation on the exercise of a property right can occur only if it serves the public interest and with fair compensation. During the post-communist period, expropriation has been limited to land for public interest, mainly infrastructure projects such as roads, energy infrastructure, water works, airports, and other facilities. Compensation has generally been reported as being below market value and owners have complained that the compensation process is slow, and unfair. Civil courts are responsible for resolving such complaints.

Changes in government can also affect foreign investments. Following the 2013 elections and peaceful transition of power, the new government revoked, or renegotiated numerous concession agreements, licenses, and contracts signed by the previous government with both domestic and international investors. This practice has occurred in other years as well.

There are many ongoing disputes regarding property confiscated during the communist regime. Identifying ownership is a longstanding problem in Albania that makes restitution for expropriated properties difficult. The restitution and compensation process started in 1993 but has been slow and marred by corruption. Many U.S. citizens of Albanian origin have been in engaged in long-running restitution disputes. Court cases go on for years without a final decision, causing many to refer their case to the European Court of Human Rights (ECHR) in Strasbourg, France. A significant number of applications are pending for consideration before the ECHR. Even after settlement in Strasbourg, enforcement remains slow.

To address the situation, the GOA approved new property compensation legislation in 2018 that aims to resolve pending claims for restitution and compensation. The 2018 law reduces the burden on the state budget by changing the cash compensation formula. The legislation presents three methods of compensation for confiscation claims: restitution; compensation of property with similarly valued land in a different location; or financial compensation. It also set a ten-year timeframe for completion of the process. In February 2020, the Albanian parliament approved a law “On the Finalization of the Transitory Process of Property Deeds in the Republic of Albania,” which aims to finalize land allocation and privatization processes contained in 14 various laws issued between 1991 and 2018.

The GOA has generally not engaged in expropriation actions against U.S. investments, companies, or representatives. There have been limited cases in which the government has revoked licenses, specifically in the mining and energy sectors, based on contract violation claims.

The Law on Strategic Investments, approved in 2015, empowers the government to expropriate private property for the development of private projects deemed special strategic projects. Despite the provision that the government would act when parties fail to reach an agreement, the clause is a source of controversy because it entitles the government to expropriate private property in the interest of another private party. The expropriation procedures are consistent with the law on the expropriation, and the cost for expropriation would be incurred by the strategic investor. The provision has yet to be exercised.

Albania maintains adequate bankruptcy legislation, though corrupt and inefficient bankruptcy court proceedings make it difficult for companies to reorganize or discharge debts through bankruptcy.

A 2016 law on bankruptcy aimed to close loopholes in the insolvency regime, decrease unnecessary market exit procedures, reduce fraud, and ease collateral recovery procedures. The Bankruptcy Law governs the reorganization or liquidation of insolvent businesses. It sets out non-discriminatory and mandatory rules for the repayment of the obligations by a debtor in a bankruptcy procedure. The law establishes statutory time limits for insolvency procedures, professional qualifications for insolvency administrators, and an Agency of Insolvency Supervision to regulate the profession of insolvency administrators.

Debtors and creditors can initiate a bankruptcy procedure and can file for either liquidation or reorganization. Bankruptcy proceedings may be invoked when the debtor is unable to pay the obligations at the maturity date or the value of its liabilities exceeds the value of the assets.

According to the provisions of the Bankruptcy Law, the initiation of bankruptcy proceedings suspends the enforcement of claims by all creditors against the debtor subject to bankruptcy. Creditors of all categories must submit their claims to the bankruptcy administrator. The Bankruptcy Law provides specific treatment for different categories, including secured creditors, preferred creditors, unsecured creditors, and final creditors whose claims would be paid after all other creditors were satisfied. The claims of the secured creditors are to be satisfied by the assets of the debtor, which secure such claims under security agreements. The claims of the unsecured creditors are to be paid out of the bankruptcy estate, excluding the assets used for payment of the secured creditors, following the priority ranking as outlined in the Albanian Civil Code.

Pursuant to the provisions of the Bankruptcy Law, creditors have the right to establish a creditors committee. The creditors committee is appointed by the Commercial Section Courts before the first meeting of the creditor assembly. The creditors committee represents the secured creditors, preferred creditors, and the unsecured creditors. The committee has the right (a) to support and supervise the activities of the insolvency administrator; (b) to request and receive information about the insolvency proceedings; (c) to inspect the books and records; and (d) to order an examination of the revenues and cash balances.

If the creditors and administrator agree that reorganization is the company’s best option, the bankruptcy administrator prepares a reorganization plan and submits it to the court for authorizing implementation.

According to the insolvency procedures, only creditors whose rights are affected by the proposed reorganization plan enjoy the right to vote, and the dissenting creditors in reorganization receive at least as much as what they would have obtained in a liquidation. Creditors are divided into classes for the purposes of voting on the reorganization plan and each class votes separately. Creditors of the same class are treated equally. The insolvency framework allows for the continuation of contracts supplying essential goods and services to the debtor, the rejection by the debtor of overly burdensome contracts, the avoidance of preferential or undervalued transactions, and the possibility of the debtor obtaining credit after commencement of insolvency proceedings. No priority is assigned to post-commencement over secured creditors. Post-commencement credit is assigned over ordinary unsecured creditors.

The creditor has the right to object to decisions accepting or rejecting creditors’ claims and to request information from the insolvency representative. The selection and appointment of insolvency representative does not require the approval of the creditor. In addition, the sale of substantial assets of the debtor does not require the approval of the creditor. According to the law on bankruptcy, foreign creditors have the same rights as domestic creditors with respect to the commencement of, and participation in, a bankruptcy proceeding. The claim is valued as of the date the insolvency proceeding is opened. Claims expressed in foreign currency are converted into Albanian currency according to the official exchange rate applicable to the place of payment at the time of the opening of the proceeding.

The Albanian Criminal Code contains several criminal offenses in bankruptcy, including (i) whether the bankruptcy was provoked intentionally; (ii) concealment of bankruptcy status; (iii) concealment of assets after bankruptcy; and (iv) failure to comply with the obligations arising under bankruptcy proceeding.

According to the World Bank’s 2020 Doing Business Report, Albania ranked 39th out of 190 countries in the insolvency index. A referenced analysis of resolving insolvency can be found at the following link:

 http://documents.worldbank.org/curated/en/255991574747242507/Doing-Business-2020-Comparing-Business-Regulation-in-190-Economies-Economy-Profile-of-Albania

The Albanian Investment Development Agency (AIDA; www.aida.gov.al) is the best source to find incentives offered across a variety of sectors. Aside from the incentives listed below, individual parties may negotiate additional incentives directly with AIDA, the Ministry of Finance and Economy, or other ministries, depending on the sector.

To boost investments in strategic sectors, the GoA approved a Law on Strategic Investments in May 2015 that outlines the criteria, rules, and procedures that state authorities employ when approving a strategic investment. The GoA has extended the deadline to apply to qualify as a strategic investment to December 2023. A strategic investment is defined as an investment of public interest based on several criteria, including the size of the investment, implementation time, productivity and value added, creation of jobs, sectoral economic priorities, and regional and local economic development. The law does not discriminate between foreign and domestic investors.

The following sectors are defined as strategic sectors: mining and energy, transport, electronic communication infrastructure, urban waste industry, tourism, agriculture (large farms) and fishing, economic zones, and development priority areas. Investments in strategic sectors may obtain assisted procedure and special procedure, based on the level of investment, which varies from EUR one million to EUR 100 million, depending on the sector and other criteria stipulated in the law.

In the assisted procedure, public administration agencies coordinate, assist, and supervise the entire administrative process for investment approval and makes state-owned property needed for the investment available to the investor. Under the special procedure, the investor also enjoys state support for the expropriation of private property and the ratification of the contract by parliament.

The law and bylaws that entered into force on January 1, 2016, established the Strategic Investments Committee (SIC), a commission in charge of approving strategic investments. The Committee is headed by the prime minister and members include ministers covering the respective strategic sectors, the state advocate, and relevant ministers whose portfolios are affected by the strategic investment. AIDA serves as the Secretariat of SIC and oversees providing administrative support to investors. The SIC grants the status of assisted procedure and special procedure for strategic investments and investors based on the size of investments and other criteria defined in the law.

Major Incentives Albania Offers:

Energy and Mining, Transport, Electronic Communication Infrastructure, and Urban Waste Industry:  Investments greater than EUR 30 million enjoy the status of assisted procedure, while investments of EUR 50 million or more enjoy special procedure status.

The government offers power purchasing agreements (PPA) for 15 years for electricity produced from hydroelectric plants with an installed capacity of less than 15 megawatts. The government also offers feed-in-premium tariff for solar installations with installed capacity of less than two megawatts and for wind installation of less than three megawatts. Exemption from custom duties and VAT is available for the manufacturing or the mounting of solar panel systems for hot water production.

Certain machinery and equipment imported for the construction of hydropower plants are VAT exempt. The government supports the construction of small wind and photovoltaic parks with an installed capacity of less than three megawatts and two megawatts, respectively, by offering feed-in-premium tariffs for 15 years. The Energy Regulatory Authority (ERE;  http://www.ere.gov.al/  ) conducts an annual review of the feed-in-premium tariffs for wind and photovoltaic parks. The ERE also conducts an annual review of the feed-in-tariffs for small hydroelectric plants with an installed capacity of less than 15 megawatts. Imports of machinery and equipment for investments of greater than EUR 400,000 for small wind and solar parks with an installed capacity of less than three megawatts and two megawatts, respectively, enjoy a VAT exemption. Imports of hot water solar panels for household and industrial use are also VAT exempt.

Tourism and Agritourism:  Investments of five million euro or more enjoy the status of assisted procedure, while investments greater than EUR 50 million enjoy the status of special procedure. In 2018, the GoA introduced new incentives to promote the tourism sector. International hotel brands that invest at least USD 8 million for a four-star hotel and USD 15 million for a five-star hotel are exempt from property taxes for 10 years, pay no profit taxes, and pay a VAT of 6 percent for any service on their hotels or resorts. For all other hotels and resorts, the GoA reduced the VAT on accommodation from 20 percent to 6 percent. Profit taxes for agritourism ventures were reduced to 5 percent from 15 percent previously, while VAT for accommodation is now 6 percent, down from 20 percent. Five star hotels and agritourism facilities are exempt from the tax on impact on infrastructure while both four and five start hotels are exempt from tax on buildings.

Agriculture (Large Agricultural Farms) and Fishing:  Investments greater than EUR three million that create at least 50 new jobs enjoy the status of assisted procedure, while investments greater than EUR 50 million enjoy the status of special procedure. In addition, the GoA offers a wide range of incentives and subsidies for investments in the agriculture sector. The funds are a direct contribution from the state budget and the EU Instrument of Pre-Accession for Rural Development Fund (IPARD.) IPARD funds allocated for the period 2018-2020 totaled EUR 71 million. The program is managed by the Agricultural and Rural Development Agency (  http://azhbr.gov.al/  ). Agricultural inputs, agricultural machinery, and veterinary services are exempt from VAT. The government offers other subsidies to agricultural farms and wholesale trade companies that export agricultural products.

Some incentives offered in the agriculture sector include: Zero VAT for agricultural machineries and for 27 fishing industry items including ships, nets, electronic equipment, refrigerators, ship engines, etc. Zero tariff for the registration and compulsory vaccination of livestock. Zero tax for the purchase of diesel from fishing vessels (0 excise, 0 fuel tax, 0 carbon tax.) A reduction of profit tax up to 5 percent for Agricultural Cooperative Societies and 10 percent VAT for supply of agricultural inputs including chemical fertilizers, pesticides, seeds, and seedlings. In addition, those investing in agriculture sector can rent agriculture land from 10 to 99 years.

Development Priority Areas:  Investments greater than EUR one million that create at least 150 new jobs enjoy the status of assisted procedure. Investments greater than EUR 10 million that create at least 600 new jobs enjoy the status of special procedure.

Foreign Tax Credit: Albania applies foreign tax credit rights even in cases where no double taxation treaty exists with the country in which the tax is paid. If a double taxation treaty is in force, double taxation is avoided either through an exemption or by granting tax credits up to the amount of the applicable Albanian corporate income tax rate (currently 15 percent).

In 2019, the GoA reduced the dividend tax from 15 percent to 8 percent.

Corporate Income Tax Exemption:  Film studios and cinematographic productions, licensed and funded by the National Cinematographic Center, are exempt from corporate income tax.

Loss Carry Forward for Corporate Income Tax Purposes:  Fiscal losses can be carried forward for three consecutive years (the first losses are used first). However, the losses may not be carried forward if more than 50 percent of direct or indirect ownership of the share capital or voting rights of the taxpayer is transferred (changed) during the tax year.

Lease of Public Property:  The GoA can lease public property of more than 500 square meters or grant a concession for the symbolic price of one euro if the properties will be used for manufacturing activities with an investment exceeding EUR 10 million, or for inward processing activities. The GoA can also lease public property or grant a concession for the symbolic price of one euro for investments of more than EUR two million for activities that address certain social and economic issues, as well as activities related to sports, culture, tourism, and cultural heritage. Criteria and terms are decided on an individual basis by the Council of Ministers.

Incentives for the Manufacturing Sector and ICT:  The GoA reduced the profit tax from 15 percent to 5 percent for software development companies and the automotive industry. Manufacturing activities are exempt from 20 percent VAT on imports of machinery and equipment. The government offers a one-euro symbolic rent for government-owned property (land and buildings) for investments exceeding USD 2.7 million that create a minimum of 50 jobs. No VAT is charged for products processed for re-exports. Employers are exempt from paying social security tax for one year for all new employees. The GoA pays the first four months of salaries for new employees and offers various financing incentives for job training.

The manufacturing sector obtains VAT refunds immediately in the case of zero risk exporters, within 30 days if the taxpayer is an exporter, and within 60 days in the case of other taxpayers.

Apparel and footwear producers are exempt from 20 percent VAT on raw materials if the finished product is exported. In 2011, the GoA also removed customs tariffs for imported apparel and raw materials in the textile and shoe industries (e.g., leather used for clothes, cotton, viscose, velvet, sewing accessories, and similar items).

Technological and Development Areas (TEDA):  The Law on Economic Development Areas provides fiscal and administrative incentives for companies that invest in this sector and for firms that establish a presence in these areas. Major incentives include: Developers and users benefit from a 50 percent deduction of profit tax for five years, exemption from the infrastructure impact tax, and exemption from real estate tax for five years. A full list of incentives can be found at:   TEDA (aida.gov.al)  

Albania has no functional duty-free import zones or free trade zones, although legislation exists for their creation. The May 2015 amendments to the Law on the Establishment and Operation of Technological and Development Areas (TEDAs) created the legal framework to establish TEDAs, defining the incentives for developers investing in the development of these zones and companies operating within the zones.

The Albanian government has granted the status of the Technological and Development Areas to TEDA Spitalle (49.1 ha), Koplik (61 ha) and Kashar (35 ha) (Tirana) but none has been developed to date.

There are no performance requirements for foreign investors or minimum requirements for domestic content in goods or technology. Investment incentives are equally available to foreign and domestic investors. Investments in certain sectors require a license or authorization and procedures are similar for foreign and domestic investors.

Visa, residence, and work permit requirements are straightforward and generally do not pose an undue burden on potential investors.

The government approved a new Law on Foreigners in June 2021, which partially aligns the domestic legislation, including that on migration, with the EU Directives. The new law introduces a single application procedure for permits. For investors there is a special permit called “Unique Investor Permit.” Foreign investors are issued a 2-year unique investor permit if they invest in Albania and meet certain criteria, including a quota ratio of one to five of foreign and Albanian workers. In addition, same ratio should be preserved in the Board of Directors and other leading and supervisory structures of the company. Salaries of the Albanian workers should match the average of last year for equivalent positions. The permit can be renewed for an additional three years and after that the investor is eligible to receive a permanent permit provided that they fulfil the criteria outlined above and prove that the company is properly registered, has paid taxes and is not incurring losses. The U.S. citizens when applying for the first time receives a five-year permit. Foreign investors can obtain the single permit by the immigration authorities following the initial approval for employment from the National Agency for Employment and Skills ( https://www.akpa.gov.al/https://www.akpa.gov.al/  .) U.S. citizens along with EU, Western Balkans, and Schengen-country citizens are exempt from this requirement. In addition, U.S., EU, and Kosovo citizens when applying for residency permit for the first time, have a term of 5 years. The new law also introduced the National Electronic Register for Foreigners (NERF), which is a state database on foreigners, who enter or intend to enter Albania, with purpose of staying, transiting, working, or studying in Albania. NERF will register data on foreign nationals, who have an entry visa, stay, or transit in the Republic of Albania, have a temporary or permanent residence permit, and have a have a unique permit (residence and employment) in Albania.

The Council of Ministers approved an annual quota of foreign workers following a needs assessment by sector and profession. However, work permits for staff that occupy key positions, among other categories, can be issued outside the annual quota.

Albanian legislation regulating the functioning of the National Agency of Information (AKSHI) requires that every company contracted by the government to develop a computer system provide the source code and all related technical documents of the system. In addition, every government system and its data must be hosted at the government datacenter maintained by AKSHI.

There are no legal restrictions to transferring business-related data abroad, except for a few cases that need prior consent. There are more stringent requirements for personal data. Albania has comprehensive legislation for the protection of personal data: the Law on the Protection of Personal Data, including by-laws, as well as the 1981 Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data, and the Additional Protocol to the Convention regarding Supervisory Authorities and Trans-border Flows of Personal Data, ratified by Albania in 2004. The authority in charge of the protection of personal data is the Information and Data Protection Commissioner https://www.idp.al/?lang=en   .

Based on Albanian legislation, international transfers of personal data in countries deemed to have an adequate level of protection are not restricted. However, companies must notify the Commissioner in advance of any processing of personal data and any intention to transfer data to third countries. This applies to companies in foreign jurisdictions that operate in Albania using any means located within the country. To transfer data to third countries that do not have an adequate protection level, companies need prior authorization from the Commissioner. There are exemptions to this policy for certain data categories defined by the Commissioner as well as when certain conditions are met. Countries with an adequate protection level include EU member states, European Economic Area countries, members of the 1981 Convention and related protocol, and all countries approved by the European Commission.

Many foreign companies operating in Albania that process sensitive data opt to keep their data in Albania.

Individuals and investors face significant challenges with protection and enforcement of property rights. Despite some improvements, procedures remain cumbersome, and registrants have complained of corruption during the process. Over the last three decades, the GoA has drafted and passed much, though not all, of its property legislation in a piecemeal and uncoordinated way. However, the GoA is working to complete the process for registration and compensation of properties, and the law on the finalization of transitional ownership processes adopted in March 2020, specifically aims to consolidate property rights by finalizing land allocation and privatization processes contained in 14 various laws issued between 1991 and 2018. According to the European Commission Report 2021 on Albania, progress on property rights should be made on further first registration of properties and transitional ownership processes, in a transparent and inclusive manner. The GoA aims to fully digitize property documents within 2023, however, the poor state of the data is a risk for title security and a constraint to investment. To streamline the property management process, the GoA established in April 2019 the State Cadaster Agency (ASHK), which merged different agencies responsible for property registration, compensation, and legalization, including the Immovable Property Registration Office (IPRO), the Agency of Inventory and Transfer of Public Properties (AITPP), and the Agency for the Legalization and Urbanization of Informal Areas (ALUIZNI).

The property registration system has improved thanks to international donor assistance, but the process has moved forward very slowly as Albania has yet to complete the initial registration of property titles in the country. In total, about 3.54 million properties were registered as part of the initial registration process. In December 2021, GoA launched a two-year project which aims to complete the digitization of the about 2.3 million remaining properties however plot records for many of these properties are still only in paper form and often in poor and outdated condition. Approximately half a million properties have still not been registered for the first time, which includes the southern coastal area. In 2020, the State Cadaster Agency initiated the process of first registration for eight zones in the Himara municipality area that holds significant potential for the tourism industry.

The Agency for the Treatment of Property (ATP) continued assessing requests and distributing funds for compensation of properties. In 2021, it distributed around USD 9.5 million from the financial fund and an area of around 100 hectares from the land fund.

Albania has registered an estimated 440,000 illegal structures, built without permits, and illicit construction continues to be a major impediment to securing property titles. A process that aims to legalize or eliminate such structures started in 2006 but is not complete. Around 200,000 legalization permits were issued through the end of 2020. The fluid situation has led to clashes between squatters, owners of allegedly illegal buildings, and the Albanian State Police including during the demolition of these structures to make way for public infrastructure projects.

According to the 2020 World Bank’s “Doing Business Report,” Albania performed poorly in the property registration category, ranking 98th out of 190 countries.  It took an average of 19 days and five procedures to register property, and the associated costs could reach 8.9 percent of the total property value. The civil court system manages property rights disputes, but verdicts can take years, authorities often fail to enforce court decisions, and corruption concerns persist within the judiciary.

Albania is not included on the U.S. Trade Representative’s (USTR’s) Special 301 Report or Notorious Markets List. That said, intellectual property rights (IPR) infringement and theft are common due to weak legal structures and poor enforcement. Counterfeit goods are present in some local markets and shopping malls, including software, garments, machines, and cigarettes. Albanian law protects copyrights, patents, trademarks, industrial designs, and geographical indications, but enforcement of these laws remains weak. Regulators are ineffective at collecting fines and prosecutors rarely press charges for IPR theft. U.S. companies should consult an experienced IPR attorney and avoid potential risks by establishing solid commercial relationships and drafting strong contracts. According to the 2021 International Property Right Index published by Property Right Alliance, Albania ranks 98th out of 129 countries evaluated, registering an improvement compared to the previous year when ranked 112th. It ranked 79th in the subcategory of copyright protection and 23rd in trademark protection.

Amendments to the Albanian Industrial Property Law, introducing new provisions regarding trade secrets and trademarks entered into force in August 2021. The most significant change is the transposition of Directive (EU) 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure. Trade secrets were previously regulated by the Law on Entrepreneurs and Companies, and Labor Code, and their subject matter was defined in broader terms. Now, under the amended IP law, a trade secret is defined as undisclosed expert knowledge, experience or business information that is not generally known or easily accessible, that has a certain market value, and for which sufficient measures have been taken to keep it a secret.  In 2019, the Criminal Code was amended to include harsher punishments of up to three years in prison for IPR infringement.

In the areas of copyright, patent, and trademarks, the two main bodies responsible are the Copyright Directorate at the Ministry of Culture and the General Directorate of Industrial Property (GDIP), which is in charge of registering, administering, and promoting IPR. Other institutions responsible for IPR enforcement include the Copyright Division of the State Inspectorate for Market Surveillance (SIMS), the Audiovisual Media Authority (AMA), the General Directorate for Customs, the Tax Inspectorate, the Prosecutor’s Office, the State Police, and the courts. In 2018, the National Council of Copyrights was established as a specialized body responsible for monitoring the implementation of the law and certifying the methodology for establishing the tariffs. Two other important bodies in the protection and administration of IPR are the agencies for the Collective Administration (AAK) and the Copyrights Department within the Ministry of Culture. Four different AAKs have merged in 2017 to provide service into a sole window for the administration of IPR.

The 2021 amendments to the IP law also define the role and duties of the State Inspectorate for Market Surveillance (SIMS), the main responsibility of which is to ensure the safety of non-food consumer products by instigating internal market inspections. The SIMS, established in 2016, is responsible for inspecting, controlling, and enforcing copyright and other related rights.  Despite some improvements, actual law enforcement on copyrights continues to be problematic and copyright violations are persistent.  The number of copyright violation cases brought to court remains low. While official figures are not available this year, Customs does usually report the quantity of counterfeit goods destroyed annually.  In cases of seizures, the rights holder has the burden of proof and so must first inspect the goods to determine if they are infringing.  The rights holder is also responsible for the storage and destruction of the counterfeit goods.

Cigarettes are traditionally the most common counterfeited product seized by Customs. According to the EU 2021 report on Albania, the high number of counterfeit products in the country remains a cause for concern. Last year the customs administration suspended the release of more than 23,000 products suspected of infringing IPR.

The GDIP is responsible for registering and administering patents, commercial trademarks and service marks, industrial designs, and geographical indications. In 2020, the number of applications for registration of trademarks continued to rise, amounting to 1,164 national applications and 2,936 international applications. As for patents, 897 patent applications were filed at the GDIP in 2020, of which 12 were national patent applications with Albanian national applicants, and 885 patent applications were patents issued by the European Patent Office seeking protection in Albania.

Albania is party to the World Intellectual Property Organization (WIPO) Patent Law Treaty, the Patent Cooperation Treaty, the Berne Convention, the Paris Convention, and is a member of the European Patent Organization. The government became party to the London Agreement on the Implementation of Article 65 of the European Convention for Patents in 2013. In 2018, Parliament approved the Law 34/2018 on Albania’s adherence to the Vienna Agreement for the International Classification of the Figurative Elements of Marks as well as the agreements of Lisbon and Locarno on international classification and protection of industrial designs. In June 2019, Albania joined the Geneva Act of WIPO’s Lisbon Agreement on Appellations of Origin and Geographical Indications.

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

Resources for Rights Holders

Contact at Embassy Tirana on IPR issues:

E-mail: USALBusiness@state.gov 

Country resources:

American Chamber of Commerce

Address: Rr. Deshmoret e shkurtit, Sky Tower, kati 11 Ap 3 Tirana, Albania

Email:  info@amcham.com.al

Phone: +355 (0) 4225 9779

Fax: +355 (0) 4223 5350

(amcham.com.al) 

List of local lawyers:

tirana.usembassy.gov

The government has adopted policies to promote the free flow of financial resources and foreign investment in Albania. The Law on “Strategic Investments” is based on the principles of equal treatment, non-discrimination, and protection of foreign investments. Foreign investors have the right to expatriate all funds and contributions of their investment.  In accordance with IMF Article VIII, the government and Central Bank do not impose any restrictions on payments and transfers for international transactions. Despite Albania’s shallow foreign exchange market, banks enjoy enough liquidity to support sizeable positions.  Portfolio investments continue to be a challenge because they remain limited mostly to company shares, government bonds, and real estate as the Tirana stock market remains non-operational

In recent years, the constant reduction of non-performing loans has allowed commercial banks to loosen lending standards and increase overall lending especially as the economy has recovering from the severe COVID-19 economic disruption in 2020. Non-performing loans (NPL) at the end of 2021 dropped to 5.65 percent compared to 8.1 percent one year ago. Overall lending has steadily increased since 2019 and at the end of 2021 reached about USD 6 billion marking a 10 percent increase compared to 2020. The credit market is competitive, but interest rates in domestic currency can be high. Most mortgage and commercial loans are denominated in euros because rate differentials between local and foreign currency average 1.5 percent. Commercial banks operating in Albania have improved the quality and quantity of services they provide, including a large variety of credit instruments, traditional lines of credit, and bank drafts, etc.

In the absence of an effective stock market, the country’s banking sector is the main channel for business financing.  The sector is sound, profitable, and well capitalized. The Bank of Albania, the country’s Central Bank, is responsible for the licensing and supervision of the banking sector in Albania. The banking sector is 100 percent privately owned and its total assets have steadily increased over the years reaching USD 17 billion at the end of 2021 mostly based on customers deposits.  The banking sector has continued the consolidation process as the number of banks decreased from 16 in 2018 to 11 at the end of 2021 when the Greek Alpha Bank was purchased by OTP Bank. As of December 2021, the Turkish National Commercial Bank (BKT) was the largest bank in the market with 26 percent market share, followed by Albanian Credins Bank with 15.8 percent, and Austrian Raiffeisen Bank third with 15.3 percent.  The American Investment Bank is the only bank with U.S. shareholders and ranks sixth with 5.5 percent percent of the banking sector’s total assets.

The number of bank outlets has also decreased over the recent years also due to the consolidation. In December 2021, Albania had 417 bank outlets, down from 446 from 2019 and the peak of 552 in 2016. Capital adequacy, at 18 percent in December 2021, remains above Basel requirements and indicates sufficient assets.  At the end of 2021, the return on assets increased to 1.42 percent compared to 1.2 percent one year ago. As part of its strategy to stimulate business activity, the Bank of Albania has adopted a plan to ease monetary policy by continuing to persistently keep low interest rates. However, due to the recent inflationary pressure in March 2021, Bank of Albania increased the base interest rate to 1 percent, up from a historical low rate of 0.5 percent which was in place since June 2018.

Many of the banks operating in Albania are subsidiaries of foreign banks. Only three banks have an ownership structure whose majority shareholders are Albanian. However, the share of total assets of the banks with majority Albanian shareholders has increased because of the sector’s ongoing consolidation. There are no restrictions for foreigners who wish to establish a bank account. They are not required to prove residency status. However, U.S. citizens must complete a form allowing for the disclosure of their banking data to the IRS as required under the U.S. Foreign Account Tax Compliance Act.

Parliament approved a law in October 2019 to establish the Albanian Investment Corporation (AIC). The law entered in force in January 2020. The AIC would develop, manage, and administer state-owned property and assets, invest across all sectors by mobilizing state owned and private domestic and foreign capital, and promote economic and social development by investing in line with government-approved development policies.

The GoA plans to transfer state-owned assets, including state-owned land, to the AIC and provide initial capital to launch the corporation. In December 2021, the GoA transferred to the AIC close to USD 20 million. There is no publicly available information about the activities of the AIC for 2020 or 2021.

The IMF https://www.imf.org/en/News/Articles/2019/11/26/mcs11262019-albania-staff-concluding-statement-of-the-2019-article-iv-mission Staff Concluding Statement  of November 26, 2019, warned that the law would allow the government to direct individual investment decisions, which could make the AIC an off-budget spending tool that risks eroding fiscal discipline and circumventing public investment management processes.

State-owned enterprises (SOEs) are defined as legal entities that are entirely state-owned or state-controlled and operate as commercial companies in compliance with the Law on Entrepreneurs and Commercial Companies. SOEs operate mostly in the generation, distribution, and transmission of electricity, oil and gas, railways, postal services, ports, and water supply. There is no published list of SOEs.

The law does not discriminate between public and private companies operating in the same sector. The government requires SOEs to submit annual reports and undergo independent audits. SOEs are subject to the same tax levels and procedures and the same domestic accounting and international financial reporting standards as other commercial companies. The High State Audit audits SOE activities. SOEs are also subject to public procurement law.

Albania is yet to become party to the Government Procurement Agreement (GPA) of the WTO but has obtained observer status and is negotiating full accession (see  https://www.wto.org/english/tratop_e/gproc_e/memobs_e.htm  ).  Private companies can compete openly and under the same terms and conditions with respect to market share, products and services, and incentives.

SOE operation in Albania is regulated by the Law on Entrepreneurs and Commercial Companies, the Law on State Owned Enterprises, and the Law on the Transformation of State-Owned Enterprises into Commercial Companies. The Ministry of Economy and Finance and other relevant ministries, depending on the sector, represent the state as the owner of the SOEs. SOEs are not obligated by law to adhere to Organization for Economic Cooperation and Development (OECD) guidelines explicitly. However, basic principles of corporate governance are stipulated in the relevant laws and generally accord with OECD guidelines. The corporate governance structure of SOEs includes the supervisory board and the general director (administrator) in the case of joint stock companies. The supervisory board comprises three to nine members, who are not employed by the SOE. Two-thirds of board members are appointed by the representative of the Ministry of Economy and Finance, and one-third by the line ministry, local government unit, or institution to which the company reports. The Supervisory Board is the highest decision-making authority and appoints and dismisses the administrator of the SOE through a two-thirds vote.

The privatization process in Albania is nearing conclusion, with just a few major privatizations remaining. Entities to be privatized include OSHEE, the state-run electricity distributor; 16 percent of ALBtelecom, the fixed-line telephone and mobile company; and state-owned oil company Albpetrol. Other sectors might provide opportunities for privatization in the future.

The bidding process for privatizations is public, and relevant information is published by the Public Procurement Agency at   www.app.gov.al  . Foreign investors may participate in the privatization program. The Agency has not published timelines for future privatizations.

Public awareness of corporate social responsibility (CSR) and Responsible Business Conduct (RBC) in Albania is low, and CSR and RBC remains new concepts for much of the business community. The small level of CSR and RBC engagement in Albania comes primarily from international corporations operating in the energy, telecommunications, heavy industry, and banking sectors, and tends to focus on philanthropy and environmental issues. International organizations have recently improved efforts to promote CSR. Thanks to efforts by the international community and large international companies, the first Albanian CSR network was founded in March 2013 as a business-led, non-profit organization. The American Chamber of Commerce in Albania also formed a subcommittee in 2015 to promote CSR among its members.

Legislation governing CSR, labor, and employment rights, consumer protection, and environmental protection is robust, but enforcement and implementation are inconsistent. The Law on Commercial Companies and Entrepreneurs outlines generic corporate governance and accounting standards. According to that law and the Law on the National Business Registration Center, companies must disclose publicly when they change administrators and shareholders and to disclose financial statements. The Corporate Governance Code for unlisted joint stock companies incorporates the OECD definitions and principles on corporate governance but is not legally binding. The code provides guidance for Albanian companies and aims to provide best-practices while assisting Albanian companies to develop a governance framework.

Albania has been a member of the Extractive Industries Transparency Initiative (EITI) since 2013.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Albania signed and ratified the Paris Agreement in 2016 and the Solidarity and Just Transition, Silesia Declaration in 2018. The country has committed to an effective transition to low GHG emissions. In 2019, Albania became member to the Nationally Determined Contribution (NDC) Partnership, showing its commitment to ambitious implementation of its NDC under the Paris Agreement and the 2030 Sustainable Development Goals. In July 2020, Albania submitted its National Energy and Climate Plan (NECP) for the period 2021-2030 to the Energy Secretariat for formal recommendations. In December 2020, the country approved the law on Climate Change and is the process of approving its bylaws defining the mechanism for monitoring and reporting of GHG emissions. The government has drafted the National Plan for Energy and Climate 2021-2030, which outlines plans of the government to reduce GHG emissions. Albania has one of the lowest emissions per capita in Europe in part due hydropower dominating electricity generation and in part due to limited levels of industrial manufacturing.

Endemic corruption continues to undermine the rule of law and jeopardize economic development. Foreign investors cite corruption including in the judiciary, a lack of transparency in public procurement, lack of transparency and competition, informal economy, and poor enforcement of contracts as some of the biggest problems in Albania. Despite some improvement in Albania’s score from 2013 to 2016, progress in tackling corruption has been slow and unsteady. In 2021, Albania’s Corruption Perceptions Index (CPI) score was 35 and its ranking fell by six slots from 104 to 110, a significant decline from the 2016 score and rank of respectively 39 and 83. Albania is still one of the most corrupt countries in Europe, according to the CPI and other observers.

The country has a sound legal framework to prevent conflict of interest and to fight corruption of public officials and politicians, including their family members. However, law enforcement is jeopardized by a heavily corrupt judicial system.

The passage of constitutional amendments in July 2016 to reform the judicial system was a major step forward, and reform, once fully implemented, is expected to position the country as a more attractive destination for international investors. Judicial reform has been described as the most significant development in Albania since the end of communism, and nearly one-third of the constitution was rewritten as part of the effort. The reform also entails the passage of laws to ensure implementation of the constitutional amendments. Judicial reform’s vetting process will ensure that prosecutors and judges with unexplained wealth or insufficient training, or those who have issued questionable verdicts, are removed from the system. As of publication, more than half of the judges and prosecutors who have faced vetting have either failed or resigned. The establishment of the Special Prosecution Office Against Corruption (SPAK) and Organized Crime and of the National Investigation Bureau, two new judicial bodies, will step up the fight against corruption and organized crime. Once fully implemented, judicial reform will discourage corruption, promote foreign and domestic investment, and allow Albania to compete more successfully in the global economy.

The government has ratified several corruption-related international treaties and conventions and is a member of major international organizations and programs dealing with corruption and organized crime. Albania has ratified the Civil Law Convention on Corruption (Council of Europe), the Criminal Law Convention on Corruption (Council of Europe), the Additional Protocol to Criminal Law Convention on Corruption (Council of Europe), and the United Nations Convention against Corruption (UNCAC). Albania has also ratified several key conventions in the broader field of economic crime, including the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (2001) and the Convention on Cybercrime (2002). Albania has been a member of the Group of States against Corruption (GRECO) since the ratification of the Criminal Law Convention on Corruption in 2001 and is a member of the Stability Pact Anti-Corruption Initiative (SPAI). Albania is not a member of the OECD Anti-Bribery Convention. Albania has adopted legislation for the protection of whistleblowers.

To curb corruption, the government announced a new online platform in 2017, “  Shqiperia qe Duam  ” (“The Albania We Want”), which invites citizens to submit complaints and allegations of corruption and misuse of office by government officials. The platform has a dedicated link for businesses. The Integrated Services Delivery Agency (ADISA), a government entity, provides a second online portal to report corruption. Effectiveness of the portal is minimal.

In February 2020, GoA approved the establishment of the Special Anticorruption and Anti-Evasion Unit which operates under the Council of Ministers. The mission of the unit is the coordination between the main public institutions, agencies, and state-owned companies in order to discover, investigate and punish corruption and abusive practices. During 2021, the National Network of Anti-Corruption Coordinators, a structure that is under the Minister of Justice, who also serves as the National Coordinator against corruption, became functional. The coordinators are placed in seventeen institutions that have the highest public perception of corruption. The coordinators collect, process, and analyze complaints filed by the citizens and businesses and report to the law enforcement authorities if necessary.

Despite progress, corruption remains pervasive. Albania has yet to build a solid track record of investigations, prosecution, conviction, and confiscation of criminal assets resulting from corruption-related offences.

Interested parties can file a complaint related to corruption directly to the coordinators embedded in the various institutions or by writing directly to them in the following e-mail, koordinatori.ak@drejtesia.gov.al  They can also use the anti-corruption platform by filing a complaint at shqiperiaqeduam.al 

Political violence is rare, the more recent instances being an attempt led by a former Albanian leader designated by the USG for corruption to breach a party headquarters in January 2022 that required police intervention and political protests in 2019 that included instances of civil disobedience, low-level violence and damage to property, and the use of tear gas by police. Albania’s April 2021 elections and transition to a new government were peaceful, as were its June 2019 local elections. On January 21, 2011, security forces shot and killed four protesters during a violent political demonstration. In its external relations, Albania has usually encouraged stability in the region and maintains generally friendly relations with neighboring countries.

Albania’s labor force numbers around 1.2 million people, according to official data. After peaking at 18.2 percent in the first quarter of 2014, the official estimated unemployment rate has significantly decreased in recent years. In December 2021, unemployment reached 11.4 percent compared to 11.8 percent at the end of 2020 marking an improvement following the economic disruption due to the COVID-19 pandemic. Unemployment among people aged 15-29 remains high, at 20.6 percent. Around 40 percent of the population is self-employed in the agriculture sector. According to the International Labor Organization (ILO), share of informal employment in the employed population was almost 57 percent in 2019, the highest in the region.

The institutions that oversee the labor market include the Ministry of Finance, Economy and Labor, the Ministry of Health and Social Protection, the National Employment Service, the State Labor Inspectorate, and private entities such as employment agencies and vocational training centers.  Albania has adopted a wide variety of regulations to monitor labor abuses, but enforcement is weak.

Outward labor migration remains an ongoing problem affecting the Albanian labor market especially in the IT and health sector. There is a growing concern about labor shortage for both skilled and unskilled workforces.  In recent years, media outlets have reported that a significant number of doctors and nurses have emigrated to the European Union, especially Germany. According to the World Bank, Albania has the lowest number of doctors per capita in the region with just 1.647 doctors per 1,000 inhabitants in 2019. In December 2021, the average public administration salary was approximately 70,531 lek (approximately USD 650) per month. The GoA has announced it will increase the minimum wage by 6.5 percent to 32,000 lek per month (approximately USD 300) in April 2022, which remains the lowest in the region.

In March 2019, parliament approved a new law on employment promotion, which defined public policies on employment and support programs. Albania has a tradition of a strong secondary educational system, while vocational schools are viewed as less prestigious and attract fewer students.  However, the government has more recently focused attention on vocational education. In the 2020-2021 academic year, about 19,000, or 18.5 percent, of high school pupils were enrolled in vocational schools.

The Law on Foreigners 79/2021 that was approved in July 2021 and various decisions of the Council of Ministers regulate the employment regime in Albania.  Employment can also be regulated through special laws in the case of specific projects, or to attract foreign investment.  The Law on TEDA’s provides financial and tax incentives for investments in the zone. Law on Foreigners extends the same employment and self-employment rights of Albanian citizens to citizens of the five Western Balkan countries and provides the same benefits that the original law provided to the citizens of EU and Schengen countries.

The Labor Code includes rules regarding contract termination procedures that distinguish layoffs from terminations.  Employment contracts can be limited or unlimited in duration, but typically cover an unlimited period if not specified in the contract. Employees can collect up to 12 months of salary in the event of an unexpected interruption of the contract. Unemployment compensation is approximately 50 percent of the minimum wage.

Pursuant to the Labor Code and the recently amended “Law on the Status of the Civil Employee,” both individual and collective employment contracts regulate labor relations between employees and management.  While there are no official data recording the number of collective bargaining agreements used throughout the economy, they are widely used in the public sector, including by SOEs. Albania has a labor dispute resolution mechanism as specified in the Labor Code, article 170, but the mechanism is considered inefficient. Strikes are rare in Albania, mostly due to the limited power of the trade unions and they have not posed a significant risk to investments.

Albania has been a member of the International Labor Organization since 1991 and has ratified 54 out of 189 ILO conventions, including the eight Fundamental Conventions, the four Governance Conventions, and 42 Technical Conventions. The implementation of labor relations and standards continues to be a challenge, according to the ILO.

See the U.S. Department of State Human Rights Report: https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/; and the U.S. Department of Labor Child Labor Report: http://www.dol.gov/ilab/reports/child-labor  .

U.S. Embassy Tirana, Albania
Rruga Stavro Vinjau, Nr. 14
Tirana, Albania
+355 4 224 7285
USALBusiness@state.gov  

The government actively encourages FDI and is committed to increasing it.  The preparation of the 2021-2025 PND was informed by a comprehensive review of the previous 2016-2020 PND to identify the main achievements, remaining challenges and additional strategic priorities.  The 2021-2025 PND process was collaborative, including consultations with civil society, private sector, local government, and development finance institutions (DFIs).  The government recognizes it cannot achieve its ambitious PND investment goals without increasing foreign investment and private investment to a target of 72 percent of total investment.  Prime Minister Achi’s March 2022 visit to the U.S. profiled CDI as an attractive trade and investment partner that offers a conducive environment to accommodate foreign companies.  Achi broadcast the government’s objective to use the private sector as a principal element of development, urging U.S. companies to invest in Côte d’Ivoire.  He highlighted CDI’s success in delivering peace and stability through its commitment to political dialogue.  Part of CDI’s vision by 2030 is to process domestically at least 50 percent of its raw export commodities.

Foreign companies are free to invest and list on the Regional Stock Exchange (BVRM – Bourse Régionale des Valeurs Mobilières), which is based in Abidjan and covers the eight countries of the West African Economic and Monetary Union (WAEMU).  WAEMU members are part of the Regional Council for Savings and Investment (CREPMF – Conseil Régional de l’Épargne Publique et des Marchés Financiers), a West African securities regulatory body.  BRVM has only 46 companies, 34 of which are Ivorian.  Looking ahead, the market is slowly going digital, with online trading platforms.  Licensed stock broking companies already execute most investors’ trades through an automated trading system.  Nevertheless, investor and corporate sentiment remain low.  Companies are reluctant to list, and investors do not yet see the market as an alternative way to make profit.  There is a need to expand and deepen markets to support international trade, including forward and futures markets.

In most sectors, there are no laws that limit foreign investment.  There are restrictions, however, on foreign investment in the health sector, law and accounting firms, and travel agencies (see the section below).

The Ivoirian government’s investment promotion agency, the Center for the Promotion of Investment in Côte d’Ivoire (CEPICI), promotes and attracts national and foreign investment.  Its services are available to all investors and are provided through a one-stop shop intended to facilitate business creation, operation, and expansion.  CEPICI ensures that investors receive incentives outlined in the investment code and facilitates access to industrial land.  More information is available at http://www.cepici.gouv.ci/.  In 2019, the government added a Ministry of Investment Promotion and Private Sector Development, charged with investment promotion activities and development of industrial zones, including economic and free zones. The Ministry oversees the CEPICI and the Ivoirian Enterprise Institute (INIE – Institut Ivoirien de l’Entreprise), charged with programs targeting Small and Medium Enterprise (SME) development.  This overlaps with the mandate of the Ministry of SMEs (Ministère de la Promotion des PME, de l’artisanat et de la Transformation du Secteur informel).

Côte d’Ivoire maintains an ongoing dialogue with investors through various business networks and platforms, such as the CEPICI, the Ivoirian Chamber of Commerce (CCI-CI), the association of large enterprises (CGECI), and the bankers’ association.  CGECI regularly proposes reforms to be adopted by the government regarding private sector financing and investment.  CGECI workshops and conferences are venues to discuss issues ranging from tax to access to debt issues.

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

There are no general, economy-wide limits on foreign ownership or control, and few sector-specific restrictions.  There are no laws specifically directing private firms to adopt articles of incorporation or association that limit or prohibit foreign investment, participation, or control in those firms, and no such practices have been reported.  Non-citizens and foreign entities can buy stocks listed on the regional stock exchange located in Abidjan.

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

The government does not have an official policy to screen investments; its overall economic and industrial strategy does not discriminate against foreign-owned firms.  There are indications in some instances of preferential treatment for firms from countries with longstanding commercial ties to CDI.  In some sectors, such as cocoa and cashew processing, the government gives preferential treatment to Ivoirian companies.  For instance, 20 percent of the national cocoa production is exclusively granted to local cocoa exporting companies.

Côte d’Ivoire has not conducted an investment policy review (IPR) through the OECD.  The WTO last conducted a Trade Policy Review in October 2017, which can be found at https://www.wto.org/english/tratop_e/tpr_e/tp462_e.htm.

UNCTAD published an Investment Policy Review for Côte d’Ivoire in February 2020, which can be found at https://unctad.org/webflyer/investment-policy-review-cote-divoire.

The Government of CDI provides information about sector policies and business opportunities in publicly available reports.  More information can be found at: https://www.cepici.gouv.ci/.  The National Development Plan 2021-2025 outlines the key sectors and priorities of the government regarding investment.

The CEPICI manages CDI’s online information portal containing all documents dedicated to business creation and registration (https://cotedivoire.eregulations.org/).  All the necessary documentation for registration is available online, however actual registration must be done in person. Further information on business registration is also available on CEPICI’s website (http://www.cepici.gouv.ci/).

Businesses can register at the CEPICI’s One-Stop Shop (Guichet Unique) in Abidjan.  The One-Stop Shop allows businesses to register with the commercial registrar (Registre du Commerce et du Crédit Immobilier), the tax authority (Direction Générale d’Impôts) and the social security institute (Caisse Nationale de Prévoyance Sociale).  The One-Stop Shop also publishes the legal notice of incorporation on CEPICI’s website.  All necessary documents for registration are also available on the website.  Registration takes between one and three days, while preparation of necessary documents can take more time.  The business licensing process, controlled by sector-specific governing bodies, is separate from the registration process.

Women have equal access to the registration process.  There have not been any reports of discrimination in that regard.

International financial institutions are recommending that government authorities better and more transparently address concerns from the private sector in the following general areas:

1) enhancing the regulatory framework, reducing bureaucratic red tape, and improving the provision of public sector services, for example by simplifying and harmonizing the process for issuing business licenses and approvals;

2) promoting digitalization, both in the provision of public services and in public finance management;

3)  reducing labor market rigidities by broadening professional training programs;

4)  safeguarding property rights, particularly with respect to ownership and transfer of land;

5)  deepening financial inclusion and facilitating access to financial markets, also via mobile systems and digital platforms; and

6)  reducing uncertainty in the timing of government payments.

Government authorities are stepping up efforts to strengthen macroeconomic statistics. The National Strategy for the development of statistics aims to broaden the competencies of the National Institute of Statistics, reinforce its independence, and create a national fund for the development of statistics.

Côte d’Ivoire does not promote or incentivize outward investment.  However, the government does not restrict domestic investors from investing abroad.

The government aims for transparency in law and policy to foster competition and provide clear rules of the game and a level playing field for domestic and foreign investors.  However, at the operational level, lack of regulatory transparency is a concern.  Publication of draft legislation and regulations is not required.  Foreign and Ivoirian companies complain that new regulations are issued with little warning and without a period for public comment.  For instance, new duties and taxes on products are generally reported in the fiscal annexes towards the end of the year and take immediate effect at the beginning of the next year.  The Ministry of Commerce supports introducing a period for public comment on new regulations and changes in regulation before they are implemented, and government often holds ad hoc public seminars and workshops to discuss proposed plans with trade and industry associations.  Further work in this area would boost investor confidence.

Regulatory actions, once adopted, are published on the government website at enforcement stage.  They are also published in the Official Journal of the Republic of Côte d’Ivoire  (Journal Officiel de la République de Côte d’Ivoire) , which is available for purchase at newsstands and by subscription on the Journal’s website http://www.sgg.gouv.ci/jo.php and at https://abidjan.net/.

The National Regulatory Authority for Public Procurement (ANRMP – Autorité Nationale de Régulation des Marchés Publics) polices transparency in public procurement and private sector compliance with public procurement rules.  Consumers, trade associations, private companies, and individuals have the right to file complaints with ANRMP to hold the government to its own administrative processes.   Since 2019, public tenders’ audits have not been published on the ANRMP official website.

Regulatory bodies regularly publish and promote access to their data for the business community and development partners, allowing for scientific and data-driven reviews and assessments.  Quantitative analysis and public comments are made available.

Regulatory authority and decision-making exist only at the national level. Sub-national jurisdictions do not regulate business. For most industries or sectors, regulations are developed through the ministry responsible for that sector.  In the telecommunications, electricity, cocoa, coffee, cotton, and cashew sectors, the government has established control boards or independent agencies to regulate the sector and pricing.  Companies have complained that rules for buying prices determined by the agriculture commodity regulatory agencies tend to be opaque and local prices are set arbitrarily without reference to world prices.

Côte d’Ivoire’s agency regulating cocoa and coffee (CCC – Conseil Café et Cacao) has identified the need for a single mechanism to control traceability to prevent child labor and deforestation. The private sector and non-governmental stakeholders agree on the need for increased accountability and traceability, but generally prefer a multi-prong approach which incorporates the work already being done in this area outside of government.  Growing international awareness of child labor and environmental challenges in CDI, and the possibility that this could impact exports, are catalysts for action.

The government publishes tender notices in the local press and sometimes in international magazines and newspapers.  On occasion, there is a charge for the bidding documents.  Côte d’Ivoire has a generally decentralized government procurement system, with most ministries undertaking their own procurements.  The National Bureau of Technical and Development Studies, the government’s technical and investment planning agency and think tank, occasionally serves as an executing agency in major projects to be financed by international institutions.

The Public Procurement Department is a centralized office of public tenders in the Ministry of Finance tasked with ensuring compliance with international bidding practices. Côte d’Ivoire’s update to its public procurement code in 2019 introduced electronic procurement bidding, provisions for sustainable public procurement, and promotion of socially responsible vendors as a bidding qualification.  While the public procurement process is open by law, in practice it is often opaque and government contracts are occasionally awarded outside of public tenders.  During negotiations on a tender, the Ivorian Government at times imposes local content requirements on foreign companies.   There are specific regulations governing the government’s use of sole source procurements and the government has awarded sole source bids without tenders, citing the high technical capacity of a firm or a declared emergency.  Many firms continue to cite corruption as an obstacle to a transparent understanding of procurement decisions.

The National Authority for Regulation of Public Procurement (ANRMP) regulates public procurement with a view to improving governance and transparency.  It has the authority to audit and sanction private-sector entities that do not comply with public-procurement regulations, and to provide recommendations to ministries to address irregularities.

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

Banking regulation follows the Central Bank (BCEAO) monetary policy covering the eight countries of WAEMU.  Ivoirian authorities have limited power to conduct monetary policy.  The Central Bank regulates interest rates to control the money supply. IMF assessments confirm CDI’s creditworthiness, with strong financial oversight.  The Ivoirian government promotes transparency of public finances and debt obligations (including explicit and contingent liabilities) with the publication of this information through the following websites:

http://budget.gouv.ci

https://www.tresor.gouv.ci/tres/fr_FR/rapport-de-la-dette-publique/

The Ivoirian government incorporates WAEMU directives into its public procurement bidding policy, processes, and auditing.  This includes separating auditing and regulatory functions and increasing advance payment for the initial procurement of goods and services from 25 to 30 percent.

Côte d’Ivoire is part of the Intergovernmental Action Group against Money Laundering in West Africa (GIABA), whose mandate is to protect economies, reinforce cooperation among member states, harmonize measures, and evaluate current strategies against money laundering and terrorism financing.  The government hopes to adopt the draft national strategy to combat money laundering and terrorism financing in 2022.   Once adopted, this strategy will put in place regulations and institutions that protect the Ivoirian financial system against money laundering and the financing of terrorism .  CDI’s National Financial Information Processing Unit (CENTIF – Cellule nationale de Traitement des Informations financières) analyzes, processes, exploits, and circulates information from atypical financial transactions transmitted by professions subject to the law, in the form of “suspicious transaction reports.”

Ivoirian laws, codes, professional-association standards, and regional-body membership obligations are incorporated in the country’s regulatory system.  The private sector often follows European norms to take advantage of the Ivoirian trade agreement with the EU – CDI’slargest market.

Côte d’Ivoire has been a WTO member since 1995 but has not notified all the draft technical regulations to the WTO Committee on Technical Barriers to Trade.  Côte d’Ivoire signed the Trade Facilitation Agreement (TFA) in December 2013 and ratified it in December 2015.  The National TFA Committee (NTFC) coordinates TFA implementation.  Consistent with the Economic Community of West African States (ECOWAS), Côte d’Ivoire applies a Common External Tariff (CET) on goods importations.

The Ivoirian legal system is based on the French civil-law model.  The law guarantees to all the right to own and transfer private property.  Rural land, however, is governed by a separate set of laws, which makes ownership and transfer very difficult.  The court system enforces contracts.

The Commercial Court of Abidjan adjudicates corporate law cases and contract disputes.  Mediation is also available through the Ivoirian legal framework in addition to the Commercial Court and the Arbitration Tribunal. The Commercial Court of Abidjan retains jurisdiction for the entire country.

The Ivoirian judicial system is ostensibly independent, but magistrates are sometimes subject to political or financial influence.  Judges sometimes fail to prove that their decisions are based on the legal or contractual merits of a case and often rule against foreign investors in favor of entrenched interests.  A frequent complaint from investors is the slow dispute-resolution process.  Cases are often postponed or appealed without a reasonable explanation, moving from court to court for years or even decades.  Regulations or enforcement actions are appealable and adjudicated through the national court system.

The 2018 Investment Code is the primary governing authority for investment conduct.  The Code does not restrict foreign investment or the repatriation of funds.  The Code offers a mixture of fiscal incentives, combining tax exoneration, patents and licenses contribution and tax credits to encourage investment.  The government also offers incentives to promote small businesses and entrepreneurs, low-cost housing construction, factories, and infrastructure development, which the government considers key to the country’s economic development. Concessionary agreements that exempt investors from tax payments require the additional approval of the Ministry of Finance and Economy and the Ministry of Commerce and Industry.  The clearance procedure for planned investments, if the investor seeks tax breaks, is time consuming and confusing.  Even when companies have complied fully with the requirements, the Tax Office sometimes denies tax exemptions with little explanation, giving rise to accusations of favoritism.

Some sectors have additional laws that govern investment activity in those sectors. In mining, for example, the Mining Code allows for a ten-year holding period for permits with an option to extend for an two additional years on a limited permit area of 400 square kilometers.  The government drafted not yet passed in the National Assembly that would impose local-content requirements in the oil and gas sector such as the requirement that companies hire locals, finance personnel training, and support local SMEs.

The government is actively seeking to increase the share of local processing of raw agricultural commodities for export from 10 percent to 50 percent by 2025 and is looking for private investments to help reach this goal.

Côte d’Ivoire was once a net energy exporter and it is making investments to retake that position as the sub-region’s energy hub.  According to 2020 data, the country produces 38,000 barrels-per-day (bpd) of oil from four blocks and 213 million cubic-feet-per-day of gas.  The country has divided its offshore Exclusive Economic Zone into 51 hydrocarbons blocks, of which 18 blocks remain available for bid.  Currently, the production of gas is entirely used for electricity production.  The government seeks to attract more foreign companies to invest in the oil and gas sector.  In 2021, the large Italian oil company ENI discovered oil and gas at an offshore well site called “Baleine.”

The CEPICI provides a one-stop shop website to assist investors.  More information on Côte d’Ivoire’s laws, rules, procedures, and reporting requirements can be found at:

www.apex-ci.org/

www.cepici.gouv.ci/

The Ministry of Commerce, Industry and Small Business Promotion, through the Commission on Anti-Competition Practices, is responsible for reviewing competition–related concerns under the 1991 competition law, which was updated in 2013.  ANRMP is responsible for reviewing the awarding of contracts.

No significant competition cases were reported over the past year.

The Ivoirian constitution guarantees the right to own property and freedom from expropriation without compensation.  The government may expropriate property with due compensation (fair market value) at the time of expropriation in the case of “public interest.”  Perceived corruption and weak judicial and security capacity, however, have resulted in poor enforcement of private property rights, particularly when the entity in question is foreign and the plaintiff is Ivoirian or a long-established foreign resident.

Côte d’Ivoire is ranked 85 out of 190 countries for ease of resolving insolvency, according to the World Bank’s 2020 Doing Business Report.  As a member of OHADA, CDI has both commercial and bankruptcy laws that address the liquidation of business liabilities. OHADA is a regional system of uniform laws on bankruptcy, debt collection, and rules governing business transactions.  OHADA permits three different types of bankruptcy liquidation:  an ordered suspension of payment to permit a negotiated settlement; an ordered suspension of payment to permit restructuring of the company, like Chapter 11; and the complete liquidation of assets, similar to Chapter 7.   Creditors’ rights, irrespective of nationality, are protected equally by the Act.  Bankruptcy is not criminalized.  Court-ordered monetary settlements resulting from declarations of bankruptcy are usually paid out in local currency.

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

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

Bloomfield Investment stated that, in 2021, the Ivoirian government implemented subsidies and incentives to enhance the performance of the rubber industry.  The government provided fiscal incentives for investments regarding rubber transformation.

Following the peak of the COVID-pandemic, the government subsidized the construction sector by easing access to bank loans, reducing taxes on cement, capping cement prices, reducing the time needed to register land, and encouraging foreign investors to take up social housing projects by providing loan guarantees.

Though not a common practice, the government occasionally guarantees loans or jointly finances foreign direct investment projects.

Created in 2008, the Ivoirian free trade zone (FTZ) for information technology and biotechnology (VITIB) is in the town of Grand Bassam in the greater Abidjan area.  In 2014, VITIB established the Mahatma Gandhi Technology Park at Grand Bassam. Bonded warehouses exist, and bonded zones within factories are allowed. High port costs and maritime freight rates have inhibited the development of in-bond manufacturing or processing, and there are consequently no general foreign trade zones.

A FTZ exists at the Port of Abidjan specifically for fish processing.  In force since December 2005, this FTZ is reserved for companies that earn at least 90% of their turnover from exports.  Eligible companies are exempt from all duties and taxes, including on imported and exported goods and services.  They also enjoy preferential rates for water, electricity, telephone, and fuel supplied by public or semi-public establishments.   A fee applies to FTZ companies, the amount of which is fixed by decree.

Côte d’Ivoire’s ports (the Autonomous Port of Abidjan and the Autonomous Port of San-Pedro) follow the ISPS security code (International Ship and Port Facility Security Code).  In November 2021, the U.S. Coast Guard assessed Ivorian ports to be a trusted maritime security partner, having achieved overall progress and maturity in port operations.

The government strongly encourages investors and firms to hire Ivoirian employees via incentives outlined in the Investment Code, but this is not a requirement.  In March 2021, the government implemented the law on local content in the oil and gas sector.  This law gives preference to Ivoirian companies and Ivoirian employees.  The country aims to build “National Champions” in the oil and gas sector, while transferring knowledge and technical know-how to local employees. It also provides incentives and access to financial services and local insurance.

The 2018 Investment Code guarantees the freedom to designate senior management and board members.

Citizens of Economic Community of West African States (ECOWAS) countries can legally work in Côte d’Ivoire without additional permissions and do not need a residency permit.  For other nationalities, visas and permits for work and residency are required.   The investment promotion agency CEPICI facilitates the visa and permit process. The process is not onerous and does not inhibit the ability of foreign investors and their employees to enter and exit the country.

There are no government-imposed trade restrictions on investment, including tariff and non-tariff barriers.  However, all imports are subject to the External Common Tariff for all ECOWAS countries.

The government does occasionally place conditions on location, local content, equity ownership, import substitution, export requirements, host country employment, and technology.  For example, the Ivoirian government required that one U.S. fast food franchise use locally sourced key ingredients, which it can do.  The government also makes use of tax exemptions and customs exonerations to incentivize companies to do more value-added processing in CDI.  There are no performance requirements for investments.

Cellular telephone companies must meet technology performance requirements to maintain their licenses.  The U.S. government does not know of any requirements that CDI imposes on foreign information technology firms to give the government source code or provide access to encryption.  Sometimes, the government advocates for fair competition between companies.

ART-CI is responsible for the oversight of local data storage.

The Ivoirian civil code provides for the enforcement of private property rights, and the government has undertaken reform efforts to secure property rights.  The cost of capital is high, and mortgages are costly, which inhibits investment. Secured interests in property are enforced by the Land Registry Office of the Ministry of Economy and Finance.  In the World Bank’s Doing Business 2020 report, Côte d’Ivoire is ranked 112 out of 190 countries for ease of registering property.

Land tenure is a complicated and sensitive issue.  Land tenure disputes exist all over the country owing to multiple forms of traditional collective tenure and the lack of formal private land ownership in most areas.  Companies wishing to purchase land must have the property surveyed before obtaining title and obtaining construction authorization.  Surveying is tightly controlled by a small group of companies and can often cost more than the value of the parcel of land.  This has led to corrupt back-channel authorizations, which, together with improper inspections, has resulted in shoddy construction and building collapses.   In 2021, the government began streamlining and regularizing this process to accelerate construction authorizations and ensure quality construction. The Ministry of Construction has established a department to help individuals obtain land title and resolve disputes.  Freehold land tenure in rural areas remains difficult to negotiate, however, and can inhibit foreign investment.  Most businesses, including agribusinesses and forestry companies, circumvent the complicated land purchase process by acquiring long-term leases instead.  There are regulations designed to control land speculation in urban areas, but they do not prevent foreigners from owning land.

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

The Audace Institute, an independent Ivoirian think tank, estimates that 96 percent of land does not have a clear title.  The World Bank estimates that only 30 percent of property owners have clear title.  There have been several attempts by the government to require rural landowners register their lands, the most recent set a deadline of 2023 with a consequence that unregistered lands will be transferred to government ownership.  However, land registration is onerous and many owners are unable to afford the complex process.  As with other aspects of Ivoirian law, follow-up and enforcement is uneven.

The Ivoirian Civil Code includes measures to protect intellectual property rights (IPR), but the government has limited capacity to enforce them.  Inadequate enforcement of intellectual property rights remains a serious problem.  The government’s Office of Intellectual Property (OIPI – Office ivoirien de la propriété intellectuelle) is charged with ensuring the protection of patents, trademarks, industrial designs, and commercial names.  Patents are valid for 10 years, with the possibility of two extensions of five years each.  Trademarks are valid for 10 years and are renewable indefinitely. Copyrights are valid for 50 years.  The Ivoirian Copyright Office (BURIDA- Bureau ivoirien du droit d’auteur) has a labeling system in place to prevent counterfeiting and to protect audio, video, literary, and artistic property rights in music and computer programs.  A new cell charged with IPR and combating counterfeiting was inaugurated in November 2021.  This cell gathers large and small enterprises around counterfeiting practices and best methods to fight them.  While Ivoirian IPR law is in conformity with standards established by the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the country lacks adequate customs inspections at its porous borders, limiting the law’s impact.

The government has not adopted any IPR-related laws or regulations in 2021.  In 2020, the Ministry of Culture, Art, and Entertainment Business established committees that study and make recommendations for the reform and restructuring of BURIDA.

The National Committee to Combat Counterfeiting (CNLC – Comité national de la lutte contre la contrefaçon) coordinates national efforts against counterfeit and pirated goods.  By law, the government must protect intellectual property on both exported and imported goods. Customs has the power to seize imported products that violate IPR laws even if installed with other equipment, including equipment detained, marketed, or illegally supplied.  Such seizures, generally of counterfeit consumer goods (increasingly medicines), are routinely publicized on government websites and media outlets, although statistics on seizures are unavailable.  IPR violations are prosecuted, and penalties vary from imprisonment of three months to two years and fines from 100,000 to 5,000,000 CFA (approx. $166 to $8,333 based on an average exchange rate of 600 CFA to one dollar).

Côte d’Ivoire is not listed in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

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

Government policies generally encourage foreign portfolio investment.

The Regional Stock Exchange (BRVM) is in Abidjan and the BRVM lists companies from the eight countries of the WAEMU.  The existing regulatory system effectively facilitates portfolio investment through the West African Central Bank (BCEAO).  The Regional Council for Savings Investments (CREPMF) sets the rules and regulations regarding the market participants and market structure.  There is sufficient liquidity in the markets to enter and exit sizeable positions. However, the market follows a limit-order mechanism.  Besides traditional foreign trade risk management tools offered by commercial banks (i.e., export credits, trade bills), the stock exchange does not provide markets for forwards, futures, or options derivative instruments.  Market volatility is low.  The market benchmark BRVM Composite rose to 6.63 percent in 2021.

Government policies allow the free flow of financial resources into investing in financial assets.

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

Credit allocation is based on market terms and has increased to support the private sector and economic growth, specifically for large businesses.  The Central Bank monitors inflation, money supply, and business cycles to ensure efficient monetary policy.  The average interbank interest rate was 2.61 percent compared to 3.01 percent in 2021, demonstrating the will of WAEMU nations to boost commercial banks’ liquidity and support private sector investment.  Foreign investors can acquire credit on the local market. This year the government facilitated access to capital, lowering borrowing interest rates for real estate companies.

As of December 2021, there were 29 commercial banks and two credit institutions in Côte d’Ivoire.  Banks are expanding their national networks, especially in the secondary cities outside Abidjan, as domestic investment has increased up-country.  The total number of bank branches has more than doubled from 324 in 2010 to 725 branches in 2019 (latest data available).  According to the World Bank, in 2017 (latest data available) 41 percent of the population over the age of 15 have a bank account.  Alternative financial services available include mobile money and microfinance for bill payments and transfers.  Many Ivoirians prefer mobile money over banking, but mobile money does not yet offer the same breadth of financial services as banks.

Most Ivoirian banks are compliant with the BCEAO’s minimum capital requirements. The government facilitated mortgages for foreign investors in housing in Côte d’Ivoire.

Foreign banks are allowed to operate in Côte d’Ivoire; at least one has been in Côte d’Ivoire for decades.  They are subject to the WAEMU Banking Commission’s prudential measures and regulations.  There have been no reports of Côte d’Ivoire losing any correspondent banking relationships in the past three years.  No correspondent banking relationships are known to be in jeopardy.

Côte d’Ivoire does not have a sovereign wealth fund.  Rothschild Bank was reported in the press to have been awarded the contract to create one.

Companies owned or controlled by the state are subject to national laws and the tax code.  The Ivoirian government still holds substantial interests in many firms, including the refinery SIR (49 percent), the public transport firm (60 percent), the national television station RTI (98 percent), the national lottery (80 percent), the national airline Air Côte d’Ivoire (58 percent), and the land management agency Agence de Gestion Foncière AGEF (35 percent).  Total assets of state-owned enterprises (SOEs) were $796 million and total net income of SOEs was $116 million in 2018 (latest figures).  Of the 82 SOEs, 28 are wholly government-owned and 12 are majority government-owned, the government owns a blocking minority in seven and holds minority shares in 35.  Each SOE has an independent board.  The government has begun the process of divestiture for some SOEs (see next section).  There are active SOEs in the banking, agri-business, mining, and telecom industries.

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

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

Côte d’Ivoire does not adhere to OECD guidelines for SOE corporate governance (it is not a member of OECD).

In 2021, audits of several SOEs highlighted serious irregularities (alleged embezzlement estimated at several tens or even hundreds of billions of FCFA, i.e. up to hundreds of millions of dollars.  The SOEs include FER, FDFP, ARTCI, and ANSUT, whose leaders have been removed and replaced.

The government has been pursuing SOE privatization for decades the most recent of which was in 2018.  That year, the government sold 51 percent of the Housing Bank of Côte d’Ivoire (BHCI – Banque d’Habitat de Côte d’Ivoire).  See previous Investment Climate Statements for past privatization efforts.

Contracts for participation in SOE privatization are competed through a French-language public tendering process, for which foreign investors are encouraged to submit bids.  The Privatization Committee, which reports to the Prime Minister, maintains a website.  The 2019 (latest) report is available at: http://privatisation.gouv.ci.

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

Investors seeking to implement projects in energy, infrastructure, agriculture, forestry, waste management, and extractive industries are required by decree to provide an environmental impact study prior to approval.  Under the new development plan and sustainable finance regime, government has laid down specific criteria to review, select, fund, and monitor private investment with the goal of channeling funds into priority sectors.  Foreign businesses, particularly in mining, energy, and agriculture, often provide social infrastructure, including schools and health care clinics, to communities close to their sites of operation.  Companies are not required under Ivoirian law to disclose information relating to RBC, although many companies, especially in the cocoa sector, publicize their work.  Cocoa companies publicize efforts to improve sustainability and combat the worst forms of child labor.  As a part of public-procurement reform, the Ministry of Budget plans to include social needs in public-procurement contracts to support job creation, fair trade, decent working conditions, social inclusion, and compliance with social standards.  On the environment, suggested reforms include the selection of goods and services that have a smaller impact on the environment.

There are reports of children subjected to forced labor in agricultural work, particularly on cocoa farms.  In February 2021, several individuals from Mali sued major international chocolate companies, claiming that the cocoa they bought came from farms in Côte d’Ivoire where the plaintiffs were subjected to abuse.

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

The OHADA outlines corporate governance standards that protect shareholders.

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

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

Côte d’Ivoire is not a signatory of the Montreux Document on Private Military and Security Companies.  Some private security companies operating in the country are participants of the International Code of Conduct for Private Security Service Providers Association (ICoCA).

This year, government took active measures against State Owned Enterprises not paying their local contractors, generally SMEs.  After the FER general manager was removed, the acting manager made immediate payments to concerned SMEs.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

In 2000, Conservation International designated the tropical Guinean forests of West Africa, an area which includes CDI’s forests, as one of 36 biodiversity hotspots – the most biologically rich, yet threatened terrestrial regions on Earth.  Half a century ago, tropical forest covered 16 million hectares in CDI.  Today, less than 2.9 million hectares of forest remain, mainly the result of land conversion for agricultural crops (primarily cocoa) and logging.

The government accords priority to investment that enhances environmental sustainability.  It has developed policies to combat forest degradation, namely the National Policy on Forest Preservation, Rehabilitation, and Expansion in 2018 and the new Forest Code in 2019.  These create an economically viable route to promote reforesting.  Further progress will require the government to define carbon rights in the Ivoirian legal code and address crucial legal issues such as time limits for the land certificate registration process, guidelines for lumber sales by legitimate owners, and how to relocate people who have settled illegally in the protected forests.

In 2021, the European Commission proposed to the European Parliament new legislation that would prohibit products that contributed to deforestation in their countries of origin from entering the EU market.  The proposed legislation would prohibit products associated with forested areas from entering the EU market unless they are certified “zero deforestation,” are in line with country-specific legislation, and meet additional due-diligence requirements laid out in the draft legislation.   According to the Ivoirian government’s analysis, CDI’s most affected products (cocoa, coffee, wood, palm oil) total about 76 percent of the value of Ivoirian exports to the EU.

Côte d’Ivoire is a signatory to the United Nations Framework Convention on Climate Change (UNFCC) Paris Agreement and has submitted its revised nationally determined contributions (NDCs), committing to action both on adaptation to climate change and reducing greenhouse gas emissions (30 percent by 2030).  Côte d’Ivoire is also involved in a multi-country effort coordinated by the World Bank to develop a national climate-smart agricultural investment plan (CSAIP).  The national plan prioritizes a set of 12 investments and actions needed to boost crop resilience and enhance yields.

Many companies cite corruption as the most significant obstacle to investment.  Corruption in many forms is deeply ingrained in public- and private-sector practices and remains a serious impediment to investment and economic growth in CDI.  It has the greatest impact on judicial proceedings, contract awards, customs, and tax issues.  Lack of transparency and the government’s failure to follow its own tendering procedures in the awarding of contracts lead businesses to conclude bribery was involved.  Businesses have reported encountering corruption at every level of the civil service, with some judges appearing to base their decisions on bribes. Clearance of goods at the ports often requires substantial “commissions.”  The demand for bribes can mean that containers stay at the Port of Abidjan for months, incurring substantial demurrage charges, despite companies having the proper paperwork.

In 2013, the Ivoirian government issued Executive Order number 2013-660 related to preventing and combatting corruption.  The High Authority for Good Governance serves as the government’s anti-corruption authority.  Its mandate includes raising awareness about corruption, investigating corruption in the public and private sectors, and collecting mandated asset disclosures from certain public officials (e.g., the president, ministers, and mayors) upon entering and leaving office.  The High Authority for Good Governance, however, does not have a mandate to prosecute; it must refer cases to the Attorney General who decides whether to take up those cases.  The country’s financial intelligence office, CENTIF, has broad authority to investigate suspicious financial transactions, including those of government officials.

Despite the establishment of these bodies and credible allegations of widespread corruption, there have been few charges filed, and few prosecutions and judgments against prominent people for corruption.  The domestic business community generally assesses that these watchdog agencies lack the power and/or will to combat corruption effectively.  In April 2021, the government formally added Good Governance and Anti-Corruption to the title and portfolio of the Ministry of Capacity Building.

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

Under the Ivoirian Penal Code, a bribe by a local company to a foreign official is a criminal act. Some private companies use compliance programs or measures to prevent bribery of government officials.  U.S. firms underscore to their Ivoirian counterparts that they are subject to the Foreign Corrupt Practices Act (FCPA).  Anti-corruption laws extend to family members of officials and to political parties.  The country’s Code of Public Procurement No. 259 and the associated WAEMU directives cover conflicts-of-interest in awarding contracts or government procurement.

There are no special protections for NGOs involved in investigating corruption.  Whistleblower protections are also weak.

Resources to Report Corruption

Inspector General of Finance
(Brigade de Lutte Contre la Corruption)
Mr. Lassina Sylla
Inspector General
TELEPHONE: +225 20212000/2252 9797
FAX: +225 20211082/2252 9798
HOTLINE: +225 8000 0380
http://www.igf.finances.gouv.ci/
info@igf.finances.gouv.ci

High Authority for Good Governance
(Haute Autorité pour la Bonne Gouvernance)
Mr. N’Golo Coulibaly
President
TELEPHONE: +225 272 2479 5000
FAX: +225 2247 8261
https://habg.ci/
Email: info@habg.ci

Police Anti-Racketeering Unit
(Unité de Lutte Contre le Racket –ULCR)
Mr. Alain Oura
Unit Commander
TELEPHONE: +225 272 244 9256
info@ulcr.ci

Social Justice
(Initiative pour la Justice Sociale, la Transparence et la Bonne Gouvernance en Côte d’Ivoire)
Ananeraie face pharmacie Mamie Adjoua
Abidjan
TELEPHONE:  +225 272 177 6373
socialjustice.ci@gmail.com

Following peaceful and inclusive legislative elections in March 2021, CDI entered a period of stability.  Major opposition parties participated and won a meaningful number of seats in elections internationally deemed credible.  The political leadership clearly recognizes that internal and regional security are prerequisites for sustained economic growth and longer-term stability.  All political parties participated in a structured Political Dialogue aimed at fostering reconciliation and strengthening democratic institutions, including dispute resolution mechanisms.  The fifth round of the Political Dialogue concluded in March 2022 and produced a consensus list of tangible recommendations to the President of the Republic.  The next presidential election is not due until 2025, so there is now a window of opportunity for the country’s political leaders to focus on difficult reforms.

The Ivoirian government has demonstrated a strong commitment to addressing insecurity in the region by strengthening its capacity to counter terrorism, strengthen social resilience, professionalize law enforcement, strengthen its justice system, and improve border security.  In June 2021, CDI and France inaugurated the International Academy for the Fight Against Terrorism (AILCT) near Jacqueville, west of Abidjan. The aim of this academy is to train relevant cadres (e.g., prosecutors, forensic investigators) and security forces from the African continent to strengthen capacity to prevail against self-styled jihadists within respect for law and human rights, thereby reinforcing ties between the population and the state.  This comes at a time of increased security challenges emanating from the Sahel and spilling over into CDI’s northern region.

The official unemployment rate is 3.5 percent, 5.5 percent in the 15-24 age group; however, unemployment is difficult to measure in the informal sector, which is estimated to account for as much as 80 percent of the Ivoirian economy.  Of the non-agricultural workforce, 47 percent is employed in the informal economy.  Official statistics fail to fully account for the large informal economy throughout the country, and do not accurately portray the general dearth of well-paying employment opportunities.  Despite the government’s efforts, child labor remained a widespread problem in rural and urban areas, notably on cocoa and coffee plantations, as well as in artisanal gold mining areas and in domestic work.

There are significant shortages of skilled labor in fields requiring higher education, including information technology, engineering, finance, management, health, and science.  The Ivoirian government is working with the Millennium Challenge Corporation (MCC) to build and develop four technical and vocational training centers as part of a six-year Compact valued at some $536 million that will end in August 2025. The Compact comprises two projects: road transportation and education.

Labor laws favor the employment of Ivoirians in private enterprises.  Any vacant position must be advertised for two months.  If after two months no qualified Ivoirian is found, the employer may recruit a foreigner provided it plans to recruit an Ivoirian to fill the position within the next two years.

There are no restrictions on employers adjusting employment in response to fluctuating market conditions.  Employees terminated for reasons other than theft or flagrant neglect of duty have the right to termination benefits.  Unemployment insurance and other social-safety programs exist for employees laid off for economic reasons.  For the roughly 60-80% percent of workers employed in the informal sector, unemployment insurance is not an option.  However, there are other social-safety-net programs that apply to informal economy workers, including monthly stipends and waiving of universal health care fees.

Labor laws are not waived to attract or retain investment.

Collective bargaining agreements are in effect in many major business enterprises and sectors of the civil service.  A prolonged teachers’ strike in 2019 was submitted for arbitration but due to the fractured nature of the teachers’ unions, not all parties agreed to the decision.

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

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

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

The government did not adopt any new labor-related laws or regulations in 2021.  In 2017, the government passed a law forbidding most forms of child labor for children under 12 and restricting it for minors aged 13 to 17.  The law’s passage put Ivoirian law on par with ILO standards for child labor.  The government established the National Surveillance Council (Conseil National de Surveillance, or CNS) and the Interministerial Committee (CIM – Conseil Interministériel). These agencies deal with child labor issues, especially in the cocoa sector.

U.S. Embassy Abidjan
Political/Economic Section
Cocody Riviera Golf
BP 730 Abidjan Cidex 03
Republic of Côte d’Ivoire
Phone: (+225) 27-22-49-40-00

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 inflow of FDI in the country.  The KIP intends to guide laws being drafted to promote and facilitate investments in Kenya.

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.

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, adjusted 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) reserves mineral acquisition rights to companies registered and established in Kenya, whether local or foreign owned.  Mineral dealership licenses are only issued to Kenyan citizens or to corporations where at least 60 percent shareholding is held by Kenyan citizens.  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 definition excludes companies owned by foreigners but incorporated in Kenya.  The act requires foreign contractors enter 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.

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).

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.

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.

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.

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.

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 insufficient budget allocations by the executive branch, which significantly impact the judiciary’s ability to fulfill its mandate.  Delayed confirmation of judges nominated by the Judicial Service Commission has in the past resulted 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.

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.

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.

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.

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.

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).  Investment incentives are revised annually through the government’s budget policy statement and the Finance Act based on government’s strategic priorities at a given time.

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 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).

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.

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.

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.

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 complaints 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.  Kenya’s score in the 2021 International Property Rights Index, which assesses intellectual and physical property rights, decreased marginally from 5.0 in 2020 to 4.98 in 2021, though its relative ranking improved, rising from 10 to 8 of 28 countries in Africa, and from 86 to 85 of 129 globally.

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/.

Though relatively small by Western standards, Kenya’s capital markets are the deepest and most sophisticated in East Africa.  The 2021 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.

In 2021, the Kenyan banking sector included 42 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, in 2020, 32 out of 41 commercial banks restructured loans to accommodate affected borrowers.  Non-performing loans (NPLs) reached 14.6 percent by the end of 2021 – a three percent year-on-year increase.

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.

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 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.

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.

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.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Kenya has a 2010 Kenya National Climate Change Response Strategy (NCCRS) that focuses on integrating adaptation and mitigation measures in all government planning, budgeting, and development objectives, and a collaborative and joint action with all stakeholders.  The NCCRS also proposes Kenya’s participation in carbon markets including the UN’s Clean Development Mechanism carbon offset scheme.  In 2020, Kenya submitted its second Nationally Determined Contribution committing to reduce its already low total greenhouse gas emissions an additional 32 percent by 2030.  Kenya develops five-year periodic National Climate Change Action Plans (NCCAP).  The current NCCAP (2018-2022) seeks to further sustainable development and create an environment to pursue low-carbon climate resilient development.  In 2016, Kenya published its Green Economy Strategy and Implementation Plan (2016-2030) which prioritizes investments and development pathways with higher green growth, cleaner environment, and higher productivity.  Kenya’s 2018 National Climate Finance Policy supports a Green Climate Fund and the tracking of climate related activities in the Integrated Financial Management Information System (IFMIS) through budget coding and tagging.

Kenyan government strategies involve a multi-stakeholder approach to climate change response.  This includes the national government, county government, non-governmental organizations, and private sector.  The National Environment Management Authority (NEMA) assesses all projects for compliance with set environmental and sustainability standards.  Projects cannot commence until meeting set criteria for environmental impact assessment and being cleared by NEMA.

Kenya’s climate policies are ranked favorably in global climate related indices, including: ClimateScope, the Green Growth Index, and The Green Future Index.  The rankings measure the degree to which economies are pivoting toward clean energy, industry, agriculture, and society through investment in renewables, innovation and green finance, which market is the most attractive for energy transition investment, and performance in achieving sustainability targets including the UN Sustainable Development Goals.  (https://global-climatescope.org/results/, https://greengrowthindex.gggi.org/wp-content/uploads/2021/01/2020-Green-Growth-Index.pdf, https://www.technologyreview.com/2021/01/25/1016648/green-future-index/)

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

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

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

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

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

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

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

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

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

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/

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Table 4: Sources of Portfolio Investment
Data not available.

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

The Nigerian Investment Promotion Commission (NIPC) Act of 1995, amended in 2004, dismantled controls and limits on FDI, allowing for 100% foreign ownership in all sectors, except those prohibited by law for both local and foreign entities.  These include arms and ammunitions, narcotics, and military apparel.  In practice, however, some regulators include a domestic equity requirement before granting foreign firms an operational license.  Nevertheless, foreign investors receive largely the same treatment as domestic investors in Nigeria, including tax incentives.  The Act also created the NIPC with a mandate to encourage and assist investment in Nigeria.  The NIPC features a One-Stop Investment Center (OSIC) that includes participation by 27 governmental and parastatal agencies to consolidate and streamline administrative procedures for new businesses and investments.  The NIPC is empowered to negotiate special incentives for substantial and/or strategic investments.  The Act also provides guarantees against nationalization and expropriation.  The NIPC occasionally convenes meetings between investors and relevant government agencies with the objective of resolving specific investor complaints.  The NIPC’s role and effectiveness is limited to that of convenor and moderator in these sessions as it has no authority over other government agencies to enforce compliance. The NIPC’s ability to attract new investment is thus limited due to its inability to resolve certain such investment challenges. 

The Nigerian government continues to promote import substitution policies such as trade restrictions, foreign exchange restrictions, and local content requirements in a bid to funnel investment toward domestic production capacity and to reduce Nigeria’s reliance on foreign imports.  The import bans and high tariffs used to advance Nigeria’s import substitution goals have been undermined by smuggling of targeted products through the country’s porous borders, and by corruption in the import quota systems developed by the government to incentivize domestic investment.  The government opened land borders in December 2020, which were progressively closed to commercial trade starting in August 2019 with the aim of curbing smuggling and bolstering domestic production.

Investment by foreign and domestic private entities is prohibited in industries contained in the “negative list.”  These include production of arms and ammunition, narcotic drugs and psychotropic substances, and military and paramilitary wear and accoutrements.  The Federal Executive Council maintains the right to amend the list as it deems fit.  There are currently no limits on foreign control of investments; however, some Nigerian regulatory bodies have insisted on domestic equity as a prerequisite to doing business.  The NIPC Act of 1995, amended in 2004, liberalized the ownership structure of business in Nigeria, allowing foreign investors to own and control 100% of the shares in any company.  One hundred percent ownership of firms is allowed in the oil and gas sector while ownership of mineral resources is vested in the federal government.  However, the dominant models for oil extraction are joint venture and production sharing agreements between oil companies (both foreign and local) and the federal government.  Foreign investors must register with the NIPC after incorporation under the Companies and Allied Matters Act reviewed in 2020.  A foreign company intending to operate in Nigeria must incorporate a company or subsidiary.  It may apply for an exemption to this requirement if it meets certain conditions including working on a specialized project specifically for the government, or on a project funded by a multilateral or bilateral donor or a foreign state-owned enterprise.  However, a foreign entity can invest in a Nigerian company without incorporation.  Importers of foreign technology must obtain a certificate from the National Office of Technology Acquisition and Promotion (NOTAP).  One of the prerequisites for obtaining the certificate is the provision of a Technology Transfer Agreement duly approved by NOTAP.  The NIPC Act prohibits the nationalization or expropriation of foreign enterprises except in cases of national interest and stipulates modalities for “fair and adequate” compensation should that occur.  

The World Bank published an Investment Policy and Regulatory Review of Nigeria in 2019.  It provides an overview of Nigeria’s legal and regulatory framework as it affects FDI, foreign investors, and businesses at large and is available at https://documents.worldbank.org/en/publication/documents-reports/documentdetail/305141586325201141/nigeria-2019-investment-policy-and-regulatory-review.  The WTO published a trade policy review of Nigeria in 2017, which also includes a brief overview and assessment of Nigeria’s investment climate.  That review is available at https://www.wto.org/english/tratop_e/tpr_e/tp456_e.htm. 

The government established the Presidential Enabling Business Environment Council (PEBEC) in 2016 with the objective of removing constraints to starting and running a business in Nigeria.  PEBEC’s implementation was supported by Presidential Executive Orders aimed at improving business transparency and efficiency.  PEBEC’s focus areas include:  starting a business, cross-border and domestic movement of people and goods, obtaining credit and resolving insolvency, enforcing contracts, registering property, acquiring construction permits and electricity, and paying taxes.  PEBEC’s significant achievements were in the areas of starting a business, acquiring construction permits and electricity, registering property, and enforcing contracts.  Despite these improvements, Nigeria remains a difficult place to do business, with companies suffering from regulatory uncertainty, policy inconsistency, poor infrastructure, foreign exchange shortages and customs inconsistency and inefficiency.  These many challenges are reflected in the fact that Nigeria’s leading trade indices lag behind regional averages.   

The One-Stop Investment Center (OSIC), housed within the NIPC, co-locates 27 relevant government agencies including the Central Bank of Nigeria (CBN), the Corporate Affairs Commission (CAC), and the Immigration Service to provide fast-tracked, efficient, and transparent services to investors.  The OSIC assists with visas for investors, company incorporation, business permits and registration, tax registration, immigration, and customs issues.  Investors may pick up documents and approvals that are statutorily required to establish an investment project in Nigeria.  In 2021, NIPC launched the electronic OSIC which allows investors to register businesses, submit documents, and pay fees remotely on its Single Window Investors’ Portal (SWIP). 

All businesses, both foreign and local, are required to register with CAC before commencing operations.  CAC began online registration as part of PEBEC reforms.  Online registration is straightforward and consists of three major steps:  name search, reservation of business name, and registration.  A registration guideline is available on the website as is a post-registration portal for enacting changes to company details.  The CAC online registration website is https://pre.cac.gov.ng/home.  The registration requires the signature of a Legal Practitioner and attestation by a Notary Public or Commissioner for Oaths.  Business registration can be completed online but the certificate of incorporation is usually collected at a CAC office upon presentation of the original application and supporting documents.  Online registration can be completed in as little as three days if there are no issues with the application.  On average, a limited liability company (LLC) in Nigeria can be established in seven days.  This average is significantly faster than the 22-day average for Sub-Saharan Africa.  It is also faster than the OECD average of nine days.  Timing may vary in different parts of the country. 

Companies must register with the Federal Inland Revenue Service (FIRS) for tax payments purposes.  If the company operates in a state other than the Federal Capital Territory, it must also register with the relevant state tax authority.  CAC issues a Tax Identification Number (TIN) to all businesses on completion of registration which must be validated on the FIRS website https://apps.firs.gov.ng/tinverification/ and subsequently used to register to pay taxes.  The FIRS then assigns a tax office with which the business will engage for tax payments purposes.  Some taxes may also be filed and paid online on the FIRS website.  

Foreign companies are also required to register with NIPC which maintains a database of all foreign companies operating in Nigeria.  Investors can register online through NIPC’s SWIP platform:  https://swip.nipc.gov.ng/auth.php?a=r.  

Companies which import capital must do so through an authorized dealer, typically a bank, after which they are issued a Certificate of Capital Importation.  This certificate entitles the foreign investor to open a bank account in foreign currency and provides access to foreign exchange for repatriation, imports, and other purposes.  

A company engaging in international trade must get an import-export license from the Nigerian Customs Service (NCS).  Businesses may also be required to register with and/or obtain licenses from other regulatory agencies which supervise the sector within which they operate. 

Nigeria does not promote outward direct investments.  Instead, it focuses on promoting exports especially as a means of reducing its reliance on oil exports and diversifying the sources of its foreign exchange earnings.  The Nigerian Export Promotion Council (NEPC) administered a revised Export Expansion Grant (EEG) in 2018 when the federal government set aside 5.1 billion naira ($13 million) in the 2019 budget for the EEG scheme.  The Nigerian Export-Import (NEXIM) Bank provides commercial bank guarantees and direct lending to facilitate export sector growth, although these services are underused.  NEXIM’s Foreign Input Facility provides normal commercial terms of three to five years (or longer) for the importation of machinery and raw materials used for generating exports.  

Agencies created to promote industrial exports remain burdened by uneven management, vaguely defined policy guidelines, and corruption.  Nigeria’s inadequate power supply and lack of infrastructure, coupled with the associated high production costs, leave Nigerian exporters at a significant disadvantage.  Many Nigerian businesses fail to export because they find meeting international packaging and safety standards is too difficult or expensive.  Similarly, firms often are unable to meet consumer demand for a consistent supply of high-quality goods in sufficient quantities to support exports and meet demand.  Most Nigerian manufacturers remain unable to or uninterested in competing in the international market, given the size of Nigeria’s domestic market.

Domestic firms are not restricted from investing abroad.  However, the Central Bank of Nigeria (CBN mandates that export earnings be repatriated to Nigeria, and controls access to the foreign exchange required for such investments.  Noncompliance with the directive carries sanctions including expulsion from accessing financial services and the foreign exchange market.

Nigeria’s Securities and Exchange Commission (SEC) in April 2020 prohibited investment and trading platforms from facilitating Nigerians’ purchase of foreign securities listed on other stock exchanges.  SEC cites Nigeria’s Investment and Securities Act of 2007, which mandates that only foreign securities listed on a Nigerian exchange should be sold to the Nigerian investing public.

Nigeria belongs to the Economic Community of West African States (ECOWAS), a free trade area comprising 15 countries located in West Africa.  Nigeria signed the African Continental Free Trade Agreement (AfCFTA) – a free trade agreement consisting of 54 African countries, which became operational on January 1, 2021 – but its legislature has yet to ratify it and implementation of the agreement remains nascent.  Nigeria has bilateral investment agreements with:  Algeria, Austria, Bulgaria, Canada, China, Egypt, Ethiopia, France, Finland, Germany, Italy, Jamaica, the Republic of Korea, Kuwait, Morocco, the Netherlands, Romania, Russia, Serbia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Turkey, Uganda, and the United Kingdom.  Fifteen of these treaties (those with China, France, Finland, Germany, Italy, the Republic of Korea, the Netherlands, Romania, Serbia, South Africa, Spain, Sweden, Switzerland, Taiwan, and the United Kingdom) have been ratified by both parties.  

The government signed a Trade and Investment Framework Agreement (TIFA) with the United States in 2000.  U.S. and Nigerian officials held their latest round of TIFA talks in 2016.  In 2017, Nigeria and the United States signed a memorandum of understanding to formally establish the U.S.–Nigeria Commercial and Investment Dialogue (CID).  The ministerial-level meeting with private sector representatives was last held in February 2020.  The CID coordinates bilateral private sector-to-private sector, government-to-government, and private sector-to-government discussions on policy and regulatory reforms to promote increased, diverse, and sustained trade and investment between the United States and Nigeria, with an initial focus on infrastructure, agriculture, digital economy, investment, and regulatory reform.  

Nigeria has 14 ratified double taxation agreements, including:  Belgium, Canada, China, Czech Republic, France, Italy, the Netherlands, Pakistan, Philippines, Romania, Singapore, Slovakia, South Africa, and the United Kingdom.  Nigeria does not have such an agreement with the United States.  Nigeria’s Finance Act of 2021 empowered the FIRS to collect corporate taxes from digital firms at a “fair and reasonable turnover” rate, which translates to 6% of turnover generated in Nigeria.  This will address the profit attribution issues raised following the ambiguity of the Finance Act of 2019 which subjected non-resident companies with significant economic presence to corporate and sales taxes.  Most of the affected companies are digital firms, many with U.S. headquarters.  Nigeria enacted the Petroleum Industry Act (2021) which overhauled the institutional, regulatory, administrative, and fiscal arrangements for the oil and gas industry.  While the legislation provides long-awaited additional clarity and  updates Nigeria’s governance structures and fiscal terms for the traditional energy sector, U.S. oil companies contend that it has not increased Nigeria’s competitiveness relative to other oil producing countries and may fail to attract significant new investments in the sector.

Nigeria is a member of the OECD Inclusive Framework on Base Erosion and Profit Sharing but declined to sign the two-pillar solution to global tax challenges in October 2021.

Nigeria’s legal, accounting, and regulatory systems comply with international norms, but application and enforcement remain uneven.  Opportunities for public comment and input into proposed regulations rarely occur.  Professional organizations set standards for the provision of professional services, such as accounting, law, medicine, engineering, and advertising.  These standards usually comply with international norms.  No legal barriers prevent entry into these sectors. 

Ministries and regulatory agencies are meant to develop and make public anticipated regulatory changes or proposals and publish proposed regulations before their application.  The general public should have the opportunity to comment through targeted outreach, including business groups and stakeholders, and during the public hearing process before a bill becomes law, but this is not always the case.  There is no specialized agency tasked with publicizing proposed changes and the time period for comment may vary.  Ministries and agencies do conduct impact assessments, including environmental, but assessment methodologies may vary.  The National Bureau of Statistics reviews regulatory impact assessments conducted by other agencies.  Laws and regulations are publicly available.  

Fiscal management occurs at all three tiers of government:  federal, 36 state governments and Federal Capital Territory (FCT) Abuja, and 774 local government areas (LGAs).  Revenues from oil and non-oil sources are collected into the federation account and then shared among the different tiers of government by the Federal Account Allocation Committee (FAAC) in line with a statutory sharing formula.  All state governments can collect internally generated revenues, which vary from state to state.  The fiscal federalism structure does not compel states to be accountable to the federal government or transparent about revenues generated or received from the federation account.  However, the federal government can demand states meet predefined minimum fiscal transparency requirements as prerequisites for obtaining federal loans.  For instance, compliance with the 22-point Fiscal Sustainability Plan, which focused on ensuring better state financial performance, more sustainable debt management, and improved accountability and transparency, was a prerequisite for obtaining a federal government bailout in 2016.  The federal government’s finances are more transparent as budgets are made public and the financial data are published by the Central Bank of Nigeria (CBN), Debt Management Office (DMO), the Budget Office of the Federation, and the National Bureau of Statistics.  The state-owned oil company (Nigerian National Petroleum Corporation (NNPC)) began publishing audited financial data in 2020.   

Foreign companies operate successfully in Nigeria’s service sectors, including telecommunications, accounting, insurance, banking, and advertising.  The Investment and Securities Act of 2007 forbids monopolies, insider trading, and unfair practices in securities dealings.  Nigeria is not a party to the WTO’s Government Procurement Agreement (GPA).  Nigeria generally regulates investment in line with the WTO’s Trade-Related Investment Measures (TRIMS) Agreement, but the government’s local content requirements in the oil and gas sector and the Information and Communication Technology (ICT) sector may conflict with Nigeria’s commitments under TRIMS.  

ECOWAS implemented a Common External Tariff (CET) beginning in 2015 with a five-year phase in period.  An internal CET implementation committee headed by the Fiscal Policy/Budget Monitoring and Evaluation Department of the Nigerian Customs Service (NCS) was set up to develop the implementation work plans that were consistent with national and ECOWAS regulations.  The CET was slated to be fully harmonized by 2020, but in practice some ECOWAS Member States have maintained deviations from the CET beyond the January 1, 2020, deadline.  The country has put in place a CET monitoring committee domiciled at the Ministry of Finance, consisting of several ministries, departments, and agencies related to the CET.  The country applies five tariff bands under the CET:  zero duty on capital goods, machinery, and essential drugs not produced locally; 5% duty on imported raw materials; 10% duty on intermediate goods; 20% duty on finished goods; and 35% duty on goods in certain sectors that the Nigerian government seeks to protect including palm oil, meat products, dairy, and poultry.  The CET permits ECOWAS member governments to calculate import duties higher than the maximum allowed in the tariff bands (but not to exceed a total effective duty of 70%) for up to 3% of the 5,899 tariff lines included in the ECOWAS CET.  

Nigeria has a complex, three-tiered legal system comprised of English common law, Islamic law, and Nigerian customary law.  Most business transactions are governed by common law modified by statutes to meet local demands and conditions.  The Supreme Court is the pinnacle of the judicial system and has original and appellate jurisdiction in specific constitutional, civil, and criminal matters as prescribed by Nigeria’s constitution.  The Federal High Court has jurisdiction over revenue matters, admiralty law, banking, foreign exchange, other currency and monetary or fiscal matters, and lawsuits to which the federal government or any of its agencies are party.  The Nigerian court system is generally slow and inefficient, lacks adequate court facilities and computerized document-processing systems, and poorly remunerates judges and other court officials, all of which encourages corruption and undermines enforcement.  Judges frequently fail to appear for trials and court officials lack proper equipment and training.

The constitution and law provide for an independent judiciary; however, the judicial branch remains susceptible to pressure from the executive and legislative branches.  Political leaders have influenced the judiciary, particularly at the state and local levels.  

The Doing Business report credited business reforms for improving contract enforcement by issuing new rules of civil procedure for small claims courts, which limit adjournments to unforeseen and exceptional circumstances but noted that there can be variation in performance indicators between cities in Nigeria (as in other developing countries).  For example, resolving a commercial dispute takes 476 days in Kano but 376 days in Lagos.  In the case of Lagos, the 376 days includes 40 days for filing and service, 194 days for trial and judgment, and 142 days for enforcement of the judgment with total costs averaging 42% of the claim.  In Kano, however, filing and service only takes 21 days with enforcement of judgement only taking 90 days, but trial and judgment accounts for 365 days with total costs averaging lower at 28% of the claim.  In comparison, in OECD countries the corresponding figures are an average of 589.6 days and averaging 21.5% of the claim and in sub-Saharan countries an average of 654.9 days and averaging 41.6% of the claim.

The Nigerian Investment Promotion Commission (NIPC) Act allows 100 percent foreign ownership of firms.  Foreign investors must register with the NIPC after incorporation under the Companies and Allied Matters Act of 2020.  The NIPC Act prohibits the nationalization or expropriation of foreign enterprises except in case of national interest, but the Embassy is unaware of specific instances of such interference by the government.  The NIPC website (nipc.gov.ng) provides information on investing in Nigeria, and its One-Stop Investment Center co-locates 27 government agencies with equities in the foreign company registration process.  

The Nigerian government enacted the Federal Competition and Consumer Protection (FCCPC) Act in 2019.  The Act repealed the Consumer Protection Act of 2004 and replaced the previous Consumer Protection Council with a Federal Competition and Consumer Protection Commission while also creating a Competition and Consumer Protection Tribunal to handle issues and disputes arising from the operations of the Act.  Under the terms of the Act, businesses will be able to lodge anti-competitive practices complaints against other firms in the Tribunal.  The Act prohibits agreements made to restrain competition, such as price fixing, price rigging, collusive tendering, etc. (with specific exemptions for collective bargaining agreements and employment, among other items).  The Act empowers the President of Nigeria to regulate prices of certain goods and services on the recommendation of the Commission. 

The law prescribes stringent fines for non-compliance.  The law mandates a fine of up to 10% of the company’s annual turnover in the preceding business year for offences.  The law harmonizes oversight for consumer protection, consolidating it under the FCCPC. 

An entity may seek redress from a court of law if it is not satisfied with the ruling of the FCCPC.

The federal government has not expropriated or nationalized foreign assets recently, and the NIPC Act forbids nationalization of a business or assets unless the acquisition is in the national interest or for a public purpose.  In such cases, investors are entitled to fair compensation and legal redress. 

The federal government’s drive to domesticate foreign investments has led to a number of seemingly discriminatory actions against a prominent South African firm.  Nigeria’s attorney general demanded the payment of $2 billion which he alleged the company owed in taxes over ten years, a suit which was later dropped in 2020 in favor of negotiations with the FIRS.  In 2018, the company paid $53 million to settle a CBN case in which it was accused of illegally repatriating $8.1 billion.  Another South African company is involved in a $4.7 billion tax dispute with the FIRS.

Reflecting Nigeria’s business culture, entrepreneurs generally do not seek bankruptcy protection.  Claims often go unpaid, even in cases where creditors obtain judgments against defendants.  Under Nigerian law, the term bankruptcy generally refers to individuals whereas corporate bankruptcy is referred to as insolvency.  The former is regulated by the Bankruptcy Act of 1990, as amended by Bankruptcy Decree 109 of 1992.  The latter is regulated by the Companies and Allied Matters Act (CAMA) revised in 2020.  Insolvency solutions in CAMA 2020 focus on rescuing insolvent corporates, where debt recovery options are feasible, instead of the former objective which focused largely on the wind-up process.  Once determined insolvent, company shareholders are allowed to enter into a binding agreement with creditors or apply to a court to appoint an administrator thereby obviating the need for claims by creditors.  The debt threshold required for triggering compulsory liquidation is 200,000 naira ($480).  The Act also ranks the claims of secured creditors above all other claims and forbids shareholders or administrators from favoring a creditor above another within the same creditor class.  The Embassy is not aware of U.S. companies that have had to avail themselves of the insolvency provisions under Nigerian law.

The Nigerian government maintains different and overlapping incentive programs.  The Industrial Development/Income Tax Relief Act provides incentives to pioneer industries deemed beneficial to Nigeria’s economic development and to labor-intensive industries, such as apparel.  There are currently 99 industries and products that qualify for the pioneer status incentive through the NIPC, following the addition of 27 industries and products to the list in 2017.  The government has added a stipulation calling for a review of the qualifying industries and products to occur every two years.  Companies that receive pioneer status may benefit from a tax holiday from payment of company income tax for an initial period of three years, extendable for one or two additional years.  A pioneer industry sited in an economically disadvantaged area is entitled to a 100% tax holiday for seven years and an additional 5% depreciation allowance over and above the initial capital depreciation allowance.  Additional tax incentives are available for investments in domestic research and development, for companies that invest in local government areas deemed disadvantaged, for local value-added processing, for investments in solid minerals and oil and gas, and for several other investment scenarios.  The NIPC in conjunction with FIRS published a compendium of investment which houses all fiscal incentives backed by Nigerian law as well as sectoral fiscal concessions approved by the government.  The compendium is available at https://www.nipc.gov.ng/compendium/preface/.

The Nigerian Export Promotion Council (NEPC) administers an Export Expansion Grant (EEG) scheme to improve non-oil export performance.  The program was suspended in 2014 due to concerns about corruption on the part of companies that collected grants but did not actually export.  It was revised and relaunched in 2018.  The NEXIM Bank provides commercial bank guarantees and direct lending to facilitate export sector growth, although these services are underused.  NEXIM’s Foreign Input Facility provides normal commercial terms for the importation of machinery and raw materials used for generating exports.  Repayment terms are typically up to seven years, including a moratorium period of up to two years depending on the loan amount and the project being finance.  Agencies created to promote industrial exports remain burdened by uneven management, vaguely defined policy guidelines, and corruption.

The NIPC states that up to 120% of expenses on research and development (R&D) are tax deductible, provided that such R&D activities are carried out in Nigeria and relate to the business from which income or profits are derived.  Also, for the purpose of R&D on local raw materials, 140% of expenses are allowed.  Long-term research will be regarded as a capital expenditure and written off against profit.

The government similarly offers incentives for the importation of equipment, parts, and machinery used in renewable energy generation, transmission, and/or storage.  Solar cells in modules or panels attract zero import duty and are exempt from paying value added tax (VAT).  Solar-powered coolers, solar-powered generators, wind-powered generators, battery-manufacturing inputs, and nuclear reactors are subject to a relatively low duty rate of 5% and are exempt from paying VAT.

The Nigerian Export Processing Zone Authority (NEPZA) allows duty-free import of all equipment and raw materials into its export processing zones.  Up to 100% of production in an export processing zone may be sold domestically based on valid permits and upon payment of applicable duties.  Investors in the zones are exempt from foreign exchange regulations and taxes and may freely repatriate capital.  Foreign investors still face challenges with unreliable implementation of the regulations applied to export processing zones and are sometimes asked to pay import duties or restricted from accessing foreign exchange.  The Nigerian government also encourages private sector participation and partnership with state and local governments under the free trade zones (FTZ) program.  There are three types of FTZs in Nigeria:  federal or state government-owned, private sector-owned, and public-private partnerships.  NEPZA regulates Nigeria’s FTZs regardless of the ownership structure.  Workers in FTZs may unionize but may not strike for an initial ten-year period. 

Nigeria ratified the WTO Trade Facilitation Agreement (TFA) in 2016 and the Agreement entered into force in 2017.  Nigeria already implements items in Category A under the TFA and has identified, but not yet implemented, its Category B and C commitments.  In 2016, Nigeria requested additional technical assistance to implement and enforce its Category C commitments.  (See https://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm)

Foreign investors must register with the NIPC, incorporate as a limited liability company (private or public) with the CAC, procure appropriate business permits, and register with the Securities and Exchange Commission (when applicable) to conduct business in Nigeria.  Manufacturing companies sometimes must meet local content requirements.  Long-term expatriate personnel do not require work permits but are subject to needs quotas requiring them to obtain residence permits that allow salary remittances abroad.  Expatriates looking to work in Nigeria on a short-term basis can either request a temporary work permit, which is usually granted for a two-month period and extendable to six months, or a business visa, if only traveling to Nigeria for the purpose of meetings, conferences, seminars, trainings, or other brief business activities.  Authorities permit larger quotas for professions deemed in short supply, such as deep-water oilfield divers.  U.S. companies often report problems in obtaining quota permits.  The Nigerian government’s Immigration Regulations 2017 introduced additional means by which foreigners can obtain residence in Nigeria.  Foreign nationals who have imported an annual minimum threshold of capital over a certain period may be issued a permanent residence permit if the investment is not withdrawn.  The Nigerian Oil and Gas Content Development Act of 2010 restricts the number of expatriate managers to 5% of the total number of personnel for companies in the oil and gas sector.

The National Office of Industrial Property Act of 1979 established the National Office for Technology Acquisition and Promotion (NOTAP) to regulate the international acquisition of technology while creating an environment conducive to developing local technology.  NOTAP recommends local technical partners to Nigerian users in a bid to reduce the level of imported technology, which currently accounts for over 90% of technology in use in Nigeria.  NOTAP reviews the Technology Transfer Agreements (TTAs) required to import technology into Nigeria and for companies operating in Nigeria to access foreign currency.  NOTAP reviews three major aspects prior to approval of TTAs and subsequent issuance of a certificate: 

• Legal – ensuring that the clauses in the agreement are in accordance with Nigerian laws and legal frameworks within which NOTAP operates; 
• Economic – ensuring prices are fair for the technology offered; and 
• Technical – ensuring transfer of technical knowledge. 

U.S. firms complain that the TTA approval process is lengthy and can routinely take three months or more.  NOTAP took steps to automate the TTA process to reduce processing time to one month or less; however, from the date of filing the application to the issuance of confirmation of reasonableness, TTA processing still requires 60 business days. 

https://notap.gov.ng/new_dev/register-a-technology-transfer-agreement/

The Nigerian Oil and Gas Content Development Act of 2010 contains certain technology-transfer requirements that may violate a company’s intellectual property rights.  

In 2013, the National Information Technology Development Agency (NITDA), under the auspices of the Ministry of Communication, issued the Guidelines for Nigerian Content Development in the ICT sector.  NITDA re-issued an updated version of the Guidelines in 2019.  The Guidelines require telecommunications companies to ensure that at least 80% of network infrastructure value and volume be locally sourced, use indigenous companies to build network infrastructure, and use locally developed or manufactured software components.  The Guidelines also require multinational ICT equipment manufacturers operating in Nigeria to provide a detailed local content development plan for the creation of jobs, recruitment of Nigerians, human capital development, use of indigenous ICT products and services for value creation; all government agencies to procure at least 40% computer hardware and associated devices from NITDA-approved original equipment manufacturers; and ICT companies to host all consumer and subscriber data locally.  Enforcement of the Guidelines is largely inconsistent.  The government generally lacks capacity and resources to monitor labor practices, technology compliancy, and digital data flows.  There are reports that individual Nigerian companies periodically lobby the National Assembly and/or NITDA to address allegations (warranted or not) against foreign firms that they are in non-compliance with the guidelines.

The goal of the Guidelines is to promote development of domestic production of ICT products and services for the Nigerian and global markets, but some assessments indicate they pose risks to foreign investment and U.S. companies by interrupting their global supply chain, increasing costs, disrupting global flow of data, and stifling innovative products and services.  Industry representatives remain concerned about whether the guidelines would be implemented in a fair and transparent way toward all Nigerian and foreign companies.  All ICT companies, including Nigerian companies, use foreign manufactured equipment as Nigeria does not have the capacity to supply ICT hardware that meets international standards.

The Nigerian Customs Service (NCS) and the Nigerian Ports Authority (NPA) exercise exclusive jurisdiction over customs services and port operations respectively.  Nigerian law allows importers to clear goods on their own, but most importers employ clearing and forwarding agents to minimize tariffs and lower landed costs.  The Nigerian government closed land borders to trade in August 2019, purportedly to stem the tide of smuggled goods entering from neighboring countries.  Nigeria reopened land borders to trade in December 2020, but it continues to restrict the import of items such as rice and vehicles through its land borders.  The NCS maintains a wider import prohibition list available at https://customs.gov.ng/?page_id=3075, while the CBN continues to restrict access to foreign exchange for the importation of 44 classes of goods.  The initial list that contained 41 items (https://www.cbn.gov.ng/out/2015/ted/ted.fem.fpc.gen.01.011.pdf ) has since been expanded to include fertilizer, maize, dairy products, and sugar (except for three companies that the CBN exempts from the lack of access to foreign exchange for sugar imports) with the CBN adding items in an ongoing basis as part of its “backward integration” strategy.  

The Nigerian government implements a destination inspection scheme whereby all inspections occur upon arrival into Nigeria, rather than at the ports of origin.  In 2013, the NCS regained the authority to conduct destination inspections, which had previously been contracted to private companies.  NCS also introduced the Nigeria Integrated Customs Information System (NICIS) platform and an online system for filing customs documentation via a Pre-Arrival Assessment Report (PAAR) process.  The NCS still carries out 100% cargo examinations, and shipments take more (sometimes significantly more) than 20 days to clear through the process.  In addition to creating significant delays and additional fees for security and storage for items awaiting customs clearance, NCS’s continued reliance on largely manual customs processes creates opportunities for significant variation, individual discretion, and corruption in the application of customs regulations.  At the time of this report, a growing number of companies were engaged in disputes with the customs agency due to NCS arbitrarily reclassifying their imports into new classification categories with higher import tariffs.  

Shippers report that efforts to modernize and professionalize the NCS and the NPA have largely been unsuccessful – port congestion persists and clearance times are long.  A presidential directive in 2017 for the Apapa Port, which handles over 40% of Nigeria’s legal trade, to run a 24-hour operation and achieve 48-hour cargo clearance has not met its stated goals.  The port is congested, inefficient and the proliferation of customs units incentivizes corruption from official and unofficial middlemen who complicate and extend the clearance process.  Delays for goods entering the country via the Apapa Port were exacerbated under COVID; U.S. companies have reported wait times to berth ships at the port of up to 90 days.  Freight forwarders usually resort to bribery of customs agents and port officials to avoid long delays clearing imported goods through the NPA and NCS.  The NPA set up an Electronic Truck Call-up System in January 2021 to increase efficiency in the management of cargo movement across the Apapa Port.  However, the impact made by this initiative remains to be felt.  Other ports face logistical and security challenges leaving most operating well below capacity.  Nigeria does not currently have a true deep-sea port although one is under construction near Lagos and expected to be operational by 2023.    

Investors sometimes encounter difficulties acquiring entry visas and residency permits. Foreigners must obtain entry visas from Nigerian embassies or consulates abroad, seek expatriate position authorization from the NIPC, and request residency permits from the Nigerian Immigration Service.  In 2018, Nigeria instituted a visa-on-arrival system, which works relatively well but still requires lengthy processing at an embassy or consulate abroad before an authorization is issued.  Some U.S. businesses have reported being solicited for bribes in the visa-on-arrival program.  The visa-on-arrival system is not an option  for employment or residence.  Investors report that the residency permit process is cumbersome and can take from two to 24 months and cost $1,000 to $3,000 in facilitation fees.  The Nigerian government announced a visa rule in 2011 to encourage foreign investment, under which legitimate investors can obtain multiple-entry visas at points of entry.  Obtaining a visa prior to traveling to Nigeria is strongly encouraged.

The Nigerian government recognizes secured interests in property, such as mortgages.  The recording of security instruments and their enforcement remain subject to the same inefficiencies as those in the judicial system.  In the World Bank Doing Business 2020 Report, Nigeria ranked 183 out of the 190 countries surveyed for registering property, a decline of one point over its 2019 ranking.  Property registration in Lagos required an average of 12 steps over 105 days at a cost of 11.1% of the property value while in Kano registering property averages 11 steps over 47 days at a cost of 11.8% of the property value. 

Owners transfer most property through long-term leases, with certificates of occupancy acting as title deeds.  Property transfers are complex and must usually go through state governors’ offices, or the Minister of the Federal Capital Territory for lands located in the federal capital, as state governments have jurisdiction over land ownership.  Authorities have often compelled owners to demolish buildings deemed to be in contravention of building codes or urban masterplans, including government buildings, commercial buildings, residences, and churches, even in the face of court injunctions.  Acquiring and maintaining rights to real property can be problematic.

Clarity of title and registration of land ownership remain significant challenges throughout rural Nigeria, where many smallholder farmers have only ancestral or traditional use claims to their land.  Nigeria’s land reforms have attempted to address this barrier to development but with limited success.  Proof of ownership in the absence of land titles may be established through traditional history of ownership, proving possession over a sufficient length of time, and showing sustained enjoyment of the land.  The government may acquire land for an overriding public purpose which may be excised to an individual or entity if the land has not been committed.

Enforcement of intellectual property rights (IPR) in Nigeria faces challenges in three areas: (1) limited capacity within the judicial and law enforcement systems, (2) weak regulatory and statutory regimes, (3) and poor funding and resource allocation.  Nigeria’s legal and institutional infrastructure for protecting IPR remains in need of further development, even though laws on the books can enforce most IPR.  The areas in which the legislation is deficient include online piracy, geographical indications, and animal breeders’ rights.  In 2021, Nigeria enacted a new law giving plant breeders IPR over new and improved seeds for increased crop production.  Draft copyright bills, one sponsored by a Senator and the other approved by the Federal Executive Council, were harmonized into one earlier this year.   The harmonized bill defines technological protection measures (known as TPMs), remuneration rights, and broadcasting.  It also provides anti-piracy penalties and prohibits the circumvention of TPMs as well as the falsification, alteration, or removal of electronic rights management information (RMI). 

The International Anti-Counterfeiting Coalition (IACC) has long noted that the Copyright Act should be amended to provide stiffer penalties for violators.  Statutory penalties for copyright offenses remain relatively low and rights-holders note that offenses are typically met with non-deterrent, modest fines.  The harmonized bill proposes stricter penalties for IPR infractions.  However, a firm timeline for passage of a new copyright law remains elusive.

Existing copyright protection in Nigeria is governed by the Copyright Act Chapter C28, Laws of the Federation 2004, which provides an adequate basis for enforcing copyright and combating piracy.  The Nigerian Copyright Commission (NCC), an agency supervised by the Ministry of Justice, administers the Act.  Nigeria is a member of the World Intellectual Property Organization (WIPO) and in 2017 it ratified two WIPO treaties that it signed in 1997:  the WIPO Copyright Treaty (WCT) and WIPO Performances and Phonograms Treaty (WPPT), as well as the Beijing Treaty on Audiovisual Performances, and the Marrakesh Treaty to Facilitate Access to Published Works for persons who are Blind, Visually impaired persons, or otherwise Print disabled.  These treaties address important digital communication, broadcast, and online infringement issues that have become increasingly relevant in the globalized economy. The pending Copyright Bill of 2021 would domesticate the ratified treaties.  The NCC has primary responsibility for copyright enforcement but is understaffed and underfunded relative to the magnitude of the copyright challenges in Nigeria.  Nevertheless, the NCC continues to carry out enforcement actions on a regular basis.

Violations of IPRs continue to be widespread.  Anti-counterfeiting groups such as the IACC report that the Nigerian police work to combat counterfeiting and readily engage with trademark owners but lacks the capacity to fully enforce these laws.  Authorized penalties for counterfeiting and trademark infringements remain relatively low and rightsholders note that offenses are typically met with non-deterrent, modest fines.  A Senator has introduced legislation, the Trademarks Bill 2019, which remains pending and may address some of these issues.  Depending on the scale and type of counterfeiting involved, the National Agency for Food and Drug Administration and Control (NAFDAC) and the Federal Competition and Consumer Protection Commission (FCCPC) would be responsible for enforcing counterfeiting and trademark infringement offenses. 

The Nigerian Customs Service (NCS) has general authority to seize and destroy contraband.  If NCS suspects unauthorized importation of copyright protected works, it will require the presumed copyright owner to issue a notice for NCS to treat such works as infringing.  The implementing procedures for this practice have not been developed as it is handled on a case-by-case basis between the NCS and the NCC.  Once seizures are made, the NCS invites the NCC to inspect and subsequently take delivery of the consignment of fake goods for purposes of further investigation because the NCC has the statutory responsibility to investigate and prosecute copyright violations.  The NCC bears the costs of moving and storing infringing goods.  If, after investigations, any persons are identified with the infringing materials, a decision to prosecute may be made.  Where no persons are identified or could be traced, the NCC may obtain an order of court to enable it to destroy such works.  The NCC works in cooperation with rights owners’ associations and stakeholders in the copyright industries on such matters.  Similarly, NAFDAC and FCCPC work in cooperation with rights owners’ associations and stakeholders in the counterfeiting and trademark industries.  

Nigeria is not listed in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.  For additional information about treaty obligations and points of contact at local IP offices, please see the WIPO country profiles at http://www.wipo.int/directory/en/.

The NIPC Act of 1995, amended in 2004, liberalized Nigeria’s foreign investment regime, which has facilitated access to credit from domestic financial institutions.  The government, and the CBN in particular, has sought to diversify foreign exchange inflows by encouraging foreign portfolio investments (FPI).  High returns on the CBN’s open market operation (OMO) bills as well as the exclusion of certain classes of domestic investors from the market yielded high levels of FPI.  However, a tightening of monetary policy, foreign exchange shortages, revised CBN guidelines on OMO bills, and capital restrictions amidst COVID-19 disruptions have led to a decline in FPI.  CBN officials indicate that OMO offerings to foreigners will be phased out – a departure from its strategy of attracting hard currency investments to shore up foreign exchange supply – once current obligations have been redeemed due to the large interest repayment burden placed on the CBN.   

Foreign investors who have incorporated their companies in Nigeria have equal access to all financial instruments.  Some investors consider the capital market, specifically the Nigerian Exchange Group (NXG), a financing option, given commercial banks’ high interest rates and the short maturities of local debt instruments.  Financial institutions provide credit on market terms, but rates are relatively high due to high inflation and a high benchmark interest rate.  The NXG completed a demutualization process in 2021 which transformed the company, previously privately held and called the Nigerian Stock Exchange, to a public company limited by shares.  The NXG all-share index closed 2021 with over 42,000 points, a 4% increase from the end of 2020.  As of December 2021, the NXG had 157 listed companies with an equity market capitalization of 22.3 trillion naira ($53.5 billion), an increase of 6% from 2020.  The share of foreign investment in equity trading declined to 22% in 2021 from 35% in 2020 and over 50% in 2018.  This decline is indicative of foreign investors’ diminishing appetite for Nigerian securities especially as repatriation concerns continue to mount.  The NXG sovereign bond index declined year-on-year by 14% in 2021.

The Securities and Exchange Commission (SEC) is the government agency tasked with regulating and developing the capital market.  SEC creates operational guidelines and licenses securities and market intermediaries.  The Nigerian government has considered requiring companies in certain sectors such as telecoms, oil, and gas, or over a certain size to list on the NXG as a means to encourage greater corporate participation and sectoral balance in the Nigerian stock exchange, but those proposals have not been enacted.

The government employs debt instruments, issuing treasury bills of one year or less, and bonds of various maturities ranging from two to 30 years.  Nigeria is increasingly relying on the bond market to finance its widening deficit, especially as domestic bond rates fell well below Nigeria’s Eurobond rates in 2021.  In addition, Nigeria continues its reluctance or refusal to accept certain conditionalities attached to multilateral borrowing, and has increasingly forgone World Bank and Africa Development Bank loans that have required it to free the exchange rate, eliminate subsidies, create an agricultural exchange, easing trade restrictions, amont other macro/fiscal reforms.  The government’s preferred option in recent times has been the capital market, foreign or domestic.  It has also made increased use of Export–Import Bank of China loans, as these conditions are not as rigorous as is the case with multilateral institutions.  

Domestic borrowing accounted for 76% of new government borrowings in the first eleven months of 2021.  Some state governments have issued bonds to finance development projects, while some domestic banks have used the bond market to raise additional capital.  Nigeria’s SEC has issued stringent guidelines for states wishing to raise funds on capital markets, such as requiring credit assessments conducted by recognized credit rating agencies.  

The CBN is the apex monetary authority of Nigeria; it was established by the CBN Act of 1958 and commenced operations on July 1, 1959.  It has oversight of all banks and other financial institutions and is designed to be operationally independent of political interference although the CBN governor is appointed by the president and confirmed by the Senate.  The amended CBN Act of 2007 mandates the CBN to have the overall control and administration of the monetary and financial sector policies of the government.  The new Banking and Other Financial Institutions Act (BOFIA) of 2020 broadens CBN’s regulatory oversight function to include financial technology companies as it prohibits the operations of unlicensed financial institutions.  The revised BOFIA also grants partial immunity to the CBN and its officials from judicial intervention on actions arising from activities undertaken to implement the Act.  Furthermore, the Act forbids restorative orders and limits remedies sought against the CBN where it has revoked a license to monetary compensation.

Foreign banks and investors are allowed to establish banking business in Nigeria provided they meet the current minimum capital requirement of 25 billion naira ($60 million) and other applicable regulatory requirements for banking license as prescribed by the CBN.  The CBN regulations for foreign banks regarding mergers with or acquisitions of existing local banks in the country stipulate that the foreign institutions’ aggregate investment must not be more than 10% of the latter’s total capital. 

Any foreign-owned bank in Nigeria that wishes to acquire or merge with a local bank must have operated in Nigeria for a minimum of five years.  To qualify for merger or acquisition of any of Nigeria’s local banks, the foreign bank must have achieved a penetration of two-thirds of the states of the federation, that is, to have branches in at least 24 out of the 36 states in Nigeria.  The CBN also stipulates that the foreign bank or investors’ shareholding arising from the merger or acquisition should not exceed 40% of the total capital of the resultant entity.

The CBN currently licenses 24 deposit-taking commercial banks in Nigeria.  Following a 2009 banking crisis, CBN officials intervened in eight commercial banks and worked to stabilize the sector through reforms, including the adoption of uniform year-end International Financial Reporting Standards to increase transparency, a stronger emphasis on risk management and corporate governance, and the nationalization of three distressed banks.  The CBN has since intervened in the sector using bridge banks and capital injections to avoid bank failures.  The CBN has licensed three non-interest banks since it released operational guidelines in 2011.  There are six licensed merchant banks which provide asset management and capital market activities, the latter through a subsidiary registered by SEC, and 882 microfinance banks licensed by the CBN to provide services largely to those not served by conventional banks. 

The CBN reiterated its commitment to increasing the level of financial inclusion in the country from 60% in 2020 to 95% by 2024.  The CBN plans to achieve this goal by leveraging technology and relaxing its criteria for financial services market entry.  Most notably, telecom companies previously excluded from providing financial services are now eligible for payment service banking and digital financial services licenses.  The CBN also licenses agents to provide financial services on behalf of commercial banks and other licensed financial services providers in underserved areas.  According to the IMF’s Financial Access Survey for 2021, there were 5,158 bank branches in Nigeria in 2020 which amounted to 4.5 branches per 100,000 adults; the number of automated teller machines per 100,000 adults was to 16.1; there were 142 mobile money agents per thousand square kilometers; and the number of registered mobile money agents per thousand adults fell by more than half to 61.

The banking sector remained resilient in 2021 despite the risks and challenges posed by the COVID-19 pandemic.  The five largest banks recorded 3%, 9% and 6% increases in revenues, profits, and assets, respectively, in the first half of the year.  The CBN reported that non-performing loans (NPLs) declined to 4.9% in December 2021, breaching the 5% prudential threshold for the first time in over a decade.  This is a significant decline from 6.4% and 9.4% in June of 2020 and 2021, respectively.  The steady fall in NPLs is attributable to the CBN’s post-COVID forbearance measures as well as increased banking sector recoveries, disposals, and write-offs.  The industry average capital adequacy ratio (CAR) was 14.5% as of December 2021, compared to a minimum regulatory threshold of 10% for ordinary banks and 15% for domestically systemically important banks (D-SIBS) and banks with international authorization.  According to the CBN’s 2019 Financial Stability Report, seven D-SIBs account for 64% of banking assets, 65% of industry deposits, and 66% of industry loans, hence their failure could disrupt the entire financial system and the country’s economy.  D-SIBS usually record higher CARs while smaller banks pull down the industry average.  D-SIBS recorded an average CAR of 19.8% compared to the then average of 15.2%.  Weaker banks thereby pose a risk to Nigeria’s financial system stability.  In its first monetary policy meeting of 2022, the CBN noted downside risks to the sector were associated with sluggish post-COVID growth and resolved to “closely monitor” and “swiftly respond to emerging challenges.”

Total banking sector assets rose from 51 trillion naira ($122.3 billion) in 2020 to 59 trillion naira ($141.4 billion) while deposits increased to 38.4 trillion naira ($92 billion) in 2021.  Nigeria’s five largest banks by assets, considered Tier 1 banks by the CBN, recorded combined total assets of 40 trillion naira ($96 billion) – about two-thirds of the industry total – in the first half of 2021.  Access Bank leads the pack with 10.1 trillion naira ($24.2 billion) in assets, followed by Zenith Bank with 8.5 trillion naira (20.4 billion), UBA with 8.3 trillion naira ($20 billion), First Bank with 8 trillion naira ($19.2 billion), and GTB with 5 trillion naira ($12 billion).  

The CBN has continued its system of liquidity management using unorthodox monetary policies.  The measures included an increase in the cash reserve ratio (CRR) to 27.5% – among the highest globally – to absorb the excess liquidity within the system which was a direct consequence of the lack of investment opportunities.  The CBN arbitrarily debited banks for carrying excess loanable deposits on their books resulting in the effective CRR for some banks rising as high as 50%, which limited banks’ capacity to lend.  The CBN also enforced a 65% minimum loan to deposit ratio in order to increase private sector credit and boost productivity.  In December 2020, the CBN released some of the excess CRR back to banks by selling them special bills in an attempt to improve liquidity and support economic recovery.

Under Nigerian laws and banking regulations, one of the conditions any foreigner seeking to open a bank account in Nigeria must fulfill is to be a legal resident in Nigeria.  The foreigner must have obtained the Nigerian resident permit, known as the Combined Expatriate Residence Permit and Aliens Card which can only be processed by a foreigner that has been employed by a Nigerian company through an expatriate quota.  Another requirement is the biometric BVN, which every account holder in Nigeria must have according CBN regulations. 

Only a company duly registered in Nigeria can open a bank account in the country.  Therefore, a foreign company is not entitled to open a bank account in Nigeria unless its subsidiary has been registered in Nigeria.

The Nigeria Sovereign Investment Authority (NSIA) manages Nigeria’s sovereign wealth fund.  It was created by the NSIA Act in 2011 to harness Nigeria’s robust oil revenues toward economic stability, wealth creation, and infrastructure development.  The NSIA received $1 billion seed capital in 2013 which grew to $2.1 billion in 2020 as a result of additional investments and retained earnings.  The NSIA manages an additional $1.5 billion from third-party-managed funds for a total assets under management of $3.6 billion.

The NSIA is a public agency that subscribes to the Santiago Principles, which are a set of 24 guidelines that assign “best practices” for the operations of Sovereign Wealth Funds globally. The NSIA invests through three ring-fenced funds:

• the Future Generations Fund is assigned 30% of NSIA’s assets with the objective of preserving and growing the value of said assets for the benefit of future Nigerians.  The minimum investment horizon is 20 years, the investment base currency is the U.S. dollar, and the minimum target return is U.S. inflation + 4%.  The Fund invests primarily in “growth assets,” “deflation hedges,” and “inflation hedges.”  
• the Nigeria Infrastructure Fund aims to plug Nigeria’s infrastructure gap by investing in, and catalyzing foreign investments for, domestic infrastructure projects.  The Fund is assigned 50% of NSIA’s assets.  Investments are in naira and U.S. dollars and the return-on-investment target is U.S. inflation plus 5%.  The Fund cannot allocate more than 50% of its assets to investment managers (not more than 25% to a single manager) or more than 35% to a single infrastructure sector.  The Fund may also invest not more than 10% of its assets in “development projects’ in underserved regions or sectors.  Priority sectors are power, healthcare, real estate, technology and communications infrastructure, aviation assets, agriculture, water and sewage treatment and delivery, roads, port, and rail.
• the Stabilization Fund was created to act as a buffer against short-term economic instability and is assigned 20% of NSIA’s assets.  The Fund invests in conservative, short-term, and liquid assets since it may be drawn down to augment government revenue shortages.  The base currency is the U.S. dollar.  Investment options range from global sovereign and corporate debt, credit focused debt, cash, and to an extent, derivatives.  The minimum credit quality rating is “A” over a 12-month period.  

At least 50% of the NSIA’s assets are invested domestically in infrastructure projects.  The NSIA does not take an active role in the management of companies.  The Embassy has not received any report or indication that NSIA activities limit private competition.

The government does not have an established practice consistent with the OECD Guidelines on Corporate Governance for state-owned enterprises (SOEs), but SOEs have respective enabling legislations that govern their ownership.  To legalize the existence of state-owned enterprises, provisions have been made in the Nigerian constitution relating to socio-economic development and in section 16 (1).  The government has privatized many former SOEs to encourage more efficient operations, such as state-owned telecommunications company Nigerian Telecommunications and mobile subsidiary Mobile Telecommunications in 2014.  SOEs operate in a variety of sectors ranging from information and communication; power; oil and gas; transportation including rail, maritime, and airports; and finance.  

Nigeria does not operate a centralized ownership system for its state-owned enterprises.  Most SOEs are 100% government owned.  Others are owned by the government through the Ministry of Finance Incorporated (MOFI) or solely or jointly by MOFI and various agencies of government.  The enabling legislation for each SOE also stipulates its governance structure.  The boards of directors are appointed by the president and occasionally on the recommendation of the relevant minister.  The boards operate and are appointed in line with the enabling legislation which usually stipulates the criteria for appointing board members.  Directors are appointed by the board within the relevant sector.  In a few cases, however, appointments have been viewed as a reward to political allies.  Operational autonomy varies amongst SOEs.  Most SOEs are parastatals of a supervising ministry or the presidency with minimal autonomy.  SOEs with regulatory or industry oversight functions are often technically independent of ministerial supervision; however, ministers and other political appointees often interfere in their operations.

All SOEs are required to remit a share of their profits or operational surpluses to the federal government.  This “independent revenue” more than doubled from 2020 to 1.1 trillion naira ($2.6 billion) in 2021 and exceeded budget projections by 13%.  This was as a result of the government’s drive to increase non-oil revenues as well as increasingly stringent oversight of SOE remittances.  The 60 largest SOEs (excluding the Nigerian National Petroleum Corporation (NNPC)) generated a combined 1.2 trillion naira ($2.9 billion) in revenues and spent a total 410 billion naira ($983 million) in the first eleven months of 2021.  The government often provides certain grants to SOEs that are inefficiently run and/or loss-making.  For example, and over the past five years, the government has allocated 102 billion naira ($245 million) to the Transmission Company of Nigeria, 402 billion naira ($964 million) to the Nigerian Bulk Electricity Trading Company, 154 billion naira ($369 million) to the Nigerian Railway Corporation, and 24 billion naira ($58 million) to the Ajaokuta Steel Company.  These SOEs wereall ostensibly established to generate and remit revenue.   

NNPC is Nigeria’s most prominent state-owned enterprise.  Under the implementation of the Petroleum Industry Act, NNPC was incorporated as a limited liability company in September 2021, although the incorporation process does not appear to have led to a de facto change in the company’s operations and the government maintains 100% ownership.  NNPC Board appointments are made by the presidency, but day-to-day management is overseen by the Group Managing Director (GMD).  The GMD reports to the Minister of Petroleum Resources.  In the current administration, the President has retained that ministerial role for himself, and the appointed Minister of State for Petroleum Resources acts as the de facto Minister of Petroleum in the president’s stead with certain limitations.  

NNPC is Nigeria’s biggest and arguably most important state-owned enterprise and is involved in exploration, refining, petrochemicals, products transportation, and marketing.  It owns and operates Nigeria’s four refineries (one each in Warri and Kaduna and two in Port Harcourt), all of which are currently and largely inoperable.  NNPC remits proceeds from the sale of crude oil less operational expenses to the federation account which is managed by the federal government on behalf of all tiers of government.  It is also expected to pay corporate and petroleum profits taxes to the Federal Inland Revenue Service (FIRS).  NNPC began publishing audited financial statements in 2020 for the three prior fiscal years, a significant step toward improving transparency of NNPC operations.  The government generated crude oil net revenue of 1.5 trillion naira ($3.6 billion) in 2020 in large part due to NNPC’s $10 billion gross revenue and the government’s removal of the gasoline subsidy for half of 2020 in the face of low global oil prices.  However, despite higher oil prices, crude oil revenue fell to 970 billion naira ($2.3 billion) in the first eleven months of 2021.  This is largely due to declining crude production and the significant subsidy costs which NNPC deducts from revenue before remitting the balance to the government.

NNPC’s dual role as industry operator and unofficial regulator as well as its proximity to government lends it certain advantages its competitors lack.  For instance, the CBN often prioritizes NNPC’s foreign exchange requests and has offered the corporation a subsidized exchange rate for its importation of petroleum products in the past.  In addition, its proximity to government affords it high-level influence.  NNPC’s inputs formed a critical part of the government’s position during the drafting of the Petroleum Industry Act of 2021.  NNPC’s objection to the sale of an international oil company’s subsidiary with which it operates a joint venture has stayed the government approval required for the divestment.

The government also owns equity in some private-sector-run entities.  It retained 60% and 40% equity in the generation and distribution companies, respectively, that emerged from the power sector privatization exercise in 2013.  Despite being privately-run, revenues across the power sector value chain are hindered by the overall inefficiencies and illiquidity in the sector.  Consequently, a government facility finances a sizeable portion of the sector’s activities.  The Transmission Company of Nigeria, of which the government retained full ownership, is largely financed by the government.  The government owns 49% of Nigeria Liquefied Natural Gas (NLNG) Limited (NLNG) with the balance held by several international oil companies.  NLNG is one of Nigeria’s most profitable companies and the dividends paid to the government accounted for nearly 3% of federal government revenues in 2021.

The Privatization and Commercialization Act of 1999 established the National Council on Privatization, the policy-making body overseeing the privatization of state-owned enterprises, and the Bureau of Public Enterprises (BPE), the implementing agency for designated privatizations.  The BPE has focused on the privatization of key sectors, including telecommunications and power, and calls for core investors to acquire controlling shares in formerly state-owned enterprises.  

The BPE has privatized and concessioned more than 140 enterprises since 1999, including an aluminum complex, a steel complex, cement manufacturing firms, hotels, a petrochemical plant, aviation cargo handling companies, vehicle assembly plants, and electricity generation and distribution companies.  The electricity transmission company remains state-owned.  Foreign investors can and do participate in BPE’s privatization process.  The government also retains partial ownership in some of the privatized companies.  The federal government and several state governments hold a 40% stake, managed by BPE, in the power distribution companies.

The National Assembly has questioned the propriety of some of these privatizations, with one ongoing case related to an aluminum complex which is the subject of a Supreme Court ruling on ownership.  In addition, the failure of the 2013 power sector privatization to restore financial viability to the sector has raised criticism of the privatized power generation and distribution companies.    

The federal government estimates it will raise 91 billion naira ($218 million) from privatization proceeds in 2022.  The government did not earn any revenues from privatization in 2021 despite a 205-billion-naira ($492 million) budget projection.  

BPE has several ongoing transactions including the sale of government assets in the agricultural sector, the concession of trade fair complexes, and private-public partnership in the Nigeria Commodity Exchange amongst others.  Additional information on ongoing transactions can be found on the BPE website:  https://bpe.gov.ng/category/transactions/on-going-transactions/.

There is no specific Responsible Business Conduct law in Nigeria.  Several legislative acts incorporate within their provisions certain expectations that directly or indirectly regulate the observance or practice of corporate social responsibility.  In order to reinforce responsible behavior, various laws have been put in place for the protection of the environment.  These laws stipulate criminal sanctions for non-compliance but are not consistently enforced.  There are also regulating agencies which exist to protect the rights of consumers.  Additionally, the Nigerian government has no specific action plan regarding OECD Responsible Business Conduct guidelines.

Nigeria participates in the Extractive Industries Transparency Initiative (EITI) and is an EITI compliant country.  Specifically, in February 2019 the EITI Board determined that Nigeria had made satisfactory progress overall with implementing the EITI Standard after having fully addressed the corrective actions from the country’s first Validation in 2017.  The next EITI Validation study of Nigeria will occur in 2022.  

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), and the Nigerian Upstream Petroleum Regulatory Commission (the Commission) also ensure comprehensive standards and guidelines to direct the execution of projects with proper consideration for the environment.  These two agencies replaced the now defunct Department of Petroleum Resources (DPR) and its Environmental Guidelines and Standards of 1991 for the petroleum industry.  These two agencies aim to continue the DPR’s mission to preserve and protect the environmental issues of the Niger Delta.  

The Nigerian government provides oversight relating to the competition, consumer rights, and environmental protection issues.  The Federal Competition and Consumer Protection Commission (FCCPC), the National Agency for Food and Drug Administration and Control, the Standards Organization of Nigeria, and other entities have the authority to impose fines and ensure the destruction of harmful substances that otherwise may be sold to the general public.  The main regulators and enforcers of corporate governance are the Securities and Exchange Commission and the Corporate Affairs Commission (which register all incorporated companies).  Nigeria has adopted multiple reforms on corporate governance.  

The Companies Allied Matter Act 2020 and the Investment Securities Act provide basic guidelines on company listing.  More detailed regulations are covered in the NSX Listing rules.  Publicly listed companies are expected to disclose their level of compliance with the Code of Corporate Governance in their Annual Financial Reports.

Domestic and foreign observers identify corruption as a serious obstacle to economic growth and poverty reduction.  Nigeria ranked 154 out of 180 countries in Transparency International’s 2021 Corruption Perception Index.  

Businesses report that bribery of customs and port officials remains common and often necessary to avoid extended delays in the port clearance process, and that smuggled goods routinely enter Nigeria’s seaports and cross its land borders. 

Since taking office in 2015, President Buhari has focused on implementing a campaign pledge to address corruption, though his critics contend his anti-corruption efforts often target political rivals.  

The Economic and Financial Crimes Commission Establishment Act of 2004 established the EFCC to prosecute individuals involved in financial crimes and other acts of economic “sabotage.”  Traditionally, the EFCC has achieved the most success in prosecuting low-level internet scam operators.  A relatively few high-profile convictions have taken place, such as a former governor of Adamawa State, a former governor of Bayelsa State, a former Inspector General of Police, and a former Chair of the Board of the Nigerian Ports Authority.  The EFCC also arrested a former National Security Advisor (NSA), a former Minister of State for Finance, a former NSA Director of Finance and Administration, and others on charges related to diversion of funds intended for government arms procurement.  EFCC investigations have led to 5,562 convictions since 2010, with 2,200 in 2021.  In 2020 the EFCC announced that the Buhari administration convicted 1,692 defendants and recovered over $2.6 billion in assets over the previous four-year period.  In 2021, EFCC’s investigation of a former petroleum minister resulted in seizure of properties valued more than $80M.  

The Corrupt Practices and Other Related Offences Act of 2001 established an Independent Corrupt Practices and Other Related Offences Commission (ICPC) to prosecute individuals, government officials, and businesses for corruption.  The Corrupt Practices Act punishes over 19 offenses, including accepting or giving bribes, fraudulent acquisition of property, and concealment of fraud.  Nigerian law stipulates that giving and receiving bribes constitute criminal offences and, as such, are not tax deductible.  Between 2019-2020 the ICPC filed 178 cases in court and secured convictions in 51 cases.  The ICPC announced in early 2022 that it had recovered cash and assets valued at 166.51 billion naira (about $400 million at the official exchange rate) from corrupt persons in the preceding two and half years.  

In 2021, the Deputy Commissioner of the Nigerian Police Force (NPF) and Chief of the Intelligence Response Team (IRT), Abba Kyari, often publicly referred to as “Nigeria’s Supercop,” was suspended from the NPF and arrested for drug dealing, evidence tampering, and corruption for reportedly accepting bribes from a Nigerian internet fraudster Ramon Abbas, popularly known as “Hushpuppi,” who pleaded guilty to money laundering in the United States.  The Nigeria Police Service Commission finalized the suspension of Kyari on July 31, following the release of unsealed court documents filed in a U.S. District Court ordering the arrest of Kyari for his involvement in a $1.1 million fraud scheme with Abbas.  Kyari is alleged to have solicited payment for the detainment and arrest of Abbas at Abbas’s behest.  

In 2016, Nigeria announced its participation in the Open Government Partnership, a significant step forward on public financial management and fiscal transparency.  The Ministry of Justice presented Nigeria’s National Action Plan for the Open Government Partnership.  

Implementation of its 14 commitments has made some progress, particularly on the issues such as tax transparency, ease of doing business, and asset recovery.  The National Action Plan, which ran through 2019, covered five major themes:  ensuring citizens’ participation in the budget cycle, implementing open contracting and adoption of open contracting data standards, increasing transparency in the extractive sectors, adopting common reporting standards like the Addis Tax initiative, and improving the ease of doing business.  Full implementation of the National Action Plan would be a significant step forward for Nigeria’s fiscal transparency, although Nigeria has not fully completed any commitment to date. 

The Buhari administration created a network of agencies intended to work together to achieve anticorruption goals – the EFCC, the Asset Management Corporation of Nigeria (AMCON), the Federal Inland Revenue Service (FIRS), and the Nigerian National Petroleum Corporation (NNPC) – and which are principally responsible for the recovery of the ill-gotten assets and diverted tax liabilities.  The government launched the Financial Transparency Policy and Portal, commonly referred to as Open Treasury Portal, in 2019, to increase transparency and governmental accountability of funds transferred by making the daily treasury statement public.  The Open Treasury Portal mandates that all ministries, departments, and agencies publish daily reports of payments in excess of N5m ($13,800).  Agencies are also required to publish budget performance reports and other official financial statements monthly. Anticorruption activists demand more reforms and increased transparency in defense, oil and gas, and infrastructure procurement.   

The Nigeria Extractive Industries Transparency Initiative (NEITI) Act of 2007 provided for the establishment of the NEITI organization, charged with developing a framework for transparency and accountability in the reporting and disclosure by all extractive industry companies of revenue due to or paid to the Nigerian government.  NEITI serves as a member of the international Extractive Industries Transparency Initiative, which provides a global standard for revenue transparency for extractive industries like oil and gas and mining.  Nigeria is party to the United Nations Convention Against Corruption.  Nigeria is not a member of the OECD and not party to the OECD Convention on Combating Bribery.

Foreign companies, whether incorporated in Nigeria or not, may bid on government projects and generally receive national treatment in government procurement, but may also be subject to a local content vehicle (e.g., partnership with a local partner firm or the inclusion of one in a consortium) or other prerequisites which are likely to vary from tender to tender.  Corruption and lack of transparency in tender processes have been a far greater concern to U.S. companies than discriminatory policies based on foreign status.  Government tenders are published in local newspapers, a “tenders” journal sold at local newspaper outlets, and occasionally in foreign journals and magazines.  The Nigerian government has made modest progress on its pledge to conduct open and competitive bidding processes for government procurement with the introduction of the Nigeria Open Contracting Portal in 2017 under the Bureau of Public Procurement.  

The Public Procurement Law of 2007 established the Bureau of Public Procurement as the successor agency to the Budget Monitoring and Price Intelligence Unit.  It acts as a clearinghouse for government contracts and procurement and monitors the implementation of projects to ensure compliance with contract terms and budgetary restrictions.  Procurements above 100 million naira (approximately $243,000) reportedly undergo full “due process,” but government agencies routinely flout public procurement requirements.  Some of the 36 states of the federation have also passed public procurement legislation.

Certain such reforms have also improved transparency in procurement by the state-owned NNPC.  Although U.S. companies have won contracts in numerous sectors, difficulties in receiving payment are not uncommon and can deter firms from bidding.  Supplier or foreign government subsidized financing arrangements appear in some cases to be a crucial factor in the award of government procurements.  Nigeria is not a signatory to the WTO Agreement on Government Procurement.

Political, criminal, and ethnic violence continue to affect Nigeria.  Boko Haram and Islamic State – West Africa (ISIS-WA) have waged violent terrorist campaigns, killing of thousands of people in the country’s North East.  Boko Haram and ISIS-WA attacked civilians, military, police, humanitarian, and religious targets; recruited and forcefully conscripted child soldiers; and carried out scores of attacks on population centers in the North East and in neighboring Cameroon, Chad, and Niger.  Abductions by Boko Haram and ISIS-WA continue.  These attacks resulted in thousands of deaths and injuries, numerous human rights abuses, widespread destruction, the internal displacement of more than three million persons, and the external displacement of at least 327,000 Nigerian refugees to neighboring countries as of the end of 2021.  ISIS-WA terrorists demonstrated increased ability to conduct complex attacks against military outposts and formations.  During 2021, ISIS-WA terrorists took over significant territory formerly held by Boko Haram.  ISIS-WA expanded efforts to implement shadow governance structures in large swaths of Borno State.

President Buhari has sought to address matters of insecurity in Nigeria.  While the terrorists maintain the ability to stage forces in rural areas and launch attacks against civilian and military targets across the North East, Nigeria is also facing rural violence in many parts of the country carried out by criminals who raid villages and abduct civilians for ransom.  Longstanding disputes between migratory pastoralist and farming communities, exacerbated by increasingly scarce resources and intensified by climate change impacts, also continue to afflict the country.  

Due to challenging security dynamics throughout the country, the U.S. Mission to Nigeria has significantly limited official travel in the North East, and travel to other parts of Nigeria requires security precautions.  The Indigenous People of Biafra (IPOB), a political separatist group declared a terrorist organization by the Nigerian government in 2013, established a militant arm in December 2020, the Eastern Security Network (ESN).  ESN has been blamed for a surge in attacks in early 2021 against Nigerian police and security installations across the South East, the region in which IPOB claims the most support.  Following extradition from Kenya and subsequent arrest of IPOB leader Nnamdi Kanu in June 2021, IPOB/ESN issued a “stay at home” order on Mondays for the five states of the South East (Abia, Anambra, Ebonyi, Enugu, and Imo).  Residents or visitors to the area who disobey the order have faced violent intimidation, which has led to a near complete shutdown of activity across the South East each Monday and other days significant to Kanu’s trial.  The U.S. Mission to Nigeria does not allow official travel in those states on days that a stay-at-home order is in place. 

Decades of neglect, persistent poverty, and environmental damage caused by oil spills and illegal refining activities have left Nigeria’s oil rich Niger Delta region vulnerable to renewed violence.  Though each oil-producing state receives a 13% derivation of the oil revenue produced within its borders, and several government agencies, including the Niger Delta Development Corporation (NDDC) and the Ministry of Niger Delta Affairs, are tasked with implementing development projects, bureaucratic mismanagement and corruption have prevented these investments from yielding meaningful economic and social development in the region.  Niger Delta criminals have demonstrated their ability to attack and severely damage oil instillations at will, as seen when they cut Nigeria’s production by more than half in 2016.  Attacks on oil installations decreased due to a revamped amnesty program and high-level engagement with the region at the time, but the underlying economic woes and historical grievances of the local communities were not addressed.  As a result, insecurity in various forms continues to plague the region.  

More significant in recent years is the region’s shift from attacks against oil infrastructure to illegal oil bunkering and illicit refining.  In its July 2021 audit, the Nigeria Extractive Industries Transparency Initiative (NEITI) reported that Nigeria lost 42.25 million barrels of crude oil to oil theft in 2019, valued at $2.77 billion.  While the Nigerian Navy Eastern Naval Command disclosed that it had deactivated 175 illegal refineries and seized 27 vessels throughout its area of operation over a period of 11 months during 2021, such illegal activities have nonetheless continued, and oil theft remains a significant issue for both the industry and the region’s environment.  In 2021, Nigeria reportedly lost $3.5 billion in revenue to crude oil theft, representing approximately 10% of the country’s foreign reserves, and the National Oil Spill Detection and Response Agency (NOSDRA) still reports hundreds of oil spills each year.

Nigeria’s skilled labor pool has declined over the past decade due to inadequate educational systems, limited employment opportunities, and the migration of educated Nigerians to other countries, including the United Kingdom, the United States, Canada, and South Africa.  The low employment capacity of Nigeria’s formal sector means that almost three-quarters of all Nigerians work in the informal and agricultural sectors or are unemployed.  Companies involved in formal sector businesses, such as banking and insurance, possess an adequately skilled workforce.  Manufacturing and construction sector workers often require on-the-job training.  The result is that while individual wages are low, individual productivity is also low, which means overall relative labor costs can be high.  The Buhari Administration is pushing reforms in the education sector to improve the supply of skilled workers but this and other efforts run by state governments are in their initial stages.   

The labor movement has long been active and influential in Nigeria.  Labor organizations remain politically active and are prone to call for strikes on a regular basis against the national and state governments.  Since 2000, unions have successfully called eight general strikes.  While most labor actions are peaceful, difficult economic conditions fuel the risk that these actions could become violent.  

Nigeria’s constitution guarantees the rights of free assembly and association and protects workers’ rights to form or belong to trade unions.  Several statutory laws, nonetheless, restrict the rights of workers to associate or disassociate with labor organizations.  Nigerian unions belong to one of three trade union federations:  the Nigeria Labor Congress (NLC), which tends to represent junior (i.e., blue collar) workers; the United Labor Congress of Nigeria (ULC), which represents a group of unions that separated from the NLC in 2015; and the Trade Union Congress of Nigeria (TUC), which represents the “senior” (i.e., white collar) workers.  

According to figures provided by the Ministry of Labor and Employment, total union membership stands at roughly seven million.  A majority of these union members work in the public sector, although unions exist across the private sector.  The Trade Union Amendment Act of 2005 allowed non-management senior staff to join unions.  

Collective bargaining in the oil and gas industry is relatively efficient compared to other sectors. Issues pertaining to salaries, benefits, health and safety, and working conditions tend to be resolved quickly through negotiations.  Workers under collective bargaining agreements cannot participate in strikes unless their unions comply with the requirements of the law, which includes provisions for mandatory mediation and referral of disputes to the Nigerian government.  Despite these restrictions on staging strikes, unions occasionally conduct strikes in the private and public sectors without warning.  In 2021, localized strikes occurred in the education, government, energy, power, and healthcare sectors.  The law forbids employers from granting general wage increases to workers without prior government approval, but the law is not often enforced.  

In April 2019, President Buhari signed into law a new minimum wage, increasing it from 18,000 naira ($50 at the 2019 official exchange rate) to 30,000 naira ($73 at the 2021 official exchange rate) per month.  More than 15 state governments have yet to commence with the implementation of the new minimum wage. [Note:  The federal government has even threatened to sanction the management of the National Assembly over its breach of the provisions of the National Minimum Wage Act, 2019, for failing to pay its employees at the new minimum rate as of April 18, 2019.] Nigeria’s Labor Act provides for a 40-hour work week, two to four weeks of annual leave, and overtime and holiday pay for all workers except agricultural and domestic workers.  No law prohibits compulsory overtime.  The Act establishes general health and safety provisions, some of which specifically apply to young or female workers and requires the Ministry of Labor and Employment to inspect factories for compliance with health and safety standards.  Under-funding and limited resources undermine the Ministry’s oversight capacity, and construction sites and other non-factory work sites are often ignored.  Nigeria’s labor law requires employers to compensate injured workers and dependent survivors of workers killed in industrial accidents.

The Nigerian Minister of Labor and Employment may refer unresolved disputes to the Industrial Arbitration Panel (IAP) and the National Industrial Court (NIC).  In 2015, the NIC launched an Alternative Dispute Resolution Center.  Union officials question the effectiveness and independence of the NIC, believing it unable to resolve disputes stemming from Nigerian government failure to fulfill contract provisions for public sector employees.  Union leaders criticize the arbitration system’s dependence on the Minister of Labor and Employment’s referrals to the IAP.

The issue of child labor remains of great concern in Nigeria, where an estimated 15 million children under the age of 14 are working, and about half this population being exploited as workers in hazardous situations according to the International Labor Organization (ILO).  Nigeria’s laws regarding minimum age for child labor and hazardous work are inconsistent. Article 59 of the Labor Act of 1974 sets the minimum age of employment at 12, and it is in force throughout Nigeria.  The Act also permits children of any age to do light work alongside a family member in agriculture, horticulture, or domestic service.

The Federal 2003 Child Rights Act (CRA) codifies the rights of children in Nigeria and must be ratified by each State to become law in its territory.  To date, 28 states and the Federal Capital Territory have ratified the CRA, with all eight of the remaining states located in northern Nigeria. [Note: The legislatures in Kebbi and Yobe States tentatively approved the law and are only awaiting their governors’ signatures to ratify the bills.]

The CRA states that the provisions related to young people in the Labor Act apply to children under the CRA, but also that the CRA supersedes any other legislation related to children.  The CRA restricts children under the age of 18 from any work aside from light work for family members; however, Article 59 of the Labor Act applies these restrictions only to children under the age of 12.  This language makes it unclear what minimum ages apply for certain types of work in the country. 

While the Labor Act forbids the employment of youth under age 18 in work that is dangerous to their health, safety, or morals, it allows children to participate in certain types of work that may be dangerous by setting different age thresholds for various activities.  For example, the Labor Act allows children age 16 and older to work at night in gold mining and the manufacturing of iron, steel, paper, raw sugar, and glass.  Furthermore, the Labor Act does not extend to children employed in domestic service.  Thus, children are vulnerable to dangerous work in industrial undertakings, underground, with machines, and in domestic service.  In addition, the prohibitions established by the Labor Act and CRA are not comprehensive or specific enough to facilitate enforcement.  In 2013, the National Steering Committee (NSC) for the Elimination of the Worst Forms of Child Labor in Nigeria validated the Report on the Identification of Hazardous Child Labor in Nigeria.  The report has languished with the Ministry of Labor and Employment and still awaits the promulgation of guidelines for operationalizing the report. 

The Nigerian government adopted the Trafficking in Persons (Prohibition), Enforcement, and Administration Act of 2015.  While not specifically directed against child labor, many sections of the law support anti-child labor efforts.  The Violence against Persons Prohibition Act was signed into law in 2015 and, while not specifically focused on child labor, it covers related elements such as “depriving a person of his/her liberty,” “forced financial dependence/economic abuse,” and “forced isolation/separation from family and friends” and is applicable to minors.

Draft legislation, such as a new Labor Standards Act which includes provisions on child labor, and an Occupational Safety and Health Act that would regulate hazardous work, have remained under consideration in the National Assembly since 2006. 

Admission of foreign workers is overseen by the Ministry of the Interior.  Employers must seek the consent of the Ministry in order to employ foreign workers by applying for an “expatriate quota.”  The quota allows a company to employ foreign nationals in specifically approved job designations as well as specifying the validity period of the designations provided on the quota.

* Source for Host Country Data: Nigerian Bureau of Statistics

Table 4: Sources of Portfolio Investment
Data not available.

Trade and Investment Officer
Plot 1075 Diplomatic Drive
Abuja, Nigeria
Telephone: +234 (0)9 461 4000
Email: EconNigeria@state.gov

Over the past decade, the GOR has undertaken a series of policy reforms intended to improve the investment climate, wean Rwanda’s economy off foreign assistance, and increase FDI levels. Rwanda enjoyed strong economic growth until the start of the COVID-19 pandemic in March 2020, averaging 7.1 percent annual GDP growth over the prior decade. Rwanda also enjoys a reputation for low corruption. In 2020, Rwanda experienced a 3.4 percent GDP contraction, marking its first recession since the 1994 genocide. Rwanda’s economy is now showing signs of recovery, as GDP grew 10.9 in 2021.

The Rwanda Development Board (RDB)  was established in 2006 to fast-track investment projects by integrating all government agencies responsible for the entire investor experience under one roof. This includes key agencies responsible for business registration, investment promotion, environmental compliance clearances, export promotion, and other necessary approvals. New investors can register online at the RDB’s website and receive a certificate in as few as six hours, and the agency’s “one-stop shop” helps investors secure required approvals, certificates, and work permits. In February 2021, Rwanda made significant changes to the Investment Code to address previous investor complaints and included new incentives to attract investments in strategic growth sectors. The GOR created the Rwanda Financial Intelligence Centre (FIC), passed an anti-money laundering and counter-terrorism financing law, and passed a law on mutual legal assistance in criminal matters to fully criminalize money laundering and terrorism financing and align the country with OECD rules. The GOR also amended the Company Act and passed a law on partnerships to allow professional service providers to register as partners rather than limited liability companies.

Several investors have said tax policy implementation is a top concern affecting their operations in Rwanda. Investors cited instances in which tax incentives and deals negotiated with RDB and line ministries were interpreted differently by the Rwanda Revenue Authority (RRA). Several investors reported their initial tax incentives packages were well-respected by all government agencies, including the RRA, but later attempts to expand the business or scale up faced significant obstacles when some of the investment incentives were changed or no longer honored. Officials at RRA recognized these gaps but stated investors were welcome to work with them to resolve tax disputes. RRA officials added that the RRA’s supervisory ministry, the Ministry of Finance and Economic Planning (MINECOFIN), was often called upon to resolve line ministries’ divergent interpretations of tax policy.

Under Rwandan law, foreign firms should receive equal treatment regarding taxes and equal access to licenses, approvals, and procurement. Foreign firms should receive value added tax (VAT) rebates within 15 days of receipt by the RRA, but firms complain that the process for reimbursement can take months and occasionally years. Refunds can be further delayed pending the results of RRA audits. A few investors cited punitive retroactive fines arising from audits that took many years to complete. RRA aggressively enforces tax requirements and imposes penalties for errors – deliberate or not – in tax payments. Investors cited lack of coordination among ministries, agencies, and local government authorities (for example, district-level officials) leading to inconsistencies in implementation of promised incentives. Others pointed to a lack of clarity on who the regulator is on certain matters.

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

Foreign nationals may hold shares in locally incorporated companies. The GOR has continued to privatize state holdings, though the government, ruling party, and military continue to play a dominant role in Rwanda’s private sector. Under the 2021 land law, foreign investors can acquire real estate subject to a general limit on land ownership. Some foreign investors expressed fear implementation of the land law would pose new barriers to investment and/or place existing investments at risk due to the law’s requirements for foreign investors to acquire investment certificates. Freehold is granted only to Rwandan citizens for properties of no more than two hectares but may also be granted to foreigners for properties in designated Special Economic Zones or through a Presidential Order for exceptional circumstances of strategic national interests. Long-term leases (emphyteutic leases) in residential and commercial areas are available to both citizens and foreigners acquiring land through private means. These leases typically last 99 years and are renewable. Foreign investors can also acquire land through concessional agreements to use government private land. Such agreements cannot exceed 99 years but can be renewed.

In February 2019, The World Trade Organization (WTO) published a Trade Policy Review  for the East African Community (EAC) covering Burundi, Kenya, Rwanda, Tanzania and Uganda, along with an annex specific to Rwanda .

RDB offers one of the fastest business registration processes in Africa. New investors can register online at RDB’s website ( https://rdb.rw/neworg1/business-registration/ ) or register in person at RDB offices in Kigali. Once RDB generates a certificate of registration, company tax identification and employer social security contribution numbers are automatically created. The RDB “One Stop Center” assists firms in acquiring visas and work permits and connections to electricity and water. It also provides support with conducting required environmental impact assessments.

The Investment Code provides incentives for internationalization. A small- or medium-sized registered investor with an investment project involved in export is entitled to a 150 percent tax deduction of all qualifying expenditures relating to internationalization. Emerging investors are entitled to the same deduction. Eligible registered investors receive pre-approval of qualifying expenditures through a joint review process administered by the RRA, RDB and the Ministry of Trade and Industry (MINICOM). The Commissioner General of RRA ultimately approves qualifying expenditures in consultation with the CEO of RDB. An eligible registered investor may claim the tax deduction on a maximum of $100,000 of qualifying expenditures each year. There are no restrictions limiting domestic firms seeking to invest abroad.

The GOR generally employs transparent policies and effective laws that are largely consistent with international norms. Rwanda is a member of the UN Conference on Trade and Development’s international network of transparent investment procedures. The Rwanda eRegulations system is an online database designed to bring transparency to investment procedures in Rwanda. Investors can find further information on administrative procedures here .

The GOR publishes Rwandan laws and regulations in the Official Gazette, which is available online here . Government institutions generally have clear rules and procedures, but implementation can sometimes be uneven. Investors have cited breaches of contracts and incentive promises and the short time given to comply with changes in government policies as hurdles to complying with regulations. Government institutions generally have clear rules and procedures, but implementation can sometimes be uneven. Investors have cited breaches of contracts and incentive promises and the short time given to comply with changes in government policies as hurdles to complying with regulations.

There is no formal mechanism to publish draft laws for public comment, although civil society sometimes has the opportunity to review them. There is no informal regulatory process managed by nongovernmental organizations. Regulations are usually developed rapidly to achieve policy goals. Some investors have complained this process results in new regulations being adopted without the backing of scientific or data-driven assessments. Regulators do not publicize comments they receive. Public finances and debt obligations are generally made available to the public before budget enactment. Finances for State Owned Enterprises (SOEs) are not publicly available, though in 2021 some limited financial information for a small group of large SOEs was made public. Civil society organizations may request SOEs’ financial information by providing a legitimate reason, but these requests are not routinely granted.

There is no government effort to restrict foreign participation in industry standards-setting consortia or organizations. Legal, regulatory, and accounting systems are generally transparent and consistent with international norms but are not always enforced. Consumer protection associations exist but are largely ineffective. The business community has been able to lobby the government and provide feedback on some draft government policies through the Private Sector Federation (PSF), a business association with strong ties to the government. In some cases, the PSF has welcomed foreign investors’ efforts to positively influence government policies. On the other hand, some investors have criticized the PSF for advocating for the government’s positions more so than conveying business concerns to the government.

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

The Rwandan legal system was originally based on the Belgian civil law system. Following the revision of the legal framework in 2002, the introduction of a new constitution in 2003, and the country’s entrance to the Commonwealth in 2009, the Rwandan legal system now consists of a mixture of civil law and common law. The judiciary addresses commercial disputes and facilitates enforcement of property and contract rights. Though it suffers from a lack of resources and capacity, it continues to improve. The judiciary is generally independent and impartial in civil matters, with some exceptions involving state interests. Investors state the government occasionally takes a casual approach to contract sanctity and sometimes fails to enforce court judgments in a timely fashion.

National laws governing commercial establishments, investments, privatization and public investments, land, and environmental protection are the primary directives governing investments in Rwanda. Since 2011, the government has reformed tax payment processes and enacted additional laws on insolvency and arbitration. The Investment Code establishes policies on FDI, including dispute settlement (Article 13). The RDB publishes investment-related regulations and procedures here   .

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

The most recent laws (passed between 2020-22) on FDI are below:

• Amended Company Act
• Law on Mutual Assistance in Criminal Matters
• Law on Anti-Money Laundering and Terrorism Finance
• Law on Partnerships
• Law on Transfer Pricing Law on Insolvency
• Law on Land Reference Prices 2021
• New Instructions on Modalities of Management, Lease, Auction and Acquisition of Mortgage
• Law on Financial Service Consumer Protection
• New Land Law

The GOR created the Competition and Consumer Protection Unit at MINICOM in 2010 to address competition and consumer protection issues. The government is now setting up the Rwanda Inspectorate, Competition and Consumer Protection Authority (RICA), a new independent body with the mandate to promote fair competition among producers. The body will reportedly aim to ensure consumer protection and enforcement of standards. To learn more on competition laws in Rwanda, please review the law and related policy here .

Market forces determine most prices in Rwanda, but in some cases, the GOR intervenes to fix prices for items considered sensitive. On international tenders, a 10 percent price preference is available for local bidders, including those from regional economic integration bodies in which Rwanda is a member.

Some U.S. companies expressed frustration that while authorities require them to operate as a formal enterprise that meets all Rwandan regulatory requirements, some local competitors are allowed to operate informally without complying fully with all regulatory requirements. Other investors have claimed SOEs, ruling party-aligned, and politically connected business competitors receive preferential treatment in securing public incentives and contracts. Some investors reported it was not always possible to compete aggressively in some sectors in which the existing domestic competition enjoyed strong political ties. Those who attempted to compete aggressively in those sectors risked losing their investment because of political interference, they explained. More information on specific types of agreements, decisions and practices considered to be anti-competitive in Rwanda can be found here .

The Investment Code forbids the expropriation of investors’ property in the public interest unless the investor is fairly compensated. A 2015 expropriation law includes explicit protections for property owners.

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

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

In April 2018, the GOR instituted a new insolvency and bankruptcy law. One major change was the introduction of an article on “pooling of assets” allowing creditors to pursue parent companies and other members of the group (for example, in cases in which a subsidiary is in liquidation). The law can be accessed here . .

On February 8, 2021, Rwanda passed a new Company Act with several bankruptcy and insolvency provisions. The new law can be found here .

On February 17, 2021, Rwanda published a new law on partnerships with several provisions on partnerships’ insolvency. The new law can be accessed here .

The Investment Code offers a package of benefits and incentives for registered investors in priority and strategic growth sectors under certain conditions. These benefits and incentives include preferential corporate income tax, withholding tax, tax holidays, exemption from custom duties for products used in export processing zones, and internationalization.

More information on incentives and benefits related to philanthropic investors, the mining sector, the film industry, industrial and innovation parks, angel investors, start-ups, immigration, accelerated depreciation, and capital gain tax exemption, can be found in the annex of the Investment Code here .

In addition, MINECOFIN, upon recommendation by RDB’s Private Investment Committee, can issue a Ministerial Order offering more incentives for investments deemed of strategic importance.

According to some investors, poor coordination between the RDB, RRA, MINICOM, and the Directorate of Immigration and Emigration led to inconsistent application of incentives. Investors reported tax incentives included in deals signed by the RDB were not honored by the RRA in a timely manner or sometimes were not honored at all. For its part, RRA noted investors who started with one agreement with RDB often saw their tax incentives shift when they entered into new arrangements with a line ministry. Senior RRA officials stated they were aware of this disconnect but said they were obligated to fulfill their mandate to grow the domestic revenue base through the application of tax law. Additionally, investors continue to face challenges with receiving payment for services rendered for GOR projects, VAT refund delays, and expatriation of profits. In 2016, the GOR instituted a law governing public-private partnership (PPPs) as a step toward courting investments in key development projects. The law provides a legal framework concerning establishment, implementation, and management of PPPs. Detailed guidelines for the law can be accessed here .

Kigali’s Special Economic Zone (KSEZ) is regulated by the SEZ Authority of Rwanda (SEZAR), which is based at the RDB. Land in KSEZ is acquired through the Prime Economic Zone Secretariat, a private developer, under the regulations of SEZAR. The price per square meter is $62, and the minimum size that can be acquired is one hectare (2.5 acres). Bonded warehouse facilities are now available both in and outside of Kigali for use by businesses importing duty-free materials. The GOR has established a list of benefits for investors operating in the SEZs. These include tax and land ownership advantages. A company basing itself in the SEZ can also opt to be a part of the Economic Processing Zone. Several criteria must be satisfied to qualify. These include requirements to maintain extensive records on equipment, materials and goods, suitable offices, and security provisions.

Holding an Export Processing Zone (EPZ) license allows a company to operate in the KSEZ and will exempt a company from VAT, import duties, and corporate tax. The company is then obliged to export a minimum of 80 percent of production. Even after considering savings due to these government incentives, a few investors reported that land in the SEZs was significantly more expensive than land outside the zones. The GOR has stated that there are no fiscal, immigration, or customs incentives beyond those provided in the Investment Code, though media have occasionally speculated that certain investors received additional incentives. The negative list of goods prohibited under the EAC Customs Management Act applies in SEZs. In November 2018, the GOR approved the Bugesera Special Economic Zone (BSEZ), located 45 minutes from Kigali. A new airport is under construction near the BSEZ as well. Procedural information about operating in SEZs can be accessed here   . The SEZ policy was revised in 2018. Under the new policy, foreigners and locals may only lease land (formerly, foreign investors were able to purchase land outright in SEZs). To learn more, please review the new policy here .

For a quick survey of companies currently operating in Rwandan special economic zones, please visit the Economic Zone catalogue here .

There is no legal obligation for nationals to own shares in foreign investments and no requirement that shares of foreign equity be reduced over time. However, the government strongly encourages local participation in foreign investments. According to the Data Protection Law of 2021, storage of personal data outside Rwanda is permitted only if the data controller or processor holds an authorization certificate from a competent supervisory authority. Investors have expressed strong concerns over the implementation of this law and are working to negotiate the implementing regulations of the law. There is also no requirement for foreign IT providers to turn over source code and/or provide access to encryption technology. IT companies dealing with government data cannot store it outside Rwanda or transfer it without GOR approval. Rwandans’ private data must be stored in Rwanda. There is no formal requirement that a certain number of senior officials or board members be citizens of Rwanda unless as a pre-condition to benefits from increased investment incentives. For example, the Investment Code specifies that for an international company that moves its headquarters or regional office to Rwanda to be able to recruit any number of required managerial, professional, and technical foreign employees, at least 30 percent of professional staff must be Rwandan. A preferential corporate income tax rate of three percent is granted to collective investment schemes, special purpose vehicles, and pure holding companies if at least 30 percent of their professional staff are Rwandans and at least two professional or qualified Rwandan residents are members of their board of directors.

While the government does not impose conditions on the transfer of technology, it does encourage foreign investors to transfer technology and expertise to local staff to help develop Rwanda’s human capital. There is no legal requirement that investors must purchase from local sources or export a certain percentage of their output, though the government offers tax incentives for the latter.

The law protects and facilitates acquisition and disposition of all property rights. Investors involved in commercial agriculture have leasehold titles and can secure property titles if necessary. The Investment Code states that investors shall have the right to own private property, whether individually or collectively. According to the 2021 land law, which can be accessed here , foreign investors can acquire real estate, though there is a general limit on land ownership. Freehold is granted only to Rwandan citizens for no more than 2 hectares (5 acres) and to foreigners for properties located in designated Special Economic Zones, or through a Presidential Order for exceptional circumstances of strategic national interests. Through the new land law of 2021, the GOR increased the length of long-term leases (emphyteutic leases) in residential and commercial areas for both citizens and foreigners acquiring land through private means to 99 years. Foreign investors can also acquire land through concessional agreements to use government private land. Such agreements cannot exceed 99 years but can be renewed. Mortgages are a nascent but growing financial product in Rwanda, increasing from 770 properties in 2008 to 13,394 in 2017, according to the RDB. In 2020, RDB reported registering 16,624 mortgages in 2019.

Foreign investors have noted challenges related to the maintenance of their existing leases and some investors fear provisions of the 2021 Land Law will lead to significant investment risks. These investors noted foreigners may face barriers to gaining an investment certificate needed to develop land. Investors also expressed fear that once granted, an investment certificate could be revoked by the government, leading to a loss of assets. Implementation of the law is ongoing.

The RDB and the Rwanda Standards Board (RSB) are the main regulatory bodies for Rwanda’s intellectual property rights law. The RDB registers intellectual property rights, providing a certificate and ownership title. Every registered IP title is published in the Official Gazette. The fees payable for substance examination and registration of IP apply equally for domestic and foreign applicants. From 2016, any power of attorney granted by a non-resident to a Rwandan-based industrial property agent must be notarized (previously, a signature would have been sufficient).

Registration of patents and trademarks is on a first time, first right basis so companies should consider applying for trademark and patent protection in a timely manner. It is the responsibility of the copyright holders to register, protect, and enforce their rights where relevant, including by retaining their own counsel and advisors. Through the RSB and the RRA, Rwanda has worked to increase protection of IP rights, but many goods that violate patents, especially pharmaceutical products, make it to market nonetheless. As many products available in Rwanda are re-exports from other EAC countries, it can be difficult for authorities to take action against counterfeit goods without regional cooperation. Also, investors reported difficulties in registering patents and having rules against infringement of their property rights enforced in a timely manner. In 2021, the GOR submitted a new IP law to Parliament that will organize a patent and trade office for Rwanda.

As a COMESA member, Rwanda is automatically a member of the African Regional Intellectual Property Organization. Rwanda is also a member of the World Intellectual Property Organization (WIPO) and is working toward harmonizing its legislation with WTO trade-related aspects of IP. Rwanda has yet to ratify WIPO internet treaties, though the government has taken steps to implement and enforce the WTO TRIPS agreements. Rwanda is not listed in USTR’s 2019 Special 301 report or the 2019 Notorious Markets List. In July 2020, Rwanda acceded to the Marrakesh Treaty to facilitate access to published works for persons who are blind, visually impaired, or otherwise print disabled. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles here .

In February 2021, the GOR introduced new incentives to support the Rwanda Stock Exchange and the Capital Market Authority through the Investment Code. A preferential withholding tax of five percent is applicable to dividends and interest income paid to investors in companies listed on the Rwanda Stock Exchange. A preferential corporate income tax rate of three percent applies to collective investment schemes. A preferential corporate income tax rate of fifteen percent applies to fund management entities, wealth management services, financial advisory entities, financial technology entities, captive insurance schemes, mortgage finance institutions, fund administrators, finance lease entities, and asset backed securities.

In December 2017, the GOR established Rwanda Finance Limited (RFL), a state-owned enterprise charged with creating the Kigali International Financial Centre (KIFC). The goal is to create a conducive ecosystem to entice pan-African and international financial service providers and investment funds to Rwanda. KIFC is scheduled to be launched on the sidelines of the Commonwealth Heads of Governments Meeting (CHOGM) taking place in Kigali in June 2022. RFL has successfully pushed the GOR to change many Rwandan investment, banking, and commercial laws to align with OECD/EU and AML/CFT requirements.

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

The banking sector holds more than 67 percent of total financial sector assets in Rwanda. In total, Rwanda’s banks have assets of around $3.8 billion, which reflects an 18.5 percent increase from June 2018 to June 2020, according to the National Bank of Rwanda (NBR). Rwanda’s financial sector remains highly concentrated. The share of the three largest banks’ assets increased from 46.5 percent in December 2018 to 48.4 percent in December 2019. The largest, the partially state-owned Bank of Kigali (BoK), holds more than 30 percent of all assets. The total number of bank and micro-finance institution (MFI) accounts increased from 7.1 million to 7.7 million between 2018 and 2019.

Local banks often generate significant revenue from holding government debt and from charging a variety of fees to banking customers. The capital adequacy ratio decreased to 23.7 percent in June 2020 from 24.1 percent over the year but was still well above the prudential minimum of 15 percent, suggesting the Rwandan banking sector continues to be generally risk averse. Non-performing loans increased from 4.9 percent in December 2019 to 5.5 percent in June 2020 due to the COVID-19 pandemic’s disruption of economic activities.

The IMF gives the NBR high marks for its effective monetary policy. NBR introduced a new monetary policy framework in 2019, which shifted toward an inflation-targeting monetary framework in place of a quantity-of-money framework. In April 2020, the NBR arranged a $53.4 million liquidity fund for local banks facing challenges from COVID-19. The NBR allowed banks to restructure loans affected by the pandemic by authorizing an average of four months in loan holidays. Additionally, in March 2020, the NBR took a decision to suspend distribution of dividends from profits generated in 2019.

Foreign banks are permitted to establish operations in Rwanda. Several Kenya-based banks operate in the country.

In November 2020, the GOR signed an MOU with the African Export-Import Bank (Afreximbank) to host the permanent headquarters of Afrexim Fund for Export Development in Africa (FEDA) in Kigali.

Rwandans primarily rely on cash or mobile money to conduct transactions, though use of debit and credit cards is expanding. Use of mobile money has grown by more than 500 percent since March 2020 due in part to changes brought about by COVID-19 and business closures.

In 2012, the Rwandan government launched the Agaciro Development Fund (ADF), a sovereign wealth fund that includes investments from Rwandan citizens and the international diaspora. By September 30, 2019, the fund was worth 235.02 billion RWF in assets ($235 million). The ADF operates under the custodianship of the NBR and reports quarterly and annually to MINECOFIN. ADF is a member of the International Forum of Sovereign Wealth Funds and is committed to the Santiago Principles. In addition to returns on investments, voluntary contributions from citizens and the private sector, and other donations, ADF receives around $5 million every year from tax revenues and five percent of proceeds from every public asset that the GOR has privatized. The fund also receives five percent of royalties from minerals and other natural resources each year. ADF invests mainly in Rwanda. While the fund can invest in foreign non-fixed income investments, such as publicly listed equity, private equity, and joint ventures, the AGDF Corporate Trust Ltd (the fund’s investment arm) held no financial assets and liabilities in foreign currency, according to the 2018 annual report (the most recent report available).

Rwandan law allows private enterprises to compete with public enterprises under the same terms and conditions with respect to access to markets, credit, and other business operations. Since 2006, the GOR has made efforts to privatize SOEs; reduce the government’s non-controlling shares in private enterprises; and attract FDI, especially in the ICT, tourism, banking, and agriculture sectors, but progress has been slow. Currently there are 17 SOEs including water and electricity utilities, as well as companies in construction, ICT, aviation, mining, insurance, agriculture, finance, and other sectors. Some investors complain about unfair competition from state-owned and ruling party-aligned businesses. SOEs are governed by boards with most members having other government positions.

Rwanda continues to carry out a privatization program that has attracted foreign investors in strategic areas ranging from telecommunications and banking to tea production and tourism. As of 2017 (the latest data available), 56 companies have been fully privatized, seven were liquidated, and 20 more were in the process of privatization. RDB’s Strategic Investment Department is responsible for implementing and monitoring the privatization program. Some observers have questioned the transparency of certain transactions, noting that a number of transactions were undertaken not through public offerings but through mutual agreements directly between the government and the private investors, some of whom have personal relationships with senior government officials.

There is a growing awareness of corporate social responsibility (CSR) within Rwanda, and several foreign-owned companies operating locally implement CSR programs. Rwanda also has guidelines on corporate governance by publicly listed companies. One of the most relevant sectors for CSR-minded investors is mining. Rwanda implements the OECD’s Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. Rwanda also implements the International Tin Supply Chain Initiative tracing scheme. In 2016, the Better Sourcing Program (currently RCS Global Group) began an alternative mineral tracing scheme in Rwanda. Rwanda is not a member of the Extractive Industries Transparency Initiative. Recent U.S. sanctions announcements against individuals fueling conflict in the eastern DRC via trafficking of illicit conflict minerals, including gold, mention Rwanda and Uganda as supply chain transit points.

In recognition of the firm’s strong commitment to CSR, the U.S. Department of State awarded Sorwathe, a U.S.-owned tea producer in Kinihira, Rwanda, the Secretary of State’s 2012 Award for Corporate Excellence (ACE) for Small and Medium Enterprises. In 2015, the U.S. firm Gigawatt Global was also a finalist for the Secretary of State’s ACE award in the environmental sustainability category. In January 2021, Illinois-based Abbot laboratories was given the ACE award in recognition of its work to expand preventative health care in rural areas of Rwanda.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

The GOR is known for aggressively pioneering environmental protection initiatives. For example, in March 2022, the fifth session of the United Nations Environmental Assembly adopted a resolution co-authored by Rwanda and Peru to end plastic pollution. Rwanda’s Parliament had in 2019 already passed a law banning single use plastic containers. The law built on an earlier ban on the manufacture and use of plastic bags. With respect to the ban on single use plastic containers, several investors complained that GOR did not consult effectively with concerned stakeholders and observed that alternative packaging materials were either unavailable or could only be obtained at high cost.

The Kigali Amendment to the Montreal Protocol was adopted in October 2016 in Rwanda, and 197 participating countries committed to cut the production and consumption of hydrofluorocarbons (HFCs) by more than 80 percent over the next 30 years.

The GOR manages the Rwanda Green Fund (FONERWA) to spur investment in green innovation. UK Aid and other donors have invested in the fund. FONERWA claims 46 projects it supports have created more than 176,000 green jobs and avoided emissions equivalent to 126,014 tons of carbon dioxide.

Rwanda is ranked among the least corrupt countries in Africa, with Transparency International’s 2021 Corruption Perception Index putting the country among Africa’s four least corrupt nations and 52nd in the world. The GOR maintains a high-profile anti-corruption effort, and senior leaders consistently emphasize that combating corruption is a key national goal. The government investigates corruption allegations and generally punishes those found guilty. High-ranking officials accused of corruption often resign during the investigation period, and the GOR has prosecuted many of them. Rwanda has ratified the UN Anticorruption Convention, is a signatory to the OECD Convention on Combating Bribery and is a signatory to the African Union Anticorruption Convention. U.S. firms have identified the perceived lack of government corruption in Rwanda as a key incentive for investing in the country. At the same time, some investors have reported widespread corruption at lower, administrative levels of government, including with customs, tax, and police officials. There are no local industry or non-profit groups offering services for vetting potential local investment partners. The Ministry of Justice’s online  repository of judgments can be a useful source of information on companies and individuals in Rwanda. The Rwanda National Public Prosecution Authority  issues criminal records on demand to applicants.

Contacts at government agencies responsible for combating corruption include:

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

Ms. Rosine Uwamaliya, Commissioner for Internal Audit and Integrity, Rwanda Revenue Authority
Avenue du Lac Muhazi, P.O. Box 3987, Kigali, Rwanda
Telephone: +250 252595504 or +250 788309563
rosine.uwamaliya@rra.gov.rw 

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

Contacts at “watchdog” organizations include:

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

Rwanda is a stable country with relatively little violent crime. According to a 2017 report by the World Economic Forum, Rwanda is the ninth safest country in the world. Gallup’s Global Law and Order Index report of 2020 ranked Rwanda as the second safest place in sub-Saharan Africa. Investors have cited the stable political and security environment as an important driver of investments. A strong police and military provide a security umbrella that minimizes potential criminal activity.

The U.S. Department of State recommends that U.S. citizens exercise caution when traveling near the Rwanda-Democratic Republic of Congo border, given the possibility of fighting and cross-border attacks involving armed rebel and militia groups. Relations between Burundi and Rwanda are currently warming but have been tense in recent years, and there remains a risk of cross-border incursions and armed clashes. Since 2018, there have been a few incidents of sporadic fighting in districts bordering Burundi and the DRC and in Rwanda’s Nyungwe National Park and Volcanoes National Park.

In 2021, Rwandan authorities arrested several individuals accused of being ISIS members. Authorities stated the individuals were planning an imminent attack in Kigali. There have been several reported cross-border attacks in Western Rwanda on Rwandan police and military posts since 2016. Despite occasional violence along Rwanda’s borders with the DRC and Burundi, there have been no incidents involving politically motivated damage to investment projects or installations since the late 1990s. Relations with Uganda have been tense in recent years, but leaders continue to emphasize they are seeking a political solution. As of March 2022, Rwanda-Uganda relations appear to be improving. For example, in early 2022, Rwandan and Ugandan officials agreed to reopen the largest border crossing between the two countries. The border crossing had been largely closed to regular traffic since February 2019.

Please see the following link for State Department Country Specific Information.

General labor is available, but Rwanda suffers from a shortage of skilled labor, including accountants, lawyers, engineers, tradespeople, and technicians. Higher institutes of technology, private universities, and vocational institutes are improving and producing more highly trained graduates each year. The Rwanda Workforce Development Authority sponsors programs to support both short and long-term professional trainings targeting key industries in Rwanda.

Rwanda’s informal economy is concentrated in the agriculture sector, which contributes 24 percent of GDP but employs close to 70 percent of the country’s population. The Government of Rwanda has taken steps to formalize large portions of its informal economy, for example, by banning street vendors. Rwanda also requires all private sector employers to formalize contracts. The economic disruptions of the COVID-19 pandemic have eliminated many formal employment opportunities and forced many workers back into the informal sector.

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

Rwanda has ratified all the International Labor Organization’s eight core conventions. Policies to protect workers in special labor conditions exist, but enforcement remains inconsistent. The government encourages, but does not require, on-the-job training and technology transfer to local employees. The law restricts voluntary collective bargaining by requiring prior authorization or approval by authorities and requiring binding arbitration in cases of non-conciliation. The law provides some workers the right to conduct strikes, but due to numerous restrictions, workers rarely engage in strikes. In 2020, the government published additional specifications for labor representatives, regulations against strikes, and guidelines providing labor inspectors greater authority to access to workplaces and assess fines. The GOR has been known to take swift action against foreign companies with poor labor practices upon initial complaints from workers. There is no unemployment insurance or other social safety net programs for workers laid off for economic reasons. Labor laws are not waived to attract or retain investment. There are no labor law provisions specific to SEZs or industrial parks. Collective bargaining is a relatively new concept in Rwanda and is not common. Few professional associations fix minimum salaries for their members and some investors have expressed concern that labor law enforcement is uneven or opaque. The official minimum wage has not changed since 1974 and is 100 Rwandan francs ($0.10) per day.

David Schneider
Economic and Commercial Officer
United States Embassy
30 KG 7 Avenue, P.O. Box 28 Kigali, Rwanda
+250-252-596-538, KigaliEcon@state.gov 

The GOS welcomes foreign investment. The investment code provides for equitable treatment of foreign and local firms. There is no restriction on ownership of businesses by foreign investors in most sectors. Foreign firms generally can invest in Senegal free from systematic discrimination in favor of local firms. However, some U.S. and other foreign firms have noted that, in practice, Senegal’s investment environment favors incumbents and insiders – often other foreign firms – at the expense of new market entrants. Common complaints include excessive and inconsistently applied bureaucratic processes; nontransparent, slow judicial processes; and an opaque decision-making process for public contracts. Financial and capital markets are open, attracting domestic, regional, and international capital. In the wake of COVID-19, President Sall called for greater “economic sovereignty” in strategic sectors such as food production, pharmaceuticals, and digital technology to strengthen the country’s resilience to external shocks.

The GOS consults with the private sector through the Conseil Presidentiel de l’Investissement (Presidential Council on Investment, or “CPI”). Among other activities, the CPI for investor-government dialogue. Another important venue for dialogue is the annual Assises de l’Entreprises (Company Meetings) sponsored by the Conseil National du Patronat (www.cnp.sn), the national employers’ association. Senegal does not have a business ombudsman or other official charged with resolving business disputes. In practice, investors must often engage directly at the minister level to resolve business climate concerns. Senegal’s investment promotion agency, APIX, facilitates government review of investment proposals and the project approval process. APIX is also the exclusive administrator of all special economic zones in Senegal.

There are no barriers to ownership of businesses by foreign investors in most sectors. Exceptions include strategic sectors such as water, electricity distribution, and port services, where the government and state-owned companies maintain responsibility for most physical infrastructure but allow private companies to provide services. Senegal allows foreign investors equal access to ownership of property and does not impose any general limits on foreign control of investments. Senegal’s Investment Code includes guarantees for equal treatment of foreign investors, including the right to acquire and dispose of real property.

GOS Ministries offer guidance on large projects, primarily to verify compatibility with the country’s overall development goals and compliance with environmental regulations. The Ministry of Finance and Budget reviews project financing arrangements for projects requiring public funds to ensure compatibility with budget and debt policies.

In October 2017, Senegal, along with other members of the West African Economic and Monetary Union (WAEMU) underwent a Trade Policies Review  by WTO.

In January 2020, the Executive Board of the IMF approved a new three-year Policy Coordination Instrument (PCI) for Senegal. The IMF published its Second Review under the PCI ( IMF PCI ) on January 19, 2021.

The point of entry for business registration is Senegal’s Investment Promotion Agency, APIX, www.investinsenegal.com , which provides a range of administrative services to foreign investors. The World Bank estimates it takes six days to register a firm. In addition to other bureaucratic and documentary requirements, registering a business requires certification of certain documents by a public notary registered in Senegal. Senegalese law provides special preferences to facilitate investment and business operations by medium-sized and small enterprises, including reduced interest rates for Senegalese-owned companies. The GOS continues to expand its “single window” system, offering one-stop government services for businesses and opening new service centers. Since 2019, the GOS has made 25 government processes available online, including applications for construction permits, tax information searches, and tax and customs payments. In 2020, the GOS continued to expand its eGovernance program, harmonizing 60 government websites and creating 30 online service platforms. In 2019, APIX launched an online portal  containing extensive information regarding regulations applicable to businesses and investments in Senegal.

Senegal’s Agency for the Development and Supervision of Small and Medium-sized Enterprises (ADEPME) supports small and medium-sized enterprises (defined as having fewer than 50 employees and annual revenues less than 5 billion CFA (about $9 million)). These include tax incentives, grants for capacity building and feasibility studies, and technical assistance to help firms operating in the informal sector formalize and register. ADEPME has also launched a program to certify the creditworthiness of SMEs, making them eligible for loans at preferential rates.

Senegal’s budget and information on debt obligations are generally accessible to the public, including online.  Although Senegal included state-owned enterprise (SOE) debt in its overall debt figures, detailed information on the debt of individual SOEs was not available to the public. The budget was substantially complete and considered generally reliable.  Senegal’s supreme audit institution reviews the government’s accounts, and its reports are published online. However, the GOS has not released an audit report since 2017. Senegal is the first Francophone country in sub-Saharan Africa to submit to a fiscal transparency evaluation (FTE) by the IMF. In its January 2019 FTE, the IMF rated Senegal “average” overall for countries of similar income and institutional capacity. Senegal was rated “advanced” or “good” on fiscal forecasting, budgeting, and fiscal reporting. It was rated “basic” on monitoring risks triggered by subnational governments.

The process for allocating licenses and contracts for natural resource extraction was outlined in law and appeared to be followed in practice.  In 2019, Senegal approved a new Petroleum Code, clarifying investment terms and local content requirements for foreign investment.  Senegal is currently offering new offshore exploration blocks through an open tender process conducted in accordance with international standards. In February 2020, Senegal finalized a new Gas Code to govern development of a mid-stream gas distribution network. Basic information on natural resource extraction awards is publicly available, and the government participated actively in the Extractive Industries Transparency Initiative.

The government neither promotes nor restricts outward investment.

Senegal has made some progress towards establishing independent regulatory institutions, having set up regulators for energy, telecommunications, and finance. While Senegal lacks established procedures for a public comment process for proposed laws and regulations, the GOS sometimes holds public hearings and workshops to discuss drafts. Suggested regulations are not always made available to the public in a timely manner, however. Although Senegalese law requires proposed legislation to be published in advance in the government’s official gazette, the GOS does not consistently update its website. The government does not promote or require companies’ environmental, social, and governance disclosure to facilitate transparency or help investors and consumers distinguish between high- and low-quality investments.

Authority to make and enforce rules rests with the relevant government ministry unless there is a separate regulatory authority. Local government bodies do not have a decisive role in regulatory decisions.

The Commission de Régulation du Secteur de l’Electricité (Electricity Sector Regulatory Commission, CRSE) was established in 1998 to regulate the electricity sector and set electricity tariffs. Although the CRSE is by law an independent agency, observers note that the government frequently exercises influence over its decisions. Under the Millennium Challenge Corporation Senegal Power Compact, the GOS has committed to reforms, including adopting a new electricity code in 2021 and strengthening the CRSE’s capacity and independence.

The Autorité de Régulation des Télécommunications et des Postes (Telecommunications and Postal Regulatory Authority, ARTP) is responsible for licensing and regulating telecommunications and postal services in Senegal. The Dakar-based Central Bank of West African States (known by its French acronym, BCEAO) regulates banking.

There is no legal requirement to conduct impact assessments of proposed regulations, and regulatory agencies rarely do so. There is no specialized government body tasked with reviewing and monitoring regulatory impacts. Legal, regulatory, and accounting systems closely follow French models. Financial statements must be prepared in accordance with the SYSCOHADA system, based on generally accepted accounting principles in France.

As a member of ECOWAS, Senegal generally adheres to regional requirements concerning the movement of people and goods. Similarly, fiscal policy directives of WAEMU are enforced in Senegal, as are regulations issued by the BCEAO. Senegal is a WTO member and generally notifies draft regulations to the WTO Committee on Technical Barriers to Trade. However, since 2005, Senegal has banned imports of uncooked poultry and poultry products without notifying the WTO. In March 2019, Senegal ratified the AfCFTA, which went into effect in January 2021.

Senegal’s legal system is based on French civil law and has well-developed commercial and investment laws. Although settlement of commercial disputes has historically been cumbersome and slow, Senegal launched a new commercial court system in 2018 with jurisdiction over commercial matters and a mandate to resolve cases within three months.  The business community welcomed the move, and in the past two years, the court has heard 11,054 cases with a combined value of nearly $500 million.

While Senegal’s constitution mandates that the judiciary operate independently of the legislature and executive, the executive frequently exerts influence, particularly in high-profile criminal cases. This type of influence is rare in strictly commercial matters. Some foreign investors, however, report discriminatory treatment by local courts. Investors may consider including binding arbitration in their contracts to avoid prolonged legal entanglements. Companies may seek judicial redress against regulatory decisions. Regulatory appeals are heard in administrative tribunals that specialize in adjudicating claims against the state.

Senegal is a member of the World Intellectual Property Organization and the Berne Copyright Convention, and in 2019 hosted a regional workshop on protecting intellectual property in the pharmaceutical and pesticide industries that gathered prosecutors, customs, and law enforcement officers. Nevertheless, the country has insufficient capacity to reliably protect intellectual property rights.

Senegal’s 2004 Investment Code provides basic guarantees for equal treatment of foreign investors and repatriation of profit and capital. It also specifies tax and customs exemptions according to investment volume and company size and location, with investments outside of Dakar eligible for longer tax exemptions. A law to enhance transparency in public procurement and public tenders entered into force in 2008, establishing a public procurement regulatory body, the Autorité de Régulation des Marchés Publics (Public Procurement Regulatory Authority, ARMP), which publishes annual reviews of public procurement.

In February 2021, Senegal’s National Assembly signed into law the long-awaited update to the law governing public-private partnership (PPP) contracts, followed by the implementing decree in November 2021. The amended law includes several important innovations, including: a unified legal framework for private sector-led, GOS-supported projects; a streamlined institutional framework to simplify procedures and avoid incompatibilities; a strengthened monitoring and control system; and provisions about local content requirements. The GOS has stated that the new law will introduce a more flexible and attractive framework for blended finance projects. Some U.S. companies have raised concerns about the local content requirements included in the law.

BCEAO regulations proscribe the use of offshore accounts in project finance transactions within the WAEMU, except when approved by ministries of finance with the express consent of the BCEAO. According to BCEAO, these restrictions allow visibility over international transactions, deter money laundering, and help it maintain adequate foreign currency reserves. BCEAO emphasizes the importance of these rules in enabling it to fulfill its mandate of maintaining the stability of the CFA franc’s peg to the Euro.

Since 2018, the BCEAO and Senegalese Ministry of Finance and Budget have tightened their approach to the approvals of offshore accounts. Although there is no “maximum” number of accounts permitted, informal guidelines suggest that transactions using one to three accounts have the greatest chance of being approved. According to the BCEAO, the intent is to encourage the minimum number of such accounts necessary to legitimately conduct the transaction. Managers and lenders should raise the subject of offshore accounts with the Ministry of Finance as early in the process as possible and should be prepared to submit a functional justification for each requested account. All offshore accounts must be “reauthorized” annually.

The Investment Code, the Mining Code, the Petroleum Code, and a government services one-stop can be found at the following:

• Investment Code
• Mining Code
• Petroleum Code
• Senegal Services

Senegal’s national competition commission, the Commission Nationale de la Concurrence, is responsible for reviewing transactions for competition-related concerns.

Senegal’s Investment Code includes protection against expropriation or nationalization of private property, with exceptions for “reasons of public utility” provided there is “just compensation” in advance. In general, Senegal has no history of expropriation or creeping expropriation against private companies. The government may sometimes use eminent domain justifications to procure land for public infrastructure projects, with compensation provided to landowners. The U.S.-Senegal BIT specifies that international legal standards are applicable to any cases of expropriation.

Senegal is a member of the International Convention for the Settlement of Investment Disputes (ICSID) and a signatory of the Convention on the Recognition and Enforcement of Arbitral Awards (the “New York Convention”). Senegalese law recognizes the Cour d’Appel (Appeals Court) as the competent authority for the recognition and enforcement of awards rendered pursuant to ICSID. Senegal is also a signatory to the Organization for the Harmonization of Corporate Law in Africa Treaty (OHADA). This agreement supports enforcement of awards under the New York Convention. The Autorité de Régulation des Marchés Publics (Public Procurement Regulatory Authority or ARMP) manages a dispute-resolution mechanism for public tenders.

Senegal has growing experience in using international arbitration for resolution of investment disputes with foreign companies, including some cases involving tax disputes with U.S. firms. The government has also prevailed in some arbitration cases, including a 2013 arbitration decision in a high-profile case with a multinational company over an integrated mining/railway/port project, fostering greater confidence within the government in the arbitration process. Senegal’s BIT with the United States includes provisions to facilitate the referral of investment disputes to binding arbitration.

International firms have pursued a variety of investment disputes during the last decade, including at least two U.S. firms involved in tax and customs disputes. Other foreign companies in mining and telecommunications have pursued commercial disputes over licensing. These disputes have often been resolved through arbitration or an amicable settlement. Senegal has no history of extrajudicial action against foreign investors.

The GOS has commercial courts and uses alternative dispute resolution mechanisms to expedite dispute resolution. Under the OHADA treaty, Senegal recognizes the corporate law and arbitration procedures common to the 16 member states in Western and Central Africa. Senegalese courts routinely recognize arbitration clauses in contracts and agreements. It is not unusual for courts to rule against SOEs in disputes involving private enterprises.

Senegal has commercial and bankruptcy laws that address liquidation of business liabilities. Foreign creditors receive equal treatment under Senegalese bankruptcy law in making claims against liquidated assets. Monetary judgments are normally in local currency. As a member of OHADA, Senegal permits three different types of bankruptcy: liquidation through a negotiated settlement; company restructuring; or complete liquidation of assets.

Senegal’s Investment Code provides for investment incentives, including temporary exemption from customs duties and income taxes, for investment projects. Eligibility for investment incentives depends upon a firm’s size and the type of activity, amount of the potential investment, and location of the project. To qualify for significant investment incentives, firms must invest above CFA 100 million (approximately $165,000) or in activities that lead to an increase of 25 percent or more in productive capacity. Investors may also deduct up to 40 percent of retained investment over five years. However, for companies engaged strictly in “trading activities,” investment incentives may not be available. Senegal does not provide incentives for underrepresented investors such as women, nor does it provide specific incentives for clean energy investments.

Eligible sectors for investment incentives include agriculture and agro-processing, fishing, livestock, and related industries, manufacturing, tourism, mineral exploration and mining, banking, and others. All qualifying investments benefit from the “Common Regime,” which includes two years of exemption from duties on imports of goods not produced locally for small and medium-sized firms, and three years for all others. Also included is exemption from direct and indirect taxes for the same period.

Exemption from the Minimum Personal Income Tax and from the Business License Tax can be granted to investors who use local resources for at least 65 percent of their total inputs within a fiscal year. Enterprises that locate in less industrialized areas of Senegal may benefit from exemption of the lump-sum payroll tax of three percent, with the exemption running from five to 12 years, depending on the location of the investment. The investment code provides for exemption from income tax, duties, and other taxes, phased out progressively over the last three years of the relief period. Most incentives are automatically granted to investment projects meeting the above criteria.

An existing firm requesting an extension of such incentives must be at least 20 percent self-financed. To qualify for these benefits, firms are required to create at least 150 full-time positions for Senegalese nationals, contribute the hard currency equivalent of at least 100 million CFA ($165,000), and keep regular accounts that conform to Senegalese standards. In addition, firms must provide APIX with details on company products, production, employment, and consumption of raw materials.

In 2017, Senegal passed legislation to create Special Economic Zones (SEZ). Enterprises approved under the SEZ regime may be granted tax and customs concessions for up to 25 years. Benefits may include exemptions from duties and taxes on imports of goods, raw materials and equipment (except for community levies); application of a reduced 15 percent corporate tax rate; and exemption from certain taxes and charges, such as business and property taxes. To qualify for these benefits, companies must make a minimum investment of CFA 100 million ($165,000), create at least 150 jobs during their first year, and generate at least 60 percent of their revenue from exports. In November 2018, President Sall inaugurated the country’s first SEZ in the Dakar planned suburb of Diamniadio. The GOS has since launched two additional SEZs; one in Sandiara, 80 kilometers from the capital city Dakar, and the other in Ndiass, in the vicinity of Dakar’s International Airport. According to Senegalese officials responsible for digital economy development, the GOS has installed more than 150 kilometers of high-speed fiberoptic cable throughout Diamniadio to boost access and speeds for investors locating there.

Senegal’s Data Protection Act was passed in 2008. Senegal has mandatory requirements to register mobile device SIM cards and is a signatory to the Economic Community of West African States Supplementary Act on Personal Data Protection from 2010. There is no requirement for foreign IT providers to turn over source code and/or provide access to encryption, nor are there measures that prevent or restrict companies from freely transmitting customer or other business-related data outside Senegal.

President Macky Sall inaugurated a 1,000 terabyte government data center in June 2021 with the intent to migrate all Senegalese government data and applications there and host them in the future. In March 2022, President Sall announced that national digital agency ADIE would become Société National Senegal Numerique (National Company for Digital Senegal, SEMUM) to accelerate Senegal’s digitalization.

The Senegalese Civil Code provides a framework, based on French law, for enforcing private property rights. The code provides for equality and non-discrimination against foreign-owned businesses. Senegal maintains a property title and a land registration system, but application is uneven outside of urban areas. Establishing ownership rights to real estate can be difficult. Once established, however, ownership is protected by law.

The GOS has undertaken several reforms to make it easier for investors to acquire and register property. It has streamlined procedures and reduced associated costs for property registration and developed new land tenure models intended to facilitate land acquisition by resolving conflicts between traditional and government land ownership. If the new models are widely adopted, the GOS and donors expect they will facilitate land acquisition and investment in the agricultural sector while providing benefits to traditional landowners in local communities.

The GOS generally pays compensation when it takes private property through eminent domain. Senegal’s housing finance market is under-developed, and few long-term mortgage-financing vehicles exist. There is no secondary market for mortgages or other bundled revenue streams. The judiciary is inconsistent when adjudicating property disputes. According to the World Bank, registering property requires an average of 41 days, compared to an average of 51.6 days in sub-Saharan Africa and 23.6 days in OECD countries. Five separate procedures are required.

Senegal maintains an adequate legal framework for protecting intellectual property rights (IPR), but the country has limited institutional capacity to enforce IPR laws. Senegal has been a member of the World Intellectual Property Organization (WIPO) since its inception. Senegal is also a member of the African Organization of Intellectual Property, a grouping of 15 Francophone African countries with a common system for obtaining and maintaining protection for patents, trademarks, and industrial designs. Local statutes recognize reciprocal protection for authors or artists who are nationals of countries adhering to the 1991 Paris Convention on Intellectual Property Rights. Patents may be registered with the Agence Sénégalaise pour la Propriété industrielle et l’Innovation technologique (Senegalese Agency for Industrial Property and Technical Innovation, ASPIT) and are protected for 20 years. An annual charge is levied during this period. Registered trademarks are protected for a period of 20 years. Trademarks may be renewed indefinitely by subsequent registrations. Senegal is a signatory to the Berne Convention for the Protection of Literary and Artistic Works. The Senegalese Copyright Office, part of the Ministry of Culture, protects copyrights. Bootlegging of music CDs is common and a source of concern for the local music industry. The Copyright Office has taken actions to combat media piracy, including seizure of counterfeit cassettes, CDs, and DVDs. In 2008, the government established a special police unit to improve enforcement of the country’s anti-piracy and counterfeit laws. The government has limited capacity to combat IPR violations or to seize counterfeit goods. Customs screening for counterfeit goods production is weak and confiscated goods occasionally re-appear in the market. Nevertheless, the GOS has raised awareness of the impact of counterfeit products on the Senegalese marketplace, especially regarding pharmaceuticals, and officers have participated in trainings offered by manufacturers to identify counterfeit products.

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

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at WIPO country profiles .

Senegalese authorities take a generally positive view of portfolio investment. Assisted by the debt management office of the BCEAO and thanks to a well-functioning regional debt market,

Senegal has historically issued regular debt instruments in local currency to manage its finances. Beginning in 2011, the government began accessing international debt markets, issuing U.S. dollar-denominated Eurobonds in 2011, 2014, 2017, and 2018. In June 2021, the authorities issued a 775-million-Euro Eurobond’ its first Euro-denominated obligation. Some observers, including the IMF, have expressed concern over the continued rise in Senegal’s public debt, which has more than doubled over the last decade, in part due to the country’s significant investments associated with the PSE. With the ongoing effects of COVID-19 and the consequences of the political turmoil of March 2021, Senegal’s 2021 debt-to-GDP ratio rose to 73 percent, compared to 52 percent in 2018. In late 2020, Senegal took advantage of the G20’s Debt Service Suspension Initiative, receiving relief from $163 million in debt service payments (0.6 percent of GDP) through the end of 2021. The GOS aims to mitigate concerns about its public debt by containing energy subsidies, prioritizing concessional borrowing, and taking steps to increase government revenues.

Senegal does not have its own stock market. A handful of Senegalese companies are listed on the West African Regional Stock Exchange (BRVM), headquartered in Abidjan, Cote d’Ivoire. The BRVM also has local offices in each of the WAEMU member countries, offering additional opportunities to attract foreign capital and access diversified sources of financing.

In 2018, the BCEAO launched the region’s first certification program for dealers in securities and other financial instruments. Modeled on accreditation programs offered by the Chartered Institute for Securities and Investment, the new program was supported by the U.S. Treasury’s Office of Technical Assistance.

While Senegal’s banking system is generally sound, the financial sector is underdeveloped. Senegal’s 26 commercial banks, primarily based in France, Nigeria, Morocco, and Togo, follow conservative lending guidelines, with collateral requirements that most potential borrowers cannot meet. Few firms are eligible for long-term loans, and small and medium-sized enterprises have little access to credit. According to a 2016 government survey, about 17 percent of enterprises in the formal sector receive financing from commercial banks, compared to 6 percent for informal enterprises. Authorities have committed to implement the national financial inclusion strategy (2021-25) and achieve a financial inclusion rate of 65 percent of adults and 90 percent of SMEs. Senegal’s banking sector is regulated by the BCEAO and the WAEMU regional banking commission. Increasingly available mobile money services offer Senegalese consumers alternatives to traditional banking and credit services.

In 2012, Senegal established a sovereign wealth fund (Fonds Souverain d’Investissements Strategiques, FONSIS) with a mandate to leverage public assets to support equity investments in commercial projects supporting economic development objectives. FONSIS invests primarily in strategic sectors defined in the PSE, including agriculture, fishing, infrastructure, energy, mining, tourism, and services.

Senegal maintains several taxes and funds allocated for specific purposes such as expanding access to transportation, energy, and telecommunications, including the autonomous road maintenance fund and the energy support fund. For these funds, some information is included in budget annexes; these funds are subject to the same auditing and oversight mechanisms as ordinary budgetary spending. FONSIS reports that it abides by the Santiago Principles for sovereign wealth funds.

Senegal has generally reduced government involvement in SOEs during the last three decades. However, the GOS still owns full or majority interests in 24 SOEs, including the national electricity company (Senelec), Dakar’s public bus service, the Port of Dakar, National Post, the national rail company, and the national water utility. Senelec retains control over power transmission and distribution, but it relies increasingly on independent producers to generate power. The GOS has also retained control of the national oil company, PETROSEN, which is involved in hydrocarbon exploration in partnership with foreign oil companies and operates a small refinery dependent on government subsidies. The GOS has modest and declining ownership of agricultural enterprises, including one involved in rice production. In 2018, the government revived the state-owned airline, Air Senegal. The GOS also owns a minority share in Sonatel-Orange Senegal, the country’s largest internet and mobile communications provider.

The Direction du Secteur Parapublic, an agency within the Ministry of Finance, manages the government’s ownership rights in SOEs. The GOS’s budget includes financial allocations to these enterprises, including subsidies to Senelec. SOE revenues are not projected in budget documents, but actual revenues are included in quarterly reports published by the Ministry of Finance. Senegal’s supreme audit institution (the Cour des Comptes) conducts audits of the public sector and SOEs.

The government has no program for privatizing the remaining SOEs.

Following the lead of foreign companies, some Senegalese firms have begun adopting corporate social responsibility programs and responsible business conduct standards. However, this movement is not yet widespread.

Senegal’s 2016 Mining Code specifies the criteria and procedures by which the government awards natural resource extraction contracts or licenses. The code requires mining companies to participate in transparency reporting following the guidelines of the Extractive Industries Transparency Initiative (EITI). The GOS appears to follow the Mining Code and its implementing regulations in practice, although unregulated artisanal mining is common in some areas. Basic information on awards was publicly available online through the government’s official journal, and included details regarding geographic areas, resources under development, companies involved, and the duration of contracts. In January 2019, the government adopted a new Petroleum Code, which clarifies mechanisms for reserving revenues from oil and gas projects to the government. Senegal has been an active member of the EITI since 2013. In May 2018, the EITI Board declared Senegal the first country in Africa to have made “satisfactory progress” in implementing EITI standards. In October 2019, Senegal hosted the 41st quarterly meeting of the EITI Board, along with a conference on EITI implementation in Africa. The government’s EITI committee reports directly to the President.

Senegal’s long-term national economic development policy – the Plan Senegal Emergent (PSE) – includes a green growth program known as “Green PSE” (PSE Vert). Launched in December 2021, the Green PSE is structured around six priority sectors: agriculture, energy, industry, water and sanitation, forestry, and construction. The Green PSE aims to build Senegal’s capacity to access financial resources from the Green Climate Fund (GCF) and private sector investment. According to the PSE Operational Bureau within the Office of the President, the GOS will convene representatives from the six priority sectors in May 2022 to identify specific projects and a roadmap for their implementation.

In December 2020, the GOS published its Nationally Determined Contribution (NDC) to the 2015 Paris Agreement. Senegal’s NDC contains a greenhouse gas mitigation plan for transport, waste, energy, industry, forestry and agriculture and an adaptation plan for key climate impacts affecting Senegal, such as coastal erosion, declining agriculture, fishing, and livestock, risks to public health/biodiversity, and urban flooding. The NDC forecasts two emissions reduction scenarios: one accomplished with domestic resources (unconditional) and the other accomplished with a combination of domestic resources and foreign assistance (conditional). The unconditional scenario calls for a 5 percent reduction by 2025 and 7 percent by 2030, compared to business as usual. The conditional scenario calls for a 23 percent reduction by 2025 and a 29 percent reduction by 2030, compared to business as usual. Biodiversity is included in the adaptation plan of the NDC. The GOS has not formally instituted a net-zero carbon emissions policy. Senegal does not provide regulatory incentives or other policies to achieve policy outcomes that preserve biodiversity, clean air, or other desirable ecological benefits.

Senegal’s NDC addresses economy-wide greenhouse gas emissions, including private sector emissions. However, the NDC does not disaggregate public and private sector emissions. Senior GOS climate officials in associated with the National Climate Change Committee have told Post that during the first half of 2022 an inter-ministerial committee will meet to validate a monitoring, reporting, and verification mechanism for emissions. Senegal’s NDC states that the country will meet either its unconditional or conditional emissions reduction targets primarily through four principal means: i) increasing carbon sequestration through improved agroforestry and forest management; ii) transitioning from highly polluting fuel oil to cleaner burning fuels in the energy sector, as well as energy efficiency improvements; iii) improving the management of solid and liquid wastes; and iv) improving industrial processes. Each of these activities involves private sector participation. However, the NDC does not include specific sectoral emissions reductions targets attributable to private sector actors.

Bloomberg Markets ranks Senegal as the 13th most attractive market for energy transition investment among emerging markets and 40th globally: Climate Scope .

Senegalese law provides criminal penalties for corruption. The National Anti-Corruption Commission (OFNAC) has a mandate to enforce anti-corruption laws. In January 2020, OFNAC released overdue reports on its activities for 2017 and 2018 and swore in six new executive-level officials, bringing its managing board to a full complement for the first time in several years. A 2014 law requires the President, cabinet ministers, speaker and chief financial officer of the National Assembly, and managers of public funds more than one billion CFA francs (approximately $1.8 million) to disclose their assets to OFNAC. In 2020, all but one of these government officials complied with these disclosure requirements.

The GOS has made limited progress in improving its anti-corruption efforts. The current administration has mounted corruption investigations against several public officials (primarily the President’s political rivals) and has secured several convictions. In July 2020, President Sall launched an initiative to enforce a requirement that cabinet members and other high-level officials disclose their assets and issued a report disclosing his own personal assets.

The GOS has also taken steps to increase budget transparency in line with regional standards. Senegal ranked 73 out of 180 countries in Transparency International’s 2021 Corruption Perception Index. Notwithstanding Senegal’s positive reputation for corruption relative to regional peers, the government often did not enforce the law effectively, and some officials continued to engage in corrupt practices with impunity. Reports of corruption ranged from rent-seeking by bureaucrats involved in public approvals to opaque public procurement to corruption in the police and judiciary. Allegations of corruption against President Sall and his brother related to the development of oil and gas emerged in the press in 2019. While a subsequent investigation did not uncover wrong-doing, suspicions of high-level government corruption remain among many in civil society and the political opposition.

Senegal’s financial intelligence unit, Cellule Nationale de Traitement des Informations Financières (National Financial Information Processing Unit, CENTIF), is responsible for investigating money laundering and terrorist financing. CENTIF has broad authority to investigate suspicious financial transactions, including those of government officials. In February 2019, the regional FATF body – the Inter-Governmental Action Group against Money Laundering (GIABA) – issued a Mutual Evaluation Report of Senegal’s anti-money laundering and countering terrorist financing (AML/CTF) performance, measured by FATF standards. Although GIABA found the GOS’s understanding of AML/CTF standards and risks adequate, it gave Senegal non-compliant or partially compliant ratings on 26 of FATF’s 40 AML/CTF legal standards. Senegal also received ten low ratings and one moderate rating on the FATF’s 11 indicators measuring efforts to combat money laundering, terrorist financing, and weapons of mass destruction proliferation financing. Key weaknesses included: lack of domestic legislation implementing BCEAO AML/CTF directives; inadequate monitoring of nonprofits and non-financial professions, such as lawyers and accountants, who engage in financial transactions; inadequate inspections and sanctions of financial institutions; weak interagency cooperation; and poor AML/CTF capacity among police, judiciary, and customs. As a result, and in the absence of improvements, in February 2021, FATF added Senegal to its “gray list.” The GOS has committed to an action plan to address its deficiencies.

It is important for U.S. companies to assess corruption risks and develop an effective compliance program to prevent corruption, including bribery. U.S. firms operating in Senegal can underscore to partners that they are subject to the Foreign Corrupt Practices Act and may seek legal counsel to ensure full compliance with anti-corruption laws. The U.S. Government seeks to level the global playing field for U.S. businesses by encouraging other countries to take steps to criminalize all corruption, including bribery of officials, and requiring governments to uphold their obligations under relevant international conventions. A U.S. firm that believes a competitor is using bribery to secure a contract may convey this to U.S. officials.

Senegal is a signatory of the United Nations Convention Against Corruption but is not a signatory of the OECD Convention on Combatting Bribery.

Contact at the government agencies responsible for combating corruption:

Mrs. Seynabou Ndiaye Diakhaté
President
Office National de Lutte Contre La Fraude et la Corruption (OFNAC)
Lot 72-73, Cité Keur Gorgui à Mermoz-Pyrotechnie
Telephone: 800 000 900 / +221 33 889 98 38
www.ofnac.sn 

Mr. Birahim Seck
President
Forum Civil40 Avenue Malick Sy (1er étage) – B.P. 28 554 – Dakar
Telephone: +221 33 842 40 44
forumcivil@orange.sn  / http://www.forumcivil.sn/ 

Senegal has long been regarded as an anchor of stability in politically unstable West Africa. It is the only regional country that has never had a coup d’état. International observers assessed the February 2019 presidential election, in which President Sall won a second term, as free and fair, despite a few instances of campaign violence. Public protests occasionally spawn isolated incidents of violence when unions, opposition parties, merchants, or students demand better salaries, working conditions, or other benefits.

The March 2021 arrest of opposition figure Ousmane Sonko on alleged rape charges led to several days of intense protests that spiraled into widespread riots and looting. The unrest, Senegal’s worst in decades, was fueled by pandemic-related hardship, particularly among the youth. According to press reports, 14 people died, hundreds were injured, and private businesses across the country were damaged. While a few local businesses were damaged, firms associated with France – historically targeted by some groups as relics of the colonial past — bore the brunt of the looting and property damage. Despite this bout of unrest, foreign investors largely remained confident in Senegal’s stability and economic rebound. Most observers agreed that strong private sector investment, facilitated by improvements to the business climate and better mobilization of capital, is needed to address youth employment.

Years of declining violence in the Casamance region, home of a four-decade-old separatist conflict, ignited into a full military conflict between Senegal’s army and elements of the Movement of Democratic Forces in Casamance (MFDC) in March 2022. The Senegalese government indicated that the military operation would continue until MFDC resistance is eradicated, putting an end to the armed separatist movement.

Security is a top priority for the government, which increased its defense and security budget by 92 percent between 2012 and 2017. The Armed Forces Ministry noted a 32 percent budget increase for the fiscal year 2021.

Senegal’s Labor Code, based on the French system, was last updated in 1997. The code retains a rigid approach that, according to some observers, favors social over economic goals. Rules relating to employment contracts, layoffs, and redundancy protections are some of the most stringent in the world, imposing high costs on businesses. However, labor law is not well-enforced, especially in the dominant informal sector.

Acquiring work permits for expatriate staff is typically straightforward. Citizens from WAEMU member countries may work freely in Senegal.

Senegal has an abundant supply of unskilled and semi-skilled labor, with a more limited supply of skilled workers in engineering and technical fields. While Senegal has one of the best higher educational systems in West Africa and produces a substantial pool of educated workers, limited job opportunities in Senegal lead many to emigrate.

Relations between employees and employers are governed by the Labor Code, industry-wide collective bargaining agreements, company regulations, and individual employment contracts. The Code provides legal protection for women and children and prohibits forced or compulsory labor. It also establishes minimum standards for working age, working hours, and working conditions, and bars children from performing many dangerous jobs. Senegal ratified International Labor Organization Convention 182 on the worst forms of child labor in 2000. The Code recognizes the right of workers to form and join trade unions. Any group of workers in a similar trade or profession may create a union, although formal approval by the Ministry of the Interior is required. The right to strike is recognized but sometimes restricted. The GOS has the authority to dissolve trade unions and requisition workers from private enterprises.

Two powerful industry associations represent management’s interests: the National Council of Employers and the National Employers’ Association. The principal labor unions are the National Confederation of Senegalese Workers and the National Association of Senegalese Union Workers, a federation of independent labor unions. Collective bargaining agreements cover an estimated 44 percent of formal sector workers. Most workers, however, work in the informal sector, where labor rules are not enforced.

Child labor remains a problem, particularly in the informal sector, mining, construction, transportation, domestic work, agriculture, and fishing, where labor regulations are rarely enforced. Despite some progress, Senegal still struggles with forced child begging. Tens of thousands of religious students (talibés) are enrolled in Koranic schools (daaras) where some are forced to beg to enrich teachers, a corruption of the intended lesson in humility. The GOS has made some progress in combatting these practices, but more progress is needed.

“0” reflects amounts rounded to +/- USD 500,000.

Data 

Aichatou Fall
Economic Specialist
U.S. Embassy, Route des Almadies, B.P. 49, Dakar, Senegal
+221 33 879 4000
FallAX@state.gov 

The GoSA is generally open to foreign investment to drive economic growth, improve international competitiveness, and access foreign markets. The Department of Trade and Industry and Competition’s (DTIC) Trade and Investment South Africa (TISA) division assists foreign investors. It actively courts manufacturing in sectors where it believes South Africa has a competitive advantage. It favors sectors that are labor intensive and with the potential for local supply chain development. DTIC publishes the “Investor’s Handbook” on its website: HYPERLINKError! Hyperlink reference not valid. and TISA provides investment support through One Stop Shops in Pretoria, Johannesburg, Cape Town, Durban, and online at http://www.investsa.gov.za/one-stop-shop/  (see Business Facilitation). The 2018 Competition Amendment Bill introduced a government review mechanism for FDI in certain sectors on national security grounds, including energy, mining, banking, insurance, and defense (see section on Laws and Regulations on Foreign Direct Investment). The private sector has expressed concern about the politicization of mergers and acquisitions.

Currently, there are few limitations on foreign private ownership and South Africa has established several incentive programs to attract foreign investment. Under the Companies Act, which governs the registration and operation of companies in South Africa, foreign investors may establish domestic entities as well as register foreign-owned entities. However, the Act requires that external companies submit their annual returns to the Companies and Intellectual Property Commission Office (CIPC) for review. Although generally there are no rules that would prohibit foreign companies from purchasing South African assets or engaging in takeovers, the Act does contain national security interest criteria for certain industries, including energy, mining, banking, insurance, and defense (see section on Laws and Regulations on Foreign Direct Investment), that could potentially subject transactions covered to additional scrutiny. Reviews will be conducted by a committee comprised of 28 ministers and officials chosen by President Ramaphosa. The law also states that the president must identify and publish in the Gazette, the South African equivalent of the U.S. Federal Register, a list of national security interests including the markets, industries, goods or services, sectors or regions for mergers involving a foreign acquiring firm.

In addition to the Companies Act national security review provisions, there are a small number of industries that are subject to additional requirements through separate acts. On September 28, 2021, President Ramaphosa signed the Private Security Industry Regulation Amendment Act, which limits foreign ownership of private security companies to 49 percent based on national security concerns. The Banks Act of 1990 permits a foreign bank to apply to the Prudential Authority (operating within the administration of the South African Reserve Bank) to establish a representative office or a local branch in South Africa.  The Insurance Act of 2017 prohibits persons from conducting insurance business in South Africa without being appropriately licensed by the Prudential Authority.  The Insurance Act permits a foreign reinsurer to conduct insurance business in South Africa, subject to that foreign reinsurer being granted a license and establishing both a trust (for the purposes of holding the prescribed security) and a representative office in South Africa.  The Electronic Communications Act of 2005 imposes limitations on foreign control of commercial broadcasting services.  The Act Provides that a foreign investor may not, directly or indirectly, (1) exercise control over a commercial broadcasting licensee; or (2) have a financial interest or an interest in voting shares or paid-up capital in a commercial broadcasting licensee exceeding 20 percent. The Act caps the percentage of foreigners serving as directors of a commercial broadcasting licensee at 20 per cent. Lastly, foreign purchasers of South African securities are obliged to notify an authorized dealer (generally commercial banks) of the purchase and have the securities endorsed “non-resident.”

DTIC’s TISA division assists foreign investors, actively courting manufacturers in sectors where it believes South Africa has a competitive advantage. DTIC publishes the “Investor’s Handbook” on its website: www.the DTIC.gov.za and TISA provides investment support through One Stop Shops in Pretoria, Johannesburg, Cape Town, Durban, and online at  http://www.investsa.gov.za/one-stop-shop/  (see Business Facilitation).  Foreign companies may be eligible for incentives in South Africa under several ad hoc initiatives as well as the Special Economic Zones (SEZs) Act of 2014, which promotes regional industrial development by providing incentives for foreign (and local) investors that elect to operate within the country’s SEZs. More information regarding incentive programs may be found at: http://www.thedtic.go/v.za/financial-and-non-financial-support/incentives/  and below in Incentives. The 2018 Competition Amendment Bill introduced a government review mechanism for FDI in certain sectors on national security grounds,

Although South Africa welcomes foreign investment, there are policies that potentially disadvantage foreign companies, including the Broad-Based Black Economic Empowerment Act of 2013 (B-BBEE). B-BBEE represents one avenue that South Africa has taken to re-integrate historically disadvantaged individuals (HDIs) into the economy by requiring companies meet certain thresholds of black ownership and management control to participate in government tenders and contracts. While companies support the Act’s intent, it can be difficult to meet the B-BBEE requirements, which are tallied on B-BBEE scorecards and are periodically re-defined. The higher the score on the scorecard, the greater preferential access a company must bid on government tenders and contracts.

In recognition of the challenge the scorecards place on foreign business, the Department of Trade, Industry and Competition created an alternative Equity Equivalence Investment Program (EEIP) program for multinational or foreign owned companies to allow them to show alternative paths to meeting B-BBEE ownership and management requirements under the law. Many companies still view the terms as onerous and restrictive. Multinationals, primarily in the technology sector such as Microsoft and Amazon Web Services, participate in the EE program. J.P. Morgan was the first international investment bank in South Africa to launch a DTIC-approved equity equivalent investment program in August 2021. The company will deploy R340 million (approximately USD 22 million) of financing into the South African economy and create more than 1000 permanent jobs.

The B-BBEE program has come under sharp criticism in the past several years on the grounds that the Act has not gone far enough to shift ownership and management control in the commercial space to HDIs. In response, the GoSA has increasingly taken measures to strengthen B-BBEE through more restrictive application, increasing investigations into the improper use of B-BBEE scorecards, and is considering additional legislation to support B-BBEE’s policies. For instance, the GoSA is considering a new Equity Employment Bill that will set a numerical threshold, purportedly at the discretion of each Ministry, for employment based on race, gender, and disability, over and above other B-BBEE criteria. The bill is currently with the National Council of Provinces and if it passes, it will move to President Ramaphosa for signature.

South Africa has not undergone any third-party investment policy reviews through organizations such as the Organization for Economic Co-operation and Development (OECD), World Trade Organization (WTO), United Nations Conference on Trade and Development (UNCTAD), or UN Working Group on Business and Human Rights.

In November 2021, civil society organizations launched a constitutional lawsuit against the GoSA, demanding that it cancel plans to build 1,500 Mega Watts (MW) of coal-fired power because this would worsen air and water pollution along with health hazards and global warming. They filed the case in the North Gauteng High Court on the grounds that the new power would pose “significant unjustifiable threats to constitutional rights” and to the climate by pushing up greenhouse gas emissions. South Africa is the 12th worst greenhouse gas (GHG) emitter in the world. The Center for Environmental Rights provided a review at: https://cer.org.za/news/new-coal-power-will-cost-south-africans-much-more-report-shows .

In November 2021, environmental activists gathered at the oil and gas giant Sasol’s annual general meeting demanding commitment to move away from fossil fuels. Activists also want Sasol and its shareholders to accelerate the country’s just transition, which commits to significantly reducing carbon dioxide emissions, and moving towards greener energy alternatives. A domestic shareholder activism organization called JustShare released a report on Sasol and climate change claiming that Sasol is not planning to decarbonize, despite climate science.

DTIC has established One Stop Shops (OSS) to simplify administrative procedures and guidelines for foreign companies wishing to invest in South Africa in Cape Town, Durban, and Johannesburg. In theory, OSS should be staffed by officials from government entities that handle regulation, permits and licensing, infrastructure, finance, and incentives, with a view to reducing lengthy bureaucratic procedures, reducing bottlenecks, and providing post-investment services. However, some users of the OSS complain that some of the inter-governmental offices are not staffed, so finding a representative for certain transactions may be difficult. The virtual OSS web site is: http://www.investsa.gov.za/one-stop-shop/ .

The CIPC issues business registrations and publishes a step-by-step guide for online registration at ( http://www.cipc.co.za/index.php/register-your-business/companies/ ), which can be done through a self-service terminal, or through a collaborating private bank. New businesses must also request through the South African Revenue Service (SARS) an income tax reference number for turnover tax (small companies), corporate tax, employer contributions for PAYE (income tax), and skills development levy (applicable to most companies). The smallest informal companies may not be required to register with CIPC but must register with the tax authorities. Companies must also register with the Department of Labour (DoL) – www.labour.gov.za  – to contribute to the Unemployment Insurance Fund (UIF) and a compensation fund for occupational injuries. DoL registration may take up to 30 days but may be done concurrently with other registrations.

South Africa does not incentivize outward investments. South Africa’s stock foreign direct investments in the United States in 2019 totaled USD 4.1 billion (latest figures available), a 5.1 percent increase from 2018. The largest outward direct investment of a South African company was a gas liquefaction plant in the State of Louisiana by Johannesburg Stock Exchange (JSE) and NASDAQ dual-listed petrochemical company SASOL. There are some restrictions on outward investment, such as a R1 billion (USD 83 million) limit per year on outward flows per company. Larger investments must be approved by the South African Reserve Bank and at least 10 percent of the foreign target entities’ voting rights must be obtained through the investment. https://www.resbank.co.za/RegulationAndSupervision/FinancialSurveillanceAndExchangeControl/FAQs/Pages/Corporates.aspx 

South African laws and regulations are generally published in draft form for stakeholder comment at: https://www.gov.za/document?search_query=&field_gcisdoc_doctype=545&field_gcisdoc_subjects=All&start_date=&end_date= . South Africa’s process is similar to the U.S. notice and comment consultation process and full draft texts are available to the public; however, foreign stakeholders have expressed concern over the adequacy of notice and the GoSA’s willingness to address comments. Legal, regulatory, and accounting systems are generally transparent and consistent with international norms. The GoSA’s regulatory regime and laws enacted by Parliament are subject to judicial review to ensure they follow administrative processes.

DTIC is responsible for business-related regulations. It develops and reviews regulatory systems in the areas of competition, standards, consumer protection, company and intellectual property registration and protections, as well as other subjects in the public interest. It also oversees the work of national and provincial regulatory agencies mandated to assist DTIC in creating and managing competitive and socially responsible business and consumer regulations. DTIC publishes a list of bills and acts that govern its work at: http://www.theDTIC.gov.za/legislation/legislation-and-business-regulation/?hilite=%27IDZ%27 

South Africa has a number of public laws that promote transparency of the business regulatory regime to aid the public in understanding their rights. For instance, South Africa’s Consumer Protection Act (2008) reinforces various consumer rights, including right of product choice, right to fair contract terms, and right of product quality. The law’s impact varies by industry, and businesses have adjusted their operations accordingly. A brochure summarizing the Consumer Protection Act can be found at: http://www.theDTIC.gov.za/wp-content/uploads/CP_Brochure.pdf . Similarly, the National Credit Act of 2005 aims to promote a fair and non-discriminatory marketplace for access to consumer credit and for that purpose to provide the general regulation of consumer credit and improves standards of consumer information. A brochure summarizing the National Credit Act can be found at: http://www.theDTIC.gov.za/wp-content/uploads/NCA_Brochure.pdf

The South African National Treasury is developing new legislation that will “seek to enhance the transformation imperatives of the South African financial services sector.” In August 2021, the former Minister of Finance Tito Mboweni said that a new version of the Conduct of Financial Institutions (COFI) bill contains provisions that, if enacted, will require financial institutions to develop transformation plans and commitments around B-BBEE. The bill seeks to enhance market conduct, market development and financial inclusion. National Treasury also published a draft policy document on financial inclusion for public comment, which focuses on general ‘economic inclusiveness’ for South Africa. A summary statement of the draft policy can be found at: http://www.treasury.gov.za/comm_media/press/2020/20201028%20Media%20Statement%20-%20Updated%20Financial%20Inclusion%20Policy.pdf.

Parliament’s National Assembly passed the Employment Equity Amendment Bill in November 2021 and has sent the draft law to the National Council of Provinces for concurrence. The bill will allow the Employment and Labor minister to set employment equity targets for different business sectors and for different designated groups (that is, black people, women, and persons with disabilities).

In South Africa the financial sector has been a leader in integrating environmental, social, and governance issues into its practices. For example, regulation 28 of the Pension Funds Act, 1956 requires a pension fund and its board to “before investing in, and whilst invested in an asset, consider any factor which may materially affect the sustainable long-term performance of the asset including but not limited to those of an environment, social and governance character.” There are no specific ESG disclosure rules for companies, but several ESG related laws include a carbon tax law and energy efficiency legislation.

The Financial Sector and Deposit Insurance Levies (Administration) and Deposit Insurance Premiums Bill was tabled in parliament in January 2022. The National Treasury had published the bill for comment in December 2021. The bill seeks to “facilitate the funding of financial sector regulators, ombuds and other bodies, to ensure that they are able to effectively regulate the financial sector for the benefit of financial customers.” According to the bill’s memorandum, the deposit insurance premiums will be imposed on licensed banks, mutual banks, co-operative banks and branches of foreign banks that conduct business in South Africa. The model imposes huge expenses on the financial sector and results in an increased burden on already over-taxed citizens.

Under the current disclosure regime in South Africa, there is no explicit duty to provide disclosures on ESG matters. However, JSE-listed companies are subject to general continuing disclosure obligations under the JSE Listing Requirements, which apply to financially material ESG issues. Regulatory enforcement processes are legally reviewed and made publicly available for stakeholder comments.

The country’s fiscal transparency is overall very good. National Treasury publishes the executive budget online and the enacted budget is usually published within three months of enactment. End of year reports are published within twelve months of the end of the fiscal year. Information on debt obligations (including explicit and contingent liabilities) is made publicly available and updated at least annually. Public finances and debt obligations are fairly transparent. The year ending March 2021 report is not yet published.

South Africa is a member of the African Continental Free Trade Area, which commenced trading in January 2021. It is a signatory to the SADC-EAC-COMESA Tripartite FTA and a member of the Southern Africa Customs Union (SACU), which has a common external tariff and tariff-free trade between its five members (South Africa, Botswana, Lesotho, Namibia, and Eswatini, formerly known as Swaziland). South Africa has free trade agreements with the Southern African Development Community (SADC); the Trade, Development and Cooperation Agreement (TDCA) between South Africa and the European Union (EU); the EFTA-SACU Free Trade Agreement between SACU and the European Free Trade Association (EFTA) – Iceland, Liechtenstein, Norway, and Switzerland; and the Economic Partnership Agreement (EPA) between the SADC EPA States (South Africa, Botswana, Namibia, Eswatini, Lesotho, and Mozambique) and the EU and its Member States. SACU and Mozambique (SACUM) and the United Kington (UK) signed an Economic Partnership Agreement (EPA) in September 2019.

South Africa is a member of the WTO. While it notifies some draft technical regulations to the Committee on Technical Barriers to Trade (TBT), these notifications may occur after implementation. In November 2017, South Africa ratified the WTO’s Trade Facilitation Agreement, implementing many of its commitments, including some Category B notifications. The GoSA is not party to the WTO’s Government Procurement Agreement (GPA).

South Africa has a strong legal system composed of civil law inherited from the Dutch, common law inherited from the British, and African customary law. Generally, South Africa follows English law in criminal and civil procedure, company law, constitutional law, and the law of evidence, but follows Roman-Dutch common law in contract law, law of delict (torts), law of persons, and family law. South African company law regulates corporations, including external companies, non-profit, and for-profit companies (including state-owned enterprises). Funded by the Department of Justice and Constitutional Development, South Africa has district and magistrate courts across 350 districts and high courts for each of the provinces. Cases from Limpopo and Mpumalanga are heard in Gauteng. The Supreme Court of Appeals hears appeals, and its decisions may only be overruled by the Constitutional Court. South Africa has multiple specialized courts, including the Competition Appeal Court, Electoral Court, Land Claims Court, the Labor and Labor Appeal Courts, and Tax Courts to handle disputes between taxpayers and SARS. Rulings are subject to the same appeals process as other courts.

The major laws affecting foreign investment in South Africa are:

1. The Companies Act, which governs the registration and operation of companies in South Africa.
2. The Protection of Investment Act, which provides for the protection of investors and their investments.
3. The Labor Relations Act, which provides protection for employees against unfair dismissal and unfair labor practices.
4. The Customs and Excise Act, which provides for general incentives to investors in various sectors.
5. The Competition Act, which is responsible for the investigation, control and evaluation of restrictive practices, abuse of dominant position, and mergers.
6. The Special Economic Zones Act which provides national economic growth and exports by using support measures to attract foreign and domestic investments and technology.

In July 2021, the SARS updated the SARS Customs and Excise Client Accreditation rules. Section 64E deals with SARS client accreditation rules and is of interest to importers and exporters who wish to apply for accredited client status in South Africa. An accredited client, or preferred trader, is similar to the authorized economic operator found in many other countries. The new rules set out two levels of accredited client status: Level 1 – Authorized Economic Operator (Compliance) and Level 2 – Authorized Economic Operator (Security). A person that is registered for customs and excise activities in South Africa may apply for Level 1 or 2 accredited client status. According to the new rules, all customs activities for which an applicant is registered or licensed under the provisions of the Act will be considered when assessing applications for either level of accredited client status. The new rules also set out the application process, the validity of the person applying, the renewal process for accredited client status, criteria for levels of accredited client status, and the benefits of the two levels of accredited client status.

The Ease of Doing Business Bill was introduced in Parliament in February 2021 and is currently under consideration by the Portfolio Committee on Public Service and Administration. If passed, the bill will provide for a mechanism to allow the executive, Parliament. and others to assess the socio-economic impact of regulatory measures, including the detection and reduction of measures that increase the cost of doing business. DTIC has a one-stop-shop website for investment that provides relevant laws, rules, procedures, and reporting requirements for investors (refer to section one for details).

South Africa’s Competition Commission is empowered to investigate, control, and evaluate restrictive business practices, abuse of dominant positions, and review mergers to achieve equity and efficiency. Its public website is www.compcom.co.za . The Competition Commission is an investigative body. The Competition Tribunal, an adjudicative body that may review Competition Committee actions, functions very much like a court. It has jurisdiction throughout South Africa and adjudicates competition matters. Tribunal decisions may be appealed through the South African court system. International and domestic investors have raised concern the Commission has taken an increasingly social activist approach by prioritizing the public interest criteria found in the Competition Amendment Bill of 2018 over other more traditional anti-trust and monopoly criteria to push forward social and economic policies such as B-BBEE. Concerns include that the new Commission approach has led to more ambiguous, expensive, and lengthy review processes and often result in requests to alter previously agreed-upon terms of the merger and acquisition at a late stage.

In January 2021, GovChat, South Africa’s official citizen-government engagement platform, asked the Competition Tribunal to prevent its removal from a U.S.-owned platform, which charges a fee to business and GoSA clients for contacting customers or citizens. The tribunal granted GovChat’s application for interim relief, stating: “The respondents are interdicted and restrained from off-boarding the applicants from their WABA pending the conclusion of a hearing into the applicants’ complaint lodged with the [Competition] Commission, or six months of date hereof, whichever is the earlier.” On March 14, 2022, the Competition Commission referred the investigation to the Tribunal for review, alleging that the U.S. party’s actions against GovChat constituted an “abuse of dominance.” The Commission asked the Tribunal to assess the U.S. party with a maximum penalty constituting 10 percent of its annual turnover, and to enjoin the U.S. party from removing GovChat from the WhatsApp platform.

The Competition Commission prohibited the sale of the South African operations of a U.S. fast food chain and Grand Food Meat Plant, its main supplier, by Grand Parade Investments (GPI) to a U.S. private equity firm in June 2021 on the grounds that the sale would reduce the proportion of black ownership from 68 percent to zero percent. The regulator found this to be “a significant reduction in the shareholding of historically disadvantaged persons.” By August 2021, the parties and the Commission had agreed to a revised set of conditions which include the new owner’s commitment to improving its rating for the enterprise and supplier development element under its B-BBEE scorecard, which relates to empowering black-owned and smaller enterprises. In addition, the U.S. private equity firm agreed to establish an employee share ownership program that will entitle workers to a five percent stake in the company.

Racially discriminatory property laws and land allocations during the colonial and apartheid periods resulted in highly distorted patterns of land ownership and property distribution in South Africa. Given land reform’s slow and mixed success, the National Assembly (Parliament) passed a motion in February 2018 to investigate amending the constitution (specifically Section 25, the “property clause”) to allow for land expropriation without compensation (EWC). Some politicians, think-tanks, and academics argue that Section 25 already allows for EWC in certain cases, while others insist that amendments are required to implement EWC more broadly and explicitly. Parliament tasked an ad hoc Constitutional Review Committee composed of parliamentarians from various political parties to report back on whether to amend the constitution to allow EWC, and if so, how it should be done. In December 2018, the National Assembly adopted the committee’s report recommending a constitutional amendment. Following elections in May 2019 the new Parliament created an ad hoc Committee to Initiate and Introduce Legislation to Amend Section 25 of the Constitution. The Committee drafted constitutional amendment language explicitly allowing for EWC and accepted public comments on the draft language through March 2021. After granting a series of extensions to complete its work, Parliament finally voted on the Committee’s draft bill on December 7, 2021. Constitutional amendments require a two-thirds parliamentary majority (267 votes) to pass, as well as the support of six out of the nine provinces in the National Council of Provinces. Because no single political party holds such a majority, a two-third vote can only be achieved with the support of two or more political parties. Because the ruling ANC could not garner enough supporting votes from the left-leaning Economic Freedom Fighters, who sought more drastic “state custodianship” of all property, nor the right-leaning Democratic Alliance, which rejected EWC as an investment-killing measure, the bill failed. However, on December 8, Justice Minister Ronald Lamola told media that the ruling party would use its simple majority to pass EWC legislation, which requires a lower threshold than a constitutional amendment. The ANC’s EWC bill is still making its way through Parliament but will likely see constitutional challenges from opposing parties.

In October 2020, the GoSA published the draft expropriation bill in its Gazette, which would introduce the EWC concept into its legal system. The application of the draft’s provisions could conflict with South Africa’s commitments to international investors under its remaining investment protection treaties as well as its obligations under customary international law. Submissions closed in February 2021 and the Public Works committee is currently finalizing the language.

Existing expropriation law, including The Expropriation Act of 1975 (Act) and the Expropriation Act Amendment of 1992, entitles the GoSA to expropriate private property for reasons of public necessity or utility. The decision is an administrative one. Compensation should be the fair market value of the property as agreed between the buyer and seller or determined by the court per Section 25 of the Constitution.

In 2018, the GoSA operationalized the 2014 Property Valuation Act that creates the office of Valuer-General charged with the valuation of property that has been identified for land reform or acquisition or disposal. The Act gives the GoSA the option to expropriate property based on a formulation in the Constitution termed “just and equitable compensation.”

The Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA), enacted in 2004, gave the state ownership of South Africa’s mineral and petroleum resources. It replaced private ownership with a system of licenses controlled by the GoSA and issued by the Department of Mineral Resources. Under the MPRDA, investors who held pre-existing rights were granted the opportunity to apply for licenses, provided they met the licensing criteria, including the achievement of certain B-BBEE objectives. Parliament passed an amendment to the MPRDA in 2014 but President Ramaphosa never signed it. In August 2018, Minister for the Department of Mineral Resources Gwede Mantashe called for the recall of the amendments so that oil and gas could be separated out into a new bill. He also announced the B-BBEE provisions in the new Mining Charter would not apply during exploration but would start once commodities were found and mining commenced. In November 2019, the newly merged Department of Mineral Resources and Energy (DMRE) published draft regulations to the MPRDA. In December 2019, the DMRE published the Draft Upstream Petroleum Resources Development Bill for public comment. Parliament continues to review this legislation. Oil and gas exploration and production is currently regulated under MPRDA, but the new Bill will repeal and replace the relevant sections pertaining to upstream petroleum activities in the MPRDA.

On September 27, 2018, the Minister of the DMRE released a new mining charter, stating that the new charter would be operationalized within the next five years to bolster certainty in the sector. The charter establishes requirements for new licenses and investment in the mining sector and includes rules and targets for black ownership and community development in the sector to redress historic economic inequalities from the apartheid era. The new rules recognize existing mining right holders who have a minimum 26 percent B-BBEE ownership as compliant but requires an increase to 30 percent B-BBEE ownership within a five-year transitional period. Recognition of B-BBEE ownership compliance is not transferable to a new owner. New mining right licenses must have 30 percent B-BBEE shareholding, applicable to the duration of the mining right.

In March 2019 the Minerals Council of South Africa applied for a judicial review of the 2018 Mining Charter. The court was asked to review several issues in the Mining Charter including: the legal standing of the Mining Charter in relation to the MPRDA; the levels of black ownership of mines under B-BBEE requirements; the levels of ownership required when B-BBEE partners sell their shares, and if B-BBEE ownership levels must be maintained in perpetuity, especially when levels of ownership preceded the current Mining Charter. In September 2021, the Pretoria high court ruling set aside key aspects of the Mining Charter, notably those related to black ownership targets. The DMRE resolved not to appeal the high court ruling.

The Insolvency Act 24 of 1936 sets out liquidation procedures for the distribution of any remaining asset value among creditors. Financial sector legislation such as the Banks Act or Insurance Act makes further provision for the protection of certain clients (such as depositors and policy holders). South Africa’s bankruptcy regime grants many rights to debtors, including rejection of overly burdensome contracts, avoiding preferential transactions, and the ability to obtain credit during insolvency proceedings.

South Africa also offers various investment incentives targeted at specific sectors or types of business activities, including tax allowances to support in the automotive sector and rebates for film and television production. The GoSA favors sectors that are labor intensive and with the potential for local supply chain development More information regarding incentive programs may be found at: http://www.thedtic.gov.za/financial-and-non-financial-support/incentives/ .

The Public Investment Corporation SOC Limited (PIC) is an asset management firm wholly owned by the GoSA and is governed by the Public Investment Corporation Act, 2004 . PIC’s clients are mostly public sector entities, including the Government Employees Pension Fund (GEPF) and UIF, among others. The PIC runs a diversified investment portfolio including listed equities, real estate, capital market, private equity, and impact investing. The PIC has been known to jointly finance foreign direct investment if the project will create social returns, primarily in the form of new employment opportunities for South Africans.

To encourage and support businesses looking to green their operations, there are incentives built in into the income tax. Section 12L of the Income Tax Act was passed in 2013 allowing for deductions for energy efficiency measures. Businesses can claim deductions of 95 cents per kilowatt hour, or kilowatt hour equivalent, of energy efficiency savings made within a year against a verified 12-month baseline. The baseline measurement and verification of savings must be done by a SANAS accredited Measurement and Verification (M&V) body. The incentive allows for tax deductions for all energy carriers, not just electricity, except for renewable energy sources which have separate provisions. An amendment in 2015 allowed businesses to claim savings from electricity co-generation, combining heat and power, if there is an energy conversion efficiency of more than 35 percent. All energy efficiency schemes that businesses want to claim the deductions against need to be registered with the South African National Energy Development Institute (SANEDI). https://www.sanedi.org.za/12L.html 

Section 12B of the Income Tax Act includes a provision for a capital allowance for movable assets used in the production of renewable energy. The incentive allows for 100 percent asset accelerated depreciation in first financial year that the asset is brought online. This could equate to a 28 percent deduction on the business’ income tax. Currently, company tax in South-Africa is 28 percent (it has since been reduced to 27 percent as from April 1, the beginning of the 2022/2023 fiscal year). With this incentive, a company could deduct the value of a new solar power system as a depreciation expense decreasing the company’s income tax liability by the same value as the value of the installed solar system. The reduction can also be carried over to the next financial year as a deferred tax asset.

https://www.westerncape.gov.za/energy-security-game-changer/news/clean-energy-tax-incentives 

Section 12N of the Income Tax Act provides for improvements to property not owned by taxpayers: if the improvements are associated with the Independent Power Producer Procurement Programme. Section 12U Income Tax Act provides for additional deduction in respect of supporting infrastructure in respect of renewable energy: such as roads and fences

South Africa designated its first Industrial Development Zone (IDZ) in 2001. IDZs offer duty-free import of production-related materials and zero VAT on materials sourced from South Africa, along with the right to sell in South Africa upon payment of normal import duties on finished goods. Expedited services and other logistical arrangements may be provided for small to medium-sized enterprises or for new foreign direct investment. Co-funding for infrastructure development is available from DTIC. There are no exemptions from other laws or regulations, such as environmental and labor laws. The Manufacturing Development Board licenses IDZ enterprises in collaboration with the SARS, which handles IDZ customs matters. IDZ operators may be public, private, or a combination of both. There are currently five IDZs in South Africa: Coega IDZ, Richards Bay IDZ, Dube Trade Port, East London IDZ, and Saldanha Bay IDZ. South Africa also has SEZs focused on industrial development. The SEZs encompass the IDZs but also provide scope for economic activity beyond export-driven industry to include innovation centers and regional development. There are six SEZs in South Africa: Atlantis SEZ, Nkomazi SEZ, Maliti-A-Phofung SEZ, Musina/Makhado SEZ, Tshwane SEZ, and O.R. Tambo SEZ. The broader SEZ incentives strategy allows for 15 percent Corporate Tax as opposed to the current 28 percent, Building Tax Allowance, Employment Tax Incentive, Customs Controlled Area (VAT exemption and duty free), and Accelerated 12i Tax Allowance. For more detailed information on SEZs, please see: http://www.theDTIC.gov.za/sectors-and-services-2/industrial-development/special-economic-zones/?hilite=%27SEZ%27 

The GoSA does not impose forced localization. However, authorities incentivize the use of local content in goods and technology. In 2021, President Ramaphosa and DTIC Minister Ebrahim Patel announced that South Africa will expand existing localization measures to reboot the economy. DTIC released a policy statement on localization in May 2021. The localization plan’s cornerstone is the implementation of a scheme to substitute 20 percent of imports, or approximately R20 billion (USD 1.3 billion) across selected categories with local goods by 2025. For instance, the industrial master plan for textiles set a goal that 60 percent of all clothing sold in South Africa will be locally manufactured by 2030. Preferential procurement is applied uniformly to both domestic and foreign investors. The GoSA’s B-BBEE requirements, however, make it difficult for foreign investors to score well on the “ownership” element of the B-BBEE scorecard due to corporate rules that can prevent the transfer of discounted equity stakes to South African subsidiaries. Although the GoSA created the EEIP for international companies that cannot meet the ownership element of B-BBEE through the direct sale of equity to local investors, some companies claim that the reporting requirements and high level of required financial contributions make the EE program unviable.

A Draft National Data and Cloud Policy, released by the GoSA in April 2021, seeks to put the GoSA at the heart of data control, ownership, and distribution in South Africa.  The draft policy proposed a series of government interventions, including the establishment of a new state-owned enterprise to manage government-owned and controlled networks. It aims to consolidate excess capacity of publicly funded data centers and deliver processing, data facilities and cloud computing capacity. The GoSA plans to develop ICT special economic zones, hubs and transformation centers. The draft policy seeks to impose data localization requirements and defines data localization as the “…requirements for the physical storage of data within a country’s national boundaries, although it is sometimes used more broadly to mean any restrictions on cross border data flows.” The draft policy provides inter alia that: data generated in South Africa shall be the property of South Africa, regardless of where the technology company is domiciled; ownership and control of personal information and data shall be in line with the Protection of Personal Information Act (POPIA); DTIC through the CIPC and the National Intellectual Property Management Office (NIPMO) shall develop a policy framework on data generated from intellectual activities including sharing and use of such data. The POPIA entered fully into force in July 2021 and regulates how personal information may be processed and under which conditions data may be transferred outside of South Africa. Currently, there is no requirement for foreign information technology providers to turn over source code or provide access to surveillance. However, compliance burdens may be significant.  The Department of Communications and Digital Technologies is responsible for developing ICT policies and legislation. The Independent Communications Authority of South Africa is the regulatory body which regulates the telecommunications sector.

The South African legal system protects and facilitates the acquisition and disposition of all property rights (e.g., land, buildings, and mortgages). Deeds must be registered at the Deeds Office. Banks usually register mortgages as security when providing finance for the purchase of property. Foreigners may purchase and own immovable property in South Africa without any restrictions since they are generally subject to the same laws as South African nationals. Foreign companies and trusts are also permitted to own property in South Africa if they are registered in South Africa as an external company. Since South Africa does not have formal land audits, the proportion of land that does not have clear title is unknown. If property legally purchased is unoccupied, property ownership does not revert back to other owners such as squatters. However, squatters are known to occupy properties illegally and may rent the properties to unsuspecting tenants when there are absentee landowners.

South Africa enforces intellectual property rights through civil and criminal procedures. It is a member of the World Intellectual Property Organization (WIPO) and in the process of acceding to the Madrid Protocol. It is also a signatory to the WTO’s Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS). Generally, South Africa is considered to have a strong domestic legal framework for protecting intellectual property (IP). Enforcement can be spotty due to lack of resources for additional law enforcement and market surveillance support. However, South African authorities work closely with rights holders and with international stakeholders to address IP violations. Bringing cases to criminal court is costly, with most of the burden placed on rights holders to develop the evidence needed for prosecutions; however, civil and criminal remedies are available. South Africa has not been named in the Special 301 or the notorious market report; however, there are yearly submissions requesting South Africa’s inclusion, primarily based on delays in burdens in patent and trademark registration, draft copyright legislation under review in Parliament described below and increasing counterfeit activity in certain business districts. South Africa does not track seizures of counterfeit goods writ-large, though CIPC and law enforcement agencies release periodic reports on significant raids and media coverage in major metro areas reports on major seizures.

Owners of patents and trademarks may license them locally, but when a patent license entails the payment of royalties to a non-resident licensor, DTIC must approve the royalty agreement. Patents are granted for twenty years, usually with no option to renew. Trademarks are valid for an initial period of ten years, renewable for additional ten-year periods. A patent or trademark holder pays an annual fee to preserve ownership rights. All agreements relating to payment for applicable rights are subject to South African Reserve Bank (SARB) approval. A royalty of up to four percent is the standard for consumer goods and up to six percent for intermediate and finished capital goods.

Literary, musical, and artistic works, as well as cinematographic films and sound recordings, are eligible for protection under the Copyright Act of 1978. New designs may be registered under the Designs Act of 1967, which grants copyrights for five years. The Counterfeit Goods Act of 1997 provides additional protection to owners of trademarks, copyrights, and certain marks under the Merchandise Marks Act of 1941. The Intellectual Property Laws Amendment Act of 1997 amended the Merchandise Marks Act of 1941, the Performers’ Protection Act of 1967, the Patents Act of 1978, the Copyright Act of 1978, the Trademarks Act of 1993, and the Designs Act of 1993 to bring South African intellectual property legislation into line with TRIPS. To modernize its intellectual property rights (IPR) regime further, DTIC introduced the Copyright Amendment Bill (CAB) and the Performers’ Protection Amendment Bill (PPAB). The bills remain under Parliamentary review after being returned by President Ramaphosa in June 2020 on constitutional grounds. Stakeholders have raised several concerns, including the CAB bill’s application of “fair use,” and clauses in both bills that allow DTIC Minister to set royalty rates for visual artistic work or equitable renumeration for direct or indirect uses of copyrighted works. Additional changes to South Africa’s IPR regime are under consideration through a draft DTIC policy document, Phase 1 of the Intellectual Property Policy of the Republic of South Africa; however, draft legislation has not yet been released.

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

South Africa recognizes the importance of foreign capital in financing persistent current account and budget deficits, and South Africa’s financial markets are regarded as some of the most sophisticated among emerging markets. A sound legal and regulatory framework governs financial institutions and transactions. The fully independent SARB regulates a wide range of commercial, retail and investment banking services according to international best practices, such as Basel III, and participates in international forums such as the Financial Stability Board and G-20 Finance Ministers and Central Bank Governors. The JSE serves as the front-line regulator for listed firms but is supervised by the Financial Services Board (FSB). The FSB also oversees other non-banking financial services, including other collective investment schemes, retirement funds and a diversified insurance industry. The GoSA has committed to tabling a Twin Peaks regulatory architecture to provide a clear demarcation of supervisory responsibilities and consumer accountability and to consolidate banking and non-banking regulation.

South Africa has access to deep pools of capital from local and foreign investors that provides sufficient scope for entry and exit of large positions. Financial sector assets are more than GDP by approximately 48 percent, and the JSE is the largest on the continent with market capitalization of approximately USD 1.282 billion as of October 2021 and 442 companies listed on the main, alternative, and other smaller boards as of January 2021. Non-bank financial institutions (NBFI) hold about two thirds of financial assets. The liquidity and depth provided by NBFIs make these markets attractive to foreign investors, who hold more than a third of equities and government bonds, including sizeable positions in local-currency bonds. A well-developed derivative market and a currency that is widely traded as a proxy for emerging market risk allows investors considerable scope to hedge positions with interest rate and foreign exchange derivatives.

SARB’s exchange control policies permit authorized currency dealers, to buy and borrow foreign currency freely on behalf of domestic and foreign clients. The size of transactions is not limited, but dealers must report all transactions to SARB. Non-residents may purchase securities without restriction and freely transfer capital in and out of South Africa. Local individual and institutional investors are limited to holding 25 percent of their capital outside of South Africa.

Banks, NBFIs, and other financial intermediaries are skilled at assessing risk and allocating credit based on market conditions. Foreign investors may borrow freely on the local market. In recent years, the South African auditing profession has suffered significant reputational damage with allegations that two large foreign firms aided, and abetted irregular client management practices linked to the previous administration or engaged in delinquent oversight of listed client companies. South Africa’s WEF competitiveness rating for auditing and reporting fell from number one in the world in 2016, to number 60 in 2019.

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

The Financial Sector Conduct Authority (FSCA) is the dedicated market conduct authority in South Africa’s Twin Peaks regulatory model implemented through the Financial Sector Regulation Act. The FSCA’s mandate includes all financial institutions that provide a financial product and/or a financial service as defined in the Financial Sector Regulation Act. The JSE Securities Exchange South Africa, the sixteenth largest exchange in the world measured by market capitalization, enjoys the global reputation of being one of the best regulated. Market capitalization stood at USD 1.282 billion as of October 2021, with 442 firms listed. The Bond Exchange of South Africa (BESA) is licensed under the Financial Markets Control Act. Membership includes banks, insurers, investors, stockbrokers, and independent intermediaries. The exchange consists principally of bonds issued by the GoSA, state-owned enterprises, and private corporations. The JSE acquired BESA in 2009. More information on financial markets may be found at www.jse.co.za . Non-residents can finance 100 percent of their investment through local borrowing. A finance ratio of 1:1 also applies to emigrants, the acquisition of residential properties by non-residents, and financial transactions such as portfolio investments, securities lending and hedging by non-residents.

Although President Ramaphosa and the finance minister announced in February 2020 the aim to create a Sovereign Wealth Fund, no action has been taken.

State-owned enterprises (SOEs) play a significant role in the South African economy in key sectors such as electricity, transport (air, rail, freight, and pipelines), and telecommunications. Limited competition is allowed in some sectors (e.g., telecommunications and air). The GoSA’s interest in these sectors often competes with and discourages foreign investment.

There are over 700 SOEs at the national, provincial, and local levels. Of these, seven key SOEs are overseen by the Department of Public Enterprises (DPE) and employee approximately 105,000 people. These SOEs include Alexkor (diamonds); Denel (military equipment); Eskom (electricity generation, transmission, and distribution); Mango (budget airlines); South African Airways (national carrier); South African Forestry Company (SAFCOL); and Transnet (transportation). For other national-level SOEs, the appropriate cabinet minister acts as shareholder on behalf of the state. The Department of Transport, for example, oversees South African’s National Roads Agency (SANRAL), Passenger Rail Agency of South Africa (PRASA), and Airports Company South Africa (ACSA), which operates nine of South Africa’s airports. The Department of Communications oversees the South African Broadcasting Corporation (SABC). A list of the seven SOEs that are under the DPE portfolio are found on the DPE website at: https://dpe.gov.za/state-owned-companies/ . The national government directory contains a list of 128 SOEs at: https://www.gov.za/about-government/contact-directory/soe-s .

SOEs under DPE’s authority posted a combined loss of R13.9 billion (USD 0.9 billion) in 2019 (latest data available). Many are plagued by mismanagement and corruption, and repeated government bailouts have exposed the public sector’s balance sheet to sizable contingent liabilities. The debt of Eskom alone represents about 10 percent of GDP of which two-thirds is guaranteed by government, and the company’s direct cost to the budget has exceeded nine percent of GDP since 2008/9.

Eskom, provides generation, transmission, and distribution for over 90 percent of South Africa’s electricity of which 80 percent comes from 15 coal-fired power plants. Eskom’s coal plants are an average of 41 years old, and a lack of maintenance has caused unplanned breakdowns and rolling blackouts, known locally as “load shedding,” as old coal plants struggle to keep up with demand. Load shedding reached a record 1136 hours as of November 30, 2021, costing the economy an estimated USD eight billion and is expected to continue for the next several years until the GoSA can increase generating capacity and increase its Energy Availability Factor (EAF). In October 2019 the DMRE finalized its Integrated Resource Plan (IRP) for electricity, which outlines South Africa’s policy roadmap for new power generation until 2030, which includes replacing 10,000 MW of coal-fired generation by 2030 with a mix of technologies, including renewables, gas and coal. The IRP also leaves the possibility open for procurement of nuclear technology at a “scale and pace that flexibly responds to the economy and associated electricity demand” and DMRE issued a Request for Information on new nuclear build in 2020. In accordance with the IRP, the GoSA approved the procurement of almost 14,000 MW of power to address chronic electricity shortages. The GoSA held the long-awaited Bid Window 5 (BW5) of the Renewable Energy Independent Power Producer Procurement Program (REIPPPP) in 2021, the primary method by which renewable energy has been introduced into South Africa. The REIPPPP relies primarily on private capital and since the program launched in 2011 it has already attracted approximately ZAR 210 billion (USD 14 billion) of investment into the country. All three major credit ratings agencies have downgraded Eskom’s debt following Moody’s downgrade of South Africa’s sovereign debt rating in March 2020, which could impact investors’ ability to finance energy projects.

Transnet National Ports Authority (TNPA), the monopoly responsible for South Africa’s ports, charges some of the highest shipping fees in the world. High tariffs on containers subsidize bulk shipments of coal and iron. According to the South African Ports Regulator, raw materials exporters paid as much as one quarter less than exporters of finished products. TNPA is a division of Transnet, a state-owned company that manages the country’s port, rail, and pipeline networks. In May 2020 S&P downgraded Transnet’s local currency rating from BB to BB- based on a generally negative outlook for South Africa’s economy rather than Transnet’s outlook specifically.

South Africa’s state-owned carrier, South African Airways (SAA), entered business rescue in December 2019 and suspended operations indefinitely in September 2020. The pandemic exacerbated SAA’s already dire financial straits and complicated its attempts to find a strategic equity partner to help it resume operations. Industry experts doubt the airline will be able to resume operations. United Airlines and Delta Air Lines provide regular service between Atlanta (Delta) and Newark (United) to Johannesburg and Cape Town.

The telecommunications sector, while advanced for the continent, is hampered by poor implementation of the digital migration. In 2006, South Africa agreed to meet an International Telecommunication Union deadline to achieve analogue-to-digital migration by June 1, 2015. The long-delayed migration is scheduled to be completed by the end of March 2022, and while potential for legal challenges remain, most analysts believe the migration will be completed in 2022. The independent communications regulator initiated a spectrum auction in September 2020, which was enjoined by court action in February 2021 following suits by two of the three biggest South African telecommunications companies. After months of litigation, the regulator agreed to changes some terms of the auction, and the auction took place successfully in March 2022. One legal challenge remains, however, as third-largest mobile carrier Telkom has alleged the auction’s terms disproportionately favored the two largest carriers, Vodacom and MTN. Telkom’s case is due to be heard in April 2022, and its outcome will determine whether the spectrum allocation will proceed.

The GoSA appears not to have fulfilled its oversight role of ensuring the sound governance of SOEs according to OECD best practices. The Zondo Commission of Inquiry into allegations of state capture in the public sector has outlined corruption at the highest echelons of SOEs such as Transnet, Eskom, SAA and Denel and provides some explanation for the extent of the financial mismanagement at these enterprises. The poor performance of SOEs continues to reflect crumbling infrastructure, poor and ever-changing leadership, corruption, wasteful expenditure and mismanagement of funds.

The GoSA has taken few concrete actions to privatize SOEs; on the contrary, even minor reorganizations are roundly criticized as attempts to privatize state assets. Meanwhile, failing SOEs like PRASA are propped up by the fiscus. In 2021, the GoSA sought to sell a controlling 51 percent interest in South African Airways to a bespoke consortium funded in large part by the Public Investment Corporation, which controls investments of state pensions. A year later, however, the airline remains under government control because critical terms of the deal, including the sale price, have not been agreed upon. Transnet, Eskom, and defense contractor Denel have been subjects of various reorganization plans, but ultimately remain accountable to Cabinet shareholders.

President Ramaphosa, during his February 10, 2022, State of the Nation Address (SONA), announced that the cabinet had approved amendments to the Electricity Regulations Act (ERA) that would liberalize South African electricity markets. The amendment provides changes to definitions that will enable the legal framework for a liberalized energy market and allow for a more competitive and open electricity market in the country including the establishment of a Transmission System Operator, a necessary part of state-owned utility Eskom’s unbundling process. The Eskom generation and distribution divisions are set to be restructured by December 2022. The market structure in the bill provides for a shift to a competitive multimarket electricity supply industry, which represents a significant departure from South Africa’s long-standing vertically integrated model monopolized by Eskom. According to a press release from the DMRE, the changes will provide for “an open market that will allow for non-discriminatory, competitive electricity-trading platform.”

There is a general awareness of responsible business conduct in South Africa. The King Committee, established by the Institute of Directors in Southern Africa (IoDSA) in 1993, is responsible for driving ethical business practices. They drafted the King Code and King Reports to form an inclusive approach to corporate governance. King IV is the latest revision of the King Report, having taken effect in April 2017. King IV serves to foster greater transparency in business. It holds an organization’s governing body and stakeholders accountable for their decisions. As of November 2017, it is mandatory for all businesses listed on the JSE to be King IV compliant.

South Africa’s regional human rights commitments and obligations apply in the context of business and human rights. This includes South Africa’s commitments and obligations under the African Charter on Human and Peoples’ Rights, the African Charter on the Rights and Welfare of the Child, the Maputo Protocol on the Rights of Women in Africa, and the African Charter on Democracy, Elections and Governance. In 2015, the South African Human Rights Commission (SAHRC) published a Human Rights and Business Country Guide for South Africa which is underpinned by the UN Guiding Principles on Business and Human Rights (UNGPs) and outlines the roles and responsibilities of the State, corporations and business enterprises in upholding and promoting human rights in the South African context.

The GoSA promotes Responsible Business Conduct (RBC). The B-BBEE policy, the Companies Act, the King IV Report on Corporate Governance 2016, the Employment Equity Act of 1998 (EEA) and the Preferential Procurement Act are generally regarded as the government’s flagship initiatives for RBC in South Africa.

The GoSA factors RBC policies into its procurement decisions. Firms have largely aligned their RBC activities to B-BBEE requirements through the socio-economic development element of the B-BBEE policy. The B-BBEE target is one percent of net profit after tax spent on RBC, and at least 75 percent of the RBC activity must benefit historically disadvantaged South Africans and is directed primarily towards non-profit organizations involved in education, social and community development, and health.

The GoSA effectively and fairly enforces domestic laws pertaining to human rights, labor rights, consumer protection, and environmental protections to protect individuals from adverse business impacts. The Employment Equity Act prohibits employment discrimination and obliges employers to promote equality and eliminate discrimination on grounds of race, gender, sex, pregnancy, marital status, family responsibility, ethnic or social origin, colour, sexual orientation, age, disability, religion, HIV status, conscience, belief, political opinion, culture, language and birth in their employment policies and practices. These constitutional provisions align with generally accepted international standards. Discrimination cases and sexual harassment claims can be brought to the Commission for Conciliation, Mediation and Arbitration (CCMA), an independent dispute reconciliation body set up under the terms of the Labour Relations Act. The Consumer Protection Act aims to promote a fair, accessible and sustainable marketplace for consumer products and services. The National Environmental Management Act aims to to provide for co-operative, environmental governance by establishing principles for decision-making on matters affecting the environment, institutions that will promote co-operative governance and procedures for co-ordinating environmental functions exercised by organs of state.

The SAHRC is a National Human Rights Institution established in terms of the South African Constitution. It is mandated to promote respect for human rights, and the culture thereof; promote the protection, development, and attainment of human rights; and monitor and assess the observance of human rights in South Africa. The SAHRC is accredited with an “A” status under the United Nations’ Paris Principles. There are other independent NGOs, investment funds, unions, and business associations that freely promote and monitor RBC.

The South African mining sector follows the rule of law and encourages adherence to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas. South Africa is a founding member of the Kimberley Process Certification Scheme (KPCS) aimed at preventing conflict diamonds from entering the market. It does not participate in the Extractive Industries Transparency Initiative (EITI). South African mining, labor and security legislation seek to embody the Voluntary Principles on Security and Human Rights. Mining laws and regulations allow for the accounting of all revenues from the extractive sector in the form of mining taxes, royalties, fees, dividends, and duties.

South Africa has a private security industry and there is a high usage of private security companies by the government and industry. The country is a signatory of The Montreux Document on Private Military and Security Companies.

Additional Resources

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

South Africa’s 2019 National Climate Change Adaptation Strategy (NCCAS) and National Climate Change Bill (currently under consideration in Parliament) aim to serve as an overarching legislative framework for adapting to and mitigating the effects of climate change, supported by the implementation of the low‐emissions development and growth strategy for South Africa.

South Africa’s NCCAS supports the country’s ability to meet its obligations in terms of the Paris Agreement on Climate Change. The 2011 National Climate Change Response Policy is a comprehensive plan to address both mitigation and adaptation in the short, medium and long term (up to 2050). GHG emissions are set to stop increasing at the latest by 2020-2025, to stabilize for up to 10 years and then to decline in absolute terms.

The NCCAS specifies strategies for climate change adaptation and mitigation, making use of the short-, medium- and long-term planning horizons. Concerning mitigation, it includes proposals to set emission reduction outcomes for each significant sector and sub-sector of the economy based on an in-depth assessment of the mitigation potential, best available mitigation options and a full assessment of the costs and benefits using a ‘carbon budgets’ approach. It also proposed the deployment of a range of economic instruments, including the appropriate pricing of carbon and economic incentives, as well as the possible use of emissions offset or emission reduction trading mechanisms for those relevant sectors, sub-sectors, companies or entities where a carbon budget approach has been selected.

South Africa’s Energy Efficiency and Energy and Demand Management flagship programs cover development and facilitation of an aggressive energy efficiency program in industry, building on previous Demand Side Management programs, and covering non-electricity energy efficiency as well. A structured program will be established with appropriate initiatives, incentives and regulation, along with a well-resourced information collection and dissemination process. Local governments are encouraged to take an active part in demand-side management.

The GoSA has called its 2020 Low Emission Development Strategy (LEDS) “the beginning of our journey towards ultimately reaching a net zero economy by 2050”. The strategy is a response to the Paris Agreement’s call for countries to set out long-term climate strategies. It draws together existing policies, planning and research across economic sectors. Among these are the IRP, which is how South Africa plans its electricity supply.

The IRP guides the evolution of the South African electricity supply sector, in that it identifies the preferred electricity generation technologies to be built to meet projected electricity demand. It thus provides a mechanism for the GoSA to drive the diversification of the country’s electricity generation mix and promote the use of renewable energy and other low-carbon technologies.

South African measures are currently being implemented by government to address GHG emissions mitigation across the four key sectors of the economy, namely energy (supply and demand), industry, AFOLU and waste.

Decarbonization of energy supply will largely be driven through the Integrated Energy Plan, the Integrated Resource Plan and the Industrial Biofuels Strategy, issued by the Department of Energy, the predecessor of this Department.

South Africa’s Energy planning is guided by the Integrated Energy Plan (IEP). The Energy Act also mandates the Minister of Energy to develop, review and publish the IEP. The IEP approach analyses current energy supply and demand trends within the different sectors of the economy, across all energy carriers. It then uses this information along with assumptions about future demand and technology evolution to project the country’s future energy requirements under a variety of different scenarios, including those with emissions limits and different carbon prices. The IEP provides the overall future direction for the energy mix in South Africa, and thus represents a key instrument for driving the move to a low carbon future. The IEP update with a clear trajectory for the energy sector is critical to guiding overall energy planning for the country.

The Biofuels Industrial Strategy of the Republic of South Africa outlines the GoSA’s approach to the development of a biofuel sector in the country. The primary aim of the Strategy is to address poverty and unemployment, although the role in climate change mitigation in the liquid fuels sector is recognized. In support of the strategy, the Regulations Regarding the Mandatory Blending of Biofuels with Petrol and Diesel were published in the Government Gazette in August 2012. The Regulations describe the eligibility and process for purchasing biofuels for blending and specify the type of records that need to be kept.

In 2022, South Africa’s Department of Science and Innovation launched its Hydrogen Society Roadmap (HSRM) to, among other things, take advantage of and develop opportunities for direct replacement of hydrogen from natural gas by green hydrogen. The HSRM will focus on the creation of and export market for hydrogen and ammonia, providing power to the electricity grid, decarbonizing heavy-duty transport, decarbonization or energy intensive industry, and local manufacture of hydrogen products and fuel cell components.

A diverse range of actions that contribute to GHG emissions mitigation is being seen across the private sector in South Africa, with significant gains having been made in certain sectors on both energy efficiency and emissions mitigation.

The private sector action is being driven by a growth in understanding of the business opportunities, local and global market pressure and existing and forthcoming legislation. Actions range from adopting new products and processes to new service offerings to retrofitting of existing operations to make them more energy efficient and less emissions intensive. With suitable support this growth in action will continue.

President Ramaphosa signed into law on May 26, 2019, a carbon for company-level carbon taxes, signaling his commitment to mitigate climate change in South Africa. The carbon tax applies to entities that operate emission generation facilities at a combined installed capacity equal or above their carbon tax threshold. Each emissions generating facility must obtain a license to operate and report their emissions through the National Greenhouse Gas Emission Reporting Regulations of the Department of Environment, Forestry and Fisheries. The GoSA set the carbon tax at 120 ZAR (7.91 USD) per ton of carbon dioxide (CO2) but implemented a soft start including a phased rollout. The Minister of Finance in his February 2022 national budget  speech announced an increase to the carbon tax rate from USD 8 to USD 9 (R144), effective from 1 January 2022. He also provided more clarity on the tax announcing an increase in the carbon tax rate, a delay in the roll out of the second phase of the carbon tax, and a reference to the Climate Change Bill, under consideration in the parliament, that makes it compulsory for taxpayers to participate in the carbon budget system. To uphold South Africa’s COP26 commitments, the carbon tax rate will increase each year by at least one USD until it reaches USD 20 per ton of CO2. Starting in 2026, the carbon price increases more rapidly every year to reach at least USD 30 by 2030, and USD 120 beyond 2050. The carbon tax is being implemented in three phases, with the second phase originally scheduled to start in January 2023 having been postponed to the beginning of 2026. Taxpayers will continue to enjoy tax-free allowances which reduce their carbon tax liability. These allowances are given as rebates or refunds when the allowances being applied for are verified. The following allowances were permitted: 60 percent allowance for fossil fuel combustion; 10 percent trade exposure allowance; five percent performance allowance: five percent, carbon budget allowance; and a five percent offset allowance. The Act stipulates those multiple allowances can be granted to the same taxpayer. However, the total may not exceed 95 percent. Regulations regarding the trade exposure and performance allowances are determined by National Treasury.

The South African Air Quality Act of 2004 established minimum emissions standards (MES) for a wide range of industries and technologies from combustion installation to the metallurgical industry. The MES have been poorly enforced but there is growing pressure on the GoSA to hold companies accountable due to the negative impact air pollution is having on human health. In March 2022 the Pretoria High Court, in a suit brought by the Center for Environmental Rights, ruled that the Department of Forestry, Fisheries and the Environment (DFFE) has unreasonably delayed regulations to implement and enforce air pollution standards.

South Africa remains one of the most biodiverse countries in the world. The country is home to 10 percent of the world’s plant species and seven percent of its reptile, bird, and mammal species. Furthermore, endemism rates reach 56 percent for amphibians, 65 percent for plants and up to 70 percent for invertebrates. The GoSA has identified the biodiversity economy as a catalyst to address the triple challenge of unemployment, poverty, and inequality. The United Nations Development Programme (UNDP) has partnered with the GoSA through the Biodiversity Finance Initiative (BIOFIN) to pilot financial solutions which will advance the biodiversity economy agenda of the country.

According to the South African National Biodiversity Assessment, published by the South African National Biodiversity Institute (SANBI) in 2018, there are more than 418,000 biodiversity-related jobs in the country. This speaks volumes to the contribution of biodiversity towards addressing issues of unemployment in a post-COVID-19 agenda.

South Africa has been recognized globally for its efforts in providing fiscal incentives to promote the conservation of biodiversity. The GoSA, through the National Treasury, has provided fiscal incentives in the form of biodiversity tax incentives aiming to fulfil national environmental policy to preserve the environment. This is facilitated through the government-led regime of entering into agreements with private and communal landowners to formally conserve and maintain a particular area of land.

These agreements result in declared protected areas and are established through the national biodiversity stewardship initiative. These agreements result in environmental management expenses incurred by taxpayers as well as loss of economic rights and use. The biodiversity tax incentives present a mechanism to address the mitigation of management costs, address potential loss of production income due to land management restrictions, ensure the continued investment of landowners and communities in long term and effective land management. This mechanism ultimately assists in the sustainability of compatible commercial operations essential to the persistence of the area and the economy and livelihood growth required in South Africa.

The BIOFIN program in South Africa is currently working with the DFFE to promote the implementation of biodiversity tax incentives. The feasibility of the biodiversity tax incentives has been thoroughly tested through various projects including the partnership between SANBI and UNDP on the Biodiversity Land Use (BLU) project. The BLU project has successfully made progress in improving tax incentives for biodiversity stewardship. This project was instrumental in advocating for the 2014 amendment to the Income Tax Act that was published, which included a new Section 37D. Section 37D has provided much-needed expense relief as well as long-term financial sustainability to privately and communally owned and managed protected areas. Biodiversity tax incentives have proven to be a lifeline for many during the COVID-19 pandemic by enabling continued conservation and livelihood sustenance

BIOFIN considers biodiversity tax incentives as one of the financial mechanisms that can be used to promote biodiversity conservation and bolster the biodiversity economy. The granting of a tax relief encourages landowners (communal and private) to use their land in a sustainable manner whilst reducing the costs associated with managing a protected area. Biodiversity tax incentives effectively enhance the financial effectiveness of South Africa’s protected areas and their compatible commercial activities. They aid in sustainable biodiversity and ecosystem management. This is essential to the longevity of these areas and the creation of broader biodiversity economy livelihoods, the effective growth of small, medium and micro enterprises (SMMEs), and commercial operations linked to the wildlife economy. They also increase the protected area estate and area under responsible land management. Non-state investment in establishing and managing protected areas requires a suite of sustainable finance tools to mitigate management costs, offset loss of production income, increase land under protection, and ensure effective growth of enterprises engaged in the biodiversity economy.

South Africa recognizes the risk of general environmental decay and global warming and is committed to responding to the climate change challenge.

South Africa has taken strides in the environmental domain that support, either directly or indirectly, which include public procurement targets for renewable energy; provisions in the Energy Act; the new Green Economy Accord; and international commitments to climate change mitigation.

The GoSA’s REIPPPP is a government-led procurement program that aims to increase the share of renewable energy in the national grid by procuring energy from independent power producers (IPPs). It was issued by the Department of Energy in 2011 to replace a feed-in tariff program. A key objective of the program is economic development: using a competitive bidding process, renewable energy projects submitted are assessed on two factors, namely the tariff they offer (weighted 70 per cent) as well as their contribution to defined economic development criteria. The REIPPPP is an important component of South Africa’s overarching Integrated Resource Plan for electricity and makes clear targets for the procurement of renewable energy.

South Africa ranked 10th in the 2021 BNEF’s Climatescope rankings of most attractive markets for energy transition investments. In 2021, the MIT Technology Review’s Green Future Index, which ranks countries and territories on their progress and commitment toward building a low carbon future, ranked South Africa 47th of 76 countries. South Africa is listed at number 11 of 21 African nations ranked by the Global Green Growth Institute’s Global Green Growth Index.

South Africa has a robust anti-corruption framework, but laws are inadequately enforced, and public sector accountability is low. High-level political interference has undermined the country’s National Prosecuting Authority (NPA). “State capture,” a term used to describe systemic corruption of the state’s decision-making processes by private interests, is synonymous with the administration of former president Jacob Zuma. In response to widespread calls for accountability, President Ramaphosa launched four separate judicial commissions of inquiry to investigate corruption, fraud, and maladministration, including in the Public Investment Corporation, South African Revenue Service, and the NPA which have revealed pervasive networks of corruption across all levels of government. The Zondo Commission of Inquiry, launched in 2018, has published and submitted three parts of its report to President Ramaphosa and Parliament as of March 2022. Once the entire report is reased and submitted to Parliament, Ramaphosa stated his government will announce its action plan. The Zondo Commission findings reveal the pervasive depth and breadth of corruption under the reign of former President Jacob Zuma.

The Department of Public Service and Administration coordinates the GoSA’s initiatives against corruption, and South Africa’s Directorate for Priority Crime Investigations focuses on organized crime, economic crimes, and corruption. The Office of the Public Protector, a constitutionally mandated body, investigates government abuse and mismanagement. The Prevention and Combating of Corrupt Activities Act (PCCA) officially criminalizes corruption in public and private sectors and codifies specific offenses (such as extortion and money laundering), making it easier for courts to enforce the legislation. Applying to both domestic and foreign organizations doing business in the country, the PCCA covers receiving or offering bribes, influencing witnesses, and tampering with evidence in ongoing investigations, obstruction of justice, contracts, procuring and withdrawal of tenders, and conflict of interests, among other areas. Inconsistently implemented, the PCCA lacks whistleblower protections. The Promotion of Access to Information Act and the Public Finance Management Act call for increased access to public information and review of government expenditures. President Ramaphosa in his reply to the debate on his State of the Nation Address on 20 February 2018 announced Cabinet members would be subject to lifestyle audits despite several subsequent repetitions of this pledge, no lifestyle audits have been shared with the public or Parliament.

The South Africa government’s latest initiative is the opening of an Office on Counter Corruption and Security Services (CCSS) that seeks to address corruption specifically in ports of entry via fraudulent documents and other means.

South Africa is a signatory to the Anticorruption Convention and the OECD Convention on Combatting Bribery. South Africa is also a party to the SADC Protocol Against Corruption, which seeks to facilitate and regulate cooperation in matters of corruption amongst Member States and foster development and harmonization of policies and domestic legislation related to corruption. The Protocol defines ‘acts of corruption,’ preventative measures, jurisdiction of Member States, as well as extradition. http://www.sadc.int/files/7913/5292/8361/Protocol_Against_Corruption2001.pdf

To report corruption to the GoSA:

Advocate Busisiwe Mkhwebane
Public Protector
Office of the Public Protector, South Africa
175 Lunnon Street, Hillcrest Office Park, Pretoria 0083
Anti-Corruption Hotline: +27 80 011 2040 or +27 12 366 7000
http://www.pprotect.org  or customerservice@pprotect.org 

Or for a non-government agency:

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

South Africa has strong institutions and is relatively stable, but it also has a history of politically motivated violence and civil disturbance. Violent protests against the lack of effective government service delivery are common. Killings of, and by, mostly low-level political and organized crime rivals occur regularly. In May 2018, President Ramaphosa set up an inter-ministerial committee in the security cluster to serve as a national task force on political killings. The task force includes the Police Minister‚ State Security Minister‚ Justice Minister‚ National Prosecuting Authority, and the National Police Commissioner. The task force ordered multiple arrests, including of high-profile officials, in what appears to be a crackdown on political killings. Criminal threats and labor-related unrest have impacted U.S. companies in the past. In July 2021 the country experienced wide-spread rioting in Gauteng and KwaZulu-Natal provinces sparked by the imprisonment of former President Jacob Zuma for contempt of court during the deliberations of the “Zondo Commission” established to review claims of state-sponsored corruption during Zuma’s presidency. Looting and violence led to over USD 1.5 billion in damage to these province’s economies and thousands of lost jobs. U.S. companies were amongst those impacted. Foreign investors continue to raise concern about the government’s reaction to the economic impacts, citing these riots and deteriorating security in some sectors such as mining to be deterrents to new investments and the expansion of existing ones.

The unemployment rate in the third quarter of 2021 was 34.9 percent. The results of the Quarterly Labour Force Survey (QLFS) for the third quarter of 2021 show that the number of employed persons decreased by 660,000 in the third quarter of 2021 to 14.3 million. The number of unemployed persons decreased by 183,000 to 7.6 million compared to the second quarter of 2021. The youth unemployment (ages 15-24) rate was 66.5 percent in the third quarter of 2021.

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

There are 205 trade unions registered with the Department of Labor as of February 2019 (latest published figures), up from 190 the prior year, but down from the 2002 high of 504. According to the 2019 Fourth QLFS report from StatsSA, 4.071 million workers belonged to a union, an increase of 30,000 from the fourth quarter of 2018. Department of Labor statistics indicate union density declined from 45.2 percent in 1997 to 24.7 percent in 2014, the most recent data available. Using StatsSA data, however, union density can be calculated: The February 2020 QLFS reported 4.071 million union members and 13.868 million employees, for a union density of 29.4 percent.

The right to strike is protected on issues such as wages, benefits, organizational rights disputes, and socioeconomic interests of workers. Workers may not strike because of disputes where other legal recourse exists, such as through arbitration. South Africa has robust labor dispute resolution institutions, including the CCMA, the bargaining councils, and specialized labor courts of both first instance and appellate jurisdiction. The GoSA does not waive labor laws for foreign direct investment. The number of working days lost to strike action fell to 55,000 in 2020, compared with 1.2 million in 2019. The sharp decrease is attributable to the GoSA’s imposition of the National State of Disaster at the onset of the COVID-19 pandemic, and the accompanying lockdown that commenced on March 26, which forced many businesses either to close or lay off workers and implement wage cuts or shorten time of work. The fact that many wage negotiations were put on hold also led to a reduction in strike figures.

Collective bargaining is a cornerstone of the current labor relations framework. As of February 2019, the South Africa Department of Labor listed 39 private sector bargaining councils through which parties negotiate wages and conditions of employment. Per the Labor Relations Act, the Minister of Labor must extend agreements reached in bargaining councils to non-parties of the agreement operating in the same sector. Employer federations, particularly those representing small and medium enterprises (SMEs) argue the extension of these agreements – often reached between unions and big business – negatively impacts SMEs. In 2019, the average wage settlement resulted in a 7.1 percent wage increase, on average 2.9 percent above the increase in South Africa’s consumer price index (latest information available).

In his 2022 state of the nation address President Ramaphosa spoke of tax incentives for companies that employ youth in efforts to curb youth unemployment. In addition, President Ramaphosa announced measures to move funds in the national budget to address youth unemployment.

South Africa’s current national minimum wage is USD 1.45/hour (R21.69/hour), with lower rates for domestic workers being USD 1.27/hour (R19.09/hour). The rate is subject to annual increases by the National Minimum Wage Commission as approved by parliament and signed by President Ramaphosa. Employers and employees are each required to pay one percent of wages to the national unemployment fund, which will pay benefits based on reverse sliding scale of the prior salary, up to 58 percent of the prior wage, for up to 34 weeks. The Labor Relations Act (LRA) outlines dismissal guidelines, dispute resolution mechanisms, and retrenchment guideline. The Act enshrines the right of workers to strike and of management to lock out striking workers. It created the CCMA, which mediates and arbitrates labor disputes as well as certifies bargaining council impasses for strikes to be called legally.

The Basic Conditions of Employment Act (BCEA) establishes a 45-hour workweek, standardizes time-and-a-half pay for overtime, and authorizes four months of maternity leave for women. Overtime work must be conducted through an agreement between employees and employers and may not be more than 10 hours a week. The law stipulates rest periods of 12 consecutive hours daily and 36 hours weekly and must include Sunday. The law allows adjustments to rest periods by mutual agreement. A ministerial determination exempted businesses employing fewer than 10 persons from certain provisions of the law concerning overtime and leave. Farmers and other employers may apply for variances. The law applies to all workers, including foreign nationals and migrant workers, but the GoSA did not prioritize labor protections for workers in the informal economy. The law prohibits employment of children under age 15, except for work in the performing arts with appropriate permission from the Department of Labor.

The EEA, amended in 2014, protects workers against unfair discrimination on the grounds of race, age, gender, religion, marital status, pregnancy, family responsibility, ethnic or social origin, color, sexual orientation, disability, conscience, belief, political, opinion, culture, language, HIV status, birth, or any other arbitrary ground. The EEA further requires large- and medium-sized companies to prepare employment equity plans to ensure that historically disadvantaged South Africans, as well as women and disabled persons, are adequately represented in the workforce. More information regarding South African labor legislation may be found at: www.labour.gov.za/legislation 

Shelbie Legg
Trade and Investment Officer
877 Pretorius Street
Arcadia, Pretoria 0083
+27 (0)12-431-4343
LeggSC@state.gov