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Angola

Executive Summary

The Angolan economy emerged from five straight years of recession with slight GDP growth of 0.7 percent in 2021, thanks primarily to growth in the non-oil sector. The government forecasts more substantial growth of 2.4 percent in 2022. The oil and gas sector remains the key source of government revenue despite declining oil production and the government should benefit from higher than budgeted oil prices in 2022. The growth in non-oil sectors such as manufacturing, agriculture, transportation will be bolstered by increased demand from the lifting of COVID restrictions in late 2021 and early 2022.

The Angolan government has maintained a reform agenda since the 2017 election of President Joao Lourenço. His administration has adopted measures to improve the business environment and make Angola more attractive for investment. Angola completed the IMF’s Extended Fund Facility in December 2021, demonstrating an ability to commit to and carry out difficult fiscal and macroeconomic reforms, despite the COVID-19 pandemic. The government received three credit rating upgrades between September 2021 and early 2022.

In addition to the Privatization Program (PROPRIV), revision of the Private Investment Law, and updated Public Procurement law, the government has taken steps to recover misappropriated state assets – the Attorney General’s Office claims just under $13 billion since 2018 – and to uproot corruption. Through the Private Investment and Export Promotion Agency (AIPEX), Angola seeks to connect foreign investors with opportunities across the private sector, with PROPRIV, and a wide range of available state-owned enterprises and other assets. The public procurement process has also become more transparent. Angola plans to present its candidacy to join the Extractive Industries Transparency Initiative in 2022 to increase transparency in the oil, gas, and mineral resource sectors.

Despite the government’s efforts to address corruption, its prevalence remains a key issue of concern for investors. Angola’s infrastructure requires substantial improvement; which the government is seeking to address by attracting investment public-private partnerships to improve and manage of ports, railroads, and key energy infrastructure. The justice system and other administrative processes remains bureaucratic and time-consuming. Unemployment (32.9 percent in the fourth quarter of 2021) and inflation (which reached 27 percent in 2021) remain high. There is limited technical training, English-speaking skills are generally low. Skilled labor levels are also low, though the government has attempted to address the issue through training and apprenticeship programs.

Overall FDI increased by $2.59 billion in 2020, the last full year of reporting, from 2019.

The government has committed to reaching 70 percent installed renewable energy by 2025 and has recognized the risks of climate change for Angola. To reach its renewable energy goal, the government has signed deals with U.S. companies on the installation of solar and hydro capacity worth hundreds of millions of dollars.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 136 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 132 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $-578 million https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 $2140 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

There are currently 81 public enterprises listed on the State Institute of Asset and Shares Management website; 70 are wholly owned by the state, 8 with majority-ownership for the state and 3 with minority stakes for the government. A list of all of Angola’s SOEs can be found at the following link: https://igape.minfin.gov.ao/PortalIGAPE/#!/sector-empresarial-publico/universo-do-sep . Based on the IMF definition of government owning at least 50 percent equity and revenue being greater than 1 percent of GDP, SONANGOL, the state oil company, and Sodiam, the state diamond company qualify as SOEs.

There is no law mandating preferential treatment to SOEs, but in practice they have access to inside information and credit. Currently, SOEs are not subject to budgetary constraints and quite often exceed their capital limits. All SOEs in Angola are required to have boards of directors, and most board members are affiliated with the government.

Other public enterprises operate in the agribusiness, oil and gas, financial services, and construction sectors as well as others.

The GRA considers SOE debt as indirect public debt, and only accounts in its state budget for direct government debt, thus effectively not reflecting some substantial obligations in fact owed by the government. President Lourenço has launched various reforms to improve financial sector transparency, enhance efficiency in the country’s SOEs as part of the National Development plan 2018-2022 and Macroeconomic Stability Plan

Angola is not a party to the WTO’s Government Procurement Agreement (GPA). Angola does not adhere to the OECD guidelines on corporate governance for SOEs.

8. Responsible Business Conduct

There is a general awareness of expectations of or standards for responsible business conduct (RBC) or obligation to conduct due diligence to ensure no harm with regards to environment, social and governance issues. Projects that could have an impact on the environment are subject to an environmental impact assessment (EIA) depending on their nature, size or location, on a case-by-case basis. Presidential Decree No 117/20 of April 22, 2021 establishes the:

  • Rules and procedures for EIAs for public and private projects.
  • Environmental licensing procedure for activities that are likely to cause significant environmental and social impacts.
  • Applicable fees.
  • Fines for non-compliance.

The government has few initiatives to promote responsible business conduct. In March 2019, the UNDP launched the National Network of Corporate Social Responsibility, “RARSE,” to create a platform to reconcile responsible business conduct with the needs of the population. The government, through the Ministry of Education, also held a campaign under the theme, “Countries that have a good education, that enforce laws, condemn corruption, privilege and practice citizenship, have as a consequence successful social and economic development” in 2020.

The government has enacted laws to prevent labor by children under 14 and forced labor, although resource limitations hinder adequate enforcement. In June 2018, the government passed a National Action Plan for the Eradication of Child Labor (PANETI) (2018-2022) to eradicate the worst forms of child labor. This plan was updated on March 17, 2022 and is implemented by the Multisectoral Commission for the Prevention and Eradication of Child Labor. The National Plan aims to eliminate child labor in Angola, by creating strategies, prevention policies, a favorable environment for the harmonious development of children, and creating institutional capacity to solve the problem of worst forms of child labor in the country.

With limitations, the laws protect the rights to form unions, collectively bargain, and strike. Government interference in some strikes has been reported. The Ministry of Public Administration, Employment, and Social Security has a hotline for workers who believe their rights have been infringed. Angola’s Chamber of Commerce and Industry established the Principles of Ethical Business in Angola.

The GRA does not fully meet the minimum standards for the elimination of trafficking in persons but is made significant efforts to do so, especially considering the impact of the COVID-19 pandemic on its anti-trafficking capacity. Those efforts led to Angola remain on Tier 2 in 2021. Some of the efforts taken by Angolan authorities include convicting multiple traffickers, including five complicit officials, and sentencing all to imprisonment; offering long-term protective services that incentivized victims to participate in trials against their traffickers; dedicating funds specifically for anti-trafficking efforts, including for implementation of the national action plan; and conducting public awareness campaigns against trafficking.

In 2015, Angola organized an interagency technical working group to explore Angola’s possible membership in the Voluntary Principles on Security and Human Rights (VPs) and the Extractive Industries Transparency Initiative (EITI). Angola formally announced its intention to join the EITI in September 2020 and in November 2021 announced its intention to formally present its candidacy in March 2022. Angola has been a member of the Kimberley Process (KP) since 2003 and chaired the KP in 2015. Angola is not a party to the WTO’s GPA and does not adhere to the OECD guidelines on corporate for SOEs.

9. Corruption

Corruption remains a strong impediment to doing business in Angola and has had a corrosive impact on international market investment opportunities and on the broader business climate. The Lourenço administration has developed a comprehensive anti-corruption and anti-money laundering legal framework, but implementation remains a challenge. Angola has made several arrests of former officials and family members of the former president who were accused of embezzling state funds and has made a concerted effort to recover assets it accuses those individuals of stealing.

Some of the recent anti-corruption legislation includes:

  • The revised Criminal Law Code and Criminal Procedure Code, which both entered into force in February 2021: The updated laws include corporate criminal liability; harsh penalties for active and passive corruption by public officials, their family members, and political parties; criminalization of private sector corruption; and seizure of proceeds.
  • The updated Public Procurement Law, which entered into force on December 23, 2020, emphasizes the management of potential conflicts of interest in awarding public contracts, including the requirement for foreign investors to have a local partner, which historically made procurement ripe for bribery and kickbacks.
  • The Whistleblower Protection Law, which came into force on January 1, 2020, provides a protection system – including anonymity – for victims, witnesses, and the accused during judicial proceedings that involve corruption and/or money laundering allegations.

The government does not require the private sector to establish internal codes of conduct and does not provide a mechanism for reporting irregularities related to public officials.

U.S. firms in Angola are aware of cases of corruption in Angola despite efforts to combat the phenomenon and view it as a significant impediment to FDI. Corruption in Angola is pervasive in public institutions, government procurement customs and taxation. Foreign investors seeking to do business in Angola must remain mindful of the corruption risks and the extraterritorial reach of the U.S. FCPA.

10. Political and Security Environment

Angola maintains a stable political environment, though demonstrations and workers strikes occur with regularity, particularly in the last two years due to increased socio-economic difficulty. Politically motivated violence is not a high risk, and incidents are rare. The Front for the Liberation of the Enclave of Cabinda—Military Position (FLEC MP) based in the northern province of Cabinda threatened Chinese workers in Cabinda in 2015 and claimed in 2016 that they would return to active armed struggle against the Angolan government forces. No attacks have since ensued and the FLEC has remained relatively inactive to date.

Local elections were anticipated to take place in 2020 but have not yet occurred due to the COVID-19 pandemic and the lack of key legislation governing the elections. General elections are scheduled to occur in August 2022. Young people take to the streets occasionally to protest economic hardship and what they view as unrealized political pledges. Large pockets of the population live in poverty without adequate access to basic services. Crimes of opportunity such as muggings, robberies and car-jackings occur across the country.

11. Labor Policies and Practices

In the fourth quarter of 2021, the unemployment rate for economically active Angolans 15 years and older – who represent half of Angola’s 33 million people – was 32.9 percent. The labor market in Angola is largely characterized by high unemployment and a high level of informality. There is also a deficit of skilled and well-trained labor, especially in the industrial sector due to the low level of vocational training. The foreign/migrant labor force bridges the gap in specialized labor. The Angolan labor force also has limited technical skills, English language capabilities, and management training.

Companies in the construction and manufacturing sectors are significant sources of formal and informal mechanisms for workers to acquire skills and abilities particularly relevant to public and private construction works and manufacturing industry.

In the fourth quarter of 2021, the economically active population in Angola age 15 years and older was estimated to be approximately 16.2 million people (48.3 percent male and 51.7 female). Over 80 percent of the employed population in Angola was estimated to work in the informal sector as of the fourth quarter of 2021, equal to around 8.8 million people out of the 10.9 million people 15 years of age and older and employed in the same period. Informal employment was highest among Angolans aged 15-24 years and 65 years or older – reaching over 90 percent. The unemployment rate for women was also 90 percent for women and 71.5 percent for men.

There are gaps in compliance with international labor standards which may pose a reputational risk to investors. Children are sometimes employed in agriculture, construction, fishing, and coal industries. There have been reports of forced labor in agriculture, construction, artisanal diamond mining, and domestic work, each sometimes as a result of human trafficking. Additional information is available in the 2021 Trafficking in Persons Report, (https://www.state.gov/reports/2021-trafficking-in-persons-report/angola/), 2020 Country Report on Human Rights Practices (https://www.state.gov/reports/2021-country-reports-on-human-rights-practices/angola/), and 2020 Findings on the Worst Forms of Child Labor.

The General Labor Law 7 of September 15, 2015, governs all aspects of the employment relationship and provides guidelines on employment adjustments to respond to fluctuations in market or economic conditions. The law differentiates between layoffs and firing. However, there are unemployment insurance mechanisms in place or social safety net programs for workers laid off for economic reasons. All forms of termination must rely on Social Security contributions along the years of employment in due course as the benefits are not readily available at termination but only when the beneficiaries reach retirement age or become physically impaired to maintain employment status.

All employers and unions may enter into collective bargaining agreements under the Law on the Right to Collective Bargaining (20-A/92). Where there is no union representation, the employees may set up an ad hoc commission aimed at negotiating and concluding a collective bargaining agreement with the employer, subject to complex requirements. If more than one union represents an employer’s employees, the unions must set up a joint negotiation committee composed of representatives from each union in the same proportion as the employees are represented.

The negotiation process for a collective bargaining agreement must be finalized within 90 days of the employer receiving the union/employees’ initial proposal. If this process is unsuccessful, the Law on the Right to Collective Bargaining provides for alternative dispute resolution mechanisms to resolve collective labor conflicts – notably conciliation, mediation and arbitration. Unions/employees may call a strike if the negotiations are deadlocked when the deadline for reaching an agreement passes.

A collective bargaining agreement requires all the parties to maintain social peace while it is in force, rendering illegal any strike action or collective labor conflict during that period. Once the effective period has elapsed, the agreement shall continue to bind the parties until it is replaced by a new or amended collective bargaining agreement. Collective labor disputes are to be settled through compulsory arbitration by the Ministry of Labor, Public Administration and Social Security. The law does not prohibit employer retribution against strikers, but it does authorize the government to force workers back to work for “breaches of worker discipline” or participation in unauthorized strikes. The law prohibits anti-union discrimination and stipulates that worker complaints be adjudicated in the labor court. Under the law, employers are required to reinstate workers who have been dismissed for union activities.

14. Contact for More Information

Dorcas Makaya
Economic Specialist
United States Embassy Luanda
+244 222 641 000
MakayaDC@state.gov

Democratic Republic of the Congo

Executive Summary

The Democratic Republic of the Congo (DRC) is the largest country in Sub-Saharan Africa and one of the richest in the world in terms of natural resources. With 80 million hectares (197 million acres) of arable land and 1,100 minerals and precious metals, the DRC has the resources to achieve prosperity for its people. Despite its potential, the DRC often cannot provide adequate food, security, infrastructure, and health care to its estimated 100 million inhabitants, of which 75 percent live on less than two dollars a day.

The ascension of Felix Tshisekedi to the presidency in 2019 and his government’s commitment to attracting international, and particularly U.S. investment, have raised the hopes of the business community for greater openness and transparency. In January 2021, the DRC government (GDRC) became eligible for preferential trade preferences under the Africa Growth and Opportunity Act (AGOA), reflecting progress made on human rights, anti-corruption, and labor. Tshisekedi created a presidential unit to address business climate issues. In late 2020 Tshisekedi ejected former President Joseph Kabila’s party from the ruling coalition and in April 2021 he appointed a new cabinet.

Overall investment is on the rise, fueled by multilateral donor financing and private domestic and international finance. The natural resource sector has historically attracted the most foreign investment and continues to attract investors’ attention as global demand for the DRC’s minerals grows. The primary minerals sector is the country’s main source of revenue, as exports of copper, cobalt, gold, coltan, diamond, tin, and tungsten provide over 95 percent of the DRC’s export revenue. The highly competitive telecommunications industry has also experienced significant investment, as has the energy sector through green sources such as hydroelectric and solar power generation. Several breweries and bottlers, some large construction firms, and limited textiles production are active. Given the vast needs, there are commercial opportunities in aviation, road, rail, border security, water transport, and the ports. The agricultural and forestry sectors present opportunities for sustainable economic diversification in the DRC, and companies are expressing interest in developing carbon credit markets to fund investment.

Overall, businesses in the DRC face numerous challenges, including poor infrastructure, a predatory taxation system, and corruption. The COVID-19 pandemic slowed economic growth and worsened the country’s food security, and the Russia’s attacks on Ukraine have raised global prices on imported foods and gasoline. Armed groups remain active in the eastern part of the country, making for a fragile security situation that negatively affects the business environment. Reform of a non-transparent and often corrupt legal system is underway. While laws protecting investors are in effect, the court system is often very slow to make decisions or follow the law, allowing numerous investment disputes to last for years Concerns over the use of child labor in the artisanal mining of copper and cobalt have served to discourage potential purchasers. USG assistance programs to build capacity for labor inspections and enforcement are helping to address these concerns.

The government’s announced priorities include greater efforts to address corruption, election reform, a review of mining contracts signed under the Kabila regime, and improvements to mining sector revenue collection. The economy experienced increased growth in 2021 based on renewed demand for its minerals.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 169 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index N/A N/A https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2021 $25 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita (USD) 2020 $550 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

8. Responsible Business Conduct

The DRC has not defined Responsible Business Conduct (RBC) for most industries, but the Labor Code includes provisions to protect employees, and there are legal provisions that require companies to protect the environment. The Global Compact Network DRC, a public-private consortium affiliated with the United Nations, encourages companies operating locally to adopt sustainable and socially responsible policies.

The GDRC has taken actions of limited impact to support RBC by encouraging companies to develop and adhere to a code of ethics and respect for labor rights and the environment. However, the DRC does not possess a legal framework to protect the rights of consumers, and there are no existing domestic laws to protect individuals from adverse business impacts.

Reports of children working in the DRC’s artisanal mines has led to international pressure to find ways to ensure the DRC’s minerals supply chain is free of child labor. Concerns over the use of child labor in the artisanal mining of copper and cobalt have led to worries about the use of Congolese resources served to discourage potential purchasers. USG assistance programs to build capacity for labor inspections and enforcement are helping to address these concerns.

Development pressures have resulted in reports of violations of environmental rights. In one case, a prominent local businessman is seeking to develop a dam in a national park in the southeastern province of Haut Katanga. There is a case in eastern DRC of a local developer pressuring an environmental defender to end his activism.

There are no known high-profile and controversial cases of private sector entities having a negative impact on human rights.

With regard to human rights, labor rights, consumer protection, environmental protection, and other laws/regulations designed to protect individuals from the adverse effects of business, the GDRC faces many challenges in enforcing domestic laws effectively and fairly.

The GDRC has no known corporate governance, accounting, or executive compensation standards to protect shareholders.

There are independent NGOs, human rights organizations, environmental organizations, worker/trade union organizations, and business associations that promote or monitor RBC and report misconduct and violation of good governance practices. They monitor and/or defend RBC and are able to do their work freely.

The DRC has adopted OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas as defined by the United Nations Group of Experts, as well as various resolutions of the UN Security Council related to business and human rights in the Congolese mining sector. There are also existing domestic measures requiring supply chain due diligence for companies that source minerals that may originate from conflict-affected areas in DRC.

The DRC participates in the Extractive Industries Transparency Initiative (EITI), and the Voluntary Principles on Security and Human Rights. More information is available at https://www.itierdc.net/ . The DRC publishes reports on its revenue from natural resources. There are domestic transparency measures requiring disclosure of payments to governments and of RBC/Business and Human Rights policies or practices. The mining code provides domestic transparency measures requiring the disclosure of payments made to governments, though they appear to be infrequently enforced. PROMINES, a technical parastatal body financed by the GDRC and the World Bank, aims to improve the transparency of the artisanal mining sector. Amnesty International and Pact Inc. have also published reports related to RBC in the DRC mining sector.

The DRC has a private security industry but is not a party to the Montreux Document on Private Military and Security Companies. It does not support the International Code of Conduct or Private Security Service Providers, nor does it participate in the International Code of Conduct for Private Security Service Providers’ Association (ICoCA).

9. Corruption

The DRC constitution and legal code include laws intended to fight corruption and bribery by all citizens, including public officials. The Tshisekedi government has used public prosecutions of high-level officials and the creation of an anti-corruption unit (APLC) to improve the DRC’s anti-corruption enforcement. Prosecutions have led to jail terms but often subsequent early releases. The 2021 edition of Transparency International’s Corruption Perceptions Index (CPI) ranked the DRC 169th out of 180 countries, with a score of 19 out of 100, up from 18 out of 100 the previous year.

Anti-corruption laws extend to family members of officials and political parties. In March 2020, President Tshisekedi created the National Agency for the Prevention and Fight Against Corruption (APLC). Currently corruption investigations are ongoing for three Managing Directors of SOEs.

The country has laws or regulations to address conflicts of interest in the awarding of public contracts or procurement. Conflicts of interest committed in the context of a public contract and a delegation of public service are punishable by a fine of USD 12,500 to USD25,000.

The government through regulatory authorities encourages or requires private companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials.

Law 017-2002 of 2002, establishes the code of conduct for public officials, which provides rules of conduct in terms of moral integrity and professional ethics and the fight against corruption in socio-professional environments. Private companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials.

The DRC is a signatory to both the UN Convention against Corruption (UNCAC) and the African Union Convention on Preventing and Combating Corruption but has not fully ratified the latter. The DRC is not a signatory to the OECD Convention on Combating Bribery. The DRC ratified a protocol agreement with the Southern African Development Community (SADC) on fighting corruption.

NGOs such as the consortium “The Congo is Not for Sale,” have an important role in revealing corrupt practices, and the law protects NGOs in a whistleblower role. However, in 2021 whistleblowers from Afriland First Bank that alleged to the international NGO Global Witness interaction between sanctioned individual Dan Gertler and the bank were subjected to prosecution and, in a private proceeding, sentenced to death in absentia. Although the government worked with Global Witness to contest the case, it remained unresolved as of early 2022. NGOs report governmental or other hindrance to their efforts to publicize and/or address corruption. The Observatory of Public Expenditure (ODEP), which works with civil society organizations, raises awareness of the social impact of the execution of finance laws in order to improve transparency and accountability in the management of public finances; to participate in the fight against corruption; and to promote citizen involvement in each stage of the budget process.

U.S. firms see corruption and harassment by local security forces as one of the main hurdles to investment in the DRC, particularly in the awarding of concessions, government procurement, and taxation treatment.

10. Political and Security Environment

The DRC has a history of armed group activity, sometimes of a politicized nature and particularly in the east of the country, and of elections-related violence and civil unrest. The 2018 election, which took place after years of delay marked by protests that were in some instances violently repressed, was marred by irregularities, but most citizens accepted the announced result, and the election aftermath was calm. In January 2019, Felix Tshisekedi became President in the DRC’s first peaceful transition of power. Following President Felix Tshisekedi’s establishment of a new political alliance known as the “Sacred Union,” Tshisekedi appointed Jean-Michel Sama Lukonde as Prime Minister in April 2021.

The security situation continues to be a concern and the U.S. Embassy, through its travel advisories ( https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/DemocraticRepublicoftheCongoDRC.html), keeps a list of areas where it does not recommend travel by U.S. citizens. The security situation in eastern DRC remains unstable. Some 15-20 significant armed groups are present and inter-communal violence can affect the political, security, and humanitarian situation. Several towns in eastern DRC continue to be reported to be under attack by armed groups or temporarily under their control.

The foreign terrorist organization-designated ISIS-DRC (aka the Allied Democratic Forces (ADF) rebel group) in eastern DRC is one of the country’s most notorious and intractable armed groups and its members have shown no interest in demobilizing. In May 2021, Tshisekedi declared a “state of siege” – effectively martial law – in North Kivu and Ituri provinces, installing military governors and ramping up Armed Forces of the Democratic Republic of the Congo (FARDC) operations against ISIS-DRC/ADF and other armed groups. The state of siege has been accompanied by problematic human rights practices; the United Nations Stabilization Mission in the Democratic Republic of the Congo (MONUSCO) has documented violations including extrajudicial killings by FARDC and police, while military governments have restricted civil society and political activists and prosecuted some for criticizing the state of siege.

US citizens and interests are not being specifically targeted by armed groups, but anyone can easily fall victim to violence or kidnapping by being in the wrong place at the wrong time. The Armed Conflict Location and Event Dataset tracks political violence in developing countries, including the DRC, https://acleddata.com/ . Kivu Security Tracker ( https://kivusecurity.org/ ) is another database for information on attacks in eastern DRC. The Department of State continues to advise U.S. citizen travelers to review the Embassy’s Travel Advisory and country information page ( https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/DemocraticRepublicoftheCongoDRC.html) for the latest security information.

11. Labor Policies and Practices

The DRC labor market has a large, low-skilled workforce with high youth unemployment. Women make up 47 percent of the labor force. Expatriates frequently work in jobs requiring technical training in the key mining sector. Approximately 85 percent of the nonagricultural labor force works in the informal sector. About 60 percent of the total labor force works in agriculture.

Informal employment dominates the labor market in the DRC. According to the World Bank, the DRC has one of the highest rates of informal work in the world, with about 80 percent of urban workers engaged in the informal economy. The Congolese trade union confederation estimates that the sector employs 97.5 percent of the country’s workforce. Informal workers in the artisanal mining sector have raised worries about the use of child labor in mining, forcing companies to go through an accreditation system to show they do not use child labor. It takes many forms and is characterized by the non-respect or non-application of labor standards related to minimum wage, working hours, safety and other social standards related to the social health system, retirement, etc. The informal sector’s share of GDP is estimated at nearly 55 percent. The EGI-ODD results show that slightly more than 91 percent of jobs in the non-agricultural sectors are informal, meaning that these workers do not have a contract, receive paid vacations, or family allowances. By gender, 94 percent of women’s jobs in the nonagricultural sector are informal, compared to 87.7 percent for men.

DRC labor law stipulates that for companies with more than 100 employees, ten percent of all employees must be local. If the general manager is a foreigner, his or her deputy or secretary general must be a Congolese national. The government may waive these provisions depending on the sector of activity and available expertise. There are no onerous conditionality, visa, residency, or work permit requirements that impede the mobility of foreign investors and their employees.

The DRC faces a shortage of skilled labor in all sectors. There are few formal vocational training programs, although Article 8 of the labor law requires all employers to provide training to their employees. To address the high unemployment rate, the GDRC has enacted a policy giving Congolese preference in hiring over expatriates. Laws prevent companies from laying off workers in most cases without compensation. These restrictions discouraged hiring and encouraged the use of temporary contracts instead of permanent employment. There is no government safety net to compensate laid-off workers.

There are no labor laws waived in order to attract or retain investment, nor are there additional/different labor law provisions in special economic zones, foreign trade zones, or free ports compared to the general economy. The law grants and guarantees equal treatment to all national and foreign investors.

Congolese law bans collective bargaining in some sectors, particularly by civil servants and public employees, and the law does not provide adequate protection against anti-union discrimination. While the right to strike is recognized, there are provisions which require unions to obtain authorization and to undergo lengthy mandatory arbitration and appeal procedures before going on strike. Unions often strike to obtain wage increases or payment of back wages and seek to make gains through negotiation with employers.

The DRC government has ratified all eight core International Labor Organization (ILO) conventions, but some Congolese laws continue to be inconsistent with the ILO Forced Labor Convention.

No strikes in the past year have posed an investment risk and government’s reaction.

According to some businesses, the government does not effectively enforce relevant employment laws. DRC law prohibits discrimination in employment and occupation based on race, gender, language, or social status. The law does not specifically protect against discrimination based on religion, age, political opinion, national origin, disability, pregnancy, sexual orientation, gender identity, or HIV-positive status. Additionally, no law specifically prohibits discrimination in the employment of career public service members.

Labor law defines different standard workweeks, ranging from 45 to 72 hours, for various jobs, and prescribes rest periods and premium pay for overtime. Employers in both the formal and informal sectors often do not respect these provisions. The law does not prohibit compulsory overtime.

The labor code specifies health and safety standards, but the government does not effectively enforce labor standards in the informal sector, and enforcement is uneven to non-existent in the formal sector. The Ministry of Labor employs 200 labor inspectors, but the Labor Inspector General reports that funding is not enough to facilitate the conduct of efficient labor inspections.

No new labor related laws or regulations have been enacted in the past year, and no bills are pending.

14. Contact for More Information

Kevin Ngunza
Commercial Assistant
U.S. Embassy Kinshasa
+243 810 556 0151
NgunzaKM@state.gov

Egypt

Executive Summary

The Egyptian government continues to make progress on economic reforms, and while many challenges remain, Egypt’s investment climate is improving.  Thanks in part to the macroeconomic reforms it completed as part of a three-year, $12-billion International Monetary Fund (IMF) program from 2016 to 2019, Egypt was one of the fastest-growing emerging markets prior to the COVID-19 outbreak.  Egypt was also the only economy in the Middle East and North Africa to record positive economic growth in 2020, despite the COVID-19 pandemic and thanks in part to IMF assistance totaling $8 billion. Increased investor confidence and high real interest rates have attracted foreign portfolio investment and increased foreign reserves.  In 2021, the Government of Egypt (GoE) announced plans to launch a second round of economic reforms aimed at increasing the role of the private sector in the economy, addressing long-standing customs and trade policy challenges, modernizing its industrial base, and increasing exports. The GoE increasingly understands that attracting foreign direct investment (FDI) is key to addressing many of its economic challenges and has stated its intention to create a more conducive environment for FDI.  FDI inflows grew 11 percent between 2018 and 2019, from $8.1 to $9 billion, before falling 39 percent to $5.5 billion in 2020 amid sharp global declines in FDI due to the pandemic, according to data from the Central Bank of Egypt and the United Nations Commission on Trade and Development (UNCTAD). UNCTAD ranked Egypt as the top FDI destination in Africa between 2016 and 2020.

Egypt has passed several regulatory reform laws, including a new investment law in 2017; a “new company” law and a bankruptcy law in 2018; and a new customs law in 2020.  These laws aim to improve Egypt’s investment and business climate and help the economy realize its full potential.  The 2017 Investment Law is designed to attract new investment and provides a framework for the government to offer investors more incentives, consolidate investment-related rules, and streamline procedures.  The 2020 Customs Law is likewise meant to streamline aspects of import and export procedures, including through a single-window system, electronic payments, and expedited clearances for authorized companies.

Egypt will host the United Nations Climate Change Conference, COP 27, in November 2022. Recognizing the immense challenges the country faces from the impacts of climate change, government officials announced that the Cabinet will appropriate 30 percent of government investments in the 2022/2023 budget to green investments, up from 15 percent in the current fiscal year 2021/2022, and that by 2030 all new public sector investment spending would be green. The GoE accelerated plans to generate 42 percent of its electricity from renewable sources by five years, from 2035 to 2030, and is prioritizing investments in solar and wind power, green hydrogen, water desalination, sustainable transportation, electric vehicles, smart cities and grids, and sustainable construction materials. The government continues to seek investment in several mega projects, including the construction of smart cities, and to promote mineral extraction opportunities.  Egypt intends to capitalize on its location bridging the Middle East, Africa, and Europe to become a regional trade and investment gateway and energy hub and hopes to attract information and communications technology (ICT) sector investments for its digital transformation program.

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

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 117 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 94 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, on a
historical-cost basis
2020 USD 11,206 http://www.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 USD 3,000 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

State and military-owned companies compete directly with private companies in many sectors of the Egyptian economy. Although Public Sector Law 203 of 1991 states that state-owned enterprises (SOEs) should not receive preferential treatment from the government or be accorded exemptions from legal requirements applicable to private companies, in practice SOEs and military-owned companies enjoy significant advantages, including relief from regulatory requirements. IMF reports show that Egyptian SOEs have an average return on assets of just two percent and are only one-fourth as productive as private companies. Some 40 percent of SOEs are loss-making, despite access to subsidized capital and owning assets worth more than 50 percent of GDP. Profitable SOEs, meanwhile, tend to exploit a natural monopoly or hold exclusive rights to public assets. Few of Egypt’s 300 state-owned companies, 645 joint ventures, and 53 economic authorities release regular financial statements.

8. Responsible Business Conduct

Responsible Business Conduct (RBC) programs have grown in popularity in Egypt over the last ten years.  Most programs are limited to multinational and larger domestic companies as well as the banking sector and take the form of funding and sponsorship for initiatives supporting entrepreneurship and education and other social activities.  Environmental and technology programs are also garnering greater participation.  The Ministry of Trade has engaged constructively with corporations promoting RBC programs, supporting corporate social responsibility conferences and providing Cabinet-level representation as a sign of support to businesses promoting RBC programming.

A number of organizations and corporations work to foster the development of RBC in Egypt.  The American Chamber of Commerce has an active corporate social responsibility committee.  Several U.S. pharmaceutical companies are actively engaged in RBC programs related to Egypt’s hepatitis-C epidemic.  The Egyptian Corporate Responsibility Center, which is the UN Global Compact local network focal point in Egypt, aims to empower businesses to develop sustainable business models as well as improve the national capacity to design, apply, and monitor sustainable responsible business conduct policies.  In March 2010, Egypt launched an environmental, social, and governance index, the second of its kind in the world after India’s, with training and technical assistance from Standard and Poor’s.  Egypt does not participate in the Extractive Industries Transparency Initiative.  Public information about Egypt’s extractive industries remains limited to the government’s annual budget.

9. Corruption

Egypt has a set of laws to combat corruption by public officials, including an Anti-Bribery Law (articles 103 through 111 of Egypt’s Penal Code), an Illicit Gains Law (Law 62 of 1975 and subsequent amendments in Law 97 of 2015), and a Governmental Accounting Law (Law 27 of 1981), among others.  Countering corruption remains a long-term focus. However, corruption laws have not been consistently enforced.  Transparency International’s Corruption Perceptions Index ranked Egypt 117 out of 180 countries in its 2021 survey.  Past surveys from Transparency International reported that nearly half of Egyptians said they had paid a bribe to obtain a public service.

Some private companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials. There is no government requirement for private companies to establish internal codes of conduct to prohibit bribery.

Egypt ratified the United Nations Convention against Corruption in 2005.  It has not acceded to the OECD Convention on Combating Bribery or any other regional anti-corruption conventions.

While NGOs are active in encouraging anti-corruption activities, dialogue between the government and civil society on this issue is almost non-existent. In a 2009 study demonstrating a trend that continues to this day, the OECD found that while government officials publicly asserted they shared civil society organizations’ goals, they rarely cooperated with NGOs, and applied relevant laws in a highly restrictive manner against NGOs critical of government practices.  Media was also limited in its ability to report on corruption, with Article 188 of the Penal Code mandating heavy fines and penalties for unsubstantiated corruption allegations.

U.S. firms have identified corruption as an obstacle to FDI in Egypt. Companies might encounter corruption in the public sector in the form of requests for bribes, using bribes to facilitate required government approvals or licenses, embezzlement, and tampering with official documents.  Corruption and bribery are reported in dealing with public services, customs (import license and import duties), public utilities (water and electrical connection), construction permits, and procurement, as well as in the private sector.  Businesses have described a dual system of payment for services, with one formal payment and a secondary, unofficial payment required for services to be rendered.

10. Political and Security Environment

Stability and economic development remain Egypt’s priorities. The Egyptian government has taken measures to eliminate politically motivated violence while also limiting peaceful protests and political expression. Egypt’s presidential elections in March 2018 and senatorial elections in August 2020 proceeded without incident. In 2020 and 2021, all terrorist attacks took place in the Sinai Peninsula.  Nevertheless, terrorist plans to target civilians, tourists, and security personnel in mainland Egypt and the greater Cairo region remained a concern. The government has been conducting a comprehensive counterterrorism offensive in the Sinai since early 2018 in response to terrorist attacks against military installations and personnel by ISIS-affiliated militant groups.

11. Labor Policies and Practices

Official statistics put Egypt’s labor force at approximately 29 million, with an official unemployment rate of 7.3 percent at the end of 2020. Women make up 23.8 percent of the Egyptian labor force and have an unemployment rate of 17.8 percent as of late 2021. Accurate figures are difficult to determine and verify given Egypt’s large informal economy, in which some 62 percent of the non-agricultural workforce is engaged, according to International Labor Organization (ILO) estimates.

The government bureaucracy and public sector enterprises are substantially over-staffed compared to the private sector and international norms. According to the World Bank, Egypt has the highest number of government workers per capita in the world, although state statistics agency CAPMAS announced in March 2022 that public sector employment dropped 8.6 percent in 2021 from 2020, or 15 percent from 2017. Businesses highlight a mismatch between labor skills and market demand, despite high numbers of university graduates in a variety of fields. Foreign companies frequently pay internationally competitive salaries to attract workers with valuable skills.

The Unified Labor Law 12/2003 provides comprehensive guidelines on labor relations, including hiring, working hours, termination of employees, training, health, and safety. The law grants a qualified right for employees to strike and stipulates rules and guidelines governing mediation, arbitration, and collective bargaining between employees and employers. Non-discrimination clauses are included, and the law complies with labor-related ILO conventions regulating the employment and training of women and eligible children. Egypt ratified ILO Convention 182 on combating the Worst Forms of Child Labor in 2002. In 2018, Egypt launched the first National Action Plan on combating the Worst Forms of Child Labor. The law also created a national committee to formulate general labor policies and the National Council of Wages, whose mandate is to discuss wage-related issues and national minimum-wage policy, but it has rarely convened, and a minimum wage has rarely been enforced in the private sector.

Parliament adopted a new Trade Unions Law (Law 213 of 2017) in late 2017, replacing a 1976 law, which experts said was out of compliance with Egypt’s commitments to ILO conventions. After a 2016 Ministry of Manpower and Migration (MOMM) directive not to recognize documentation from any trade union without a stamp from the government-affiliated Egyptian Trade Union Federation, the new law established procedures for registering independent trade unions, but some of the unions noted that the directorates of the MOMM did not implement the law and placed restrictions on freedoms of association and organizing for trade union elections. Executive regulations for trade union elections stipulate a very tight deadline of three months for trade union organizations to legalize their status, and one month to hold elections, which, critics said, restricted the ability of unions to legalize their status or to campaign. The GoE registered two new independent labor unions in 2018, and a further seven in 2020 and 2021 as part of a cooperative program with the International Labor Organization.

In July 2019, the Egyptian Parliament passed a series of amendments (Law 142 of 2019) to the 2017 Trade Unions Law that reduced the minimum membership required to form a trade union and abolished prison sentences for violations of the law. The amendments reduced the minimum number of workers required to form a trade union committee from 150 to 50, the number of trade union committees to form a general union from 15 to 10 committees, and the number of workers in a general union from 20,000 to 15,000. The amendments also decreased the number of unions necessary to establish a trade union federation from 10 to 7 and the number of workers in a trade union from 200,000 to 150,000. Under the new law, a trade union or workers’ committee may be formed if 150 employees in an entity express a desire to organize.

Based on the new amendments to the Trade Unions Law and a request from the Egyptian government for assistance implementing them and meeting international labor standards, the International Labor Organization’s and International Finance Corporation’s joint Better Work Program launched in Egypt in March 2020.

The Trade Unions law explicitly bans compulsory membership or the collection of union dues without written consent of the worker and allows members to quit unions. Each union, general union, or federation is registered as an independent legal entity, thereby enabling any such entity to exit any higher-level entity.

The 2014 Constitution stipulated in Article 76 that “establishing unions and federations is a right that is guaranteed by the law.” Only courts are allowed to dissolve unions. The 2014 Constitution maintained past practice in stipulating that “one syndicate is allowed per profession.” The Egyptian constitutional legislation differentiates between white-collar syndicates (e.g., doctors, lawyers, journalists) and blue-collar workers (e.g., transportation, food, mining workers). Workers in Egypt have the right to strike peacefully, but strikers are legally obliged to notify the employer and concerned administrative officials of the reasons and time frame of the strike 10 days in advance. In addition, strike actions are not permitted to take place outside the property of businesses. The law prohibits strikes in strategic or vital establishments in which the interruption of work could result in disturbing national security or basic services provided to citizens. In practice, however, workers strike in all sectors, without following these procedures, but at risk of prosecution by the government.

Collective negotiation is allowed between trade union organizations and private sector employers or their organizations. Agreements reached through negotiations are recorded in collective agreements regulated by the Unified Labor law and usually registered at MOMM. Collective bargaining is technically not permitted in the public sector, though it exists in practice. The government often intervenes to limit or manage collective bargaining negotiations in all sectors.

MOMM sets worker health and safety standards, which also apply in public and private free zones and the Special Economic Zones (see below). Enforcement and inspection, however, are uneven. The Unified Labor Law prohibits employers from maintaining hazardous working conditions, and workers have the right to remove themselves from hazardous conditions without risking loss of employment.

Egyptian labor laws allow employers to close or downsize operations for economic reasons. The government, however, has taken steps to halt downsizing in specific cases. The Unemployment Insurance Law, also known as the Emergency Subsidy Fund Law 156 of 2002, sets a fund to compensate employees whose wages are suspended due to partial or complete closure of their firm or due to its downsizing. The Fund allocates financial resources that will come from a one percent deduction from the base salaries of public and private sector employees. According to foreign investors, certain aspects of Egypt’s labor laws and policies are significant business impediments, particularly the difficulty of dismissing employees. To overcome these difficulties, companies often hire workers on temporary contracts; some employees remain on a series of one-year contracts for more than 10 years. Employers sometimes also require applicants to sign a “Form 6,” an undated voluntary resignation form which the employer can use at any time, as a condition of their employment. Negotiations on drafting a new Labor Law, which has been under consideration in the Parliament for two years, have included discussion of requiring employers to offer permanent employee status after a certain number of years with the company and declaring Form 6 or any letter of resignation null and void if signed prior to the date of termination.

Egypt has a dispute resolution mechanism for workers. If a dispute concerning work conditions, terms, or employment provisions arises, both the employer and the worker have the right to ask the competent administrative authorities to initiate informal negotiations to settle the dispute. This right can be exercised only within seven days of the beginning of the dispute. If a solution is not found within 10 days from the time administrative authorities were requested, both the employer and the worker can resort to a judicial committee within 45 days of the dispute. This committee comprises two judges, a representative of MOMM, and representatives from the trade union and one of the employers’ associations. The decision of this committee is provided within 60 days. If the decision of the judicial committee concerns discharging a permanent employee, the sentence is delivered within 15 days. When the committee decides against an employer’s decision to fire, the employer must reintegrate the latter in his/her job and pay all due salaries. If the employer does not respect the sentence, the employee is entitled to receive compensation for unlawful dismissal.

Labor Law 12 of 2003 sought to make it easier to terminate an employment contract in the event of “difficult economic conditions.” The Law allows an employer to close his establishment totally or partially or to reduce its size of activity for economic reasons, following approval from a committee designated by the Prime Minister. In addition, the employer must pay former employees a sum equal to one month of the employee’s total salary for each of his first five years of service and one and a half months of salary for each year of service over and above the first five years. Workers who have been dismissed have the right to appeal. Workers in the public sector enjoy lifelong job security as contracts cannot be terminated in this fashion; however, government salaries have eroded as inflation has outpaced increases.

Egypt has regulations restricting access for foreigners to Egyptian worker visas, though application of these provisions has been inconsistent. The government plans to phase out visas for unskilled workers, but as yet has not done so. For most other jobs, employers may hire foreign workers on a temporary six-month basis but must also hire two Egyptians to be trained to do the job during that period. Only jobs where it is not possible for Egyptians to acquire the requisite skills will remain open to foreign workers. Application of these regulations is inconsistent.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2020 $319,056 2020 $365,253 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2019 11 2020 $11,206 BEA data available at
https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2019 $1 BEA data available at
https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data 
Total inbound stock of FDI as % host GDP N/A N/A 2020 41% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/Country-Fact-Sheets.aspx
 
 

* Sources for Host Country Data: Central Bank of Egypt; CAPMAS; GAFI

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

Ethiopia

Executive Summary

Ethiopia is the second most populous country in Africa after Nigeria, with a growing population of over 110 million, approximately two-thirds of whom are under age 30. A reform-minded government, low-cost labor, a national airline with over 100 passenger connections, and growing consumer markets are key elements attracting foreign investment.

Ethiopia faced several economic challenges in 2021 related to the COVID-19 pandemic, a drought in the southern and eastern lowlands, political tension and unrest in parts of the country, and an ongoing conflict in the north. Ethiopia’s macroeconomic position was characterized by over 30 percent inflation, meager foreign exchange reserves, a large budget deficit, and plummeting credit ratings. The IMF estimated GDP growth at 2.0 percent in 2021, a significant drop from 6.0 percent in 2020 and double-digit growth for much of the past decade. During 2021, the Government of Ethiopia (GOE) made the first revisions in over 60 years to the commercial code, awarded a spectrum license to a private telecom operator, and took initial steps toward privatization of other state-owned sectors, including the telecom and sugar industries.

Ethiopia is a signatory of the Paris Agreement on Climate Change, and it has a climate resilience green economy strategy (CRGES) to build a green and resilient economy. Ethiopia has also formulated climate-resilient sectoral policies and strategies to provide specific strategic interventions in areas such as agriculture, forestry, transport, health, urban development, and housing.

In 2020-21, the GOE provided liquidity to private banks to mitigate the impact of COVID-19 on businesses, to facilitate debt restructuring and to prevent bankruptcies and it also injected liquidity into the hotel and tourism sector through commercial banks. The GOE planned to allocate roughly $1 billion U.S. dollars during the same period for medical equipment purchases, healthcare worker salaries, quarantine and isolation facilities, and the procurement of disinfectants and personal protective equipment.

The challenges of doing business in Ethiopia remain daunting. Companies often face long lead-times importing goods and dispatching exports due to logistical bottlenecks, corruption, high land-transportation costs, and bureaucratic delays. An acute foreign exchange shortage (the Ethiopian birr is not a freely convertible currency) impedes companies’ ability to repatriate profits and obtain investment inputs. The lack of a capital market hinders private sector growth. Export performance remains weak, as the country struggles to develop exports beyond primary commodities (coffee, gold, and oil seeds) and the Ethiopian birr remains overvalued. Ethiopia is not a signatory of major intellectual property rights treaties such as the Paris Convention for the Protection of Industrial Property and the Madrid System for the International Registration of Marks.

Insecurity and political instability associated with various ethnic conflicts – particularly the conflict in northern Ethiopia – have negatively impacted the investment climate and dissuaded foreign direct investment (FDI).

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 87 of 180 https://www.transparency.org/en/countries/ethiopia 
Global Innovation Index 2020 126 of 131 https://www.globalinnovationindex.org/gii-2018-report#  
U.S. FDI in partner country (M USD, stock positions) 2021 N/A https://apps.bea.gov/international/factsheet/factsheet.html#411 
World Bank GNI per capita 2020 $890 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD  

1. Openness To, and Restrictions Upon, Foreign Investment

2. Bilateral Investment Agreements and Taxation Treaties

Ethiopia is a member of the Multilateral Investment Guarantee Agency (MIGA), and it has bilateral investment and protection agreements with Algeria, Austria, China, Denmark, Egypt, Germany, Finland, France, Iran, Israel, Italy, Kuwait, Libya, Malaysia, the Netherlands, Sudan, Sweden, Switzerland, Tunisia, Turkey, and Yemen. Other bilateral investment agreements have been signed but are not in force with Belgium/Luxemburg, Brazil, Equatorial Guinea, India, Morocco, Nigeria, South Africa, Spain, the United Kingdom, and the United Arab Emirates. Ethiopia signed a protection of investment and property acquisition agreement with Djibouti. A Treaty of Amity and Economic Relations, which entered into force in 1953, governs economic and consular relations with the United States.

There is no double taxation treaty between the United States and Ethiopia. Ethiopia has taxation treaties with fourteen countries, including Italy, Kuwait, Romania, Russia, Tunisia, Yemen, Israel, South Africa, Sudan, and the United Kingdom.

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

Ethiopia’s roughly 40 state-owned enterprises (SOEs) dominate major sectors of the economy. There is a state monopoly or state dominance in telecommunications, power, banking, insurance, air transport, shipping, railway, industrial parks, and petroleum importing. SOEs have considerable advantages over private firms, including priority access to credit, foreign exchange, land, and quick customs clearances. While there are no conclusive reports of credit preference for these entities, there are indications that they receive incentives, such as priority foreign exchange allocation, preferences in government tenders, and marketing assistance. Ethiopia does not publish financial data for most state-owned enterprises, but Ethiopian Airlines and the Commercial Bank of Ethiopia have transparent accounts

Ethiopia is not a member of the Organization for Economic Co-operation and Development (OECD) and does not adhere to the guidelines on corporate governance of SOEs. Corporate governance of SOEs is structured and monitored by a board of directors composed of senior government officials and politically affiliated individuals, but there is a lack of transparency in the structure of SOEs.

8. Responsible Business Conduct

Some larger international companies in Ethiopia have introduced corporate social responsibility (CSR) programs. Most Ethiopian companies, however, do not officially practice CSR, though individual entrepreneurs engage in charity, sometimes on a large scale. There are efforts to develop CSR programs by MOTRI in collaboration with the World Bank, U.S. Agency for International Development, and other institutions.

The government encourages CSR programs for both local and foreign direct investors but does not maintain specific guidelines for these programs, which are inconsistently applied and not controlled or monitored. The Addis Ababa Chamber of Commerce also has a corporate governance institute, which promotes responsible business conduct among private business enterprises.

The GOE does not publish data on the number of children who are victims of forced labor. The Ethiopian Central Statistics Agency’s 2015 National Child Labor Survey and 2021 Labor Force and Migration Survey did not assess forced labor.

On January 1, 2022, the U.S. Trade Representative (USTR) announced that due to human rights concerns related to the conflict in northern Ethiopia, Ethiopia no longer met the eligibility criteria for African Growth and Opportunity Act (AGOA) trade preferences. Ethiopia will continue to undergo AGOA’s annual review process and may regain eligibility once it meets the criteria.

The 2020 Investment Law requires all investors to give due regard to social and environmental sustainability values including environmental protection standards and social inclusion objectives. The 2002 Environmental Impact Assessment Proclamation number 299/2002 mandates any government agency issuing business licenses or permits for investment projects ensure that federal or relevant regional environmental agencies authorize the project’s implementation. In practice, environmental laws and regulations are not fully enforced due to limited capacity at government regulatory bodies.

In 2014, the Extractive Industry Transparency Initiative (EITI) admitted Ethiopia as a candidate-member. In 2019, EITI found Ethiopia made meaningful progress in implementing EITI standards. The Commercial Code requires extractive industries and other businesses to conduct statuary audits of their financial statements at the end of each financial year.

9. Corruption

The Federal Ethics and Anticorruption Proclamation number 1236/2020 aims to combat corruption involving government officials and organizations, religious organizations, political parties, and international organizations. The Federal Ethics and Anti-Corruption Commission (FEACC) is accountable to parliament and charged with preventing corruption among government officials by providing ethics training and education. MOJ is responsible for investigating corruption crimes and prosecutions. The Office of the Ombudsman is responsible for ensuring good governance and preventing administrative abuses by public offices.

Transparency International’s 2022 Corruption Perceptions Index, which measures perceived levels of public sector corruption, rated Ethiopia’s corruption at 39 (the score indicates the perceived level of public sector corruption on a scale of zero to 100, with the former indicating highly corrupt and the latter indicating very clean). Its comparative rank in 2021 was 87 out of 180 countries, a seven-point improvement from its 2020 rank. In 2020 the American Chamber of Commerce in Ethiopia polled its members and asked what the leading business climate challenges were; transparency and governance ranked as the 4th leading business climate challenge, ahead of licensing and registration, and public procurement.

Ethiopian and foreign businesses routinely encounter corruption in tax collection, customs clearance, and land administration. Many past procurement deals for major government contracts, especially in the power generation, telecommunications, and construction sectors, were widely viewed as corrupt. Allegations of corruption in the allocation of urban land to private investors by government agencies are a major source of popular discontent in Ethiopia.

Ethiopia is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Ethiopia is a signatory to the African Union Convention on Preventing and Combating Corruption. Ethiopia is also member of the East African Association of Anti-Corruption Authorities. Ethiopia signed the UN Anticorruption Convention in 2003, which was eventually ratified in November 2007. It is a criminal offense to give or receive bribes, and bribes are not tax deductible.

10. Political and Security Environment

Ethnic conflict – often sparked by historical grievances or resource competition, including land disputes – has resulted in varying levels of violence across Ethiopia. According to the 2022 Global Humanitarian Overview, there were an estimated 4.2 million Internally Displaced Persons (IDPs) in Ethiopia at the end of 2021, with high levels of need also identified among non-displaced people living in conflict-affected areas. The primary cause of displacements was conflict and insecurity, followed by drought and seasonal floods and flash flooding.

Most significantly, in early November 2020, a conflict broke out between a regional political party in the Tigray Region and the federal government. The conflict quickly enlarged, with Eritrean troops present in parts of Tigray Region, and Amhara Region forces controlling much of Western Tigray. The conflict in northern Ethiopia has led to many deaths, widespread displacements, extensive destruction of infrastructure, widespread gross human rights violations, gender-based violence, a vast reduction in public services, and widespread hunger.

Insecurity, often driven by ethnic tensions, persists in many other areas, notably in the southern and western Oromia Region; eastern Southern Nations, Nationalities, and People’s Region; and in the Hararges on the border of the Somali Region. In western Oromia, the Oromo Liberation Army-Shane and other unidentified armed groups have intensified attacks against public and local government officials; this violence has spilled over into other parts of Oromia. In far western Ethiopia, ethnic violence and clashes in Benishangul-Gumuz Region have continued throughout 2021 and into early 2022, leaving hundreds dead and hundreds of thousands displaced. Amhara has experienced altercations in 2022 between regional security forces and youth militias.

When Prime Minister Abiy came to power in 2018, political space opened significantly, although it has since regressed especially after the government declared a State of Emergency in November 2021. While the State of Emergency was lifted in February 2022, during its implementation thousands of people, mostly of Tigrayan ethnicity, were arbitrarily detained and freedom of the press was significantly curtailed. Constitutional rights, including freedoms of assembly and expression, are generally supported at the level of the federal government, though the protection of these rights remains uneven, especially at regional and local levels. While opposition parties mostly operate freely, authorities, especially at the sub-national level, have employed politically motivated procedural roadblocks to hinder opposition parties’ efforts to hold meetings or other party activities; this was especially true in the run-up to the June 2021 general election.

The space for media and civil society groups has generally become freer following reforms instituted by Prime Minister Abiy. Still, journalism in the country remains undeveloped, social media is often rife with unfounded rumors, and government officials occasionally react with heavy-handedness, especially to news they feel might spur social unrest, resulting in self-censorship. Civil society reforms have spurred an expansion of the sector, though many civil society groups continue to struggle with capacity and resource issues.

11. Labor Policies and Practices

The national unemployment rate in February 2021 was 8 percent according to the 2021 Labor Force and Migration Survey. The unemployment rates for men and women were 5 and 11.7 percent, respectively. The law only gives refugees and asylum seekers the opportunity to work on a development project supported by the international community that economically benefits both refugees and citizens or to earn wages through self-employment. The law prohibits discrimination with respect to employment and occupations. However, there are legal restrictions on women’s employment, including limitations on occupations deemed dangerous and in industries, such as mining and agriculture. Women have fewer employment opportunities than men. Around 46.3 percent of people were working in the informal sector nationally according to the 2021 Labor Force and Migration Survey.

According to a 2020 International Labor Organization labor market assessment across all sectors, there was a generally higher demand for highly skilled workers, followed by medium-skilled workers; low-skilled workers had the lowest demand, especially in construction and manufacturing sectors. In terms of supply, there was generally an oversupply of low- and medium-skilled workers across major sectors such as agriculture, construction, and manufacturing. The Ministry of Labor and Skills, in collaboration with other international and national stakeholders, provides trainings for technical and vocational trainers.

The investment law gives employment priority for nationals and provides that any investor may employ duly qualified expatriate experts in the positions of “higher management, supervision, trainers and other technical professions” required for the operation of business only when it is ascertained that Ethiopians possessing similar qualifications or experiences are not available.

There is no restriction on employers adjusting employment to respond to fluctuating market conditions. The labor law allows employers to terminate employment contracts with notice when demand falls for the employer’s products or services and reduces the volume of work or profit. The law differentiates between firing and layoffs.

The national labor law recognizes the right to collective bargaining, but this right was severely restricted under the law. Negotiations aimed at amending or replacing a collectively bargained agreement must take place within three months of its expiration; otherwise, the prior provisions on wages and other benefits cease to apply. The constitution and the labor law recognize the right of association for workers.

Labor divisions are established at the federal and regional level. Employers and workers may also introduce social dialogue to prevent and resolve labor disputes amicably. The Ministry of Labor and Skills assigns councilors or arbitrators when a dispute is brought to the attention of the Ministry or the appropriate authority by either of the parties to the dispute.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) (M USD) 2020/21** $111.3 2020 $107.6 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country (M USD, stock positions) 2021 $741 N/A N/A https://apps.bea.gov/international/factsheet/ 
Host country’s FDI in the United States (M USD, stock positions) 2020 N/A N/A N/A http://bea.gov/international/direct_
investment_multinational_companies_
comprehensive_data.htm
 
Total inbound stock of FDI as % host GDP 2020-21** 10% 2020 2.22% www.worldbank.org/en/country 

*National Bank of Ethiopia and Ethiopian Investment Commission

**Ethiopian Fiscal Year 2020-21, which begins on July 8, 2020.

Table 3: Sources and Destination of FDI
Data regarding inward direct investment are not available for Ethiopia via the IMF’s Coordinated Direct Investment Survey (CDIS) site ( http://data.imf.org/CDIS ).

14. Contact for More Information

The U.S. Embassy’s main number is +251 011 130 6000.

Economic Officer, USEmbassyPolEconExternal@state.gov

Ghana

Executive Summary

Ghana’s economy had expanded at an average of seven percent per year since 2017 until the coronavirus pandemic reduced growth to 0.4 percent in 2020, according to the Ministry of Finance. Between 2017 and 2019, the fiscal deficit narrowed, inflation decreased, and GDP growth rebounded, driven primarily by increases in oil production. Ghana saw a 9 percent growth rate in the first quarter of 2019 and closed that year with a 6.5 percent GDP growth rate.  Indicating a recovery from the pandemic, the Ghana Statistical Service reported a 6.6 percent growth rate in the third quarter of 2021, marking the fastest growth in GDP since the pandemic began.  The International Monetary Fund (IMF) expected growth to rebound to 4.7 percent in 2021 from the shock of COVID-19 and by 6.2 percent in 2022. The economy remains highly dependent on the export of primary commodities such as gold, cocoa, and oil, and consequently is vulnerable to slowdowns in the global economy and commodity price shocks. In November 2020, Ghana launched the 100 billion cedi (about $13 billion) Ghana COVID-19 Alleviation and Revitalization of Enterprises Support (Ghana CARES) Program to address the effects of the virus on the economy. In 2020, the government also launched Ghana’s National Adaptation Plan Process by which it expects to develop strategies to build resilience against the impacts of both climate change and crises such as COVID-19. In general, Ghana’s investment prospects remain favorable, as the Government of Ghana seeks to diversify and industrialize through agro-processing, mining, and manufacturing.  It has made attracting foreign direct investment (FDI) a priority to support its industrialization plans and to overcome an annual infrastructure funding gap.

Challenges to Ghana’s economy include high government debt, particularly energy sector debt, low internally generated revenue, and inefficient state-owned enterprises.  Ghana has a population of 31 million, with over 14 million potential taxpayers, but only six million of whom filed their annual tax returns.  As Ghana seeks to move beyond dependence on foreign aid, it must develop a solid domestic revenue base.  On the energy front, Ghana has enough installed power capacity to meet current demand, but it needs to reduce the cost of electricity by improving the management of its state-owned power distribution system.

Among the challenges hindering foreign direct investment are: costly and difficult financial services, lack of government transparency, corruption, under-developed infrastructure, a complex property market, costly and intermittent power and water supply, the high costs of cross-border trade, a burdensome bureaucracy, and an unskilled labor force.  Enforcement of laws and policies is weak, even where good laws exist on the books.  Public procurements are sometimes opaque, and there are often issues with delayed payments.  In addition, there have been troubling trends in investment policy over the last six years, with the passage of local content regulations in the petroleum, power, and mining sectors that may discourage needed future investments.

Despite these challenges, Ghana’s abundant raw materials (gold, cocoa, and oil/gas), relative security, and political stability, as well as its hosting of the African Continental Free Trade Area (AfCFTA) Secretariat make it stand out as one of the better locations for investment in sub-Saharan Africa.  There is no discrimination against foreign-owned businesses.  Investment laws protect investors against expropriation and nationalization and guarantee that investors can transfer profits out of the country, although international companies have reported high levels of corruption in dealing with Ghanaian government institutions.  Among the most promising sectors are agribusiness and food processing; textiles and apparel; downstream oil, gas, and minerals processing; construction; and mining-related services subsectors.

The government has acknowledged the need to strengthen its enabling environment to attract FDI, and is taking steps to overhaul the regulatory system, improve the ease of doing business, and restore fiscal discipline.

Table 1: Key Metrics and Rankings 
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 73 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 112 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in Ghana ($M USD, historical stock positions) 2020 USD 429 million https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 USD 2,340 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment 

3. Legal Regime 

4. Industrial Policies 

5. Protection of Property Rights 

6. Financial Sector 

7. State-Owned Enterprises 

Ghana has 94 State-Owned Enterprises (SOEs), 51 of which are wholly owned, while 43 are partially owned.  While the president appoints the CEO and full boards of most of the wholly owned SOEs, they are under the supervision of line ministries.  Most of the partially owned investments are in the financial, mining, and oil and gas sectors.  To improve the efficiency of SOEs and reduce fiscal risks they pose to the budget, in 2019 the government embarked on an exercise to tackle weak corporate governance in the SOEs as well as created the State Interests and Governance Authority (SIGA), a single institution, to monitor all SOEs, replacing both the State Enterprises Commission and the Divestiture Implementation Committee.

As of December 2021, only a handful of large SOEs remain, mainly in the transportation, water, banking, power, and extractive sectors.  The largest SOEs are Electricity Company of Ghana (ECG), Volta River Authority (VRA), Ghana Water Company Limited (GWCL), Ghana Ports and Harbor Authority (GPHA), Ghana National Petroleum Corporation (GNPC), Ghana National Gas Company Limited (GNGC), Ghana Airport Company Limited (GACL), Consolidated Bank Ghana Limited (CBG), Bui Power Authority (BPA), and Ghana Grid Company Limited (GRIDCo).  Many of these receive subsidies and assistance from the government.  The list of SOEs can be found at: https://siga.gov.gh/state-interest/ .

While the Government of Ghana does not actively promote adherence to the OECD Guidelines, SIGA oversees corporate governance of SOEs and encourages them to be managed like Limited Liability Companies to be profit making.  In addition, beginning in 2014, most SOEs were required to contract and service direct and government-guaranteed loans on their own balance sheet.  The government’s goal is to stop adding these loans to “pure public” debt, paid by taxpayers directly through the budget.

8. Responsible Business Conduct 

There is no specific responsible business conduct (RBC) law in Ghana, and the government has no action plan regarding OECD RBC guidelines.

Ghana has been a member of the Extractive Industries Transparency Initiative since 2010.  The government also enrolled in the Voluntary Principles on Security and Human Rights in 2014.

Corporate social responsibility (CSR) is gaining more attention among Ghanaian companies.  The Ghana Club 100 is a ranking of the top performing companies, as determined by GIPC.  It is based on several criteria, with a 10 percent weight assigned to corporate social responsibility, including philanthropy.  Companies have noted that Ghanaian consumers are not generally interested in the CSR activities of private companies, with the exception of the extractive industries (whose CSR efforts seem to attract consumer, government, and media attention).  In particular, there is a widespread expectation that extractive sector companies will involve themselves in substantial philanthropic activities in the communities in which they have operations.

Guinea

Executive Summary

On September 5, 2021 Colonel Mamadi Doumbouya and Guinean military special forces seized power and detained former President Alpha Conde through a coup d’état.  COL Doumbouya declared himself Guinea’s head of state, dissolved the government and National Assembly and suspended the constitution.  Guinea is currently governed by the National Committee for Reunification and Development (CNRD), which is led by COL Doumbouya and comprised primarily of military officials.  On September 27, 2021 COL Doumbouya released the Transitional Charter which supersedes the constitution until a new Constitution is promulgated; Guinea’s penal and civil codes remains in force.  On October 1, 2021 the Supreme Court Justice installed COL Doumbouya as Head of State, Transition President, CNRD President, and Commander-in-Chief of Security Forces.  On January 22, 2022 the National Transition Council, the transition government’s legislative body, was installed but no timeline for future elections or return to civilian rule was provided as of April 2022.

Guinea enjoys sizeable endowments of natural resources, energy opportunities, and arable land.

These seeming advantages have not yet resulted in economic development, and may in fact hinder it, in an example of the famous “resource curse.”  Guinea’s economy has been based on extraction of primary resources, from at least the French colonial era and the slave trade before it.  This extractive paradigm and legacy of underdevelopment, combined with low levels of education, and longstanding patterns of nondemocratic governance dating back to the colonial era, limit the potential for broad-based economic growth based on value addition, innovation, and productive as opposed to extractive or rent-seeking investment.  At the same time, a sense of national identity and unity, and both formal and informal practices of solidarity that tend towards wealth redistribution may prove to be assets for the country’s development, if the government and the private sector can harness them productively.

The 2021 coup d’etat, persistent corruption, and fiscal mismanagement make the near-term economic prognosis for Guinea mixed.  In this context, Guinea has looked to foreign investment to bolster tax and export revenues and to support infrastructure projects and overall economic growth.  China, Guinea’s largest trading partner, dramatically increased its role in years leading up to the coup with a variety of infrastructure investments.  Investors should proceed with caution, understanding that the potential for profits comes with significant political risk.  Weak institutions mean that investors may secure lucrative concessions from the government in the short term, but these could be open to renegotiation or rescission in the long term.  Prior to the coup, former President Conde’s government implemented reforms to improve various aspects of the investment climate.  For example, the former government reduced property transfers fees from 2 to 1.2 percent of property value.  The time required to obtain a construction permit was reduced and import procedures were improved.  Since 2019, Guinea has implemented a permanent taxpayer identification number system that requires all payments to be made by “Real Time Gross System” (RTGS) immediate transfers.

Since the coup d’etat, the transition government has spoken extensively about fighting corruption and increasing transparency.  Transition President COL Doumbouya created the Court to Repress Economic and Financial Crimes (CRIEF) to handle cases involving embezzlement, corruption, and misuse of public funds over one billion GNF (approximately $110,000) in December 2021.  As of April 2022, the court has focused on collecting evidence for corruption cases against businesses tied to and officials that served in former President Conde’s government.

Endowed with abundant mineral resources, Guinea has the raw materials to be an economic leader in the extractives industry.  Guinea is home to a third of the world’s reserves of bauxite (aluminum ore), and bauxite accounts for over half of Guinea’s present exports.  Historically, most of the country’s bauxite was exported by Compagnie des Bauxites de Guinee (CBG) (Bauxite Company of Guinea) [a joint venture between the Government of Guinea, U.S.-based Alcoa, the Anglo-Australian firm Rio Tinto, and Dadco Investments of the Channel Islands], via a designated port in Kamsar.  While CBG still retains the largest reserves, the Societe Miniere de Boke (SMB) (Mineral Company of Boke), a Sino-Singaporean conglomerate, recently surpassed CBG as the largest single producer of bauxite.  New investment by SMB and CBG, in addition to new market entrants, are expected to significantly increase Guinea’s bauxite output over the next five to ten years.  Guinea also possesses over four billion tons of untapped high-grade iron ore, significant gold and diamond reserves, undetermined amounts of uranium, as well as prospective offshore oil reserves.  Artisanal and medium-sized industrial gold mining in the Siguiri region is a significant contributor to the Guinean economy, but some suspect much of the gold leaves the country clandestinely, without generating any government revenue.  In the long term, both former President Conde’s government and the transition government project that Guinea’s greatest potential economic driver will be the Simandou iron ore project, which is slated to be the largest greenfield project ever developed in Africa.  The transition government reached an ambitious agreement with Rio Tinto and the SMB-Winning Consortium (WCS) in March 2022 to develop the rail and port infrastructure to bring ore from Simandou to market by early 2025.  In 2017, the governments of Guinea and China signed a USD 20 billion framework agreement giving Guinea potentially USD 1 billion per year in infrastructure projects in exchange for increased access to mineral wealth.  In 2018, the Chinese Group TBEA invested USD 2.89 billion in the bauxite and alumina sector.  The project includes development of a bauxite mine, the construction of a port, railroad, and power plant to facilitate the supply chain.  The project is estimated to generate USD 406 million in annual revenue for Guinea.

The amended 2013 Mining Code stipulates that raw ore producers in Guinea begin processing raw ore into refined or processed products within a few years of development, depending on the terms of the individual investment and the mandate with the Ministry of Mines and Geology.  In April 2022, the transition government called upon bauxite concessionaires to solidify refining plans by May 2022.  U.S.-based companies are in varying stages of proposing LNG projects to furnish this upcoming tremendous energy need.  China is reportedly offering coal-based solutions to meet the potential demand.

Guinea’s abundant rainfall and natural geography bode well for hydroelectric and renewable energy production. The largest energy sector investment in Guinea is the 450MW Souapiti dam project (valued at USD 2.1 billion), begun in late 2015 with Chinese investment, which likewise completed the 240MW Kaleta Dam (valued at USD 526 million) in May 2015.  Kaleta more than doubled Guinea’s electricity supply, and for the first-time furnished Conakry with more reliable, albeit seasonal, electricity (May-November). Souapiti began producing electricity in 2021. A third hydroelectric dam on the same river, dubbed Amaria, began construction in January 2019 and is expected to be operational in 2024. The Chinese mining firm TBEA is providing financing for the Amaria power plant (300 MW, USD 1.2 billion investment).  If corresponding distribution infrastructure is built, and pricing enables it, these projects could make Guinea an energy exporter in West Africa. In addition, U.S.-based Endeavor began operating Project Te in November 2020, a 50MW thermal plant on the outskirts of the capital.  Former President Conde’s government also signed an emergency agreement in December 2019 to buy power from the 105 MW Turkish Karpowership barge anchored off Conakry’s coast.  Former President Conde’s government emphasized investment in solar and other energy sources to compensate for hydroelectric deficits during Guinea’s dry season.  Toward that end, former President Conde’s government entered into several Memoranda of Understanding with the private sector to develop solar projects.

Agriculture and fisheries hold other areas of opportunity and growth in Guinea.  Already an exporter of fruits, vegetables, and palm oil to its immediate neighbors, Guinea is climatically well suited for large-scale agricultural production and export.  However, the sector has suffered from decades of neglect and mismanagement, lack of transportation infrastructure, and lack of electricity and a reliable cold chain.  Guinea is an importer of rice, its primary staple crop.

Guinea’s macroeconomic and financial situation is weak.  The aftermath of the 2014-2016 Ebola crisis left former President Conde’s government with few financial resources to invest in social services and infrastructure.  Lower natural resource revenues stemming from a drop in world commodities prices and ill-advised government loans strained an already tight budget.  In 2018 the government borrowed excessively from the Central Bank (BCRG), which threatened the first review of Guinea’s current International Monetary Fund (IMF) program.  Lower than forecast natural resource revenues in 2019 due to heavy rains and political violence threatened the fourth review, which Guinea passed in April 2020.  In December 2020, the Executive Board of the IMF completed its fifth and sixth reviews of Guinea’s economic performance. The completion of these reviews enabled the immediate disbursement of USD 49.47 million – bringing total disbursements under Guinea’s third extended credit facility to USD 66.60 million before the program’s end.

A shortage of credit persists, particularly for small- and medium-sized enterprises, and the government is increasingly looking to international investment to increase growth, provide jobs, and kick-start the economy. On March 13, 2020, Guinea confirmed its first Covid-19 case. The pandemic negatively impacted the well-being of households, particularly those working in the informal sector, who have limited access to savings and financial services.  Guinea experienced an Ebola epidemic from February to June 2021.  Despite its able handling of the epidemic, which kept deaths to a minimum, cross-border trade with Liberia, Ivory Coast, and Sierra Leone was reduced temporarily during the outbreak.  Violence surrounding the March 2020 legislative election and constitutional referendum, as well as the October 2020 presidential election, all negatively impacted Guinea’s growth prospects.  The transition government has worked to maintain economic stability since the 2021 coup d’etat, though without a timeline for elections, the uncertain political situation further limits potential growth.

Prior to the coup, Guinea passed and implemented an anti-corruption law, updated its Investment Code, and renewed efforts to attract international investors, including a new investment promotion website put in place in 2016 by Guinea’s investment promotion agency to increase transparency and streamline processes for new investors.  However, Guinea’s capacity to enforce its more investor-friendly laws is compromised by a weak and unreliable legal system.  Then President Conde inaugurated the first Trade Court of Guinea on March 20, 2018.  Transition President COL Doumbouya created the Court to Repress Economic and Financial Crimes (CRIEF) to handle cases involving embezzlement, corruption, and misuse of public funds over one billion GNF (approximately $110,000) in December 2021.  As of April 2022, the court has focused on collecting evidence for corruption cases against businesses tied to and officials that served in former President Conde’s government.

To attract foreign investment, the Private Investment Promotion Agency (APIP) and the Ministry of Commerce, Industry, and Small and Medium Enterprises hosted the second annual Guinea Investment Forum (GUIF) in Dubai in February 2022, following the inaugural event in Guinea in February 2021.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 150 of 175 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 130 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $278 million https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $1,020 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

While all Guinea’s public utilities (water and electricity) are state-owned enterprises (SOEs), the former Conde administration proposed permitting private enterprises to operate in this sphere.  In 2015, the French firm Veolia was contracted to manage the state-owned electric utility Electricité de Guinée (EDG) – a contract which ended in October 2019.  Several private projects aimed at harnessing Guinea’s solar energy potential and gas-powered thermal plants are being implemented with the goal of producing and selling energy throughout Guinea and possibly to neighboring countries.  Other SOEs are found in the telecommunications, road construction, lottery, and transportation sectors.  There are several other mixed companies where the state owns a significant or majority share, that are typically related to the extractives industry.

The hydroelectricity sector could support Guinea’s modernization, and possibly even supply regional markets.  Guinea’s hydropower potential is estimated at over 6,000MW, making it a potential exporter of power to neighboring countries.  The largest energy sector investment in Guinea is the 450MW Souapiti dam project (valued at USD 2.1 billion), begun in late 2015 with Chinese investment.  A Chinese firm likewise completed the 240MW Kaleta Dam (valued at USD 526 million) in May 2015. Kaleta more than doubled Guinea’s electricity supply, and for the first-time furnished Conakry with more reliable, albeit seasonal, electricity (May-November). Souapiti began producing electricity in 2021.  A third hydroelectric dam on the same river, dubbed Amaria, began construction in January 2019 and is expected to be operational in 2024. The Chinese mining firm TBEA is providing financing for the Amaria power plant (300 MW, USD 1.2 billion investment).  If corresponding distribution infrastructure is built, and pricing enables it, these projects could make Guinea an energy exporter in West Africa.

Plans for improving the distribution network to enable electricity export are in process with the development of the Gambia River Basin Development (OMVG) (Organization pour la Mise en Oeuvre de Fleuve Gambie, in French) transmission project connecting Guinea, Senegal, Guinea Bissau, and The Gambia.  The OMVG project involves the construction of 1,677 kilometers of 225-volt transmission network capable of handling 800MW to provide electricity for over two million people.  At the same time, Guinea is moving forward with the Côte d’Ivoire, Liberia, and Sierra Leone, (CLSG) transmission interconnector project, which will integrate Guinea into the West African Power Pool (WAPP) and allow for energy import-export across the region.  While neither former President Conde’s administration nor the transition government have published significant information concerning the financial stability of SOEs, EDG’s balance sheet is understood to be in the red. The IMF reported that as recently as 2017, up to 28 percent of Guinea’s budget went towards subsidizing electricity, and the IMF urged that EDG improve tariff collection since large numbers of its users do not pay. Former Prime Minister Ibrahima Kassory Fofana announced in March 2021 that EDG subsidies cost Guinea’s government USD 350 million annually.

The amount of research and development (R&D) expenditures is not known, but it would be highly unlikely that any of Guinea’s SOEs would devote significant funding to R&D.  Guinean SOEs are entitled to subsidized fuel, which EDG uses to run thermal generator stations in Conakry.  Guinea is not party to the Government Procurement Agreement.

Corporate governance of SOEs is determined by the government. Guinean SOEs do not adhere to the OECD guidelines.  SOEs are supposed to report to the Office of the President, however, typically they report to a ministry.  Seats on the board of governance for SOEs are usually allocated by presidential decree.

8. Responsible Business Conduct

The 2013 Mining Code includes Guinea’s first legal framework outlining corporate social responsibility.  Under the provisions of the code, mining companies must submit social and environmental impact plans for approval before operations can begin and sign a code of good conduct, agreeing to refrain from corrupt activities and to follow the precepts of the Extractive Industry Transparency Initiative (EITI).  However, lack of capacity in the various ministries involved makes government monitoring and enforcement of corporate social responsibility requirements difficult, a gap that some non-governmental organizations (NGOs) are filling.  In February 2019, Guinea was found to have achieved meaningful progress in implementing EITI standards.  The EITI Board outlined eight corrective actions, including disclosing more information on infrastructure agreements, direct subnational payments, and quasi-fiscal expenditures.  The Board noted that the EITI should play a role in overseeing the new Local Economic Development Fund (FODEL).  Mining companies continue to note a lack of transparency in the expenditure of revenues by the National Agency for Mining Infrastructure (ANAIM).

The 2019 Environmental Code also has specific provisions regarding environmental and social due diligence on any development projects.  The Code requires each development project to conduct an environmental impact study which includes a list of mitigation measures for any negative impact.

Guinea has laws that protect the population from adverse business impacts however, these laws are not effectively enforced.  In the last few years, there were several cases of private enterprise having an adverse impact on human rights, especially in the mining and energy sectors.  The government is often reluctant to fully enforce legislation regarding responsible conduct and the mitigation of these impacts.  There are several local and international organizations that are promoting and monitoring the implementation of RBCs.  Guinea is not signatory of the Montreux document on Private Military and Security Companies.

9. Corruption

According to Transparency International’s 2021 Corruption Perception Index, Guinea lost 13 points and was ranked 150 out of 180 countries listed.

Guinea passed an Anti-Corruption Law in 2017, and in April 2019, a former director of the Guinean Office of Advertising was sentenced to five years in prison for embezzling GNF 39 billion (approximately USD four million), though in June 2019, he was acquitted by the Appeals Court and was elected a member of the National Assembly in March 2020.  It is not clear whether the Anti-Corruption Law was used to prosecute the case.  According to a 2019 Afrobarometer survey, at least 40 percent of Guineans reported having given a government official a bribe, while a 2016 World Bank Enterprise Survey reported that of 150 firms surveyed, 48.7 percent reported that they were expected to give “gifts” to public officials to get things done, but only 7.9 percent reported having paid a bribe.

The business and political culture, coupled with low salaries, have historically combined to promote and encourage corruption.  Requests for bribes are a common occurrence.  Though it is illegal to pay bribes in Guinea, there is little enforcement of these laws.  In practice, it is difficult and time-consuming to conduct business without giving “gifts” in Guinea, leaving U.S. companies, who must comply with the Foreign Corrupt Practices Act, at a disadvantage.

Although the law provides criminal penalties for corruption, the law does not extend to family members of government officials. It does include provisions for political parties.  According to the World Bank’s 2018 Worldwide Governance Indicators, corruption continues to remain a severe problem, and Guinea is in the 13th percentile, down from being in the 15th percentile in 2012.  Public funds have been diverted for private use or for illegitimate public uses, such as buying vehicles for government workers.  Land sales and business contracts generally lack transparency.

Guinea’s Anti-Corruption Agency (ANLC) is an autonomous agency established by presidential decree in 2004.  The ANLC reports directly to the President and is currently the only state agency focused solely on fighting corruption, though it has been largely ineffective in its role with no successful convictions.  The ANLC’s Bureau of Complaint Reception fields anonymous tips forwarded to the ANLC. Investigations and cases must then be prosecuted through criminal courts.  According to the ANLC, during the past year there were no prosecutions as a result of tips.  The agency is underfunded, understaffed, and lacks computers and vehicles.  The ANLC is comprised of 52 employees in seven field offices, with a budget of USD 1.1 million in 2018.

Former President Conde’s administration named corruption in both the governmental and commercial spheres as one of its top agenda items.  In November 2019, Ibrahim Magu, the acting Chairman of the Economic and Financial Crimes Commission of Nigeria, and President Alpha Conde reached an agreement through which the Commission will assist Guinea to establish an anti-corruption agency; however, it is not clear if that meant reforming the existing anti-corruption agency or establishing a new anti-corruption agency.

In January 2021, Beny Steinmetz, an Israeli businessman and billionaire was sentenced to five years in jail in Geneva for bribing the wife of Guinea’s late President Lansana Conté to gain the rights to one of the world’s richest iron-ore deposits.  He was also ordered to pay a 50 million Swiss franc (USD 56 million) fine.  Steinmetz has long claimed to be a victim of a vast international conspiracy to deprive him of the rights to the Simandou project.  He plans to appeal his case.

Transition President COL Doumbouya created the Court to Repress Economic and Financial Crimes (CRIEF) to handle cases involving embezzlement, corruption, and misuse of public funds over one billion GNF (approximately $110,000) in December 2021.  As of April 2022, the court has focused on collecting evidence for corruption cases against businesses tied to and officials that served in former President Conde’s government.

 

A 2016 survey by the ANLC, the Open Society Initiative-West Africa (OSIWA), and Transparency International found that among private households, 61 percent of the respondents stated they were asked to pay a bribe for national services and 24 percent for local services.  Furthermore, 24 percent claimed to have paid traffic-related bribes to police, 24 percent for better medical treatment, 19 percent for better water or electricity services, and 8 percent for better judicial treatment.

Guinea is a party to the UN Anticorruption Convention.  http://www.unodc.org/unodc/en/treaties/CAC/signatories.html

Guinea is not a party to the OECD Convention on Combatting Bribery.  http://www.oecd.org/daf/anti-bribery/countryreportsontheimplementationoftheoecdanti-briberyconvention.htm

Since 2012, Guinea has had a Code for Public Procurement (Code de Marches Publics et Delegations de Service Public) that provides regulations for countering conflicts of interest in awarding contracts or in government procurements.  In 2016, the government issued a Transparency and Ethics charter for public procurement that provides the main do’s and don’ts in public procurement, highlighting avoidance of conflict of interest as a priority.  The charter also includes a template letter that companies must sign when bidding for public contracts stating that they will comply with local legislation and public procurement provisions, including practices to prevent corruption.

Since April 2020, Government of Guinea officials and family must complete the asset declaration form which is available on the Court of Audit website.

Resources to Report Corruption

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

National Agency to Fight Corruption (ANLC)
Cite des Nations, Villa 20, Conakry, Guinea
Korak Bailo Sow, Permanent Secretary
+224 622 411 796
ddiallo556@gmail.com
+224 620 647 878
cc@anlcgn.org

Contact at a “watchdog” organization:

Transparency International
Dakar, Senegal
+221-33-842-40-44
forumcivil@orange.sn  

Guinea Association for Transparency
Oumar Kanah Diallo, President
+224 622 404 142
okandiallo77@gmail.com
agtguinee224@gmail.com 

10. Political and Security Environment

Guinea has had a long history of political repression, with more recent episodes of politically-motivated violence around elections.  The country suffered under authoritarian rule from independence in 1958 until its first democratic presidential election in 2010.  It has seen continued political violence associated with national and local elections since 2010, culminating in the most recent September 2021 coup d’etat.

On September 5, 2021 Colonel Mamadi Doumbouya and Guinean military special forces seized power and detained former President Alpha Conde through a coup d’état.  COL Doumbouya declared himself Guinea’s head of state, dissolved the government and National Assembly and suspended the constitution.  Guinea is currently governed by the National Committee for Reunification and Development (CNRD), which is led by COL Doumbouya and comprised primarily of military officials.  On September 27, 2021 COL Doumbouya released the Transitional Charter which supersedes the constitution until a new Constitution is promulgated; Guinea’s penal and civil codes remains in force.  On October 1, 2021 the Supreme Court Justice installed COL Doumbouya as Head of State, Transition President, CNRD President, and Commander-in-Chief of Security Forces.  On January 22, 2022 the National Transition Council, the transition government’s legislative body, was installed but no timeline for future elections or return to civilian rule was provided as of April 2022.

In March 2020, the former Conde administration amended the constitution through a referendum that allowed former President Conde to seek a third term in office.  Observers noted the process was not transparent, inclusive, or consultative.  Major opposition parties boycotted the referendum and accompanying legislative elections.  This resulted in resetting presidential term limits and the ruling party, the Rally for the Guinean People, gaining a super majority in the National Assembly.  Domestic and international observers raised concerns regarding widespread violence and voting irregularities in the legislative elections, including closed and ransacked polling stations.

In October 2020 President Alpha Conde ran for reelection for a third term under the new constitution.  International and domestic observers raised concerns about widespread electoral violence, restrictions on freedom of assembly, the lack of transparency in vote tabulation, and inconsistencies between the announced results and tally sheet results from polling stations.  Violent protests during both elections closed businesses in major population centers, resulted in about 150 deaths, and the arbitrary detention of hundreds of people including several prominent opposition figures.  Political intimidation and arbitrary detention of opposition members continued for several months after the election.

The local populace in Boke, Bel-Air, and Sangaredi disrupted road and/or railroad traffic on at least three occasions in 2017 and at least twice in 2018, in response to grievances over employment, lack of services, and other issues.  Although none of these events targeted American or foreign investors, they were disruptive to business in general and eroded confidence in the security situation under which investors must operate in Guinea.  Street violence is difficult to predict or avoid, but generally does not target westerners.

Presidential elections in 2015 sparked violent protests in Conakry, but clashes between police and demonstrators were largely contained.  In addition to political violence, sporadic and generally peaceful protests over fuel prices, lack of electricity, labor disputes, and other issues have occurred in the capital and sometimes beyond since 2013.  In February 2017, seven civilians died in confrontations with security services during large protests against education reforms.  After two days of violent protests in March 2018, teachers’ unions and the government agreed to a raise of 40 percent.  These protests over teacher union pay became intermingled with political protests over voting irregularities in the February 4 local elections.  The political opposition claims the government is responsible for the deaths of over 90 people during political protests over the past eight years.

Other instances of violence occurred in 2014 and 2015 during the Ebola epidemic when local citizens attacked the vehicles and facilities of aid workers.  The Red Cross, MSF (Doctors Without Borders) and the World Health Organization (WHO) also reported cases of property damage (destroyed vehicles, ransacked warehouses, etc.).  On September 16, 2014, in the Forest Region village of Womei, eight people were killed by a mob when they visited the village as part of an Ebola education campaign. The casualties included radio journalists, local officials, and Guinean health care workers.

The small mining town of Zogota, located in Guinea’s Forest Region, saw the deaths of five villagers, including the village chief, during August 2012 clashes with security forces over claims that the Brazilian iron-mining company Vale was not hiring enough local employees and was instead bringing workers from other regions of Guinea.  The ensuing instability led to Vale evacuating all expatriate personnel from the town.

Following the death of President Lansana Conte on December 22, 2008, a military junta calling themselves the National Council for Democracy and Development (CNDD) took power in a bloodless coup.  Immediately following the coup, the U.S. government suspended all but humanitarian and election assistance to Guinea.  The African Union (AU) and ECOWAS suspended Guinea’s membership pending democratic elections and a relinquishment of power by the military junta.  In September 2009, junta security forces attacked a political rally in a stadium in Conakry, killing 150 people, and raping over a hundred women.

The state had persecuted political dissidents and opposition parties for decades.  The Sekou Toure regime (1958-1984) and the Lansana Conte regime (1984-2008) were marked by political violence and human rights abuses.

11. Labor Policies and Practices

Guinea has a young population and a high unemployment rate.  Potential employees often lack specialized skills.  The country has a poor educational system and lacks professionals in all sectors of the economy. Guinea has deficits in specialized skills needed for large-scale projects of any kind.

According to a 2019 World Bank report on “Employment, productivity and inclusion of youth”, in 2017 Guinea’s economy was based on services (49 percent of GDP), mining and industry (37 percent) and agriculture (10 percent).  The tendencies show that employment in Guinea is like other countries in the region, with a high level of employment in the informal sector.  According to the 2018 World Bank Development Indicators, approximately 65 percent of Guineans above 15 years old, (56 percent males and 44 percent females) were employed in the formal or informal sectors.  Of those employed, 52 percent were working in agricultural sector, 34 percent in commerce, and 14 percent in industry and manufacturing.

In March 2020, the National Assembly revised the Children’s Code to increase protections and rights afforded to minors.  The new code provides increased penalties for offenses that expose children to violence, sexuality, the display or dissemination of obscene images, and messages not intended for children.  The new code also increases penalties relating to child labor, sexual abuse, sexual exploitation of children and the fight against child pornography.  Under the new code children between the ages of 12 and 14 can perform light work, which does not meet international standards, as it applies to children under age 13.  In addition, the new code does not prescribe the number of hours per week permitted for light work, nor does it specify the conditions under which light work may be done. Moreover, these laws only apply to workers with written employment contracts, leaving self-employed children and children working outside of formal employment relationships vulnerable to exploitation.

Guinea’s National Assembly adopted a new labor code in February 2014 which protects the rights of employees and is enforced by the Ministry of Technical Education, Vocational Training, Employment and Labor.  The Labor Code sets forth guidelines in various sectors, the most stringent being the mining sector.  Guidelines cover wages, holidays, work schedules, overtime pay, vacation, and sick leave.  The Labor Code also outlaws all discrimination in hiring, including on the basis of sex, disability, and ethnicity.  It also prohibits all forms of workplace harassment, including sexual harassment.  However, the law does not provide antidiscrimination protections for persons based on sexual orientation and/or gender identity.

Although the law provides for the rights of workers to organize and join independent unions, engage in strikes, and bargain collectively, the law also places restrictions on the free exercise of these rights.  The Labor Code requires unions to obtain the support of 20 percent of the workers in a company, region, or trade that the union claims to represent.  The code mandates that unions provide ten days’ notice to the labor ministry before striking, but the code does allow work slowdowns. Strikes are only permitted for professional claims.  The Labor Code does not apply to government workers or members of the armed forces.  While the Labor Code protects union officials from anti-union discrimination, it does not extend that same protection to other workers.

The law prohibits child labor in the formal sector and sets forth penalties of three to ten years imprisonment and confiscation of resulting profits.  The law does not protect children in the informal sector.  The minimum age for employment is 16.  Exceptions allow children to work at age twelve as apprentices for light work in such sectors as domestic service and agriculture, and at 14 for other work.  A new child code was adopted at the National Assembly in December 2019, though it was never enacted by former President Conde.  The new child code provides more severe sentences for violations related to child labor.

The Labor Code allows the government to set a minimum monthly wage through the Consultative Commission for Labor and Social Laws.  The minimum wage for all sectors was established in 2013 at 440,000 GNF (approximately USD 50).  There is no known official poverty income level established by the government.

The law mandates that regular work should not exceed ten-hour days or 48-hour weeks, and it mandates a period of at least 24 consecutive hours of rest each week, usually on Sunday.  Every salaried worker has the legal right to an annual paid vacation, accumulated at the rate of at least two workdays per month of work.  There also are provisions in the law for overtime and night wages, which are a fixed percentage of the regular wage.  The law stipulates a maximum of 100 hours of compulsory overtime a year.

The law contains general provisions regarding occupational safety and health, but neither former President Conde’s government nor the transition government have established a set of practical workplace health and safety standards.  Moreover, no orders have been issued laying out the specific safety requirements for certain occupations or for certain methods of work called for in the Labor Code.  All workers, foreign and migrant included, have the right to refuse to work in unsafe conditions without penalty.

Authorities rarely monitor work practices or enforced the workweek standards and the overtime rules.  Teachers’ wages are low, and teachers sometimes have gone for months without pay.  When salary arrears are not paid, some teachers live in abject poverty.  From 2016-2018, teachers conducted regular strikes and as a result and were promised a 40 percent increase in pay.  Initially they received only ten percent, but in March 2018, the government began to pay the remaining 30 percent.  In February 2019, the teacher’s union accepted the government proposal at the time and returned to work.  In January 2020, the teachers started an indefinite strike demanding higher wages and the re-running of a census of currently employed teachers.  As of end of March 2020, the teachers’ strike was put on hold due to the COVID-19 pandemic.

Despite legal protection against working in unsafe conditions, many workers feared retaliation and did not exercise their right to refuse to work under unsafe conditions.  Accidents in unsafe working conditions remain common.  The government banned artisanal mining during the rainy season to prevent deaths from mudslides, but the practice continues.

Pursuant to the Labor Code, any person is considered a worker, regardless of gender or nationality, who is engaged in any occupational activity in return for remuneration, under the direction and authority of another individual or entity, whether public or private, secular, or religious.  In accordance with this code, forced or compulsory labor means any work or services extracted from an individual under threat of a penalty and for which the individual concerned has not offered himself willingly.

A contract of employment is a contract under which a person agrees to be at the disposal and under the direction of another person in return for remuneration.  The contract may be agreed upon for an indefinite or a fixed term and may only be agreed upon by individuals of at least 16 years of age, although minors under the age of 16 may be contracted only with the authorization of the minor’s parent or guardian.  An unjustified dismissal provides the employee the right to receive compensation from the employer in an amount equal to at least six months’ salary with the last gross wage paid to the employee being used as the basis for calculating the compensation due.

The Investment Code obliges new companies to prioritize hiring local employees and provide capacity training and promotion opportunities for Guineans, a sentiment echoed by public remarks from Transition President COL Doumbouya and other members of the transition government.

14. Contact for More Information

Caroline Corcoran
Economic and Commercial Officer
U.S. Embassy Conakry
+224 655 104 428
corcorance@state.gov

Mozambique

Executive Summary

Mozambique’s lengthy coastline, deep-water ports, favorable climate, rich soil, and vast natural resources give the country significant potential, but investors face challenges related to the business environment. The Government of the Republic of Mozambique (GRM) made progress on public financial management reforms and publishing budget and debt figures, took steps to reform State-Owned Enterprises (SOEs), and arrested or prosecuted high-level officials on corruption-related charges. It reached an agreement with the IMF and promoted dialogue with the private sector and donor community on economic reforms. Challenges include Mozambique’s opaque and complicated taxation policies, barriers to private land ownership, corruption, an underdeveloped financial system, high interest rates, poor infrastructure, and difficulties obtaining visas. Infrastructure outside of Maputo is often poor, while bureaucracy and corruption slow trade at many points of entry. Mozambican labor law makes it difficult to hire and fire workers, and court systems are bogged down in labor disputes. The domestic workforce also lacks many advanced skills needed by industry, and the visa regime makes bringing in foreign workers difficult.

Insecurity related to a terrorist insurgency in northern Mozambique has resulted in multi-billion-dollar onshore LNG projects being delayed, although a smaller offshore floating LNG platform remains on track to begin production by October 2022.

The COVID-19 pandemic negatively impacted the extractive industry and tourism sector, and pandemic-related restrictions affected many other economic sectors. Following a recession in 2020, the economy returned to 2.5 percent economic growth in 2021. In 2022, the GRM began to ease some restrictions, although COVID-19 measures have continued to limit the hours restaurants and other businesses can operate and impose testing requirements on travelers.

Mozambique is eager to partner with the United States on climate issues, although it lacks resources. It joined the Agricultural Innovation Mission for Climate (AIM4C) and is considering joining the Global Methane Pledge. As the GRM made progress on rural electrification, it incorporated solar energy and solicited investment for hydropower projects. U.S. development agencies and international financial institutions contributed to energy projects in solar and natural gas. The U.S. Department of Energy helped identify areas where small renewable solar and wind projects could be built alongside agricultural activities. These areas may provide opportunities for sustainable foreign direct investment in the renewable energy market. Mozambique is a growing producer of critical minerals, including graphite, lithium, and titanium. In 2021, Mozambique joined the Kimberley Process Certification Scheme, enabling Mozambique to legally export diamonds.

The GRM worked constructively with the United States and other members of the donor community. In March 2022, it reached an agreement with the IMF for a three-year, $470 million program that aims to reinforce economic recovery while addressing challenges related to debt and financing and encouraging good governance and improved management of public resources. The GRM is working with the U.S. Millennium Challenge Corporation (MCC) towards signing a second MCC compact (Compact II) in 2023. Compact II will entail business-enabling reforms and will undertake investments in Zambézia Province that focus on transportation infrastructure, commercial agriculture, and climate change mitigation. While Compact II is still under development, it has potential to contribute to key sectors and help create an enabling environment for additional investments.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 147 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 122 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2018 $491 https://apps.bea.gov/international/factsheet/  
World Bank GNI per capita (USD) 2020 $460  https://data.worldbank.org/indicator/NY.GNP.PCAP.CD   

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

According the State Holdings Management Institute (IGPE), Mozambique has twelve SOEs , 18 companies  that are majority state-owned, and 23 companies  with minority state ownership, which IGPE does not consider to be SOEs.

Some of the largest SOEs, such as Airports of Mozambique (Aeroportos de Moçambique) and Electricity of Mozambique (Electricidade de Moçambique), have monopolies in their respective industries.  In some cases, SOEs enter into joint ventures with private firms to deliver certain services.  For example, Ports and Railways of Mozambique (CFM, Portos e Caminhos de Ferro de Moçambique) offers some concessions. Many SOEs benefit from state subsidies.  In some instances, SOEs have benefited from non-compete contracts that should have been competitively tendered.  SOE accounts are generally not transparent and not thoroughly audited by the Supreme Audit Institution.  Unsustainable SOE debt represents a liability for the GRM, and SOEs were at the heart of the hidden debt scandal revealed in 2016.

In 2018, the Parliament passed Law no. 3/2018, which broadens the definition of SOEs to include all public enterprises and shareholding companies.  The law seeks to unify SOE oversight and harmonize the corporate governance structure, instituting additional financial controls, borrowing limits, and financial analysis and evaluation requirements for SOEs.  The law requires the oversight authority to publish a consolidated annual report on SOEs, with additional reporting requirements for individual SOEs.  The Council of Ministers approved regulations for the SOE law in early 2019, and in 2020 the MEF published limited information on SOE debt.

The GRM is working with the IMF and the international donor community in an effort to reform its SOEs. In March 2021, the GRM hired a consulting company to study models for restructuring SOEs and selected four SOEs to be restructured: Mozambican Insurance Company (EMOSE), the Correios de Moçambique (Post Office), the Sociedade de Gestão Imobiliária (DOMUS) and the Matola Silos and Grain Terminal (STEMA).

8. Responsible Business Conduct

Larger companies and foreign investors in Mozambique tend to follow their own responsible business conduct (RBC) standards.  For some large investment projects, RBC-related issues are negotiated directly with the GRM.  RBC is an increasingly high-profile issue in Mozambique, especially in the extractive industries, where some projects require resettlement of communities.

The GRM joined the Extractive Industries Transparency Initiative (EITI) in May 2009.  The EITI Governing Board labeled Mozambique as a compliant country in 2012, and Mozambique continues to make meaningful progress towards implementing the EITI standards.

Following the emergence of a violent extremist insurgency in northern Mozambique in 2017, the GRM turned to private military companies (PMCs) to provide logistical and tactical support to Mozambican military and police forces in 2020 and 2021. In March 2021, Amnesty International accused one PMC operating in Mozambique of carrying out indiscriminate attacks on civilians. The GRM’s contract with this PMC ended on April 6, 2021. Mozambique is not a signatory of the Montreaux Document on Private Military and Security Companies, does not support the International Code of Conduct for Private Security Service Providers, and does not participate as a government in the International Code of Conduct for Private Security Service Providers’ Association. In March 2021, officials from the Ministries of Defense and Justice and the semi-independent Human Rights Commission participated in a series of workshops organized by the Center for Democracy and Development on the Voluntary Principles of Security and Human Rights in Cabo Delgado Province.

9. Corruption

While corruption remains a major concern in Mozambique, the GRM has undertaken some steps to address the problem. Working with the IMF, it published the July 2019 Diagnostic Report on Transparency, Governance and Corruption , which identifies 29 anti-corruption reform measures. The March 2022 IMF agreement intends to use these measures as benchmarks for subsequent reforms.

The Mozambican judicial system conducted a trial for 19 defendants in the “hidden debts” case, hearing from more than 70 witnesses. The trial was aired publicly in a positive step to counter the perception that senior Mozambican government officials can commit crimes with impunity. The Maputo City Court has set sentences for August 1, 2022; the court has announced it is considering seizing assets of the accused to partially compensate the nation for the over $2 billion in fraudulent state-backed loans.

Mozambique’s civil society and journalists remain vocal on corruption-related issues.  Action related to the “hidden debts” scandal is being led by a civil society umbrella organization known as the Budget Monitoring Forum (Forum de Monitoria de Orcamento, FMO) that brings together around 20 different organizations for collective action on transparency and corruption issues.  A civil society organization that participates in the FMO, the Center for Public Integrity (CIP), also continues to publicly pressure the GRM to act against corrupt practices.  CIP finds that many local businesses are closely linked to the GRM and have little incentive to promote transparency.

10. Political and Security Environment

In July 2021, Mozambican security forces deployed to Cabo Delgado Province were joined by Rwandan and SADC military contingents. Since that time, the combined forces have made security gains against the Islamic State in Mozambique (ISIS-M). However, the ongoing insurgency continues to deter investment in northern Mozambique. Sporadic terrorist attacks continue to occur, mainly against civilians, in the northern provinces. As of mid-2022, TotalEnergies had yet to resume construction of its Area 1 LNG facility following suspension of its operations and declaration of force majeure in April 2021.

The United States designated ISIS-M as a Foreign Terrorist Organization and Specially Designated Global Terrorist Group in March 2021. ISIS provides support to combatants in northern Mozambique and occasionally claims credit for their attacks. Since 2017, the ISIS affiliate carried out more than 500 deliberate attacks against unarmed civilians, causing an estimated 3,100 deaths and up to 800,000 internally displaced persons (IDPs). As of April 2022, the GRM had begun implementing plans to stabilize the region with support from the international donor community and encouraging IDPs to return to their homes.

Following the ceasefire and peace agreement signed in August 2019, Mozambique’s disarmament, demobilization, and re-integration (DDR) of ex-combatants from political opposition group Renamo is nearing conclusion. The October 2021 death of Mariano Nhongo, leader of the Renamo Military Junta splinter group, corresponded with a drop in the number of attacks along major highways in Manica and Sofala provinces.

11. Labor Policies and Practices

According to the International Labor Organization (ILO), an estimated six million Mozambicans, or 80 percent of the economically active population in Mozambique, work in the informal sector. Mozambique’s Ministry of Labor generally had not effectively enforced minimum wage, hour of work, and occupational safety and health standards in the informal economy; labor law is only enforced in the formal sector.

There is an acute shortage of skilled labor in Mozambique.  As a result, many employers hire foreign employees who have required skills.  The GRM limits the number of expatriates a business can employ in relation to the number of Mozambican citizens it employs.  The GRM passed labor regulations in 2016 strengthening the requirement for employers to devise skills transfer programs to train Mozambican nationals to eventually replace the foreign workers.

The constitution and law provide that workers, with limited exceptions, may form and join independent trade unions, conduct legal strikes, and bargain collectively, although unions must be approved by the government.  The GRM takes 45 days to register employers’ or workers’ organizations, a delay the ILO has deemed excessive. Approximately three percent of the labor force is affiliated with trade unions.  An employee fired with cause does not have a right to severance, while employees terminated without cause do.  Unemployment insurance does not exist and there is not a social safety net program for workers laid off for economic reasons. The law does not allow workers to strike until a complex mediation and arbitration process has been conducted, which typically takes two to three weeks. The law also provides for voluntary arbitration for “essential services” personnel monitoring the weather and fuel supply, postal service workers, export-processing-zone workers, and those loading and unloading animals and perishable foodstuffs.

With support from international donors, the GRM is reviewing its Labor Law to align with international conventions related to forced labor, health and safety issues in mining, and the worst forms of child labor.  The proposed revisions would extend the maternity leave period from 60 to 90 days; address sexual harassment; incorporate special conditions in the fisheries sector; provide for telework and intermittent work; address suspension of contracts in cases of force majeure or for technological, structural or market reasons; address private employment agencies; and provide for recruitment of retired persons. CTA and donors are applying pressure for the draft law to be reviewed by the Labor Consultative Commission (CCT) then sent to the Council of Ministers and the Parliament for approval.

14. Contact for More Information

Elizabeth Filipe
Economic Assistant
Avenida Marginal, 5467
Maputo, Mozambique
(258) 84-095-8000
filipeec@state.gov  

Nigeria

Executive Summary

Nigeria’s economy – Africa’s largest – exited recession with a 3.4% GDP growth rate in 2021 following a contraction of 1.9% the previous year.  The IMF forecasts growth rates of under 3% in 2022 and 2023 while the Nigerian National Bureau of Statistics predicts a more robust 4.2% growth rate in 2022.  President Muhammadu Buhari’s administration has prioritized diversification of Nigeria’s economy beyond oil and gas, with the stated goals of building a competitive manufacturing sector, expanding agricultural output, and capitalizing on Nigeria’s technological and innovative advantages.  With the largest population in Africa, Nigeria is an attractive consumer market for investors and traders, and offering abundant natural resources and a low-cost labor pool.  

The government has undertaken reforms to help improve the business environment, including by facilitating faster business start-up by allowing electronic stamping of registration documents and making it easier to obtain construction permits, register property, obtain credit, and pay taxes.  Foreign direct investment (FDI) inflows nevertheless declined from roughly $1 billion in 2020 to $699 million in 2021 as persistent challenges remain.  

Corruption is a serious obstacle to Nigeria’s economic growth and is often cited by domestic and foreign investors as a significant barrier to doing business.  Nigeria’s ranking in Transparency International’s 2021 Corruption Perception Index fell slightly from its 2020 score of 149 out of 175 countries to154 of 180 in 2021.   Businesses report that corruption by customs and port officials often leads to extended delays in port clearance processes and to other issues importing goods.  

Nigeria’s trade regime is protectionist in key areas.  High tariffs, restricted foreign exchange availability for 44 categories of imports, and prohibitions on many other import items have the aim of spurring domestic agricultural and manufacturing sector growth.  The government provides tax incentives and customs duty exemptions for pioneer industries including renewable energy.  A decline in oil exports, rising prices for imported goods, an overvalued currency, and Nigeria’s expensive fuel subsidy regime continued to exert pressure on the country’s foreign exchange reserves in 2021.  Domestic and foreign businesses frequently cite lack of access to foreign currency as a significant impediment to doing business. 

Nigeria’s underdeveloped power sector is a bottleneck to broad-based economic development and forces most businesses to generate a significant portion of their own electricity.  Reform of Nigeria’s power sector is ongoing, but investor confidence continues to be weakened by regulatory uncertainty and limited domestic natural gas supply.  

Security remains a concern to investors in Nigeria due to violent crime, kidnappings for ransom, and terrorism in certain parts of the country.  The ongoing Boko Haram and Islamic State in West Africa (ISIS-WA) insurgencies have included attacks against civilian and military targets in the northeast of the country.  Nigeria has experienced a rise in kidnappings for ransom and attacks on villages by armed gangs in the North West and North Central regions.  Criminal attacks on oil and gas infrastructure in the Niger Delta region that restricted oil production in 2016 have eased, but a significant rise in illegal bunkering and oil theft has left the sector in a similar state of decreased output.  

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 154 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 118 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $6,811 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 $2,000 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

2. Bilateral Investment Agreements and Taxation Treaties

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.

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

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.

8. Responsible Business Conduct

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.

9. Corruption

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.

10. Political and Security Environment

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.

11. Labor Policies and Practices

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.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2021 $422,240 2020 $432,294 https://data.worldbank.org/indicator/
NY.GDP.MKTP.CD?locations=NG
 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2020 $9,405 BEA data available at BEA : Nigeria –
International Trade and Investment
Country Facts
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2020 $132 BEA data available at BEA : Nigeria –
International Trade and Investment
Country Facts
Total inbound stock of FDI as % host GDP N/A N/A 2020 0.55% https://data.worldbank.org/indicator/
BX.KLT.DINV.WD.GD.ZS?locations=NG
 

* Source for Host Country Data: Nigerian Bureau of Statistics

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $74,256 100% Total Outward $13,213 100%
Netherlands, The $13,640 18% United Kingdom $2,380 18%
United States $9,405 13% Netherlands, The $1,217 9%
France $8,798 12% Bermuda $1,014 8%
United Kingdom $8,132 11% Ghana $917 7%
Bermuda $7,696 10% Norway $808 6%
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information 

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

South Africa

Executive Summary

South Africa boasts the most advanced, broad-based economy in sub-Saharan Africa. The investment climate is fortified by stable institutions; an independent judiciary and robust legal sector that respects the rule of law; a free press and investigative reporting; a mature financial and services sector; and experienced local partners.

In dealing with the legacy of apartheid, South African laws, policies, and reforms seek economic transformation to accelerate the participation of and opportunities for historically disadvantaged South Africans. The Government of South Africa (GoSA) views its role as the primary driver of development and aims to promote greater industrialization, often employing tariffs and other trade measures that support domestic industry while negatively affecting foreign trade partners. President Ramaphosa’s October 2020 Economic Reconstruction and Recovery Plan unveiled the latest domestic support target: the substitution of 20 percent of imported goods in 42 categories with domestic production within five years. Other GoSA initiatives to accelerate transformation include labor laws to achieve proportional racial, gender, and disability representation in workplaces and prescriptive government procurement requirements such as equity stakes and employment thresholds for historically disadvantaged South Africans. In January 2022, the World Bank approved South Africa’s request for a USD 750 million development policy loan to accelerate the country’s COVID-19 response. South Africa previously received USD 4.3 billion from the International Monetary Fund in July 2020 for COVID-19 response. This is the first time that the institutions have supported South Africa’s public finances/fiscus since the country’s democratic transition.

In November 2021 at COP 26 the GoSA, the United States, the UK, France, Germany, and the European Union (EU) announced the Just Energy Transition Partnership (JETP). The partnership aims to accelerate the decarbonization of South Africa’s economy, with a focus on the electricity system, to help achieve the ambitious emissions reduction goals laid out in South Africa’s Nationally Determined Contribution (NDC) in an inclusive, equitable transition. The partnership will mobilize an initial commitment of USD 8.5 billion over three-to-five years using a variety of financial instruments.

South Africa continues to suffer the effects from a “lost decade” in which economic growth stagnated, hovering at zero percent pre-COVID-19, largely due to corruption and economic mismanagement. During the pandemic the country implemented one of the strictest economic and social lockdown regimes in the world at a significant cost to its economy. South Africa suffered a four-quarter technical recession in 2019 and 2020 with economic growth registering only 0.2 percent growth for the entire year of 2019 and contracting -6.4 percent in 2020. In a 2020 survey of over 2,000 South African businesses conducted by Statistics South Africa (StatsSA), over eight percent of respondents permanently ceased trading, while over 36 percent indicated short-term layoffs. Although the economy grew by 4.9 percent in 2021 due to higher economic activity in the financial sector, the official unemployment rate in the fourth quarter of 2021 was 34.9 percent. Other challenges include policy certainty, lack of regulatory oversight, state-owned enterprise (SOE) drain on the fiscus, widespread corruption, violent crime, labor unrest, lack of basic infrastructure and government service delivery and lack of skilled labor.

Due to growth in 2021, Moody’s moved South Africa’s overall investment outlook to stable; however, it kept South Africa’s sovereign debt at sub-investment grade. S&P and Fitch ratings agencies also maintain assessments that South Africa’s sovereign debt is sub-investment grade at this time.

Despite structural challenges, South Africa remains a destination conducive to U.S. investment as a comparatively low-risk location in Africa, the fastest growing consumer market in the world. Google (US) invested approximately USD 140 million, and PepsiCo invested approximately USD 1.5 billion in 2020. Ford announced a USD 1.6 billion investment, including the expansion of its Gauteng province manufacturing plant in January 2021.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 70 of 175 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 61 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $3.5 billion https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $6,010 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

State-owned enterprises (SOEs) play a significant role in the South African economy in key sectors such as electricity, transport (air, rail, freight, and pipelines), and telecommunications. 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.

8. Responsible Business Conduct

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.

9. Corruption

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.

10. Political and Security Environment

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.

11. Labor Policies and Practices

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 

14. Contact for More Information

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

Sudan

Executive Summary

Following the end of the 30-year regime of Omar Bashir in 2019, Sudan’s military and a coalition of civilian opposition groups agreed to a three-year power-sharing agreement under the Civilian-Led Transitional Government (CLTG) that was to culminate with a popularly elected government in 2022. The clock on that agreement was reset to 2024 with the integration of former armed opposition groups into the CLTG following the signing of the Juba Peace Agreement on October 3, 2020. The transition ended abruptly on October 25, 2021, when the country’s military, led by General Abdul Fattah al-Burhan, seized power and ousted the CLTG, including Prime Minister Abdalla Hamdok. The military takeover precipitated a political crisis that continues into 2022. Sudanese citizens, angered and frustrated by the military’s seizure of power, initiated a series of regular nationwide protests demanding a return to civilian rule. In January 2022, the United Nations Integrated Transition Assistance Mission in Sudan (UNITAMS) launched a mediation effort aimed at bringing together a broad range of civilian actors to begin negotiations on a political solution to restore Sudan’s democratic transition; the African Union and Intergovernmental Authority on Development later joined that effort.

During its two-year administration, the CLTG initiated a series of political, economic, and legal reforms. In cooperation with the International Monetary Fund (IMF), the government pursued a program that reduced or eliminated several costly subsidy programs, improved fiscal discipline and public financial management, adopted currency and tariff reforms, and launched a revision of its commercial laws. The international community, under U.S. government leadership, took actions to dramatically reduce Sudan’s outstanding $56 billion international debt by paying off debt arrears owed to International Financial Institutions and organizing debt relief among creditors nations. A popularly supported “Dismantling Committee,” in concert with the Ministry of Justice, was intended to root out corruption, identify and seize illegally obtained assets, and return much of the national wealth that was spirited out of the country by Bashir-era cronies.

The October 25 military takeover stalled most CLTG reform efforts and threatens to reverse the gains of the previous two years. Sudan’s current military leadership dismissed most of the civilian ministers, including the Prime Minister, appointing in their place “caretaker” ministers absent legal authority to do so. The international community has imposed significant costs on Sudan’s military regime for its actions. The United States has paused all non-humanitarian assistance to Sudan, and much assistance from bilateral donors and International Financial Institutions also remain paused. The United States government has been clear that the only path to restoring financial assistance is predicated on restoring Sudan’s democratic transition. The ongoing political turmoil has produced economic uncertainty, a depreciating national currency, price increases, and shortages of grain, fuel, medicine, and other imported commodities.

The sectors of greatest interest to foreign investors remain mineral extraction (primarily gold, non-precious metals, oil, and natural gas) and agriculture. Sudan’s infrastructure is in significant need of modernization and expansion. Many American companies have inquired about investment opportunities and visited Sudan with an expressed interest in direct investment and promotion of U.S. products. The Sudanese have expressed a robust interest in obtaining U.S. goods, services, technologies, and training/capacity building programs. However, a lack of domestic investment capital, poor infrastructure, burdensome bureaucracy, endemic corruption, and low household incomes create challenges for any company considering the Sudanese market.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 164 of 175 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 N/A https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2021 N/A https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 $650 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

State-owned enterprises (SOEs) associated with the military and security services play an unusually large role in the Sudanese economy and are currently involved in a range of commercial activities, including fuel storage, natural gas projects, solar panel manufacturing, infrastructure, the railroad sector, cotton and textiles, and food industries, including flour milling, bread production, and animal husbandry. Approximately 220 out of approximately 650 SOEs cataloged by the CLTG are associated with Sudan’s military and security services. Reportedly, many of these SOEs are inefficient and poorly managed; however, reforming and transferring them to civilian control has been politically sensitive. Although the CLTG made SOE reform a centerpiece of its broader economic and governance reform program, this agenda has stalled because of the military takeover.

As part of the IMF’s Extended Credit Facility (ECF) program, Sudanese authorities committed to take the following actions by June 2022: (1) endorse an ownership strategy that sets forth the oversight and management framework for SOEs and guiding principles for a review of the existing stock of SOEs; (2) publish end-2021 financial statements and audit reports for ten priority SOEs and creating a calendar for annual publication of these reports thereafter; and (3) publish a complete list of SOEs, including those in the intelligence sector. SOE audits from previous years exist but authorities have not yet made them public. The U.S. government, in concert with the IMF, continues to press the Sudanese authorities to accelerate their review of SOE operations and publish the aforementioned documents as steps toward greater transparency and adherence to its IMF program. However, military authorities have resisted these reform efforts.

8. Responsible Business Conduct

Sudan’s Investment Law (National Investment Encouragement Act, 1999, Amended (2013 and 2021)) sets the standards for business conduct and obligations. The law and its executive rules are applied to both Sudanese and foreign investors. The investment authority maintains oversight for “responsible business conduct” and provides information on regulations, services, and the various departments to which the investor could contact on its website:  http://www.sudaninvest.org/English/About-Ministry.htm . The investment authority also developed a “one-stop-shop” for information on land, customs, taxes, commercial registration, and agriculture among others. The law under its Chapter 6 “Privileges and Guarantees” and Chapter 8 “General Rules” commits the government to “non-nationalization or non-confiscation of projects.” Sudan’s Investment Council and Specialized Court create the regulations and are the bodies which settle overlapping issues. Sudan makes available an ombudsman at its Public Grievance Chamber ( www.ombudsman.gov.sd ). The Sudanese Constitution (1998) first established the General Ombudsman body. In 2011, Chapter V, Article 147 (1) of the Constitution (2011) established the Public Grievances Chamber. The Ombudsman’s office explains its complaint process and other information online. Corruption in the supply chain for commodities and minerals within the major cities and in the conflict-affected areas remains a concern.

Sudan falls short of consistently strong supply chain due diligence. For example, while the government takes positive steps through its Ministry of Animal Resources ( http://mar.gov.sd/en/index.php/departments/view_dept/2 ) to outline regulations for implementation of livestock and fisheries administration, it does not, through its Ministry of Energy and Mining, prohibit the harmful use of cyanide or other dangerous chemicals in gold mining operations. In fact, the government and private companies use cyanide in gold extraction. Sudan is not an adherent to the OECD’s Guidelines for Multinational Enterprises on Responsible Business Conduct International, does not participate in the Extractive Industries Transparency Index (EITI) nor participates in the Voluntary Principles on Security and Human Rights.

9. Corruption

Corruption is widespread in Sudan. The law provides criminal penalties for corruption by officials; nevertheless, government corruption at all levels is widespread. The Bashir regime made a few efforts to enforce legislation aimed at preventing and prosecuting corruption.  The law provides the legislative framework for addressing official corruption, but implementation under the Bashir regime was weak, and punishments were lenient. Officials found guilty of corrupt acts could often avoid jail time if they returned ill-gotten funds. Under the Bashir regime, journalists who reported on government corruption were sometimes intimidated, detained, and interrogated by security services.

A special anticorruption attorney investigated and prosecuted corruption cases involving officials, their spouses, and their children. Punishments for embezzlement include imprisonment or execution for public service workers, although these were almost never carried out. Under the Bashir regime, media reporting on corruption was considered a “red line” set by the National Intelligence and Security Services and a topic that authorities, for the most part, prohibited newspapers from covering. While reporting on corruption was no longer a red line under the CLTG, media continued to practice self-censorship on issues related to corruption.  In August 2019, Omar Bashir was formally indicted on charges of corruption and illegal possession of foreign currency. Bashir’s trial began in August 2019; in December 2019, he was convicted and sentenced to two years’ imprisonment on these charges. Bashir remains imprisoned as further charges are pending.

Financial Disclosure: Under the Bashir regime, the law required high-ranking officials to publicly disclose income and assets. There were no clear sanctions for noncompliance, although the former Anti-Corruption Commission possessed discretionary powers to punish violators. The Financial Disclosure and Inspection Committee and the Unlawful and Suspicious Enrichment Administration at the Ministry of Justice both monitored compliance. Despite three different bodies ostensibly charged with monitoring financial disclosure regulations, there was no effective enforcement or prosecution of offenders.

The 2019 Constitutional Declaration includes financial disclosure and prohibition of commercial activity provisions for members of the Sovereign Council and Council of Ministers, state and regional governors, and members of the Transitional Legislative Council. It also mandates the creation of an anti-corruption commission (not established) and an Empowerment Elimination, Anti-Corruption, and Funds Recovery Committee (informally called the Dismantling Committee). However, following the October 2021 military takeover, the commission was abolished, many of its members imprisoned on corruption charges, and many government employees dismissed at the Commission’s direction were re-instated in their positions. Sudan ranked 164 out of 180 countries on Transparency International ‘s 2021  Corruption Perceptions Index .

https://www.transparency.org/en/cpi/2021 

10. Political and Security Environment

Sudan’s political and security environment is volatile. Neighborhood Resistance Committees, political parties, and other groups opposing the October 25, 2021, military takeover regularly stage large protests aimed at forcing the military leadership to relinquish control and return Sudan to its democratic transition. These protests have become violent, with 102 protesters killed as of June 2022 and over 2,000 injured by police and security forces since October 2021. On March 21, 2022, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Sudan’s Central Reserve Police for the use of excessive force against peaceful protestors.

On May 23, 2022 the U.S. Department of State, the U.S. Department of the Treasury, the U.S. Department of Commerce, and the U.S. Department of Labor issued a business advisory to highlight growing risks to American businesses and individuals associated with conducting business with Sudanese State-Owned Enterprises (SOE) which includes all companies under military control (hereafter collectively referred to as “SOEs and military-controlled companies”). These risks arise from recent actions undertaken by Sudan’s Sovereign Council and security forces under the military’s control and could adversely impact U.S. businesses, individuals, other persons, and their operations in the country and the region.

U.S. businesses, individuals, and other persons, including academic institutions, research service providers, and investors (hereafter “businesses and individuals”) that operate in Sudan should be aware of the role of SOEs and military-controlled companies in its economy. Though Sudan’s military has long controlled a network of entities, following its seizure of power on October 25, 2021, it is in effective control of all SOEs. Further, Sudan’s military is increasing its direct control of Sudan’s many SOEs and plans for civilian control over SOEs has been abandoned. Businesses and individuals operating in Sudan and the region should undertake increased due diligence related to human rights issues and be aware of the potential reputational risks of conducting business activities and/or transactions with SOEs and military-controlled companies. U.S. businesses and individuals should also take care to avoid interaction with any persons listed on the Department of the Treasury’s Office of Foreign Assets Controls’(OFAC) list of Specially Designated Nationals  and Blocked Persons (SDN List).

The business advisory relates specifically to SOEs and military-controlled companies. The U.S. government does not seek to curtail or discourage responsible investment or business activities in Sudan with civilian-owned Sudanese counterparts.

The full business advisory here:  https://www.state.gov/risks-and-considerations-for-u-s-businesses-operating-in-sudan/.

11. Labor Policies and Practices

Sudan suffers from high unemployment, unofficially estimated at 40%. The Sudanese educational system produces many skilled and talented workers, but an absence of career options prompts many to emigrate in search of better opportunities. U.S. business contacts have praised the professionalism of their Sudanese counterparts. Sudan is also experiencing a demographic “bulge” that has resulted in a disproportionate number of potential workers under 25 years of age. There is a large, informal market of small entrepreneurs. The country’s borders are porous, producing a large pool of unskilled labor market, with many workers from Ethiopia, South Sudan, and Syria.

In November 2019, the CLTG dissolved all trade unions and associations as part of its effort to dismantle the remnants of the Bashir regime. The CLTG encouraged the formation of new trade unions. In 2021, the Ministry of Labor and Administrative Reform, with technical input from the International Labor Organization (ILO), finalized the drafting of a Trade Union Law.  The draft law was not, however, passed prior to the military takeover.

14. Contact for More Information

Justine King
Economic Officer
U.S. Embassy Khartoum
+249-(0)18-702-2000 ext.2035
KingJA3@state.gov

Tanzania

Executive Summary

The United Republic of Tanzania achieved lower-middle income country status in July 2020, following two decades of sustained economic growth. The country’s solid macroeconomic foundation, sound fiscal policies, rich natural endowments, and strategic geographic position have fostered a diverse economy resilient to external shocks. This proved critical as the COVID-19 pandemic resulted in an economic downturn, though Tanzania avoided a more severe pandemic-induced recession.

The Government of Tanzania (GoT) welcomes foreign direct investment. In March 2021, President Samia Suluhu Hassan assumed the presidency following the death of President John Pombe Magufuli. In her first months in office, President Hassan promised reforms to improve the business climate and identified attracting foreign investment as a key priority. This commitment to increasing investment has continued throughout her tenure and economic issues remain at the forefront of the administration’s policies, strategies, and goals. President Hassan’s government has sought to engage stakeholders, including local private sector organizations and development partners, to improve the business climate and regain investor confidence. Consistent with this shift in rhetoric, significant changes to improving the business environment and investment climate have been made over the past year: improving the complex, and sometimes inconsistent, work permit issuance process for foreign workers and investors; streamlining Tanzania Investment Center (TIC) operations; disbandment of the special ‘Tax Task Force’ previously associated with heavy-handed and arbitrary tax enforcement; and strengthening regional trade cooperation.

However, while several laws have been reviewed, business climate legislative reforms have not yet been sweeping. There remain significant legislative obstacles to foreign investment such as the Natural Resources and Wealth Act, Permanent Sovereignty Act, Public Private Partnership Act, and the Mining Laws and Regulations. Despite pledges by President Hassan and senior government officials, these have yet to be resolved; rather, the administration has selectively eased the application of these laws. The primary business and investment challenges lie in tax administration; opening and closing businesses; inconsistent institutions compounded by corruption and requests for “facilitation payments” at many levels of government; late payment issues; and cross-border trade obstacles. In recent years, aggressive and arbitrary tax collection policies targeted foreign and domestic companies and individuals alike, and tough labor regulations made it difficult to hire foreign employees, even when the required skills were not available within the local labor force. Corruption, especially in government procurement, taxation, and customs clearance remains a concern for foreign investors, though the government has prioritized efforts to combat the practice.

The country’s drastic and improved shift in its acknowledgement of and approach to COVID-19 in 2021 led to the creation and implementation of a national COVID-19 response plan that addressed both health and socio-economic impacts of the pandemic. Tanzania has reengaged with the international community to support implementation of its robust national pandemic response plan with key pillars for improving data sharing, welcoming vaccines, and conducting vaccination outreach campaigns.

Sectors traditionally attracting U.S. investment include infrastructure, transportation, energy, mining and extractive industries, tourism, agriculture, fishing, agro-processing, and manufacturing. Other opportunities exist in workforce development, microfinance solutions, technology, and consumer products and services.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 87 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 90 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country (historical stock positions) 2020 USD 1,510 Million https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2019 USD 1,080 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

Public enterprises do not compete under the same terms and conditions as private enterprises because they have access to government subsidies and other benefits. SOEs are active in the power, communications, rail, telecommunications, insurance, aviation, and port sectors. SOEs generally report to ministries and are led by a board. Typically, a presidential appointee chairs the board, which usually includes private sector representatives. SOEs are not subjected to hard budget constraints. SOEs do not discriminate against or unfairly burden foreigners, though they do have access to sovereign credit guarantees.

Specific details on SOE financials and employment figures are not publicly available.

As of June 2019, the GoT’s Treasury Registrar reported shares and interests in 266 public parastatals, companies and statutory corporations ( view the most recent Treasury Registrar report ).

8. Responsible Business Conduct

The GoT’s National Environment Management Council (NEMC) undertakes enforcement, compliance, review, and monitoring of environmental impact assessments; performs research; facilitates public participation in environmental decision-making; raises environmental awareness; and collects and disseminates environmental information. Stakeholders, however, have expressed concerns over whether the NEMC has sufficient funding and capacity to handle its broad mandate.

There are no legal requirements for public disclosure of RBC, and the GoT has not yet addressed executive compensation standards. Dar es Salaam Stock Exchange (DSE) listed companies, however, must release legally required information to shareholders and the general public. In addition, the DSE signed a voluntary commitment with the United Nations Sustainable Stock Exchanges Initiative in June 2016, to promote long-term sustainable investments and improve environmental, social, and corporate governance. Tanzania has accounting standards compatible with international accounting bodies.

The Tanzanian government does not usually factor RBC into procurement decisions. The GoT is responsible for enforcing local laws, however, the media regularly reports on corruption cases where offenders allegedly avoid sanctions. There have also been reports of corporate entities collaborating with local governments to carry out controversial undertakings that may not be in the best interest of the local population.

Some foreign companies have engaged NGOs that monitor and promote RBC to avoid adversarial confrontations. In addition, some of the multinational companies who are signatories to the Voluntary Principles on Security and Human Rights (VPs) have taken the lead and appointed NGOs to conduct programs to mitigate conflicts between the mining companies, surrounding communities, local government officials and the police.

Tanzania is a member of the Extractive Industries Transparency Initiative (EITI) and in 2015 Tanzania enacted the Extractive Industries Transparency and Accountability Act, which demands that all new concessions, contracts and licenses are made available to the public. The government produces EITI reports that disclose revenues from the extraction of its natural resources.

Investors should be aware of human and labor rights concerns in the minerals and extractives sector, as well as agriculture. In May 2021 there was a high-profile USD 6 million out of court settlement for alleged breaches of human rights associated with third-party security operations at the Williamson Diamond Mine in Tanzania, which is 25% owned by the Government of Tanzania and 75% owned by Petra (UK). Petra (UK) agreed to pay claimants and committed to invest in programs dedicated to providing long-term sustainable support to the communities living around the Mine. Petra is also establishing a new and independent (“Tier 2”) Operational Grievance Mechanism (“OGM”). It will be managed by an independent panel and operate according to the highest international standards, as set out in the United Nations Guiding Principles on Business and Human Rights.

9. Corruption

Tanzania has laws and institutions designed to combat corruption and illicit practices. It is a party to the UN Convention against Corruption, but it is not a signatory to the OECD Convention on Combating Bribery. While former President Magufuli’s focus on anti-corruption translated into an increased judiciary budget and new corruption cases, corruption is still viewed as a major, and potentially growing, problem. There have been various efforts to mitigate corruption – including implementing electronic services to reduce the opportunity for corruption through human interactions at agencies such as the Tanzania Revenue Authority (TRA), the Business Registration and Licensing Authority (BRELA), and the Port Authority – however, the broader concerns surrounding corruption persist.

Tanzania has three institutions specifically focused on anti-corruption. The Prevention and Combating of Corruption Bureau (PCCB) prevents corruption, educates the public, and enforces the law against corruption. The Ethics Secretariat and its associated Ethics Tribunal under the President’s office enforce compliance with ethical standards defined in the Public Leadership Codes of Ethics Act 1995.

Companies and individuals seeking government tenders are required to submit a written commitment to uphold anti-bribery policies and abide by a compliance program. These steps are designed to ensure that company management complies with anti-bribery polices, though the effectiveness of this step is unclear.

The GoT is currently implementing its National Anti-Corruption Strategy and Action Plan Phase III (2017-2022) (NACSAP III) which is a decentralized approach focused on broad government participation. NACSAP III has been prepared to involve a broader domain of key stakeholders including GoT local officials, development partners, civil society organization (CSOs), and the private sector. The strategy puts more emphasis on areas that historically have been more prone to corruption in Tanzania such as oil, gas, and other natural resources. Despite the outlined role of the GoT, CSOs, NGOs and media find it increasingly difficult to investigate corruption in the current political environment.

The GoT’s anti-corruption campaign affected public discourse about the prevailing climate of impunity, and some officials are reluctant to engage openly in corruption. Some critics, however, question how effective the initiative will be in tackling deeper structural issues that have allowed corruption to thrive.

Transparency International (TI), which ranks perception of corruption in public sector, gave Tanzania a score of 39 points out of 100 for 2021 and 38 points for 2020. The Afrobarometer report estimates that between 2015 and 2019 the corruption increase in the previous 12 months was only 10 percent in Tanzania, the lowest in Africa. While for the same period, 23 percent of the respondents voted that Tanzania is doing a bad job of fighting corruption, again the lowest in Africa. Thirty-two percent of the respondents also noted that business executives are corrupt, up from 31 percent in 2015.

10. Political and Security Environment

Since gaining independence, Tanzania has enjoyed a relatively high degree of peace and stability compared to its neighbors in the region. Tanzania has held six national multi-party elections since 1995, the most recent in October 2020 which saw the ruling party’s candidates win by vast majorities. There were serious doubts about the credibility of the October 2020 elections on the mainland and Zanzibar, as there were for byelections in 2018 and 2019. Zanzibar, particularly experienced political violence several times since 1995, including in 2020.

Following the untimely death of President Magufuli (elected in October 2020) in March 2021, a peaceful transfer of power to Vice President Samia Suhulu Hassan took place in accordance with constitutionally mandated procedures. President Hassan continues to follow the CCM ruling party’s manifesto and has begun to lay out her own priorities, which include a reset on international relations and an effort to revive the private sector and attract foreign investment.

Tanzania is generally free from violent conflict, however, there are ongoing concerns about insecurity spilling over from neighboring countries, particularly religious extremism from the Tanzania-Mozambique border. There are a significant number of refugees from crisis and conflicts in neighboring Democratic Republic of the Congo and Burundi, and the continuing violence in neighboring Mozambique has resulted in Mozambican citizens seeking refuge across the border in southern Tanzania.

11. Labor Policies and Practices

Despite Tanzania’s large youth population, there is a shortage of skilled labor and gaps remain in professional training to support industrialization. Only 3.6 percent of Tanzania’s 20-million-person labor force is highly skilled. On the regional front, Tanzania, Uganda, Rwanda and Kenya have committed to the EAC’s 2012 Mutual Recognition Agreement of engineers, making for a more regionally competitive engineering market.

In Tanzania, labor and immigration regulations permit foreign investors to recruit up to ten expatriates with the possibility of additional work permits granted under specific conditions. The Non-Citizens (Employment Regulation) Act 2015 introduced stricter rules for hiring foreign workers. Under the Act, the Labor Commissioner must determine if “all possible efforts have been explored to obtain a local expert” before approving a non-citizen work permit. In addition, employers must submit “succession plans” for foreign employees, detailing how knowledge and skills will be transferred to local employees. The Act was amended in 2021, increasing the period of work permit validity from five years to eight years, with applications to be renewed every 24 months. The non-citizens quota shall not preclude the investor from employing other non-citizens provided that such employment complies with the employment ratio of one non-citizen to ten local employees and that the investor has satisfied the Labor Commissioner that the nature of the business necessitates such number of non-citizens. Foreign investors may be granted ten-year work permits which may be extended if the investor is determined to be contributing to the economy and wellbeing of Tanzanians. In April 2021, the government introduced a simplified online system of applying and issuing work permit which reduces the waiting period from 33 days to less than a week.

Mainland Tanzania’s minimum wage, which has not changed since July 2013, is set by categories covering 12 employment sectors. The minimum wage ranges from TZS 100,000 ($43.20) per month for agricultural laborers to TZS 400,000 ($172.79) per month for laborers employed in the mining sector. Zanzibar’s minimum wage is TZS 300,000 ($129.59).

Mainland Tanzania and Zanzibar governments maintain separate labor laws. Workers on the mainland have the right to join trade unions. Any company with a recognized trade union possessing bargaining rights can negotiate in a Collective Bargaining Agreement. In the public sector, the government sets wages administratively, including for employees of state-owned enterprises.

Mainland workers have the legal right to strike, and employers have the right to a lockout. The law restricts the right to strike when doing so may endanger the health of the population. Workers in certain sectors are restricted from striking or subject to limitations. In 2017, the GoT issued regulations that strengthened child labor laws, created minimum one-year terms for certain contracts, expanded the scope of what is considered discrimination, and changed contract requirements for outsourcing agreements.

The labor law in Zanzibar applies to both public and private sector workers. Zanzibar government workers have the right to strike as long as they follow procedures outlined in the Employment Act of 2005, but they are not allowed to join Mainland-based labor unions. Zanzibar requires a union with 50 or more members to be registered and sets literacy standards for trade union officers. An estimated 40 percent of Zanzibar’s workforce is unionized.

The Integrated Labor Force Survey of 2020/21 indicates that employment in the informal sector has increased from 22 percent in 2014 to 29.4 percent in 2020/21, with the most significant increase in rural areas. The informal sector operates outside of the legal system with no formal contracts, leaving workers vulnerable to precarious working conditions, limited social protection, and low earnings.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) (USD) 2019 $63 billion 2020 $62.41 billion www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source USG or international statistical source USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country (USD, stock positions) N/A N/A 2020 $1.47 million BEA data available at https://apps.bea.gov/international/factsheet/ 
Host country’s FDI in the United States (USD, stock positions) N/A N/A 2020 $ (-2) million BEA data available at https://www.bea.gov/international/
direct-investment-and-multinational-enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP N/A N/A 2020 1.5% UNCTAD data available at https://stats.unctad.org/handbook/Economic
Trends/Fdi.html
 

* Source for Host Country Data: host country data not publicly available.

Table 3: Sources and Destination of FDI

There is no data for Tanzania in the IMF’s Coordinated Direct Investment Survey (CDIS).

According to the Bank of Tanzania, the top sources for inward foreign investment into Tanzania are South Africa, Canada, Nigeria, Netherlands, United Kingdom, Mauritius, Kenya, United States, Vietnam, and France.

Data on outward direct investment is not available.

Table 4: Sources of Portfolio Investment

There is no data for Tanzania in the IMF’s Coordinated Direct Investment Survey (CDIS).

14. Contact for More Information

Economic Officer
U.S. Embassy Dar es Salaam
686 Old Bagamoyo Road
Msasani, Dar es Salaam
Tel: 255-22-229-4000
DarPolEconPublic@state.gov 

Uganda

Executive Summary

Uganda’s investment climate presents both important opportunities and major challenges for U.S. investors. With a market economy, ideal climate, ample arable land, a young and largely English-speaking population, and development underway of fields containing at least 1.4 billion barrels of recoverable oil, Uganda offers numerous opportunities for investors. Despite the negative effects of COVID-19 related countermeasures on the economy, including a 40-day July-August 2021 national lockdown, according to the Bank of Uganda (BOU), the economy grew by 6.5% in 2021, recovering from 1.5% contraction in 2020. On a fiscal year basis, the economy grew by 3.3% in FY 2020/21 (July 1, 2020-June 30, 2021) compared to 3% in FY 2019/20. Foreign direct investment (FDI) is still yet to recover from pre-pandemic levels, with receipts dropping by 35% to $847 million in FY 2020/21 compared to $1.3 billion in FY 2019/20. The International Monetary Fund (IMF) expects FDI to rebound due to oil-related investments projected at $10 billion over the next five years and the IMF also projects Uganda’s economy to return to pre-pandemic growth that averaged 5.3% from 2014 to 2019. Oil-related investments were spurred by the February 1, 2022 announcement by Uganda and its partners – Tanzania, TotalEnergies, China National Offshore Oil Corporation (CNOOC), and the state-owned Uganda National Oil Company (UNOC) – of final investment decision (FID) on upstream oil production, with first oil expected in 2025.

Uganda maintains a liberal trade and foreign exchange regime. In 2021, the IMF approved a $1 billion Extended Credit Facility (ECF) to the government to enable the country to deal with the COVID-19 crisis and spur economic recovery. Uganda received the first tranche of $258 million in June 2021 and the second tranche of $125 million in March 2022. As the economy begins to recover, Uganda’s power, agricultural, construction, infrastructure, technology, and healthcare sectors present attractive potential opportunities for U.S. business and investment.

President Yoweri Museveni and government officials vocally welcome foreign investment in Uganda. However, the government’s actions sometimes do not support its rhetoric. The closing of political and democratic space, poor economic management, endemic corruption, growing sovereign debt, weak rule of law, growing calls for protectionism from some senior policymakers, and the government’s failure to invest adequately in the health and education sectors all create risks for investors. U.S. firms often find themselves competing with third-country firms that cut costs and win contracts by disregarding environmental regulations and labor rights, dodging taxes, and bribing officials. Shortages of skilled labor, a complicated land tenure system, and increased local content requirements, also impede the growth of businesses and serve as disincentives to investment.

An uncertain mid-to-long-range political environment also increases risk to foreign businesses and investors. President Museveni was declared the winner in the widely disputed and discredited January 2021 general elections and started a five-year term in May 2021 after 35 years already in power. Domestic political tensions increased following election-related violence and threats to democratic institutions. Many of Uganda’s youth, a demographic that comprises 77% of the population, openly clamor for change. However, the 77-year-old President has not provided any indication that he or his government are planning reforms to promote more inclusive, transparent, and representative governance.

On the legislative front, Uganda’s parliament passed a Mining and Minerals Bill on February 17, 2022, aimed at reforming the mining sector and attracting larger mining companies to exploit Uganda’s cobalt, copper, nickel, rare earth, and other mineral deposits. However, the private sector has noted that the bill could limit potential international investment since it contains high tax and free carried interest provisions and insufficient legal protections for mining firms.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 144 of 180 https://www.transparency.org/en/cpi/2021/index/uga
Global Innovation Index 2021 119 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $50 https://apps.bea.gov/international/factsheet/factsheet.html#446
World Bank GNI per capita 2020 $800 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD?locations=UG

 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

Uganda has thirty State Owned Enterprises (SOEs). However, the Ugandan government does not publish a list of its SOEs, and the public is unable to access detailed information on SOE ownership, total assets, total net income, or number of people employed. The government has not established any new SOEs in 2021 but has ramped up expenditure for car manufacturer Kiira Motors Corporation. While there is insufficient information to assess the SOEs’ adherence to the OECD Guidelines of Corporate Governance, the Ugandan government’s 2021 Office of Auditor General report noted corporate governance issues in seven SOEs. In February 2021, the Ugandan government embarked on a plan to merge some of the SOEs to reduce duplication of roles and costs of administration. This process is still ongoing. SOEs do not get special financing terms and are subject to hard budget constraints. According to the Ugandan Revenue Authority Act, they have the same tax burden as the private sector. According to the Land Act, private enterprises have the same access to land as SOEs. One notable exception is the Uganda National Oil Company (UNOC), which receives proprietary exploration data on new oil discoveries in Uganda. UNOC can then sell this information to the highest bidder in the private sector to generate income for its operations.

8. Responsible Business Conduct

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

Uganda’s capacity and political will to regulate the mineral trade across its borders remain weak. On March 17, 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Belgian national Alain Goetz, his company the African Gold Refinery in Uganda, and a network of companies involved in the illicit movement of gold valued at hundreds of millions of dollars per year from the Democratic Republic of the Congo (DRC). Uganda’s gold refining sector, which includes at least two other refineries in addition to African Gold Refinery (AGR), relies on conflict minerals illicitly imported from neighboring countries, especially from eastern DRC. While Uganda has no significant gold reserves, in FY 2020/21, gold remained the country’s largest export for the third FY in a row, totaling $2.2 billion.

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

9. Corruption

Uganda has generally adequate laws to combat corruption, and an interlocking web of anti-corruption institutions. The Public Procurement and Disposal of Public Assets Authority Act’s Code of Ethical Standards (Code) requires bidders and contractors to disclose any possible conflict of interest when applying for government contracts. However, endemic corruption remains a serious problem and a major obstacle to investment. Transparency International ranked Uganda 144 out of 180 countries in its 2021 Corruption Perceptions Index, dropping two places from 2020. While anti-corruption laws extend to family members of officials and political parties, in practice many well-connected individuals enjoy de facto immunity for corrupt acts and are rarely prosecuted in court.

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

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

10. Political and Security Environment

There has been an uptick in crime over the past several years – particularly after the start of the pandemic – and Uganda has also experienced periodic political violence associated with elections and other political activities. Security services routinely use excessive force to stop peaceful protests and demonstrations. In 2021, Uganda experienced twin suicide bombings in the capital, Kampala, and another bomb explosion in the city outskirts. In the twin suicide explosions, one targeted the main central police station and the other took place a few dozen meters away from parliament gate. Four victims and the bombers were killed in the twin suicide bombings; ISIS-DRC claimed responsibility for both, as well as the earlier bombing on the outskirts, which killed one. Also in 2021, Minister of Works and Transport Gen. Katumba Wamala was targeted by armed assailants who fired bullets at his car, killing his daughter and driver. He survived with minor injuries. Political tensions increased dramatically prior to, during, and after the January 2021 general elections. Security forces in unmarked cars picked up dozens of opposition supporters and held them in detention long past the constitutionally mandated limit. Cases of torture allegedly perpetrated by elements within the security forces persist.

11. Labor Policies and Practices

Over 70% of Ugandans are engaged in the agriculture sector, and only 20% work in the formal sector. Statistics on the number of foreign/migrant workers are not publicly available; however, given the abundance of cheap domestic labor, there is minimal import of unskilled labor. Conversely, there is an acute shortage of skilled and specialized laborers. Uganda has a large informal sector that is estimated to contribute at least 50% of Uganda’s GDP. The informal sector, however, contributes less direct tax revenue; Uganda’s government is implementing several tax policies to raise revenue. Targeting the informal sector would reduce the pressure to tax foreign businesses. The passing of the Landlord and Tenant Bill in 2022 also sought to formalize the relationship between landlords and, especially, informal tenants.

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

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

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

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

Uganda’s monthly minimum wage remains $1.64.

14. Contact for More Information

U.S. Economic and Commercial Office Uganda
Embassy of the United States of America
Plot 1577 Ggaba Road,
P.O. Box 7007, Kampala, Uganda
Tel. +256 414 306001
E-mail: commercialkampala@state.gov 

Zambia

Executive Summary

Zambia is a landlocked country in southern Africa that shares a border with eight countries: Angola, Democratic Republic of the Congo, Tanzania, Malawi, Mozambique, Zimbabwe, Botswana, and Namibia. It has an estimated population of 17.86 million, GDP of $19.3 billion and GDP per capita of USD $1,086.

Zambia has been in a financial and economic crisis since at least 2020, when the country became the world’s first COVID-era default after Zambia missed a payment on $3 billion of outstanding Eurobonds. The Zambian economy contracted in 2020 by 3.0 percent and grew by a meager 1.0 percent in 2021. The IMF forecasts 2022 real GDP growth of only 1.1 percent. Zambia’s debt overhang remains a severe inhibitor of economic growth, effectively eliminating the government’s access to international capital markets and forcing it to finance a persistent budget deficit through domestic borrowing, which crowds out private sector access to capital and limits growth.

Despite broad economic reforms and debt relief under the World Bank’s Highly Indebted Poor Countries (HIPC) initiative in the early 2000s, Zambia has generally struggled to meet its full economic potential. A decade of democratic and economic backsliding under former President Edgar Lungu and the Patriotic Front resulted in widespread use of corruption and economic rent-seeking that has further damaged Zambia’s reputation as an investment destination. Cumbersome administrative procedures and unpredictable legal and regulatory changes continue to inhibit Zambia’s immense potential for private sector investment, compounded by insufficient transparency in government contracting, ongoing lack of reliable electricity, and a high cost of doing business due to poor infrastructure, high cost of capital, and the lack of skilled labor.

President Hakainde Hichilema achieved a resounding victory at the polls in August 2021 on a platform of democratic and economic reform and renewal. By December 2021, Zambia achieved staff-level agreement with the IMF on a $1.4 billion Extended Credit Facility that is expected to anchor macroeconomic and fiscal reforms and restore investor confidence. With the appointment of respected economists and technocrats to lead the Ministry of Finance and the central bank, the Hichilema administration has made significant strides reducing inflation, which has dropped from nearly 25.0 percent in July 2021 to 13.1 by the end of March 2022. The Hichilema administration is currently seeking debt restructuring under the auspices of the G-20 Common Framework, which would provide the basis for IMF board approval of Zambia’s Extended Credit Facility. A successful businessman and investor in his own right, President Hichilema has pledged to tackle fiscal and regulatory reforms aimed at strengthening Zambia’s investment climate.

Zambia remains highly dependent on its mining and extractives industry. It is Africa’s second-largest producer of copper and is an important source of several other critical minerals, including nickel and cobalt. According to the Extractives Industries Transparency Initiative, mining products accounted for 77 percent of Zambia’s total export earnings and 28 percent of government revenues in 2019. Investment in the mining sector fell substantially during the Lungu era due to multiple changes to Zambia’s minerals tax regime and an unstable regulatory environment. The Hichilema administration in its maiden budget introduced a key reform to Zambia’s minerals tax policy that is expected to attract new investment in the sector. The agriculture, healthcare, energy, financial services, and ICT sectors all offer potentially attractive opportunities for expanded U.S. trade and investment.

The U.S. Embassy works closely with the American Chamber of Commerce of Zambia (AmCham) to support its American and Zambian members seeking to increase two-way trade. Agriculture and mining remain headlining sectors for the Zambian economy. U.S. firms are present and are exploring new projects in tourism, power generation, agriculture, and services.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 117 of 180 http://www.transparency.org/
research/cpi/overview
Global Innovation Index 2021 121 of 190 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $21 https://apps.bea.gov/international/
factsheet/factsheet.cfm
World Bank GNI per capita 2020  $1,160 http://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

1. Openness To and Restrictions Upon Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

There are currently 34 state-owned enterprises (SOEs) operating in different sectors in Zambia including agriculture, education, energy, financial services, infrastructure, manufacturing, medical, mining, real estate, technology, media and communication, tourism, and transportation and logistics. Most SOEs are wholly owned, or majority owned by the government under the Industrial Development Corporation (IDC) established in 2015. Zambia has two categories of SOEs: those incorporated under the Companies Act and those established by particular statutes, referred to as statutory corporations. There is a published list of SOEs in the Auditor General’s annual reports; SOE expenditure on research and development is not detailed. There is no exhaustive list or online location of SOEs’ data for assets, net income, or number of employees. Consequently, inaccurate information is scattered throughout different government agencies/ministries. The majority of SOEs have serious operational and management challenges.

In theory, SOEs do not enjoy preferential treatment by virtue of government ownership, however, they may obtain protection when they are not able to compete or face adverse market conditions. The Zambia Information Communications Authority Act has a provision restricting the private sector from undertaking postal services that would directly compete with the Zambia Postal Services Corporation. Zambia is not party to the Government Procurement Agreement (GPA) within the framework of the WTO, however private enterprises are allowed to compete with public enterprises under the same terms and conditions with respect to access to markets, credit, and other business operations such as licenses and supplies.

SOEs in Zambia are governed by Boards of Directors appointed by government in consultation with and including members from the private sector. The chief executive of the SOE reports to the board chairperson. In the event that the SOE declares dividends, these are paid to the Ministry of Finance. The board chair is informally obliged to consult with government officials before making decisions. The line minister appoints members of the Board of Directors from within public service, the private sector, and civil society. The independence of the board, however, is limited since most boards are comprised of a majority of government officials, while board members from the private sector or civil society that are appointed by the line minister can be removed.

SOEs can and do purchase goods or services from the private sector, including foreign firms. SOEs are not bound by the GPA and can procure their own goods, works, and services. SOEs are subject to the same tax policies as their private sector competitors and are generally not afforded material advantages such as preferential access to land and raw materials. SOEs are audited by the Auditor General’s Office, using international reporting standards. Audits are carried out annually, but delays in finalizing and publishing results are common. Controlling officers appear before a Parliamentary Committee for Public Accounts to answer audit queries. Audited reports are submitted to the president for tabling with the National Assembly, in accordance with Article 121 of the Constitution and the Public Audit Act, Chapter 378.

In 2015, the government transferred most SOEs from the Ministry of Finance to the revived Industrial Development Corporation (IDC). The move, according to the government, was to allow line ministries to focus on policy making thereby giving the IDC direct mandate and authorization to oversee SOE performance and accountability on behalf of the government. The IDC’s oversight responsibilities include all aspects of governance, commercial, financing, operational, and all matters incidental to the interests of the state as shareholder.

8. Responsible Business Conduct

The government in theory limits its direct involvement in business to strategic investments deemed critical for the delivery of public goods and services and seeks to maintain high standards of consumer protection. While Zambia is a high performer among low-income countries in terms of Responsible Business Conduct (RBC), it lacks clearly formulated or well-implemented RBC policies.

The government has sought to improve implementation of legislative and regulatory reforms that impact RBC. As an example, most investment ventures are required to create and submit environmental impact assessments as a prerequisite to the approval process. The government requires many investment sectors, such as insurance, banking, and financial services, to submit annual audited financial statements as a licensing condition. In the case of financial services, quarterly publication of financial statements is compulsory and rigidly enforced by the BoZ.

Zambia has ratified a number of international human rights conventions, such as the Convention against Torture and Other Cruel, Inhuman, or Degrading Treatment or Punishment; the Convention on the Rights of the Child; and the Convention on the Rights of Persons with Disabilities. At the national level, the lead authority for upholding human rights norms is the Human Rights Commission (HRC), while the Industrial and Labor Relations Act addresses labor issues. The Act provides the legal framework for trade unions, employers’ organizations and their federations, the Tripartite Consultative Labor Council, and the Industrial Relations Court. The Employment Act, Chapter 268, is the basic employment law, while the Minimum Wages and Conditions of Employment Act makes provisions for the regulation of minimum wage levels and minimum conditions of employment. Currently, the average minimum wage per month for employees, starting with general or domestic workers, stands at 1,132 kwacha (~$62@04/2022), to include food and transportation.

The government supports measures that encourage responsible business conduct and has recognized the importance of adopting international practices. The main challenges include domesticating international practices and strengthening regulatory capacities. In many cases, the business sector is encouraged by the government to adopt practices that promote responsible business conduct on a “voluntary basis.” For example, the Institute of Directors Zambia (IODZ) actively advocated the introduction of “Board Charters” that set out good corporate standards (such as ethical conduct) with which business enterprises will be associated and will implement. The Citizens Economic Empowerment Commission (CEEC) is also promoting the adoption of “Sector Codes” by the business sectors that commit themselves to supporting citizens’ economic empowerment. In addition, a number of public institutions have established Integrity Committees that address the strengthening of internal policies and procedures for combating corruption, in compliance with the Anti-Corruption Act of 2012. The private sector is also encouraged to either establish similar Integrity Committees or to strengthen their corporate governance standards to effectively address corruption.

The Zambian government seeks to maintain high standards of consumer protection by, for example, following the United Nations Guidelines for Consumer Protection. The Competition and Consumer Protection Act of 2010 seeks to encourage competition in the economy, protect consumer welfare, strengthen the efficiency of production and distribution of goods and services, secure the best possible conditions for the freedom of trade, expand the base of entrepreneurship, and regulate monopolies and concentrations of economic power. Most local manufacturers of consumer products have submitted to voluntary product testing and certification by the Zambia Bureau of Standards (ZABS); ZABS certification is then embossed on the product labels as a “mark of quality” indicating the product’s suitability for consumption. Legislative measures have also been agreed with food processors and drug manufacturers that indicate product manufacturing and expiry dates.

A number of mining companies have acceded to the Extractive Industries Transparency Initiative (EITI), adapted in February 2009 for Zambian conditions, and allow independent audits of their operations and financial reporting. EITI audit results are available to the general public. Zambia has been an EITI compliant country since September 2012. The government receives revenue in the form of taxes and royalties from all extractive industries, including mining. The mining sector accounts for about 12 percent of GDP and around 70 percent of export revenue. All exploration and mining activities are governed by the Mines and Minerals Act of 2008 and other mining related regulations that include: the Petroleum Exploration and Production Act, the Explosives Act, and the Environmental Protection and Pollution Control Act. The GRZ, through the Ministry of Mines and Minerals, conducts open bidding and grants mining licenses to qualified bidders. The Zambian Revenue Authority collects all payments from mining companies and remits them to the Ministry of Finance. The Zambian Revenue Authority regularly publishes production volumes for copper, cobalt, and gold, and the names of companies operating in the country.

9. Corruption

Zambia’s anti-corruption activities are governed by the Anti-Corruption Act of 2012 and the National Anti-Corruption Policy of 2009, which stipulate penalties for different offenses. The Anti-Corruption Commission (ACC) is the supreme institution mandated to fight corruption in Zambia and works with partner institutions-Zambia Police, Drug Enforcement Agency and Intelligence Services. While legislation and stated policies on anti-corruption are adequate in theory, implementation often falls short due to limited technical capacity and suspected corruption within key government institutions. The Public Interest Disclosure (Protection of Whistleblowers) Act of 2010 provides for the disclosure of conduct adverse to the public interest in the public and private sectors. However, like with other laws and policies, enforcement is weak. Zambia lacks adequate laws on asset disclosure, evidence, and freedom of information. Although the ACC has the mandate to investigate corruption and sometimes prosecute, it lacks autonomy to fully prosecute cases, often requiring authorization to prosecute from the Director of Public Prosecution (DPP). This practice has been criticized as a conduit for shielding high level crime and corruption through the executive which is perceived as influencing the DPP as an appointing authority. In March 2019 Cabinet approved the Access to Information Bill (ATI), but the draft bill has not been made public or presented to Parliament as of March 2022. The bill aims to ensure the government is proactive and organized in disseminating information to the public. Versions of the ATI Bill have been pending since 2002.

In 2021, Zambia established a fast-track financial crimes court to prosecute public corruption cases. The Hichilema administration has dismissed several key civil service staff and arrested numerous former government officials on suspicion of corruption. Zambia maintained a ranking of 117 out of 180 countries in the 2021 Corruption Perception Index (CPI) report — a drop from 113 in the 2019 report. The legal and institutional frameworks against corruption have been strengthened, and efforts have been made to reduce red tape and streamline bureaucratic procedures, as well as to investigate and prosecute corruption cases, including those involving high-ranking officials. Most of these cases, however, remain on the shelves waiting to be tried while officials remain free, sometimes still occupying the positions through which the alleged corruption took place. In March 2018, Parliament passed the Public Finance Management Bill, which allows the government to prosecute public officials for misappropriating funds, something previous legislation lacked. The government published the implementing regulations in November 2020. Despite this progress, corruption remains a serious issue in Zambia, affecting the lives of ordinary citizens and their access to public services. Corruption in the police service has emerged as an area of particular concern (with frequency of bribery well above that found in any other sector), followed by corruption in the Road Transport and Safety Agency. The government has cited corruption in public procurements and contracting procedures as major areas of concern.

The Anti-Money Laundering Unit of the Drug Enforcement Commission (DEC) also assists with investigation of allegations of corruption and financial misconduct. An independent Financial Intelligence Center (FIC) was established in 2010 but does not have the authority to prosecute financial crimes. Zambia’s anti-corruption agencies generally do not discriminate between local and foreign investors. Transparency International has an active Zambian chapter.

The government encourages private companies to establish internal codes of conduct that prohibit bribery of public officials. Most large private companies have internal controls, ethics, and compliance programs to detect and prevent bribery. The Integrity Committees (ICs) Initiative is one of the strategies of the National Anti-Corruption Policy (NACP), which is aimed at institutionalizing the prevention of corruption. The NACP received the Cabinet’s approval in March 2009 and the Anti-Corruption Commission spearheads its implementation. The NACP targets eight institutions, including the Zambia Revenue Authority, Immigration Department, and Ministry of Lands. The government has taken measures to enhance protection of whistleblowers and witnesses with the enactment of the Public Disclosure Act, as well as to strengthen protection of citizens against false reports, in line with Article 32 of the UN Convention.

U.S. firms have identified corruption as an obstacle to foreign direct investment. Corruption is most pervasive in government procurement and dispute settlement. Giving or accepting a bribe by a private, public, or foreign official is a criminal act, and a person convicted of doing so is liable to a fine or a prison term not exceeding five years. A bribe by a local company or individual to a foreign official is a criminal act and punishable under the laws of Zambia. A local company cannot deduct a bribe to a foreign official from taxes. Many businesses have complained that bribery and kickbacks, however, remain rampant and difficult to police, as some companies have noted government officials’ complicity in and/or benefitting from corrupt deals.

Zambia signed and ratified the United Nations Convention against Corruption in December 2007. Other regional anti-corruption initiatives are the SADC Protocol against Corruption, ratified in 2003, and the AU Convention on Preventing and Combating Corruption, ratified in 2007. Zambia is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions but is a party to the Anticorruption Convention. Currently, there are no local industries or non-profit groups that offer services for vetting potential local investment partners. Normally, the U.S. Embassy provides limited vetting of potential local investment partners for U.S. businesses, when contracted as a commercial service.

10. Political and Security Environment

Zambia has benefited from almost 30 years of largely peaceful multi-party politics, with 3 peaceful transfers of executive power. Zambia does not have a history of large-scale political violence. National elections in 2021 were largely peaceful and former President Edgar Lungu conceded defeat to Hakainde Hichilema. The rise in street crime remains a significant concern as the Zambian economy struggles to create meaningful employment opportunities for young people.

11. Labor Policies and Practices

About a third of Zambia’s employed population works in the formal sector. While an abundance of unskilled labor exists in Zambia, investors complain that the supply of skilled and semi-skilled labor is inadequate, while labor-management relations vary by sector. Zambia’s population is estimated to be around 17.86 million, the majority being of employable age. Zambia’s 2020 Labor Force Survey reported that the working-age population (i.e., 15 years or older) was 9,905,071. Labor demand, however, does not match supply and Zambia has high rates of unemployment, youth unemployment, and underemployment while living costs have risen steadily. The government adheres closely to International Labor Organization (ILO) conventions and has ratified all eight ILO core conventions. The government has continuously sought to revise labor laws and improve compliance, but there are still gaps in law and practice. Strikes are not uncommon in the public sector and often are related to the government’s failure to pay salaries or allowances on time, but lawful strikes are very difficult to hold due to several restrictions and conditions.

Labor laws provide for extremely generous severance pay, leave, and other benefits to workers, which can impede investment. Such rules do not apply to personnel hired on a short-term basis. As such, the vast majority of Zambian employees are hired on an informal or short-term basis. In September 2018, the Minimum Wage and Conditions of Employment Act 276 of the laws of Zambia were revised following issuance of Statutory Instrument (SI) number 69 of 2018 covering domestic workers. This revision doubled the minimum wage of certain classes of low-wage workers. The Employment Code Act No. 3 of 2019, which went into effect in May 2020, furthers the employees’ protections and expands severance and gratuity payments, whether the employee is terminated or come to an end of contract, regardless of who employs them.

The Employment Act, Chapter 268 covers employment and labor related issues. While the law recognizes the right of workers to form and join independent unions, conduct legal strikes, and bargain collectively, there are statutory restrictions limiting these rights. Police officers, military personnel, and certain other categories of workers are excluded from exercising these rights. No trade union can be registered if it claims to represent a class of employees already represented by an existing trade union. At least 25 members are required, and registration may take up to six months. The government has discretionary power to exclude certain categories of workers, including prison staff, judges, registrars of the court, magistrates, and local court justices from labor law provisions. The law also gives the labor commissioner the power to suspend and appoint an interim executive board of a trade union, as well as to dissolve the board and call for a new election.

The government generally protects unions’ right to conduct their activities without interference. Trade unions are independent of government, but the Ministry of Labor and Social Security is ultimately responsible for employment exchange services and enforcing labor legislation. An employer is allowed to terminate a contract of service on grounds of redundancy; however, the Employment Act requires the employer fulfill certain conditions before terminating a contract of service on such grounds. One of these conditions is notifying the employee’s trade union. The Act makes a clear distinction between layoffs and severance. In the event an employee is summarily dismissed, he/she shall be paid upon dismissal the wages and allowances due up to the date of such dismissal. The government formally permits employment of expatriate labor only in sectors where there is scarcity of local personnel, but investors promoting large scale investments can negotiate the number of work permits that they can obtain from the Department of Immigration to employ expatriates.

The law does not limit the scope of collective bargaining, but it allows either party, in certain cases, to refer a labor dispute to court or arbitration. The law also allows for a maximum period of one year from the day on which the complaint is filed within which a court must consider the complaint and issue its ruling. The law provides for the right to strike if recourse to all legal options is first exhausted. The law prohibits workers engaged in a broadly defined range of essential services from striking. Under Zambian law, essential services are defined as any activity relating to the generation, supply, or distribution of electricity; the supply and distribution of water and sewage removal; fire departments; and the mining sector. Employees in the Zambian Defense Forces, judiciary, police, prison, and the Zambia Security Intelligence Service (ZSIS) personnel are also considered essential. The government has power to add other services to the list of essential services, in consultation with the tripartite consultative labor council.

The process of exhausting the legal alternatives to a strike is lengthy. The law also limits the maximum duration of a strike to 14 days, after which, if the dispute remains unsolved, it is referred to the court. A strike can be discontinued if the court finds it not to be “in the public interest.” Workers who engage in illegal strikes may be dismissed by employers. The Industrial and Labor Relations Act, Chapter 269, Part IX covers the settling of labor disputes. Aggrieved parties may report the matter to a labor officer, who would take steps deemed fit to affect a settlement between the parties and would encourage the use of collective bargaining facilities where applicable. In the event of a collective dispute between an employer and a trade union regarding the terms and conditions of employment, claims and demands must be put in writing and both parties must have held at least one meeting with a view to reaching a settlement. Such disputes are referred to a conciliator or board of conciliators to be appointed by both parties to the dispute. If the conciliator fails to resolve the problem, the conciliator will inform the Labor Commissioner, who will call on the Minister of Labor to appoint a conciliator who will again call the parties to consider dispute resolution. If all efforts to resolve the matter fail, it is then taken to the Industrial Relations Court for arbitration.

Other internationally recognized fundamental labor rights, including the elimination of forced labor, child labor employment, discrimination, minimum wage, occupational safety and health, and weekly work hours are all recognized under domestic law, but enforcement is often weak. The government has supported the development of programming to empower adolescent girls and reduce child labor in rural areas. However, children in Zambia continue to engage in the worst forms of child labor, including in the production of tobacco, and in commercial sexual exploitation, sometimes as a result of human trafficking. Gaps remain in the legal framework related to children; for example, the Education Act does not include the specific age to which education is compulsory, which may leave children under the legal working age vulnerable to the worst forms of child labor. In addition, law enforcement agencies lack the necessary human and financial resources to adequately enforce laws against child labor. There is no documented number of children in Zambia who are engaged in child labor, but studies point to a yearly increase in the number of these children, who work primarily in the agriculture and mining sectors. Cotton, tobacco, cattle, gems, and stones are included on the U.S. Government’s List of Goods Produced by Child Labor or Forced Labor in Zambia.

The Department of Labor and the Department of Occupational Safety and Health of the Ministry of Labor and Social Security monitor labor abuses, as well as health and safety standards in low-wage assembly operations such as construction. Two primary labor stakeholders, the Zambian Congress of Trade Unions (ZCTU) and the Zambian Federation of Employers (ZFE), assist with Ministry of Labor enforcement. The worker and employer organizations are consulted at tripartite gatherings on any proposed policy document or legislation, and they participate in labor inspections. The Ministry of Labor produces annual inspection reports, which are made available to social partners. In December 2015, Parliament passed, and the president signed a suite of amendments to the Employment Act that prohibit casual labor and increase protections for unskilled workers. Zambia has benefited from duty-free and quota-free market access from the GSP in the U.S. market under AGOA.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($BM USD) 2020 N/A 2020 $18.11 https://data.worldbank.org/
country/zambia
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2020 N/A 2020 $21 BEA data available at
https://apps.bea.gov/international/
factsheet/factsheet.cfm
Host country’s FDI in the United States ($M USD, stock positions) 2020 N/A 2020 -$1 BEA data available at
https://apps.bea.gov/international/
factsheet/factsheet.cfm
Total inbound stock of FDI as % host GDP 2020 N/A 2020 1.3% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 

* Host country statistical data released is almost non-existent. If it exists, there is not a central source for retrieving the data, and at most times it does not match international sources.

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data**
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Stock Outward Direct Investment Stock
Total Inward $12,383.6 100% Total Outward $725.8 100%
Canada $3,387 27.4% Switzerland $165.8 22.8%
China $2,439 19.7% United States $22.3 3%
Switzerland $2,382 19.2% South Africa $6.5 0.9%
Netherlands $1,775 14.3% Mauritius $3 0.4%
Australia $890 7.2% Rest of the World $2.6 0.4%
“0” reflects amounts rounded to +/- USD 500,000.

**Bank of Zambia Private Capital Flow 2021 Report

14. Contact for More Information

U.S. Embassy | Political/Economic Section
Commercial Team
Stand 100, Kabulonga Road, Ibex Hill, Lusaka, Zambia
+260 211 35 7000
Email Address: CommercialLusaka@state.gov 

Zimbabwe

Executive Summary

Zimbabwe suffered serious economic contractions in 2019 and 2020 due to the economic mismanagement, the extended effects of the COVID-19 pandemic, and climate shocks that crippled agriculture and electricity generation. According to the government of Zimbabwe, the economy recovered strongly, growing by 7.8 percent, in 2021 although the International Monetary Fund (IMF) estimates the economy grew by 6.1 percent, thanks to increased agricultural production, high commodity prices, and improved capacity utilization in the manufacturing sector. The government expects the economy to grow by 5.5 percent in 2022 as the negative impacts of COVID-19 subside. International financial institutions also project positive but more modest growth, with the IMF forecasting a real GDP growth of 3.1 percent in 2022. Inflation remained high in 2021, but steadily declined to end the year at 60.6 percent. Authorities attributed the decline to the introduction of a weekly foreign exchange auction system in June 2020 and fiscal consolidation that resulted in near balanced budgets in 2020 and 2021. However, the inflation rate has continued to rise to 72.7 percent by March 2022 due to the negative effects of the Russia-Ukraine war on commodity prices as well as the depreciation of the Zimbabwe dollar. Zimbabwe’s local currency has lost 79 percent of its value relative to the U.S. dollar since the government adopted an auction system on June 23, 2020. A gap between the auction and parallel-market exchange rates has persisted, with U.S. dollars more than twice as expensive on the parallel market.

To improve the ease of doing business, the government formed the Zimbabwe Investment and Development Agency (ZIDA) in 2020, intended as a one-stop-shop to promote and facilitate both domestic and foreign investment in Zimbabwe. Zimbabwe’s incentives to attract FDI include tax breaks for new investment by foreign and domestic companies, and making capital expenditures on new factories, machinery, and improvements fully tax deductible. The government waives import taxes and surtaxes on capital equipment. It has made gradual progress in improving the business environment by reducing regulatory costs, but policy inconsistency and weak institutions have continued to frustrate businesses. Corruption remains rife and there is little protection of property rights, particularly with respect to agricultural land. Historically, the government has committed to protect property rights but has also expropriated land without compensation.

The Finance Act (No 2) at the end of 2020 amended the Indigenization Act by removing language designating diamonds and platinum as the only minerals subject to indigenization (requiring majority ownership by indigenous Zimbabweans), finally ending indigenization requirements in all sectors. However, the new legislation also granted broad discretion to the government to designate minerals as subject to indigenization in the future. The government subsequently issued statements to reassure investors that no minerals will be subject to indigenization, including diamonds and platinum.

The government ended its 2019 ban on using foreign currencies for domestic transactions in March 2020. However, the authorities decreed businesses selling in foreign exchange must surrender 20 percent of the receipts to the central bank in exchange for local currency at the overvalued auction rate. Exporters must surrender 40 percent of foreign currency earnings at the unfavorable auction rate.

Zimbabwe owes approximately US$10.7 billion (US$6.5 billion of which is in arrears) to international financial institutions accounting for 71 percent of the country’s GDP. The country’s high external debt (public and private) limits its ability to access official development assistance at concessional rates. Additionally, domestic banks do not offer financing for periods longer than two years, with most financing limited to 180 days or less. The sectors that attract the most investor interest include agriculture (tobacco, in particular), mining, energy, and tourism. Zimbabwe has a well-earned reputation for the high education levels of its workers.

Although the United States has a targeted sanctions program against Zimbabwe, it currently applies to only 83 individuals and 37 entities.  The U.S. Government imposed sanctions against specifically identified individuals and entities in Zimbabwe, as a result of the actions and policies of certain members of the Government of Zimbabwe and other persons that undermine democratic institutions or processes in Zimbabwe, violate human rights, or facilitate corruption.  U.S. companies can do business with Zimbabwean individuals and companies that are not on the specially designated nationals (SDN) list.

After reaching US$745 million in 2018, Zimbabwe witnessed significant declines in foreign direct investment (FDI). According to data from the United Nations Conference on Trade and Development (UNCTAD), FDI inflows into Zimbabwe fell from US$280 million in 2019 to US$194 million in 2020.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 157 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 113 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 (D) https://apps.bea.gov/international/factsheet/  
World Bank GNI per capita 2020 USD 1,140 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD   

(D) – Information suppressed to avoid disclosure of data of individual companies.

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

Zimbabwe has 107 state-owned enterprises (SOEs), defined as companies wholly owned by the state. A list of the SOEs appears here . Many SOEs support vital infrastructure including energy, mining, and agribusiness. Competition within the sectors where SOEs operate tends to be limited. However, the government of Zimbabwe (GOZ) invites private investors to participate in infrastructure projects through public-private partnerships (PPPs). Most SOEs have public function mandates, although in more recent years, they perform hybrid activities of satisfying their public functions while seeking profits. SOEs should have independent boards, but in some instances such as the recent case of the Zimbabwe Mining Development Corporation (ZMDC), the government allows the entities to function without boards.

Zimbabwe does not appear to subscribe to the Organization for Economic Cooperation and Development (OECD) guidelines on corporate governance of SOEs. SOEs are subject to the same taxes and same value-added tax rebate policies as private sector companies. SOEs face several challenges that include persistent power outages, mismanagement, lack of maintenance, inadequate investment, a lack of liquidity and access to credit, and debt overhangs. As a result, SOEs have performed poorly. Few SOEs produce publicly available financial data and even fewer provide audited financial data. SOE poor management and lack of profitability has imposed significant costs on the rest of the economy.

8. Responsible Business Conduct

Awareness of standards for responsible business conduct (RBC) is mainly driven by the private sector through the Standards Association of Zimbabwe.

The Zimbabwean government has not taken any measures to encourage RBC and it does not take into account RBC policies or practices in procurement decisions.

The private sector developed the National Corporate Governance Code of Zimbabwe (ZimCode), which is a framework designed to guide Zimbabwean companies on RBC. The Confederation of Zimbabwe Industries, an industrial advocacy group, , has a standing committee on business ethics and standards that drives ethical conduct within the Zimbabwean private sector. The organization has developed its own charter according to OECD guidelines, highlighting good corporate governance and ethical behavior. Firms that demonstrate corporate social responsibility do not automatically garner favorable treatment from consumers, employees, or the government.

The U.S Department of Labor’s (DOL) report https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods  published in September 2020 reports that children work in Zimbabwe’s sugarcane and tobacco industries. The DOL’s report   https://www.dol.gov/agencies/ilab/resources/reports/child-labor/zimbabwe  found children in Zimbabwe engage in the worst forms of child labor, including in mining, agriculture, and tobacco production. Law enforcement agencies lack resources to enforce child labor laws. The COVID-19 crisis severely limited the government’s ability to combat the worst forms of child labor. The country’s continuing economic decline and school closures due to COVID-19 lockdown restrictions likely increased the number of children working in informal labor sectors, including those that harbor the worst forms of child labor, to support family incomes.

The government regularly thwarts union efforts to demonstrate with violence and excessive force and harasses labor leaders. Police and state intelligence services regularly attend and monitor trade union activities, sometimes preventing unions from holding meetings with their members and carrying out organizational activities. Although unions are not required by law to notify police of public gatherings, police require such notification in practice. Those unions engaging in strikes deemed illegal risk fines and imprisonment.

The government ordered in March 2021 the eviction of 13,000 members of the Chilonga community in the southeastern part of the country, but eventually backed down after a court ruled in favor of a temporary relief. Although the Chilonga villagers appealed the eviction citing unconstitutionality of sections of the Communal Land Act the government used in its eviction order, the High Court ruled in favor of the government but recommended a review of the Act.

Although the Zimbabwean government has expressed its intention to implement the Extractive Industries Transparency Initiative (EITI) principles to strengthen accountability, good governance, and transparency in the mining sector, it has yet to launch an EITI program. A domestic initiative called the Zimbabwe Mining Revenue Transparency Initiative (ZMRTI) has produced limited results.

Zimbabwe is not signatory to the Montreux Document on Private Military and Security Companies.

U.S. Customs and Border Patrol issued a withhold release order on Zimbabwean rough diamonds from Marange in 2019 after an investigation concluded that forced labor contributed to the mining activity. Widespread artisanal and small-scale gold mining presents a threat to the environment, and informal miners have little-to-no safety and labor protections.

9. Corruption

Endemic corruption presents a serious challenge to businesses operating in Zimbabwe. Zimbabwe’s scores on governance, transparency, and corruption perception indices are well below the regional average. U.S. firms have identified corruption as an obstacle to FDI, with many corruption allegations stemming from opaque procurement processes.

In theory, the government has specified laws that require managers and directors to declare their financial interests in the public sector, although these may not be followed in practice. As noted below, Zimbabwe does not have laws that guard against conflict of interest with respect to the conduct of private companies, but existing rules on the Zimbabwe Stock Exchange compel listed companies to disclose, through annual reports, minimum disclosure requirements.

While anti-corruption laws exist and extend to family members of officials and political parties, the government tends to engage in selective enforcement against the opposition while engaging in “catch and release” of government officials and their business partners. As a result, Transparency International ranked Zimbabwe 157 out of 175 countries and territories surveyed in 2020 with respect to perceptions of corruption. In 2005, the government enacted an Anti-Corruption Act that established a government-appointed Zimbabwe Anti-Corruption Commission (ZACC), the structure of which has evolved over time. Following the end of Robert Mugabe’s rule in November 2017, the government pledged to address governance and corruption challenges by appointing a new ZACC chaired by a former High Court Judge and granting it new powers. President Mnangagwa also established a special unit within his office to deal with corruption cases. Despite these developments, the government has a track record of prosecuting individuals selectively, focusing on those who have fallen out of favor with the ruling party and ignoring transgressions by members of the favored elite. Accusations of corruption seldom result in formal charges and convictions. Zimbabwe does not provide any special protections to NGOs investigating corruption in the public sector. Journalists reporting on high-level corruption have suffered from arbitrary arrests and lengthy detentions.

While Zimbabwe does not have laws that guard against conflict of interest with respect to the conduct of private companies, existing rules on the Zimbabwe Stock Exchange compel listed companies to disclose, through annual reports, minimum disclosure requirements. Regarding SOEs, the government has specified laws that require managers and directors to declare their financial interests. In 2016, the World Bank report on the extent of conflict-of-interest regulation index (0-10), put Zimbabwe at 5.

While Zimbabwe signed the United Nations Convention against Corruption in 2004 and ratified the treaty in 2007, it is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

10. Political and Security Environment

Political parties, labor organizations, and civil society groups sometimes encounter state-sponsored intimidation and repression from government security forces and Zimbabwe African National Union – Patriotic Front (ZANU-PF) – linked activists. Disagreements between and within political parties occasionally result in violence targeting political party members. Political tensions and civil unrest persist since the end of Robert Mugabe’s rule in November 2017. On August 1, 2018, the army fired upon people demonstrating against the delay in announcing official presidential election results, killing six civilians. In response to January 2019 demonstrations against rising fuel prices, security forces killed 17, raped 16, injured hundreds, and arrested more than 800 people over the course of several weeks. The crackdown targeted members of the main opposition party, civil society groups, and labor leaders.

In 2020 and 2021, the government arrested and detained journalists, several leaders of opposition parties, and trade union activists for organizing demonstrations against corruption and allegedly violating bail conditions. Police also arrested three women members of the opposition party, MDC Alliance (now Citizens Coalition for Change (CCC)), including a member of parliament for violating lockdown measures when they demonstrated against corruption and food shortages during the first of several lockdowns imposed on the country to fight COVID-19. They were subsequently abducted from police custody and tortured by alleged security agents. Since then, the government routinely arrests and detains the three leaders whenever they speak out against the government. Political tensions also prevailed during campaigns for the March 26, 2022 by-elections. On February 26, 2022, ZANU-PF-affiliated youths allegedly killed CCC rally attendee Mboneli Ncube and injured 22 others after they stormed a CCC rally in Kwekwe. The CCC also reported attacks targeted at its activists and supporters across the country.

Political uncertainty remains high. Violent crime, such as assault, smash and grabs, and home invasion, is common. Armed robberies perpetrated by serving members of the army and police have increased. Local police lack the resources to respond effectively to serious criminal incidents. Incidents of violence have typically not targeted investment projects.

11. Labor Policies and Practices

Decades of political and economic crises have led to the emigration of many of Zimbabwe’s skilled and well-educated citizens. Formal sector employment has fallen significantly. Anecdotal evidence shows widespread youth unemployment as the country continues to produce graduates without a matching growth in employment opportunities. According to the Labor Force Survey, Zimbabwe’s unemployment rate stood at 16.4 percent in 2019, the latest available data. As a result, most end up joining the informal sector estimated at over 85 percent of the workforce. The government strongly encourages foreign investors to make maximum use of Zimbabwean management and technical personnel and any investment proposal that involves the employment of foreigners must present a strong case to obtain work and residence permits. Normally, the maximum contract period for a foreigner is three years but with possible extension to five years for individuals with highly specialized skills.

According to the IMF, Zimbabwe has the second largest informal economy (as a share of GDP) in the world, after Bolivia, with a 60.6 percent contribution to the country’s GDP. Official data from the Zimbabwe National Statistical Agency (ZimStat) shows women accounted for 43 percent of the people involved in the informal sector in 2019.

The country’s labor laws make it very difficult for employers to adjust employment in response to an economic downturn except in the Special Economic Zones (SEZs) where labor laws do not apply. Outside the SEZs, the employer must engage the employees and their representatives and agree to adopt measures to avoid retrenchment. If the measures fail, the employer can retrench and pay an all-inclusive package of one-month salary for each two years of service or the pro rata share thereof. Labor laws differentiate between layoffs and severance with the former falling under retrenchment where the retrenchment law must apply. The law does not accept unfair dismissal or layoffs of employees. The 2015 amendments to the act only permit terminations of contracts to be in terms of a registered code of conduct, expiry of a contract of fixed term duration, or mutual agreement. There is no unemployment insurance or other safety net programs for workers laid off for economic reasons.

Collective bargaining agreements apply to all workers in an industry, not just union members. Collective bargaining takes place at the enterprise and industry levels. At the enterprise level, work councils negotiate collective agreements, which become binding if approved by 50 percent of the workers in the bargaining unit. Industry-level bargaining takes place within the framework of National Employment Councils. Unions representing at least 50 percent of the workers may bargain with the authorization of the Minister of Public Service and Labor. The law encourages the creation of employee-controlled workers’ committees in enterprises where less than 50 percent of workers are unionized. Workers’ committees exist in parallel with trade unions. Their role is to negotiate shop floor grievances, while that of the trade unions is to negotiate industry-level grievances, notably wages. The minister and the registrar have broad powers to take over the direction of a workers’ committee if they believe it is mismanaged. Trade unions regarded the existence of such a parallel body as an arrangement that allows employers to undermine the role of unions.

Employers in all sectors rely heavily on temporary or contract workers to avoid having to pay severance costs and follow other onerous termination procedures. The Labor Amendment Act of 2015, however, requires employment councils to put a limit on the number of times employers can renew short-term contracts. The government does not waive labor laws in order to attract or retain investment, except in the case of SEZs.

The law provides for the right of private-sector workers to form and join unions, conduct legal strikes, and bargain collectively. Public-sector workers may not form or join trade unions but may form associations that bargain collectively and strike. The law prohibits anti-union discrimination, provides that the labor court handle discrimination complaints, and may direct reinstatement of workers fired due to such discrimination. However, the government does not respect workers’ rights to form or join unions, strike, and bargain collectively.

Parliament enacted a bill establishing the Tripartite Negotiating Forum (TNF) in 2019 to formalize dialogue efforts among government, labor leaders, and employers to discuss social and economic policy and address demands. However, the forum met only once in 2020. The Zimbabwe Congress of Trade Unions (ZCTU) stated the TNF did little to address workers’ demands for wage increases and labor law reform, and the government showed little progress in supporting workers’ protections, fairness, and peaceful resolution of labor disputes.

The country has a labor dispute resolution process that starts at the company level through disciplinary or grievance committees. If the issue is not resolved at this level, the aggrieved party can appeal to either the employment council or the Labor Court depending on the industrial agreement. Other redress is through the Ministry of Public Service, Labor, and Social Welfare in which labor officers settle disputes for industries without employment councils. From the Labor Court, an aggrieved party can appeal to the Supreme Court. Labor inspections are minimal due to a lack of inspectors.

The government continues to harass labor unions and their leaders. Police and state intelligence services regularly attend and monitored trade union activities and sometimes prevented unions from holding meetings with their members and carrying out organizational activities. Although unions are not required by law to notify police of public gatherings, police require such notification in practice. Those unions engaging in strikes deemed illegal risk fines and imprisonment.

The government used violence and excessive force when some unions tried to demonstrate during the period under review. Police arrested three members of the Amalgamated Rural Teachers Union of Zimbabwe (ARTUZ) following a June 2020 protest in Masvingo to demand increased salaries paid in U.S. dollars. Police also arrested 13 nurses at Harare Central Hospital in July and charged them with contravening COVID-19 lockdown regulations, with photos and video of police holding clubs and chasing nurses circulating widely on social media. In July 2020, the Zimbabwe Republic Police published a list of 14 prominent government critics wanted for questioning, including the presidents of ZCTU and ARTUZ, regarding planned anti-corruption demonstrations on July 31, 2020. In the lead-up to the planned July 31 protests, the ZCTU president suspected state security agents slashed his car tires and unsuccessfully tried to seize his relatives, and the ARTUZ president alleged that armed suspected state security agents detained his wife and besieged the home of a relative demanding to know his whereabouts.

The government is a member of the International Labor Organization (ILO) and has ratified conventions protecting worker rights. The country has been subject to ILO supervisory mechanisms for practices that limit workers’ rights to freely associate, organize, and hold labor union meetings. At the 108th session of the ILO’s International Labor Conference in June 2019, the Committee on the Application of Standards noted concern regarding the government’s failure to implement specific recommendations of the 2010 Commission of Inquiry, which found the government responsible for serious violations of fundamental rights by its security forces, including a clear pattern of intimidation that included arrests, detentions, violence, and torture against union and opposition members. The Committee also noted persisting allegations of violations of the rights of the freedom of assembly of workers’ organizations. The Committee urged the government to accept a direct contacts mission of the ILO to assess progress before the next conference. The government ultimately agreed to accept a direct contacts mission, originally scheduled for May 2020 but postponed due to the COVID-19 pandemic.

In 2020 the Office of the U.S. Trade Representative initiated a review of Zimbabwe’s eligibility for trade preferences under the Generalized System of Preferences due to concerns of worker rights related to a lack of freedom of association, including the rights of independent trade unions to organize and bargain collectively, and government crackdown on labor activists. The review has not yet concluded.

14. Contact for More Information

Economic Specialist
U.S. Embassy Harare
2 Lorraine Drive, Bluffhill, Harare
+263 8677011000
zimbizopps@state.gov