Angola is actively seeking FDI to diversify capital inflows, boost economic growth, and diversify the country’s economy. Angola has maintained its privatization program (PROPRIV), started in 2019, despite the difficulty attracting investment during the COVID-19 pandemic. PROPRIV offers investment opportunities for foreign investment in state-owned enterprises and other publicly owned assets as the government seeks to liquidate its stake in assets across sectors such as transportation, telecommunications, and banking. Angola has also modernized its tendering process to make it more transparent. Despite the increased openness and concerted effort to attract foreign investors, Angola passed local content regulations for the oil sector in October 2020 restricting the concept of “national company” to companies fully owned by Angolan citizens, as opposed to a companies with at least 51 percent ownership by Angolan entities. The regulation has three regimes determining the types of services that must be contracted with local entities and which can be contracted with foreign entities. The local content regulations apply to all companies providing goods and services to oil sector as well as oil companies.

Angola’s trade and investment promotion agency AIPEX  provides an online investment window platform for investors to register their investment proposals. AIPEX and the Institute of State Assets and Shares work together on roadshows to promote PROPRIV for foreign investors. AIPEX is also responsible for providing institutional support and monitoring investment project execution.

Foreign and domestic private entities can establish and own business enterprises with limitations on foreign entities holding the majority stake in companies in specific sectors. The 2018 Private Investment Law (PIL) establishes the general principles of private investment in Angola for domestic and foreign investors and applies to private investments of any value. Under the PIL, the acquisition of shares of an Angolan entity by a foreign investor is deemed to be a private investment operation. If the investor wishes to transfer funds abroad, the private investment project must be properly registered and executed, and appropriate taxes must be paid before transferring.

Majority foreign shareholding restrictions persist in specific industries such as the oil and gas sector (49 percent cap) and the maritime sector, specifically for shipping, due to their significance in the Angolan economy. Mining rights are granted to private investors by the national diamond company ENDIAMA. The PIL lifted restrictions on having Angolan partners for several strategic sectors such as he telecommunications, hospitality and tourism, transportation and logistics, and information technology.

At the government’s request, the last Investment Policy Review (IPR) of Angola’s business and economic environments was completed in 2019 by the United Nations Conference on Trade and Development (UNCTAD). The full report and policy recommendations are accessible at UNCTAD TPR . The WTO’s last IPR was more than five years ago; OECD has never conducted an IPR of Angola.

There are no recent policy recommendations by civil society organizations based on reviews of investment policy related concerns.

Presidential Decree No 167/20, of June 15, 2020, created the “ Single Investment Window ” (Janela Única de Investimento, or JUI), which is aimed at simplifying the contact between the investor and all the public entities involved in the approval of foreign investment projects.

To incorporate a company, investors must obtain a certificate of availability of the corporate name from the Ministry of Justice and Human Rights; deposit share capital and show proof of deposit to a notary; submit a draft incorporation deed, articles of association, and shareholder documents. The company must then register with the Commercial Registrar to register the company’s incorporation in the Angola’s Official Gazette (Diário da República).

Despite efforts to reduce the bureaucracy related to incorporating a business, it still takes around 30 days to incorporate. The business then must register with Tax Authority , the National Institute for Statistics , and the National Institute for Social Security . The business can then initiate licensing procedures.

Angola is also negotiating with the EU on a Sustainable Investment Facilitation Agreement , the EU’s first bilateral agreement on investment facilitation. The sides have had two rounds of negotiations in June and December 2021. The agreement intends to simplify procedures and encourage e-governance and public-private dialogue, while diversifying Angola’s economy and helping small and medium sized enterprises invest. Its goal is to support Angola’s ability to attract and retain investment by improving the investment climate for foreign and local investors.

The Angolan government does not promote or incentivize outward investment, nor does it restrict Angolans from investing abroad. Investors are free to invest in any foreign jurisdiction.

Domestic investors often prefer to invest in Portuguese-speaking countries, with few investing in neighboring countries in Sub-Saharan Africa. The bulk of investment is in real estate, fashion, fashion accessories, and domestic goods.

Due to foreign exchange constraints, there has been very limited investment abroad by domestic investors.

Angola’s regulatory system is complex, vague, and inconsistently enforced. In many sectors, no effective regulatory system exists due to a lack of institutional and human capacity. The banking system is slowly beginning to adhere to International Financial Reporting Standards (IFRS). SOEs are still far from practicing IFRS. The public does not participate in draft bills or regulations formulation, nor does a public online location exist where the public can access this information for comment or hold government representatives accountable for their actions. The Angolan Communications Institute (INACOM) is the regulatory authority for the telecommunications sector and regulates prices for telecommunications services such as mobile telephone, internet, and TV services, particularly in sectors without much competition. Revised energy-sector licensing regulations have permitted some purchase power agreements (PPA) participation.

Overall, Angola’s regulatory system does not conform to other international regulatory systems.

Angola became a member of the WTO in 1996. However, it is not party to the Plurilateral Agreements on Government Procurement, or the Trade in Civil Aircraft Agreement and it has not yet notified the WTO of its state-trading enterprises under Article XVII of the GATT. A government procurement management framework introduced in late 2010 stipulates a preference for goods produced in Angola and/or services provided by Angolan or Angola-based suppliers. Technical Barriers to Trade regimes are not coordinated. Angola conducts distinct bilateral negotiations with seven of the nine full members of the Community of Portuguese Language countries (CPLP), Cuba, and Russia and extends trade preferences to China due to previously negotiated credit facilitation terms, while attempting to encourage and protect local content.

Regulatory reviews are based on scientific, or data driven assessments or baseline surveys. Evaluations are based on data, but not made available for public comment.

The state reserves the right to have the final say in all regulatory matters and relies on sectorial regulatory bodies for supervision of institutional regulatory matters concerning investment. The Economic Commission of the Council of Ministers oversees investment regulations that affect the country’s economy including the ministries in charge. Other major regulatory bodies responsible for getting deals through include:

• The National Petroleum, Gas and Biofuels Agency (ANPG) is the government regulatory and oversight body responsible for regulating oil exploration and production activities. On February 6, 2019, the parastatal oil company Sonangol launched ANPG through Presidential decree 49/19. The ANPG is the national concessionaire of hydrocarbons in Angola, authorized to conduct, execute, and ensure oil, gas, and biofuel operations run smoothly, a role previously held by state owned Sonangol. The ANPG must also ensure adherence to international standards and establish relationships with other international agencies and sector relevant organizations.
• The Regulatory Institute of Electricity and Water Services (IRSEA) is the regulatory authority for renewable energies and enforcing powers of the electricity regulatory authority. Revised energy-sector licensing regulations have improved legal protection for investors to attract more private investment in electrical infrastructure, such as dams and hydro distribution stations.
• The Angolan Communications Institute (INACOM) is the regulatory authority for the telecommunications sector including for prices for telecommunications services.
• As of October 1, 2019, a 14 percent VAT regime came into force, replacing the existing 10 percent Consumption Tax. For The General Tax Administration (AGT) oversees tax operations and ensures taxpayer compliance. The new VAT tax regime aimed to boost domestic production and consumption and reduce the incidence of compound tax for businesses unable to recover the consumption tax. The government introduced a temporary reduction of the VAT in October 2021 for key items in the basic basket of goods to 7 percent. The temporary measure should run at least through 2022. Corporate taxpayers can be reimbursed for the VAT on the purchase of good and services, including imports.

There are no informal regulatory processes managed by nongovernmental organizations or private sector associations, and the government does not allow the public to engage in the formulation of legislation or to comment on draft bills. Procurement laws and regulations are unclear, little publicized, and not consistently enforced. Oversight mechanisms are weak, and no audits are required or performed to ensure internal controls are in place or administrative procedures are followed. Inefficient bureaucracy and possible corruption frequently lead to payment delays for goods delivered, resulting in an increase in the price the government must pay.

No regulatory reform enforcement mechanisms have been implemented since the last ICS report. The Diário da República (the Federal Register equivalent) publishes official regulatory action.

The Ministry of Finance’s Debt Management Unit has a portal with quarterly public debt reports, debt strategy, annual debt plan, bond reports, and other publications in Portuguese and in English for the quarterly reports and the debt plan, though it does not have regular reporting on contingent liabilities.

Regionally, Angola is a member of SADC and ECCAS, though it is not a member of SADC’s Free Trade Area or of the Economic and Monetary Community of Central Africa (CEMAC) the customs union associated with ECCAS. New regulations are generally developed in line with regulatory provisions set by AfCTA, SADC, and ECCAS. Standards for each organization can be found at their respective websites: AfCTA: https://au.int/en/cfta ; SADC: SADC Standards and Quality Infrastructure ; ECCAS: https://ceeac-eccas.org/en/#presentation 

Angola is a WTO member but does not notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT). Technical Barriers to Trade (TBT) regimes are not coordinated and often trade regulations are passed and implemented without the due oversight of the WTO.

Angola’s legal system follows civil law tradition and is heavily influenced by Portuguese law, though customary law often prevailed in rural areas. Legislation is the primary source of law. Precedent is accepted but not binding as it is in common-law countries. The Angolan Constitution is at the top of the hierarchy of legislation and establishes the general principle of separation of powers between the judicial, executive, and legislative power. Primary judicial authority in Angola is vested in its courts, which have institutional weaknesses that include lack of independence from political influence in the decision-making process at times.

The Angolan justice system is slow, arduous, and often partial. Legal fees are high, and most businesses avoid taking commercial disputes to court in the country. The World Bank’s Doing Business 2020 survey ranked Angola 186 out of 190 countries on contract enforcement, and estimated that commercial contract enforcement, measured by time elapsed between filing a complaint and receiving restitution, takes an average of 1,296 days, at an average cost of 44.4 percent of the claim.

Angola has commercial legislation that governs all contracts and commercial activities but no specialized court. On August 5, 2020, the Economic Council of Ministers approved the opening of the Court for Litigation on Commercial, Intellectual, and Industrial Property Matters, at the Luanda First Instance Court. With the introduction of this commercial court, the GRA hopes the business environment and trust in public institutions will improve. Prior to this arrangement, trade disputes were resolved by judges in the Courts of Common Pleas. The commercial legislation provides that before going to court, investors can challenge the decision under the terms of the administrative procedural rules, either through a complaint (to the entity responsible for the decision) or through an appeal (to the next level above the entity responsible for the decision). In the new system, investors will be able, in general, to appeal to civil and administrative courts. Investors exercising their right to appeal, however, should expect decisions to take months, or even years, in the case of court decisions.

Angola enacted a new Criminal Code and a new Criminal Procedure Code which entered into force on February 9, 2021, to better align the legal framework with internationally accepted principles and standards, with an emphasis on white-collar crimes and corruption. The legal reforms extend criminal liability for corruption offenses and other crimes to legal entities; provide for private sector corruption offenses to face similar fines and imprisonment to the punishments applicable to the public sector, and modernize and broaden the list of criminal offenses against the financial system. The legal system lacks resources and independence, limiting the effectiveness of the reforms.

There is a general right of appeal to the Court of First Instance against decisions from the primary courts. To enforce judgments/orders, a party must commence executive proceedings with the civil court. The main methods of enforcing judgments are:

• Execution orders (to pay a sum of money by selling the debtor’s assets).
• Seizure of assets from the party and
• Provision of information on the whereabouts of assets.

The Civil Procedure Code also provides for ordinary and extraordinary appeals. Ordinary appeals consist of first appeals, review appeals, interlocutory appeals, and full court appeals, while extraordinary appeals consist of further appeals and third-party interventions. Generally, an appeal does not operate as a stay of the decision of the lower court unless expressly provided for as much in the Civil Procedure Code.

Angola’s legal system is becoming more favorable to FDI and has generally not allowed FDI in specific sectors such as military and security, activities of the Central Bank, and key infrastructure port and airport infrastructure. Under PROPRIV the government has encouraged FDI in ports and airports through management and operation tenders. Investment values exceeding $10 million require an investment contract that needs to be authorized by the Council of Ministers and signed by the President.

AIPEX, Angola’s investment and export promotion agency, maintains the Janela Única do Investimento  (Single Investment Window), which serves as Angola’s one-stop-shop for investment.

Mergers and acquisitions, including those which take place through the sale of state-owned assets, are reviewed by the Institute of Asset Management and State Holdings (IGAPE) and competition related concerns receive oversight by the Competition Regulatory Authority (the “CRA”) which is also responsible for prosecuting offenses. Competition is also regulated by the Competition Act of 2018, which prohibits cartels and monopolistic behavior. A leniency regime was added in September 2020 to reduce fines for the first party to come forward under specific conditions.

CRA decisions are subject to appeal, though Angola does not have special courts of jurisdiction to deal with competition matters.

Angola’s Competition Act creates a formal merger control regime. Mergers are subject to prior notification to the CRA, and they must meet certain specified requirements. The thresholds requiring prior notification are the following:

• the creation, acquisition, or reinforcement of a market share which is equal to or higher than 50 percent in the domestic market or a substantial part of it; or
• the parties involved in the concentration exceeded a combined turnover in Angola of 3.5 billion Kwanzas in the preceding financial year; or
• the creation, acquisition, or reinforcement of a market share which is equal to or higher than 30 percent, but less than 50 percent in the relevant domestic market or a substantial part of it, if two or more of the undertakings achieved more than 450 million Kwanzas individual turnover in the preceding financial year.

Mergers must not hamper competition and must be consistent with public interest considerations such as:

• a particular economic sector or region.
• the relevant employment levels.
• the ability of small or historically disadvantaged enterprises to become competitive; or

the capability of the industry in Angola to compete internationally.

Under the revised Law of Expropriations by Public Utility (LEUP), which came into force in October 2021, real property and any associated rights can be expropriated for specific public purposes listed in the LEUP in exchange for fair and prompt compensation to be calculated pursuant to the act. Only property strictly indispensable to achieve the relevant public purpose can be expropriated. The LEUP does not apply to compulsory eviction, nationalization, confiscation, easements, re-homing, civil requisition, expropriation for private purpose, temporary occupation of buildings, destruction for public purpose and revocation of concessions. Save for the urgent expropriation instances specifically set forth in the act, the LEUP enshrines the primacy of acquisition through private-law mechanisms, providing for a negotiation process between the expropriating entity – national or local government – and the relevant citizen or private-law entity.

Despite the reforms, expropriation without compensation remains a common practice with idle or underdeveloped areas frequently reverting to the state with little or no compensation to the claimants who paid for the land, who in most cases allege unfair treatment and at times lack of due process.

Angola’s Law on Corporate Restructuring and Insolvency went into force on May 10, 2021, representing the first amendment to bankruptcy legislation since 1961. The law regulates the legal regime of extrajudicial and judicial recovery of the assets of natural and legal persons in economic distress or imminent insolvency, provided recovery is viable and the legal regime of insolvency proceedings of natural and legal persons. The law permits the conservation of national and foreign investment since investors know they have a legal remedy that has as its purpose the preservation of the company.

The Private Investment Law (PIL) of 2021 included amendments allowing for negotiation of tax incentives between state and potential investors. The PIL also eliminated the investment value and the value required to qualify for incentives in foreign and local investments, previously set at USD 1,000,000 and USD 500,000 respectively. It also eliminates the requirement for foreign investors to establish a partnership with an Angolan entity with at least a 35 percent stake in the capital structure of investments in the electricity and water, tourism, transport and logistics, construction, media, telecommunications, and IT sectors. Investors can determine their own capital structure in those sectors under the current law.

Angola does not yet have a legislation which offers incentives to green investment.

The PIL restructures the country into three economic development zones (zones A through C) determined by political and socio-economic factors, up from two as per the 2015 investment law. For Zone A, investors have a three-year moratorium on taxes reduced between 25- 50 percent of the tax levied on the distribution of profits and dividends. For Zone B, it is between three to six years with a 50 to 60 percent tax reduction, and for Zone C between six to eight years with a tax reduction between 60-70 percent of the tax levied on distribution of profits and dividends.

The Free Trade Zones Law (FTZL) passed October 12, 2020. The FTZL establishes benefits to be offered to investors by the Angolan Government in exchange for meeting specific monetary, job creation, or other investment requirements on a per contract basis. Investors are granted use of the Free Zone for 25 years and can receive industrial tax and VAT benefits, customs rights, as well as land and capital benefits for investing in a Free Zone. Investments made in Free Zones must consider environmental protection interests.

Investors are allowed to carry out industrial activities, agriculture, technology activities, as well as commercial and service activities. It is possible to carry out other activities which are not specified by the FTZL, provided that such activities target an international market and relevant authorities authorize the activities. Industrial activities should use Angolan raw materials and be focused on exports).

The GRA follows “forced localization” in the oil and gas sector where foreign investors in the sector must use domestic goods and tertiary services as stipulated in decree 271/20 of October 20, 2020. The Local Content Law covers all companies providing goods and services to oil sector, as well as the oil companies themselves. Commercial relations for the oil and gas sector continue to be divided into an “Exclusivity Regime”, “Preference Regime”, and a “Competitive Regime. Under the Exclusivity Regime, oil and gas companies must contract wholly owned Angolan commercial companies. Under the Preference Regime, the contracted company must be incorporated in Angola, and under the Competitive Regime, there is contractual freedom in sourcing the company. The specific goods and services falling under the Exclusivity and Preference regimes must be listed by the National Oil, Gas and Biofuels Agency (ANPG) – the national concessionaire – annually. In addition, all companies operating in any segment of the petroleum-sector value chain are required to present an Annual Local Content Plan to the ANPG.

Local content regulations offer guidelines that are only loosely enforced, and companies lack clarity on how to satisfy the Angolan government’s requirements. While the lack of enforcement may make it easier for foreign companies to comply with local content regulations, the lack of specificity challenges their business planning. For example, it is difficult for companies to compare their competitive position against each other when competing for lucrative concessions and licenses from the government, as local content is sometimes considered during competition for government tenders. Legal guidance to get the guarantees for investors under the PIL is strongly encouraged.

Regulations around data storage, management, and encryption are still at nascent stages. The Institute for Communications of Angola (INACOM) oversees and regulates data in liaison with the Ministry of Telecommunications. The President of Angola passed Decree No. 214/16 on October 10, 2016, establishing the organizational framework of the data protection authority. The Ministry of Telecommunications and Information Technology (‘MTTI’) announced, on October 9, 2019, that the National Database Protection Agency (APD) had become operational. The APD issued the first license to a private credit agency in February and collaborates with other governments and private sector entities to train Angolan public officials on data protection.

Property rights enforcement remains difficult, given that the Land Law (Lei de Terras de Angola) has not been revised since its approval in December 2004 and two-thirds of Angolans are directly dependent on land property rights due to their work in agriculture. Normalization of land ownership in Angola persists with problems such as difficulties in completing land claims, land grabbing, lack of reliable government records, and unresolved status of traditional land tenure. Among other provisions, the Land Law includes a formal mechanism for transforming traditional land property rights into legal land property rights (clean titles), since a transparent system of land property rights enforcement did not exist before the civil war ended in 2002.

Foreigners are permitted to hold land in Angola through acquisition or lease under the 2004 Land Law. The Land Law sets out requirements for all potential landholders to acquire land, with the main distinctions for foreign entities being the type of identification (passport) a foreign citizen must produce.

Mortgages exist but can be difficult to obtain.

According to the Land Law, the State may transfer or constitute, for the benefit of Angolan natural or legal persons, a multiplicity of land rights on land forming part of its private domain. Although, it is possible to transfer ownership over some categories of land, the transfer of State land almost never implies the transfer of its ownership, but only the formation of minor land rights with leasehold being the most common form. The recipient of private property rights from the State can only transfer those rights with the consent of the local authority and after a period of five years of effective use of the land. Weak land tenure legislation and lack of secure legal guarantees (clean titles) are the reasons given by most commercial banks for their greater than 80 percent refusal rate for loans since land is used as collateral. Foreign real-estate developers therefore seek out public-private partnership (PPP) arrangements with State actors who can provide protection against land disputes and financial risks involved in projects that require significant cash outlays to get started.

Registering parcels of land over 10,000 hectares must be approved by the Council of Ministers. Registering property takes 190 days on average, ranking 167 out of 173 according to the World Bank’s Doing Business 2020 survey, with fees averaging three percent of property value. Owners must wait five years after purchasing before reselling land. There are no written regulations setting out guidelines defining different forms of land occupation, including commercial use, traditional communal use, leasing, and private use. Over the years, the government has given out large parcels of land to individuals to support the development of commercial agriculture. However, this process has largely proceeded in an unsystematic way and does not follow any formal rule change on land tenure by the State.

Before obtaining proof of title nationwide, an Angolan citizen or an Angolan legal entity must also obtain the Real or Leasing Rights (“Usufruct”) of the Land from the Institute of Planning and Urban Management of Luanda (IPGUL), an often-time-consuming procedure that can take up to a year or more. However, if a company already owns the land, it must secure a land property title deed from the Real Estate Registry in Luanda. The local registry – if the property is not in the capital – then produces an updated property certificate (certidão predial) with the complete description of the property including owner(s) information and any charges, liens, and/or encumbrances pending on the property. The complex administration of property laws and regulations that govern land ownership and transfer of real property as well as its tedious registration process may reduce investor appetite for real estate investments in Angola. Dispatch no. 174/11 of March 11, 2011, mandates the total fees for the property certificate include stamp duty (calculated according to the Law on Stamp Duty); justice fees (calculated according to the Law on Justice Fees); fees to justice officers (according to the set contributions for the Justice budget); along with notary and other fees. The total fee is also dependent on the current value of the fiscal correction unit (UCF), set at 88 kwanzas.

Domestic enforcement of Intellectual Property Rights can be difficult due to lack of resources and competing priorities, but the National Authority of Economic Inspection and Food Safety (ANIESA) was able to identify and break up a network of businesses selling counterfeit cosmetic products in early 2021. Authorities traced the source of the products to DRC, highlighting concerns about lack of border measures to intercept counterfeits. The Angolan Government signed an agreement with Portugal in October 2021 to jointly combat counterfeit medicines. In December 2021, ANIESA suspended the operations of three factories (located in Viana, Kikuxi, and Benfica) for producing counterfeit Havaianas-branded sandals. Trademark registration is mandatory to be granted rights over a mark. Angolan trademarks are valid for 10 years from the filing date and renewable for further periods of 10 years.

The Instituto Angolano de Propriedade Intelectual (IAPI) is the governmental body within the Ministry of Industry & Commerce charged with implementing patent and trademark law. The Ministry of Culture, Tourism & Environment oversees copyright law.

Regarding patents, additional fees are due for each claim after the 15th. Additionally, the request for the anticipation or postponement of the publication of a patent is now provided by the new applicable fees.

Angola is not listed in United States Trade Representative’s (USTR) Special 301 report nor the notorious market report.

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

Foreign portfolio investment is still new in Angola, but the government is seeking to increase it. The National Bank of Angola (BNA) abolished the licensing previously required to import capital from foreign investors allocated to the private sector and export income associated with such investments. This measure compliments the need to improve the capture of FDI and portfolio investment and it is in line with the privatization program for public companies (PROPRIV) announced through Presidential Decree No. 250/19 of August 5, 2019, which encourages foreign companies to purchase state-owned assets the government is liquidating. BNA has also stopped requiring a license to export capital resulting from the sale of investments in securities traded on a regulated market and the sale of any investment, in which the buyer is also not – foreign exchange resident, pursuant to Notice No. 15/2019. The BNA is increasingly removing restrictions on payments and transfers for current international transactions.

Angola’s Debt and Securities Stock Exchange (BODIVA), planned to be privatized by 2022, trades an equivalent in local currency (kwanzas) of USD 2 billion a year. In view of policies adopted by the institution, BODIVA predicts an increase in the volume of trades. The stock exchange has 23 commercial banks and two brokerages as members, which operate mainly in government denominated Treasury Bonds. BODIVA allows the trading of different types of financial instruments through an electronic auction platform to investors with rules (self-regulation), systems (platforms), and procedures that assure market fairness and integrity to facilitate portfolio investment. The Capital Markets Commission, the regulator, is updating its own supervisory framework while looking to provide new services and attract more individual investors to the capital markets. Presently, only local commercial banks can list on the nascent stock exchange. According to the Capital Markets Commissioner, portfolio investment by individuals only represents 16 percent of BODIVA’s equity.

Through the ongoing privatization program, the government announced in February its intent to sell 30 percent of the stocks it has invested in BODIVA by the end of 2022, with plans to sell the rest in phases in 2023 and 2024.

Credit is partially allocated on market terms. Since the revision of the PIL in 2021, domestic credit is accessible to foreign investors and companies that are majority foreign held (this was previously only possible after implementation of the investment project). For Angolan investors, credit access remains limited. In 2020, however the BNA directed commercial banks to increase the minimum amount of subsidized credit that they must make available to borrowers 2 percent of their assets to 2.5 percent by the end of 2020 to accelerate the diversification of domestic production. The private sector has access to a variety of conventional credit instruments provided by commercial banks.

Forty-seven percent of Angola’s income-earners utilize banking services, with 80 percent being from the urban areas. Angola is over-banked for the size of its economy. Although four banks have been closed since 2018, 26 banks still operate in Angola. The banking market remains marked by concentration and limited financial inclusion. The top six banks control nearly 80 percent of sector assets, loans and deposits, but the rest of the sector includes many banks with minimal scale and weak franchises. The total number of customers in the six largest banks is 9.9 million. Angola’s largest bank Banco Angolano de Investimentos has an asset value of approximately USD 5.5 billion.

Angola has a central banking system. The banking sector largely depends on monetary policies established by Angola’s central bank, the National Bank of Angola (BNA). Thanks to the ongoing IMF economic and financial reform agenda, the BNA is adopting international best practices and slowly becoming more autonomous. On February 13, 2021, President Joao Lourenco issued a decree granting autonomy to the BNA in line with IMF recommendations. Since that time, the bank has made decision on monetary, financial, credit, and foreign exchange policies without political influence, while also maintaining its oversight, regulatory, and supervisory role of the institutions in the financial system. The reforms taken under the Lourenco administration have lessened the political influence over the BNA and allowed it to more freely adopt strategies to build resilience from external shocks on the economy. As Angola’s economy depends heavily on oil to fuel its economy, so does the banking sector. The BNA periodically monitors minimum capital requirements for all banks and orders the closure of non-compliant banks.

Credit availability is limited and often supports government-supported programs. The GRA obliges banks to grant credit more liberally in the economy, notably by implementing a Credit Support Program (PAC). For instance, the BNA first issued a notice obliging Angolan commercial banks to grant credit to national production equivalent at a minimum to 2.5 percent of their net assets in 2020 and extended the notice through the end of 2022. Although the RECREDIT Agency purchased non-performing loans (NPLs) of the state’s parastatal BPC bank, NPLs remain high at 23 percent, a decrease of 9 percent since 2017.

The country has not lost any additional correspondent banking relationships since 2015. At the time of issuing this report no correspondent banking relationships were in jeopardy. The Eastern and Southern Africa Anti-Money Laundering Group is evaluating Angola’s anti-money laundering regime. A positive result could lead private foreign banking institutions to reestablish correspondent banking relationships. Most transactions go via third party correspondent banking services in Portugal banks, a costly option for all commercial banks.

Foreign banking institutions are allowed to operate in Angola and are subject to BNA oversight.

The Angolan Sovereign Wealth Fund (FSDEA) was established in 2012 with $5 billion USD in support from the petroleum sector. The fund was established in accordance with international governance standards and best practices as outlined in the Santiago Principles. As of March 2021, the FSDEA reported $2.97 billion USD. Angola is a full member  of the International Forum of Sovereign Wealth Funds

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.

Angola began its privatization program (PROPRIV) in 2019, with an aim to privatize 195 assets by 2022. By January, the government had privatized 73 assets and raised $1.7 billion in revenue through the program despite COVID-19 pandemic-imposed hurdles. The program is supervised by State Institute of Asset and Shares Management (IGAPE) and will implemented through the Angolan Debt and Securities Exchange Market (BODIVA). The government plans to partially privatize the state-owned telecommunications company and the national oil company Sonangol, as well as the national airline TAAG, and companies in the extractives sector, health, manufacturing, and agriculture.

The privatization process is open to interested foreign investors and the government has improved the transparency of the bidding process. The government has an “electronic auction” site where investors can submit their bids for the various tenders: https://leilaoigape.minfin.gov.ao/ .

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.

Department of State

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

Department of the Treasury

• OFAC Recent Actions 

Department of Labor

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

According to Article 5 of Decree No. 51/04 of July 23, 2004, every project (private or public) must present an Environmental Impact Study to the Ministry of Environment for their approval.

Angola aims to address the impacts of climate change as stated in its National Development Plan . It includes the main goals and actions to tackle current and future impacts on important sectors for economic development and for environmental sustainability. In addition, the National Strategy for Climate Change (2018–2030) includes five pillars on mitigation, adaptation, capacity building, funding, and institutional coordination. In addition, the Government of Angola has ratified the UNFCCC and developed and submitted its National Adaptation Plans of Action (NAPAs).

Angola has not made firm commitments or introduced policies to reach net-zero carbon emissions by 2050. Angola prioritizes the implementation of adaptation measures in coastal zones, land use, forests, ecosystems and biodiversity, and water resources. On mitigation, Angola aims to reach 70 percent of installed renewable energy  by 2025 and to sequester 5 million tons of CO2e per year through reforestation by 2030. Angola, like many African countries, needs access to abundant, always available, and cost-effective power to support economic growth. As part of a path towards sustainable transition, Angola needs to reduce emissions from its existing fossil fuel facilities.

The Forest and Fauna law 06/17 of January 24, 2017, has significantly changed how natural forests are managed in the country, introducing the concept of forest concessions for the first time, allowing for a more rational use of forest resources. Recognizing the potential of the blue economy, the government has expanded the mandate of the Ministry of Fisheries to cover issues of the sea, launched a marine spatial plan to address conflicting uses of marine resources, and is planning to establish the first marine protected area in the country. In addition, the government has started the preparation of guidelines to regulate private concessions in protected areas, as an effort to attract private investments in nature-based tourism and has also established the Kavango Agency to ensure further multi-sectoral coordination in the management of the high-sensitive Kavango watershed.

The Strategic Plan for the Protected Areas System of 2018 (PESAP 2018) is the most recent policy document for protected areas. The plan focuses on measures to allow fundraising, train staff, and strengthen institutions such as the National Institute for Biodiversity and Protected Areas. It also emphasizes the importance of maintaining the socioeconomic and financial sustainability of conservation areas.

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.

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

Hélder Pitta Grós
Procurador Geral da Republica (Attorney General of the Republic)
Procurador Geral da Republica (Attorney General’s Office)
Travessa Antonio Marques Monteiro 22, Maianga
Telephone: 244-222333 172

Sebastiao Domingos Gunza
Inspector General of State Administration
Office of the Inspector General of State Administration
Rua 17 de Setembro, Luanda, Angola
+244 993 666 338

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.

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.

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

The ascension of Felix Tshisekedi to the Presidency in January 2019 and his welcoming attitude toward foreign direct investment (FDI), particularly from the United States, have raised hopes that the GDRC can impose and monitor investor-friendly policies. FDI-friendly laws exist, but the judicial system is slow to protect investors’ rights and is susceptible to political pressure and corruption. Investors hope that Tshisekedi can create a more favorable environment by improving the rule of law and tackling corruption. The DRC’s rich endowment of natural resources, large population, and generally open trading system offer significant potential opportunities for U.S. investors. For more than a decade, the DRC has undertaken reforms related to investment in order to make its business environment competitive and attractive including reforms to the investment code, the mining code, the insurance code, the agricultural Act, the Act on the liberalization of electricity, and the telecommunications code. The GDRC has also promoted improvements in the tax, customs, parafiscal, non-tax and foreign exchange regimes, which are applicable to collaboration agreements and cooperation projects, as well as the decree on the strategic partnership on value chains, the Industrial Property Act, the Public-Private Partnership Act, the Competition Act, and the Special Economic Zones Act.

The main regulations governing FDI are found in the Investment Code Act (No. 004/2002 of February 21, 2002). Current regulations reserve the practice of small-scale commerce and retail commerce in DRC to nationals and prohibit majority ownership by foreigners of agricultural enterprises. The ordinance of “August 8, 1990” clearly states that “small business may only be carried out by Congolese”. Foreign investors must limit themselves to import trade and wholesale and semi-wholesale trade. Investors fear that the ban on foreign agricultural ownership will stifle any attempt to revive the agrarian sector.

The National Investment Promotion Agency (ANAPI) is the official investment agency, providing investment facilitation services for initial investments above $200,000. It is mandated to promote the positive image of the DRC and specific investment opportunities; advocate for the improvement of the business climate in the country; and provide administrative support to new foreign investors who decide to establish or expand their economic activities on the national territory. More information is available at https://www.investindrc.cd/ .

The GDRC maintains an ongoing dialogue with investors to hear their concerns. There are several public and private sector forums that address the government on the investment climate in specific sectors. In 2019, the GDRC created the Business Climate Unit (CCA) to monitor and improve the business enabling environment in the DRC, and to interface with the business community. In June 2020, the CCA presented a roadmap for reforms. In December 2021, the CCA developed a digital tool for monitoring and evaluating reforms and missions within the public administration, to allow the highest authorities, including the President of the Republic and the Prime Minister, to follow in real time the progress of the implementation of reforms by the various ministers. The Public-Private mining group Financial and Technical Partners (PTF) represents countries with significant mining investments in the DRC. On March 1, 2022, the GDRC created, by decree, the Agency for the Steering, Coordination and Monitoring of Cooperation Agreements between the DRC and its Private Partners (APCSC). This agency will oversee the implementation of cooperation agreements that the DRC has concluded with private companies, particularly in the areas of basic infrastructure and natural resources. The APCSC serves as an interface between the various parties and entities interested in projects resulting from collaboration or cooperation agreements in basic infrastructure and natural resources, including the GDRC, private companies and/or groups of companies, as well as any joint venture or monitoring structure created for the purpose of exploring, exploiting, or marketing natural resources and/or carrying out infrastructure work. The Federation of Congolese Enterprises (FEC), a private sector organization that partners with the government and workers’ unions, maintains a dialogue on business interests with the government.

The GDRC provides the right for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity.

Foreign ownership or control is possible except in certain excepted sectors. The DRC law reserves small-scale commerce and retail trade to Congolese nationals and there is a foreign ownership limit of 49 percent for agricultural concerns, which limits agricultural investment. Many investors note that in practice the GDRC requires foreign investors to hire local agents and participate in joint ventures with the government or local partners. The new telecommunications law enacted in 2022 includes a 25 percent ownership requirement.

Some foreign investors in the mining sector note that the 2018 mining code raised royalty rates from two to ten percent, raising tax rates on “strategic” metals, and imposing a surcharge on the “super profits” of mining companies. The code also removed a stability clause that protected investors from any new taxes or duties for ten years. The Tshisekedi government has indicated that it is prepared to reopen discussions on the mining code.

The GDRC does not maintain an organization to screen inbound investment. The Presidency and the ministries serve this purpose de facto. In May 2021 President Tshisekedi announced his intention to review the content of and compliance with mining contracts signed under former President Kabila, a process that is still ongoing.

In the past five years, has the GDRC not been subject to a third-party investment policy review (IPR) through a multilateral organization such as the Organization for Economic Co-operation and Development (OECD), World Trade Organization (WTO), United Nations Conference on Trade and Development (UNCTAD) or the UN Working Group on Business and Human Rights. Cities with high custom clearance traffic use Sydonia  https://asycuda.org/wp-content/uploads/Etude-de-Cas-SYDONIA-Contr%C3%B4le-de-la-Valeur-RDC.pdf , which is an advanced software system for custom administrations in compliance with ASYCUDA WORLD. (ASYCUDA is a large technical assistance software program recommended by UNCTAD for custom clearance management.)

The international NGO The Sentry published a report in November 2021 on a multi-million-dollar embezzlement and bribery operation using money intended to support infrastructure development. The NGO Global Witness reported in 2019 that a DRC-based bank was involved in laundering money for Congolese officials.

The GDRC operates a “one-stop-shop” for Business Creation (GUCE) that brings together all the government entities involved in the registration of a company in the DRC with an electronic tracking system of the business creation file online. The goal is to permit the quick and simple registration of companies through one office in one location. In October 2020, President Tshisekedi instructed the government to restructure GUCE in order to ease its work with the various state organizations involved in its operation. More information is available at https://guichetunique.cd/ .

In December 2021, the GDRC attempted to make the GUCE more efficient for companies by implementing a system that allows for online business registration. Using the GUCE’s online portal, companies fill out a “single form,” which integrates all of the services involved in the process of creating a company including the Notary’s Office, the Registry of the Commerce and Personal Property Credit Register, the Administration of Tax Authority (DGI), a Center for Ordination of the General Directorate of Administrative, State, Judicial and Participation Revenues (DGRAD), the Administration of the National Economy, the National Fund of Social Security (CNSS), the Administration of the Environment, the National Office of Employment (ONEM), the National Institute of Professional Preparation (INPP), the General Inspection of Work; and a representation of Municipal Entities. Businesses may also need to obtain an operating permit as required by some city councils. The registration process should now take three days, but in practice it can take much longer. Some businesses have reported that the GUCE has significantly shortened and simplified the overall business registration process.

The GDRC does not promote or incentivize outward investment.

There are currently no government restrictions preventing domestic investors from investing abroad, and there is currently no blacklist of countries with which domestic investors are prevented from doing business.

The 2018 Law on Pricing, Freedom, and Competition (the “Competition Act”) created a Competition Commission. DRC law mandates review if a company’s turnover is equal to or exceeds the amount determined by Decree of the Prime Minister upon proposal of the Minister of the Economy; if the party in question also holds a combined market share of 25% or more; or if the contemplated transaction creates / reinforces an already dominant position. DRC law requires notification prior to a corporate merger.

The DRC is a member of the regional competition bodies, the Common Market for Eastern and Southern Africa (COMESA),and the Organization for the Harmonization of Business Law in Africa (“OHADA”), which covers francophone African countries . OHADA does not have an operational merger control regime in place, while COMESA does have merger control. Merger activities in the DRC should should comply with COMESA standards.

There are no informal regulations run by private or nongovernmental organizations that discriminate against foreign investors. However, some U.S. investors perceive the regulations in the mining and agricultural sectors mandating a percentage of local ownership as discriminatory against foreign investment.

Proposed laws and regulations are rarely published in draft format for public discussion and comment; discussion is typically limited to the governmental entity that proposes the draft law and Parliament prior to enactment. Sometimes the government will hold a public hearing after public appeals. The Official Gazette of the DRC is a specialized service of the Presidency of the Republic, which publishes and disseminates legislative and regulatory texts, judicial decisions, acts of companies, associations and political parties, designs, industrial models, trademarks as well as any other act referred to in the law. More information is available at  http://www.leganet.cd/ .

There are no formal or informal GDRC provisions that systematically impede foreign investment. Companies often complain of facing administrative hurdles as laws and regulations are often poorly or unevenly applied.

DRC is member of Francophone Africa’s OHADA – the Organization for Business and Customs Harmonization, or Organisation pour l’Harmonisation en Afrique du Droit des Affaires – a system of accounting, legal, and regulatory procedures which covers the legal framework in the areas of contract, company, and bankruptcy law and sets up an accounting system better aligned to international standards. A Coordination Committee in the DRC monitors OHADA implementation.

The GDRC does not promote or require companies’ environmental, social, and governance (ESG) disclosure. However, some companies believe that compliance with international ESG standards can attract new financing and are taking steps to ensure that their companies are ESG compliant. These companies believe that compliance allows them to have a positive impact on the communities in which they operate and protect the environment.

Draft bills or regulations are rarely made available for public comment, or through a public comment process. Discussion is usually limited to the government entity proposing the bill and to Parliament before the bill’s enactment. Sometimes the government will hold a public hearing after public appeals.

The Official Gazette of the DRC is a specialized service of the Presidency of the Republic, which publishes and disseminates legislative and regulatory texts, judicial decisions, acts of companies, associations and political parties, designs, industrial models, trademarks as well as any other act referred to in the law. More information is available at http://www.leganet.cd/ .

Oversight mechanisms are weak, and often the law does not require audits to ensure that internal controls are in place or that administrative procedures are followed. Companies often complain that they face administrative barriers, with the government often poorly or unevenly enforcing laws and regulations. However, there are regulatory authorities in different sectors that ensure compliance with laws, regulations, conventions, etc., in order to guarantee effective and fair competition for the benefit of consumers and to provide legal and regulatory certainty for private investors. Some of them can issue, suspend, or withdraw authorizations and establish corresponding specifications.

In August 2021, the GDRC established the National Agency for Export Promotion (ANAPEX), with the aim of identifying and attracting foreign investments to sectors with export potential.

Following the decree signed in March 2022 by the Prime Minister, a new public establishment called the Agency for the Steering, Coordination and Monitoring of Collaboration Agreements Between the DRC and Private Partners (APCSC) was created. It replaces the Office for Coordination and Monitoring of the Sino-Congolese Program (BCPSC) established by former President Kabila and limited to agreements with Chinese investors. The APCSC will focus particularly on the areas of basic infrastructure and natural resources.

Through the National Agency for the Promotion of Exports (ANAPEX), the DRC can take advantage of its commitments at the regional level and can also target the Asian, European, and American markets to increase exports and further diversify its international markets. APCSC will interface between the various parties and entities interested in collaborating on projects in basic infrastructure and natural resources.

The enforcement process is legally reviewable, sometimes digitalized, and otherwise made accountable to the public. Public and private institutions responsible for monitoring and regulating various sectors make regulatory enforcement mechanisms publicly available. Regulatory agencies regularly publish their data and make it available to the business community and development partners, allowing for scientific and data-driven reviews and assessments.

In 2021, the DRC made significant progress by producing and publicly issuing a revised budget when budget execution deviated significantly from budget projections. Information on debt obligations was publicly available, except for major State-Owned Enterprise debt information.  However, the GDRC strives to promote transparency in public finances and debt obligations (including explicit and contingent liabilities) by publishing information on https://budget.gouv.cd/ .

The DRC is a member of several regional economic blocs, including the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA), the Organization for the Harmonization of Business Law in Africa (“OHADA”), the Economic Community of Central African States (ECCAS), and the Economic Community of the Great Lakes Countries (ECGLC). In April 2022, the DRC joined the East African Community. The Congolese Parliament must still ratify the EAC’s laws and regulations before the agreement take effect. The GDRC has made efforts to harmonize its system with these regional bodies.

According to the Congolese National Standardization Committee, the DRC has adopted 470 harmonized COMESA standards, which are based on the European system.

The DRC is a member of the World Trade Organization (WTO) and seeks to comply with Trade Related Investment Measures (TRIM) requirements, including notifying regulations to the WTO Committee on Technical Barriers to Trade (TBT).

The DRC is a civil code country, and the main provisions of its private law date back to the Napoleonic Civil Code. The general characteristics of the Congolese legal system are similar to those of the Belgian system. Various local laws govern both personal status laws and property rights, including inheritance and land ownership systems in traditional communities throughout the country. The Congolese legal system consists of three branches: public law, private law, and economic law. Public law governs legal relationships involving the state or state authority; private law governs relationships between private persons; and economic law governs interactions in areas such as labor, trade, mining, and investment.

The DRC has written commercial and contractual laws. The DRC has thirteen commercial courts located in its main business cities, including Kinshasa, Lubumbashi, Matadi, Boma, Kisangani, and Mbuji-Mayi. These courts are designed to be led by professional judges specializing in commercial matters and exist in parallel to the judicial system. However, a lack of qualified personnel and reluctance by some DRC jurisdictions to fully recognize OHADA law and institutions have hindered the development of commercial courts. Legal documents in the DRC can be found at: http://www.leganet.cd/ .

The current executive branch has generally not interfered with judicial proceedings. The current judicial process is not procedurally reliable, and its rulings are not always respected.

The national court system provides an appeals mechanism under the OHADA framework.

The 2002 Investment Code governs most foreign direct investment (FDI) and provides for investment protection. Law n°004/2002 on the Investment Code, through the provisions of articles 23-30, which provide the mechanisms of security and guarantees for investments as well as customs, tax, and parafiscal exemptions. The country’s constitution and laws state that the property (private and collective) of all persons in the DRC is sacred. The GDRC guarantees the right to individual or collective property acquired in accordance with the law or custom. It encourages and ensures the security of private, national, and foreign investments. No one may be deprived of his or her property except for reasons of public utility and in return for fair and prior compensation granted under the conditions established by law; the State guarantees the right to private initiative to both nationals and foreigners.

The Public Private Partnership (PPP) Act provides for the guarantee of execution of the partnership contract regardless of a change of government (art. 15). Taxation in this law a common application of the law, except for the reduction of the tax on profits and earnings, which is set at 15%. There are other laws that grant customs exemptions, such as the Agricultural Act, the Partnership Act in the Value Chain, etc. The law favors amicable settlement or arbitration in case of investment disputes. Specific sectoral laws govern agriculture, industry (protection of industrial property), infrastructure and civil engineering, transportation (operating license in air transport), mining research and exploitation, hydrocarbons, various electricity sub-sectors, information and communication technologies (ICT) (license to operate telecommunications services), insurance and reinsurance, healthcare, and arms production and related military activities. Notwithstanding the specific provisions governing each of these sectors, all investors are required to submit a copy of their investment file to the DRC investment agency ANAPI ( www.investindrc.cd ).

The Telecommunications Law went into effect in 2021, bringing the first revision of the law since 2002. The government’s decisions in 2021 to establish an agency to monitor foreign investment in infrastructure and natural resources and to create a presidential body to review all mining contracts have affected some of the largest investments in the DRC.

The GUCE provides a One-Stop Shop designed to simplify business creation. The GUCE has reduced the processing time from five months to three days and for corporations, the fee was lowered from $120 to $80. For sole proprietorships, the fee has been reduced from $40 to $30. There is also an Integral One-Stop Shop for foreign trade (GUICE), which is a neutral, transparent, and secure electronic platform, accessible 24 hours a day to the entire foreign trade community. It centralizes all regulatory, customs and logistical components related to the import, export, and transit of goods ( https://segucerdc.com ). GUICE is operated by SEGUCE RDC SA, a private operator under the framework of a public-private partnership.

Competition Commission – COMCO is the regulatory and supervisory body for competition in DRC under the Organic Law no. 18/020 on Pricing Freedom and Competition and the COMESA Competition Regulation. It ensures that the rules of free competition are respected by economic operators. This commission works to allow all economic operators, according to their capacities, to exercise a fair competition, based on the quality of goods, products, and services, respecting the official price structure. Its priorities are acquisitions and mergers (investigating, evaluating, and monitoring acquisitions and mergers), business practices and exemptions (investigating anti-competitive practices), consumer welfare (acting against violators), and good practice awareness (good practices and anti-competitive consequences).

The U.S. District Court for the District of Columbia ordered the GDRC to pay a liability judgment of $619 million to the South African company Dig Oil due to breach of contract. The GDRC is considering settling the 2020 judgment but has yet to do so. In August 2021, the Minister of Justice informed the GDRC of six emblematic cases of international litigation. The main causes of the DRC’s multiple liabilities in these cases are the poor management of the disputes by the sectoral authorities, the late transmission of files to the Ministry of Justice, and the failure to respect the findings of arbitration procedures. President Tshisekedi has called for better monitoring of cases involving the DRC before the courts in order to reduce the risk of the state being found liable for hundreds of millions of dollars.

As a member of COMESA, the DRC follows the COMESA Competition Regulations and rules, and the COMESA competition body regulates competition.

Agency decisions may be appealed to the courts/judicial system.

The GDRC may proceed with an expropriation when it benefits the public interest, and the person or entity subject to an expropriation should receive fair compensation.

There have been no expropriations of property in the past three years.

Some claims have been taken to arbitration, though many arbitral judgments against the GDRC have are not resulted in a payment.

Businesses report that the GDRC levies heavy fines, which is a form of financial expropriation. A government agency imposes fines because a company has not paid a tax, although often the tax system is unclear, and several government agencies impose different taxes. Companies that appeal these fines in court often face a long wait.

The 2002 Investment Code provides for attractive customs and tax exemptions for investors who submit their investment plan to ANAPI. Once the project is approved by ANAPI within a period not exceeding 30 days, the investor benefits from the following customs, fiscal and parafiscal advantages: (1) exemption from import duties and taxes on machinery, materials, and equipment (excluding the 2% administrative tax and VAT (to be paid upstream by the promoter, but to be refunded by the tax authorities); (2) exemption from income tax; (3) exemption from property tax; and (4) exemption from proportional duties when setting up a limited liability company or increasing its share capital.

The duration of the advantages granted is from three to five years depending on the economic region where the investment is located: three years for economic region A (Kinshasa, the Capital); four years for economic region B (Bas-Congo, cities of Lubumbashi, Likasi, Kolwezi); and five years for economic region C (everywhere else).

The conditions for accessing the benefits of the Investment Code are simple; establishment as an economic entity under Congolese law; the overall cost of the planned investment (all expenses included) must be at least $200,000 (or at least $10,000 for SMEs/SMIs); commitment to respect environmental regulations; commitment to respect labor regulations; and a guarantee the investment has a value-added rate of at least 35%. There are no additional incentives for businesses owned by underrepresented investors such as women.

The GDRC does not issue guarantees or jointly finance foreign direct investment projects.

Aside from the incentives offered in the Investment Code, the GDRC does not offer additional incentives for clean energy investments (including renewable energy, energy storage, energy efficiency, clean hydrogen, carbon sequestration, low-carbon transport, and fuels, and other decarbonization technologies). A group of off-grid electricity producers is pushing the government to provide an exemption from import taxes for off-grid solar products brought into the DRC.

The DRC does not have any areas designated as Free Trade Zones or Duty-Free Zones. The DRC is a signatory to the SADC but is not a SADC Free Trade Area member. In February 2022, the DRC deposited its instrument of ratification and became the 42nd country to ratify the African Continental Free Trade Agreement (AFCFTA). The agreement aims to facilitate imports and exports among member countries with reduced or zero tariffs, free market access and market information, and the elimination of trade barrier, and provides numerous benefits to SMEs. In March 2022, the DRC joined the East African Community (EAC) as the seventh member, massively expanding the territory of this trading bloc, giving it access to the Atlantic Ocean and greatly increasing the number of francophones in what was originally a club of former British colonies. The GDRC is committed to experimenting with Special Economic Zones (SEZ). It is in this context that it promulgated in 2014, the Law n°14/022 fixing the regime of SEZ in the DRC.

To date, six areas for the creation of SEZs have been defined: the Industrial Zone of the Kinshasa Area, comprising the City Province of Kinshasa; Kongo Central Province, and the former Province of Bandundu; the Industrial Zone of the Kasaï Area, comprising the Provinces of Kasaï, Kasaï Central, Eastern Kasaï, Lomami and Sankuru; the Industrial Zone of the former Katanga Province; the Industrial Zone of Great Kivu; the Industrial Zone of the former Eastern Province; and the Industrial Zone of the former Equateur Province. According to the provisions of article 6 of this law, the administration of the SEZs in the DRC is the responsibility of a public establishment called the “Agency of Special Economic Zones (AZES).”

With a view to attracting and promoting investments in SEZs, the GDRC, in accordance with the provisions of the law on SEZs, issued Decree No. 20/004 of March 5, 2020, which sets out the advantages and facilities to be granted to investors operating in SEZs in DRC.

• For developers: a total exemption from property, furniture, and business taxes on profits for 10 years, renewable once after evaluation; a 50 percent reduction in the tax rate set from the 21st year; a total exemption from import duties and taxes on machinery, tools and new or used equipment, capital goods, etc. for 10 years, etc.
• For companies: a total exemption from property, movable and professional taxes on profits for 5 years, renewable once after evaluation; a reduction of 50 percent of the tax rate from the 11th year; an application of the exceptional depreciation system; a total exemption from import duties and taxes on machinery, tools, and equipment, new or used, and capital goods for 10 years; an exemption from export duties and taxes on finished products for 10 years.

On November 4, 2020, the GDRC launched the construction of the first Special Economic Zone – Maluku SEZ in Kinshasa, with the aim of attracting foreign investment and stimulating the creation of local businesses. This SEZ offers tax and regulatory advantages for investors and entrepreneurs including a 5-to-10-year tax exemption. More information is available at https://azes-rdc.com/ .

In August 2021, the GDRC presented its Industrialization Master Plan (PDI) accompanied by a cost estimate of the structuring and industrializing infrastructures. The transport and communication infrastructure package (airport, rail, river, lake, maritime, road and energy), together with the densification of Special Economic Zones, is estimated at $58.3 billion.

The GDRC does not follow “forced localization,” the policy in which foreign investors must use domestic content in goods or technology. The DRC does not have specific legislation on data storage or limits on the transmission of data.

There are no known enforcement procedures for performance requirements in the DRC.

Investors benefiting from the Investment Code regime must guarantee the investment has a value-added rate of at least 35%

The GDRC does not require IT companies to hand over encryption data. Cellular phone companies must meet technology performance requirements to maintain their license.

According to officials, the Ministry of Digitalization is developing measures to prevent or restrict companies from freely transmitting customer data or data to other companies outside the economy/country. These measures may go beyond the requirements for data transferred within the country.

On November 25, 2020, President Tshisekedi enacted Law No. 20/017 on telecommunications and information and communication technologies. This law provides in its articles 126 to 133 the right to privacy and the protection of personal data in telecommunications and information technology and communication. This protection of privacy is secured by the right to secrecy of correspondence for all users of telecommunications networks and services and information and communication technologies (ICT). The law thus prohibits any interception, listening, recording, transcription and disclosure of correspondence without prior authorization from the General Prosecutor’s Office of the Court of Cassation. The authorization from the Public Prosecutor’s Office of the Court of Cassation, for a renewable period of three months, must demonstrate the facts in a judicial file, and it must include all the identification elements of the targeted link, the offence that justifies the interception, as well as its duration. The Post and Telecommunications Regulatory Authority of Congo (ARPTC) ensures the regulation and control of personal data protection.

The DRC Constitution protects private property without discriminating between foreign and domestic investors. Despite this provision, the GDRC recognized the lack of enforcement protecting property rights. The Congolese law on real property rights lists provisions for mortgages and liens. Real property (buildings and land) is protected and registered by the Office of the Registrar of Mortgages of the Ministry of Land Affairs. The registration of real property does not fully protect owners, as records are often incomplete and disputes over land transactions are common. Many property owners do not have a clear and recorded title to their property. In May 2021, the Ministry of Land Affairs presented the GDRC with its plan to digitize the land registry and secure land and property titles in the DRC. This plan will make it possible to digitize the entire land registry, to establish land security for investors and individuals alike, to electronically store all data collected in a database accessible to all public authorities, and to resolve land conflicts, which make up 80 percent of the cases handled.

Article 61 of Law No. 73-021 of 1973 on the general property regime, the land and real estate regime, and the system of securities, as amended and supplemented by Law No. 80-008 of 1980, provides that “a concession is a contract by which the State recognizes the right of use of land to a community, a natural person, or a legal entity of private or public law, under the terms and conditions provided for in the present law and its implementing regulations. However, a perpetual concession is only available to Congolese individuals. Foreigners and legal entities can only have access to an ordinary concession, which cannot exceed 25 years. However, the latter is renewable at the discretion of the State. In the event of non-renewal, the law provides for compensation for the concessionaire in certain cases (long lease, surface area). This compensation may not exceed 75 percent of the current and intrinsic value of the buildings incorporated into the land. Land is owned and managed by the GDRC. Government officials with the status of Registrars of Real Property Titles issue certificates of registration to individuals in their respective land districts.

Less than 10 percent of land has a clear property title, but the GDRC is in the process of promoting and encouraging people to regularize property titles by buying a final title called a “Record Certificate” (Certificat d’Enregistrement).

Ownership interest in personal property (e.g., equipment, vehicles, etc.) is protected and registered through the Ministry of the Interior’s Office of the Notary.

Intellectual Property Rights (IPR) are legally protected in the DRC, but enforcement of IPR regulations is limited and IP theft is common. Law n°82-001 of 1982 on Intellectual Property (IP) organizes the procedure of IP protection. The registration is done in three steps with the General Secretariat of the Ministry of Industry, which is the competent body for intellectual property in the DRC: (1) filing the file – after paying the official fees, the applicant must file his file. When the file is filed, the applicant receives a filing number that specifies the day and time of filing. This number is used to prove the earlier filing of the IP. (2) Examination of the application and (3) registration of the application. This administrative procedure can take between six and nine months. The applicant can carry out the procedure alone or be accompanied and assisted by an Industrial Property Agent.

The law provides several tools to protect IP against those who want to appropriate or use it without the owner’s consent; in particular, the infringement action or the opposition, which makes it possible to defeat IP violations. The protection of the registered trademark is valid for a renewable period of ten years from the date of filing. The patent allows to benefit on the Congolese territory from a monopoly of exploitation on an innovation for a limited period of 20 years. The registration of a design or model offers a five-year protection that can be renewed only once. The GDRC has yet to join the African Intellectual Property Organization (OAPI), which offers greater protection of trademarks (a protection valid in 16 African countries).

In the past year, no new IP-related laws or regulations have been enacted and no reform bills are underway. The country is a signatory to agreements with international organizations such as the World Intellectual Property Organization (WIPO) and the World Trade Organization (WTO) and is subject to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

The country tracks and reports seizures of counterfeit goods but does not keep a public record of IPR violations. Information on these seizures is often reported by the Congolese Office of Control (OCC) – [Office Congolais de Contrôle]- which is responsible for enforcing laws, regulations, and standards on the conformity of products, goods, procedures and services.

The DRC is not listed in USTR’s Special 301 report.

The DRC is not listed in the notorious market report.

The government welcomes investment including by foreign portfolio investors. A small number of private equity firms are actively investing in the mining industry. The institutional investor base is not well developed, with only an insurance company and a state pension fund as participants. There is no market for derivatives in the country. Cross-shareholding and stable shareholding arrangements are also not common. Credit is allocated on market terms, but there are occasional complaints about unfair privileges extended to certain investors in profitable sectors such as mining and telecommunications.

There is no domestic stock market. Although reforms have been initiated, the Congolese financial system remains small, heavily dollarized, characterized by fragile balance sheets, and difficult to use. Further reforms are needed to strengthen the financial system, sustain its expansion, and stimulate economic growth. Inadequate risk-based controls, weak regulatory enforcement, low profitability, and over-reliance on demand deposits undermine the resilience of the financial system. The DRC’s capital market remains underdeveloped and consists primarily of the issuance of Treasury bonds.

The Central Bank refrains from making restrictions on payments and transfers for current international transactions.

It is possible for foreign companies to borrow from local banks, but their options are limited. Loan terms are generally limited to 3-6 months, and interest rates are typically 16-21 percent. The inconsistent legal system, the often-burdensome business climate, and the difficulty of obtaining interbank financing discourage banks from making long-term loans. Opportunities for financing large projects in the national currency, the Congolese franc (CDF), are limited.

The Congolese financial system is comprised of 15 licensed banks, a national insurance company (SONAS), the National Social Security Institute (INSS), one development bank, SOFIDE (Société Financière de Development), a savings fund (CADECO), roughly 21 microfinance institutions and 72 cooperatives, 81 money transfer institutions which are concentrated in Kinshasa, Kongo Central, former Bandundu, North and South Kivu and the former Katanga provinces, 4 electronic money institutions, and 48 foreign exchange offices.

While the financial system is improving, it is fragmented and dominated by so-called “local” banks. With very different profiles (international, local, pan-African, networked, corporate, etc.) and approaches that diverge fundamentally in terms of management, governance, and terms of management and risk appetite, the so-called “local” commercial banks continue to dominate the banking sector. Pan-African banks are increasing their share, especially with the recent acquisition of the Banque Commerciale du Congo by the Kenyan Equity Group.

The Central Bank controls monetary policy and regulates the banking system. Banks are mainly concentrated in the provinces of Kinshasa, Kongo Central, North and South Kivu, and Haut Katanga. The banking penetration rate is about 7.6 percent, or about 5.3 million accounts, which places the country among the least banked nations in the world.

Mobile banking has the potential to significantly increase the banking customer base, as an estimated 35 million Congolese use cell phones. In the last five years, there has been an evolution and consolidation of prudential ratios or risk indicators of the banking sector and the introduction of alternative channels for financial service delivery and inclusion, such as Agency Banking and Mobile Banking. Mobile money continues to play an increasingly important role in financial inclusion in the DRC, as mobile money is a lever for economic and social inclusion. Over the past ten years, mobile money subscriptions in the DRC have increased by 20 percent per year.

There is no debt market. The financial health of DRC banks is fragile, reflecting high operating costs and exchange rates. In 2021 asset quality measures taken by the Central Bank allowed banks to absorb the economic impact of the COVID-19 pandemic. Fees charged by banks are a major source of revenue.

Statistics on non-performing loans are not available because many banks only record the balance due and not the total amount of their non-performing loans.

The financial system is primarily based on the banking sector, with total assets estimated at US$ 5.2 billion. Of the five largest banks, four are local and one is controlled by foreign holding companies. The five largest banks hold nearly 65 percent of bank deposits and more than 60 percent of total bank assets, or about $ 3.1 billion.

The country has an operating central banking system with Citigroup as the only correspondent bank.

All foreign banks or branches need to be accredited by the Central Bank, are considered Congolese banks with foreign capital, and fall under the provisions and regulations covering the credit institutions’ activities in the DRC.

There are no restrictions on a foreigner’s ability to establish a bank account in the DRC.

The DRC has no declared Sovereign Wealth Fund (SWF), although the 2018 Mining Code refers to creating a future fund “FOMIN” that will be capitalized by a percentage of mining revenues. In October 2021, the Extractive Industries Transparency Initiative Technical Secretariat organized a workshop to develop the FOMIN decree as well as tools for managing the shares of mining royalties accruing to the provinces and local entities.

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).

Department of State

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

Department of the Treasury

• OFAC Recent Actions

Department of Labor

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

The GDRC has a national climate strategy and/or a strategy for monitoring natural capital, such as biodiversity and ecosystem services. The GDRC has the following national climate change strategy documents: the National Policy, Strategy and Action Plan for Climate Change, the National Policy and Strategy Document on Climate Change in the DRC (2020-2024), the National Strategic Development Plan (PNSD), the Capacity Development Program for a Low Carbon Development Strategy, the Second National Communication to the Framework Convention on Climate Change, the National Strategy for Biodiversity Conservation in DRC Protected Areas, the National Biodiversity Strategy and Action Plan, and other key policy documents. The DRC’s vision in the fight against climate change is to promote a green, resilient, and low-carbon economy by rationally and sustainably managing its important natural resources in order to ensure ecological balance and the social, economic, cultural and environmental well-being of its population.

The GDRC has not introduced any policies to reach net-zero carbon emissions by 2050. The DRC ratified the United Nations Framework Convention on Climate Change (UNFCCC) in 1997, the Kyoto Protocol in 2005 and the Paris Agreement in 2017. To this end, the DRC is firmly committed to taking action to mitigate its greenhouse gas (GHG) emissions, to preserve the Congo Basin Rainforest, and to adapt to the effects of climate change, in accordance with Article 41 of the Paris Agreement. It has also submitted its first three National Communications on Climate Change to the UNFCCC for 2001, 2009, and 2015 respectively, and is currently preparing its fourth National Communication and finalizing its first Biennial Update Report (BUR).

Private sector organizations are key actors in the achievement of the Nationally Determined Contribution (NDC) and the implementation of climate change adaptation and mitigation activities, as they are also affected by climate change. Some examples of private sector organizations are COPEMECO (Confederation of Small and Medium Enterprises), FIB (Federation of Wood Manufacturers), FEC (Federation of Enterprises of Congo), SAFBOIS and SIFORCO, and agribusinesses. Their participation is required to make the implementation of the climate change policy and law possible, both for the implementation of mitigation and/or adaptation measures, and the realization of NDCs and the provision of data and information for the operation of the MRV and GHG inventories.

The government is hoping to benefit financially by establishing carbon credits to support the preservation of the rain forest. The GDRC is working on a comprehensive national forestry plan which will govern the use and protection its part of the Congo Basin Rainforest, the second largest rainforest in the world. The forestry sector is currently regulated in the DRC by the following legal provisions: Law No. 011/2002 of August 29, 2002, on the Forestry Code; Decree No. 05/116 of October 24, 2005, setting out the modalities for converting old forest titles into forest concession contracts and, extending the moratorium on granting forest exploitation titles; Decree No. 08/09 of April 8, 2008, setting out the procedure for allocating forest concessions. Decree No. 011/27 of May 20, 2011, setting the specific rules for the allocation of conservation forest concessions. In September 2021, GDRC decided, through a Council of Ministers, to lift the current moratorium on the granting of forest titles. After the international community protested, President Tshisekedi reinstated the moratorium in December 2021.

Under the DRC Public Procurement Act, environmental impact is one of the criteria for evaluating bidders’ offers.

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.

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

Chouna Lomponda
Director of Communications and Spokesperson
Agence de Prévention et de Lutte contre la Corruption (APLC)
Général Basuki, N°14C, Ngaliema,
Kinshasa, RDC
+243 89 33 02 819
communicationaplc@gmail.com 

Contact at a “watchdog” organization:

Ernest MPARARO
Executive Secretary
Ligue Congolaise de Lutte contre la Corruption (LICOCO)
Luango, N°14, Quartier 1, N’djili
Kinshasa RDC
+243 81 60 49 837 / +243 89 89 72 130
contact@licoco.org
https://licoco.org/ 

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.

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.

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

Egypt’s completion of the three-year, $12-billion IMF Extended Fund Facility between 2016 and 2019, and its associated reform package, helped stabilize Egypt’s macroeconomy, introduced important subsidy and social spending reforms, and helped restore investor confidence in the Egyptian economy.  The flotation of the Egyptian Pound (EGP) in November 2016 and the restart of Egypt’s interbank foreign exchange (FX) market as part of this program was the first major step in restoring investor confidence that immediately led to increased portfolio investment and should lead to increased FDI over the long term.  Other important reforms have included a new investment law and an industrial licensing law in 2017, a new bankruptcy law in 2018, a new customs law in 2020, and other reforms aimed at reducing regulatory overhang and improving the ease of doing business.

In 2021, Egypt’s government 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, and modernizing its industrial base and increasing exports.

As a result of the government’s increased focus on infrastructure development, Egypt’s $259 billion project finance pipeline is the third-largest in the Middle East and the largest in Africa as of March 2022, according to ratings agency Fitch. Recognizing the immense challenges the country faces from the impacts of climate change, government officials announced in 2021 that by 2030 all new public sector investment spending would be green, and accelerated plans to generate 42 percent of its electricity from renewable sources by 2035. Egypt will host the United Nations Conference on Climate Change, COP 27, in November 2022, and the government is developing a package of investment incentives aimed at attracting foreign investment and project finance in areas such as solar and wind power, green hydrogen, water desalination, sustainable transportation, electric vehicles, smart cities and grids, and sustainable construction materials.

With few exceptions, Egypt does not legally discriminate between Egyptian nationals and foreigners in the formation and operation of private companies. The 1997 Investment Incentives Law was designed to encourage domestic and foreign investment in targeted economic sectors and to promote decentralization of industry away from the Nile Valley. The law allows 100 percent foreign ownership of investment projects and guarantees the right to remit income earned in Egypt and to repatriate capital.

The Tenders Law (Law 89 of 1998) requires the government to consider both price and best value in awarding contracts and to issue an explanation for refusal of a bid. However, the law contains preferences for Egyptian domestic contractors, who are accorded priority if their bids do not exceed the lowest foreign bid by more than 15 percent.

The Capital Markets Law (Law 95 of 1992) and its amendments, including the most recent in February 2018, and relevant regulations govern Egypt’s capital markets.  Foreign investors are able to buy shares on the Egyptian Stock Exchange on the same basis as local investors.

The General Authority for Investment and Free Zones (GAFI, http://gafi.gov.eg) is the principal government body that regulates and facilitates foreign investment in Egypt and reports directly to the Prime Minister.

The Investor Service Center (ISC) is an administrative unit within GAFI that provides “one-stop-shop” services, easing the way for global investors looking for opportunities presented by Egypt’s domestic economy and the nation’s competitive advantages as an export hub for Europe, the Middle East, and Africa. This is in addition to promoting Egypt’s investment opportunities in various sectors.

The ISC provides a start-to-end service to the investor, including assistance related to company incorporation, establishment of company branches, approval of minutes of Board of Directors and General Assemblies, increases of capital, changes of activity, liquidation procedures, and other corporate-related matters. The Center also aims to issue licenses, approvals, and permits required for investment activities within 60 days from the date of request. Other services GAFI provides include:

• Advice and support to help in the evaluation of Egypt as a potential investment location;
• Identification of suitable locations and site selection options within Egypt;
• Assistance in identifying suitable Egyptian partners; and
• Dispute settlement services. ​

The ISC plans to establish branches in each of Egypt’s Governorates by the end of 2021.  Egypt maintains ongoing communication with investors through formal business roundtables, investment promotion events (conferences and seminars), and one-on-one investment meetings.

The Egyptian Companies Law does not set any limitation on the number of foreigners, neither as shareholders nor as managers/board members, except for Limited Liability Companies where the only restriction is that one of the managers must be an Egyptian national. In addition, companies are required to obtain a commercial and tax license, and pass a security clearance process.  Companies are able to operate while undergoing the often lengthy security screening process.  However, if the firm is rejected, it must cease operations and may undergo a lengthy appeals process.  Businesses have cited instances where Egyptian clients were hesitant to conclude long-term business contracts with foreign businesses that have yet to receive a security clearance. They have also expressed concern about seemingly arbitrary refusals, a lack of explanation when a security clearance is not issued, and the lengthy appeals process. Although the Government of Egypt has made progress streamlining the business registration process at GAFI, inconsistent treatment by banks and other government officials has in some cases led to registration delays.

Sector-specific limitations to investment include restrictions on foreign shareholding of companies owning lands in the Sinai Peninsula. Likewise, the Import-Export Law requires companies wishing to register in the Import Registry to be 51 percent owned and managed by Egyptians. Nevertheless, the new Investment Law does allow wholly foreign companies investing in Egypt to import goods and materials. In January 2021 the Egyptian government removed the 20-percent foreign ownership cap for international and private schools in Egypt.

The ownership of land by foreigners is complicated, in that it is governed by three laws: Law 15 of 1963, Law 143 of 1981, and Law 230 of 1996.  Land/Real Estate Law 15 of 1963 explicitly prohibits foreign individual or corporation ownership of agricultural land (defined as traditional agricultural land in the Nile Valley, Delta and Oases). Law 15/1963 stipulates that no foreigners, whether natural or juristic persons, may acquire agricultural land.  Law 143/1981 governs the acquisition and ownership of desert land. Certain limits are placed on the number of feddans (one feddan is approximately equal to one acre) that may be owned by individuals, families, cooperatives, partnerships, and corporations regardless of nationality. Partnerships are permitted to own 10,000 feddans. Joint stock companies are permitted to own 50,000 feddans.

Under Law 230/1986, non-Egyptians are allowed to own real estate (vacant or built) only under the following conditions:

• Ownership is limited to two real estate properties in Egypt that serve as accommodation for the owner and his family (spouses and minors) in addition to the right to own real estate needed for activities licensed by the Egyptian Government;
• The area of each real estate property does not exceed 4,000 m²; and
• The real estate is not considered a historical site.

Exemption from the first and second conditions is subject to the approval of the Prime Minister. Ownership in tourist areas and new communities is subject to conditions established by the Cabinet of Ministers. Non-Egyptians owning vacant real estate in Egypt must build within a period of five years from the date their ownership is registered by a notary public. Non-Egyptians cannot sell their real estate for five years after registration of ownership, unless the Prime Minister consents to an exemption.

In December 2020, the World Bank published a Country Private Sector Diagnostic report for Egypt which analyzed key structural economic reforms that the Egyptian government should adopt in order to encourage private-sector-led economic growth. The report also included recommendations for the agribusiness, manufacturing, information technology, education, and healthcare sectors.

https://www.ifc.org/wps/wcm/connect/publications_ext_content/ifc_external_publication_site/publications_listing_page/cpsd-egypt 

On July 8, 2020, the Organization for Economic Cooperation and Development (OECD) released an Investment Policy Review for Egypt that highlighted the government’s progress implementing a proactive reform agenda to improve the business climate, attract more foreign and domestic investment, and reap the benefits of openness to FDI and participation in global value chains.

https://www.oecd.org/countries/egypt/egypt-continues-to-strengthen-its-institutional-and-legal-framework-for-investment.htm  

In January 2018 the World Trade Organization (WTO) published a comprehensive review of the Egyptian Government’s trade policies, including details of the Investment Law’s (Law 72 of 2017) main provisions.

https://www.wto.org/english/tratop_e/tpr_e/s367_e.pdf 

The United Nations Conference on Trade Development (UNCTAD) published an Information and Communications Technology (ICT) Policy Review for Egypt in 2017, in which it highlighted the potential for investments in the ICT sector to help drive economic growth and recommended specific reforms aimed at strengthening Egypt’s performance in key ICT policy areas.

https://unctad.org/en/PublicationsLibrary/dtlstict2017d3_en.pdf   

GAFI’s ISC ( https://gafi.gov.eg/English/Howcanwehelp/OneStopShop/Pages/default.aspx ) was launched in February 2018 and provides start-to-end service to the investor, as described above.  The Investment Law (Law 72 of 2017) also introduces “Ratification Offices” to facilitate obtaining necessary approvals, permits, and licenses within 10 days of issuing a Ratification Certificate.

Investors may fulfill the technical requirements of obtaining the required licenses through these Ratification Offices, directly through the concerned authority, or through its representatives at the Investment Window at GAFI.  The Investor Service Center is required to issue licenses within 60 days from submission. Companies can also register online.  GAFI has also launched e-establishment, e-signature, and e-payment services to facilitate establishing companies.

Egypt promotes and incentivizes outward investment. According to the Egyptian government’s FDI Markets database for the period from January 2003 to January 2021, outward investment featured the following:

• Egyptian companies implemented 278 Egyptian FDI projects. The estimated total value of the projects, which employed about 49,000 workers, was $24.26 billion;
• The following countries respectively received the largest amount of Egyptian outward investment in terms of total project value: The United Arab Emirates (UAE), Saudi Arabia, Algeria, Kenya, Jordan, Ethiopia, Germany, Libya, Morocco, and Nigeria;
• The UAE, Saudi Arabia, and Algeria accounted for about 28 percent of the total amount;
• Elsewedy Electric was the largest Egyptian company investing abroad, implementing 21 projects with a total investment estimated to be $2.1 billion.

Egypt does not restrict domestic investors from investing abroad.

The Egyptian government has made efforts to improve the transparency of government policy and to support a fair, competitive marketplace.  Nevertheless, improving government transparency and consistency has proven difficult, and reformers have faced strong resistance from entrenched bureaucratic and private interests.  Significant obstacles continue to hinder private investment, including the reportedly arbitrary imposition of bureaucratic impediments and the length of time needed to resolve them.  Nevertheless, the impetus for positive change driven by the government reform agenda augurs well for improvement in policy implementation and transparency.

Enactment of laws is the purview of the Parliament, while executive regulations are the domain of line ministries.  Under the Constitution, the president, the cabinet, and any member of parliament can present draft legislation.  After submission, parliamentary committees review and approve legislation, including any amendments.  Upon parliamentary approval, a judicial body reviews the constitutionality of any legislation before referring it to the president for his approval.

Although notice and full drafts of legislation are typically printed in the Official Gazette (similar to the Federal Register in the United States), there is no centralized online location where the government publishes comprehensive details about regulatory decisions or their summaries, and in practice consultation with the public is limited.  In recent years, the Ministry of Trade and other government bodies have circulated draft legislation among concerned parties, including business associations and labor unions. This has been a welcome change from previous practice, but is not yet institutionalized across the government.

Accounting, legal, and regulatory procedures are transparent and consistent with international norms.  The Financial Regulatory Authority (FRA) supervises and regulates all non-banking financial markets and instruments, including capital markets, futures exchanges, insurance activities, mortgage finance, financial leasing, factoring, securitization, and microfinance.  It issues rules that facilitate market efficiency and transparency. FRA has issued legislation and regulatory decisions on non-banking financial laws, which govern FRA’s work and the entities under its supervision. ( http://www.fra.gov.eg/jtags/efsa_en/index_en.jsp  )

The criteria for awarding government contracts and licenses are made available when bid rounds are announced.  The process actually used to award contracts is broadly consistent with the procedural requirements set forth by law.  Further, set-aside requirements for small and medium-sized enterprise (SME) participation in GoE procurement are increasingly highlighted. The FRA publishes key laws and regulations to the following website:

http://www.fra.gov.eg/content/efsa_en/efsa_pages_en/laws_efsa_en.htm  

The Parliament and the independent “Administrative Control Authority” both ensure the government’s commitment to follow administrative processes at all levels of government.

The cabinet develops and submits proposed regulations to the president following discussion and consultation with the relevant ministry and informal consultation with other interest groups. Based on the recommendations provided in the proposal, including recommendations by the presidential advisors, the president issues “Presidential Decrees” that function as implementing regulations.  Presidential decrees are published in the Official Gazette for enforcement.

The degree to which ministries and government agencies responsible for drafting, implementing, or enforcing a given regulation coordinate with other stakeholders varies widely.  Although some government entities may attempt to analyze and debate proposed legislation or rules, there are no laws requiring scientific studies or quantitative regulatory impact analyses prior to finalizing or implementing new laws or regulations. Not all issued regulations are announced online, and not all public comments received by regulators are made public.

The government made its budget documents widely and easily accessible to the general public, including online.  Budget documents did not include allocations to military state-owned enterprises, nor allocations to and earnings from state-owned enterprises.  Information on government debt obligations was publicly available online, but up-to-date and clear information on state-owned enterprise debt guaranteed by the government was not available.  According to information the Central Bank has provided to the World Bank, the lack of information available about publicly guaranteed private-sector debt meant that this debt was generally recorded as private-sector non-guaranteed debt, thus potentially obscuring some contingent debt liabilities.

In general, international standards are the main reference for Egyptian standards.  According to the Egyptian Organization for Standardization and Quality Control, approximately 7,000 national standards are aligned with international standards in various sectors.  In the absence of international standards, Egypt uses other references referred to in Ministerial Decrees No. 180/1996 and No. 291/2003, which stipulate that in the absence of Egyptian standards, the producers and importers may use European standards (EN), U.S. standards (ANSI), or Japanese standards (JIS).

Egypt is a member of the WTO, participates actively in various committees, and notifies technical regulations to the WTO Committee on Technical Barriers to Trade.  Egypt ratified the Trade Facilitation Agreement (TFA) in June 2017 (Presidential decree No. 149/2017) and deposited its formal notification to the WTO on June 24, 2019.  Egypt notified indicative and definitive dates for implementing Category B and C commitments on June 20, 2019, but to date has not notified dates for implementing Category A commitments.  In August 2020, the Egyptian Parliament passed a new Customs Law, Law 207 of 2020, that includes provisions for key TFA reforms, including advance rulings, separation of release, a single-window system, expedited customs procedures for authorized economic operators, post-clearance audits, and e-payments.

Egypt’s legal system is a civil codified law system based on the French model.  If contractual disputes arise, claimants can sue for remedies through the court system or seek resolution through arbitration.  Egypt has written commercial and contractual laws. The country has a system of economic courts, specializing in private-sector disputes, which have jurisdiction over cases related to economic and commercial matters, including intellectual property disputes.  The judiciary is set up as an independent branch of the government.

Regulations and enforcement actions can be appealed through Egypt’s courts, though appellants often complain about the lengthy judicial process, which can often take years.  To enforce judgments of foreign courts in Egypt, the party seeking to enforce the judgment must obtain an exequatur (a legal document issued by governments allowing judgements to be enforced).  To apply for an exequatur, the normal procedures for initiating a lawsuit in Egypt must be satisfied. Moreover, several other conditions must be satisfied, including ensuring reciprocity between the Egyptian and foreign country’s courts, and verifying the competence of the court rendering the judgment.

Judges in Egypt enjoy a high degree of public trust, according to Egyptian lawyers and opinion polls, and are the designated monitors for general elections.  The Judiciary is proud of its independence and can point to a number of cases where a judge has made surprising decisions that run counter to the desires of the regime.  The judge’s ability to interpret the law can sometimes lead to an uneven application of justice.

No specialized court exists for foreign investments.

The 2017 Investment Law (Law 72 of 2017) as well as other FDI-related laws and regulations, are published on GAFI’s website,  https://gafi.gov.eg/English/StartaBusiness/Laws-and-Regulations/Pages/default.aspx .

In 2017, the Parliament also passed the Industrial Permits Act, which reduced the time it takes to license a new factory by mandating that the Industrial Development Authority (IDA) respond to a request for a license within 30 days of the request being filed.  As of February 2020, new regulations allow IDA regional branch directors or their designees to grant conditional licenses to industrial investors until other registration requirements are complete.

In 2016, the Import-Export Law was revised to allow companies wishing to register in the Import Registry to be 51 percent owned and managed by Egyptians; formerly the law required 100 percent Egyptian ownership and management.  Later in 2016, the inter-ministerial Supreme Investment Council also announced seventeen presidential decrees designed to spur investment or resolve longstanding issues. These include:

• Forming a “National Payments Council” that will work to restrict the handling of FX outside the banking sector;
• Producers of agricultural crops that Egypt imports or exports will get tax exemptions;
• Five-year tax exemptions for manufacturers of “strategic” goods that Egypt imports or exports;
• Five-year tax exemptions for agriculture and industrial investments in Upper Egypt; and
• Begin tendering land with utilities for industry in Upper Egypt for free as outlined by the Industrial Development Authority.

The Egyptian Competition Law (ECL), Law 3 of 2005, provides the framework for the government’s competition rules and anti-trust policies. The ECL prohibits the abuse of dominant market positions, which it defines as a situation in which a company’s market share exceeds 25 percent and in which the company is able to influence market prices or volumes regardless of competitors’ actions. The ECL prohibits vertical agreements or contracts between purchasers and suppliers that are intended to restrict competition, and also forbids agreements among competitors such as price collusion, production-restriction agreements, market sharing, and anti-competitive arrangements in the tendering process. The ECL applies to all types of persons or enterprises carrying out economic activities, but includes exemptions for some government-controlled public utilities. In early 2019, the Egyptian Parliament endorsed a number of amendments to the ECL, including controls on price hikes and prices of essential products and higher penalties for violations.

In addition to the ECL, other laws cover various aspects of competition policy. The Companies Law (Law 159/1981) contains provisions on mergers and acquisitions; the Law of Supplies and Commerce (Law 17 of 1999) forbids competition-reducing activities such as collusion and hoarding; and the Telecommunications Law (Law 10 of 2003), the Intellectual Property Law (Law 82 of 2002), and the Insurance Supervision and Control Law (Law 10 of 1981) also include provisions on competition.

The Egyptian Competition Authority (ECA) is responsible for protecting competition and prohibiting the monopolistic practices defined within the ECL. The ECA has the authority to receive and investigate complaints, initiate its own investigations, and take decisions and necessary steps to stop anti-competitive practices. The ECA’s enforcement powers include conducting raids; using search warrants; requesting data and documentation; and imposing “cease and desist orders” on violators of the ECL. The ECA’s enforcement activities against government entities are limited to requesting data and documentation, as well as advocacy.

Egypt’s Investment Incentives Law provides guarantees against nationalization or confiscation of investment projects under the law’s domain.  The law also provides guarantees against seizure, requisition, blocking, and placing of assets under custody or sequestration.  It offers guarantees against full or partial expropriation of real estate and investment project property.  The U.S.-Egypt Bilateral Investment Treaty also provides protection against expropriation.  Private firms are able to take cases of alleged expropriation to court, but the judicial system can take several years to resolve a case.

Egypt passed a Bankruptcy Law (Law 11 of 2018) in January 2018, which was designed to speed up the restructuring of troubled companies and settlement of their accounts.  It also replaced the threat of imprisonment with fines in cases of bankruptcy.  As of July 2020, the Egyptian government was considering but had not yet implemented amendments to the 2018 law that would allow debtors to file for bankruptcy protection, and would give creditors the ability to determine whether debtors could continue operating, be placed under administrative control, or be forced to liquidate their assets.

In practice, the paperwork involved in liquidating a business remains convoluted and protracted; starting a business is much easier than shutting one down. Bankruptcy is frowned upon in Egyptian culture, and many businesspeople still believe they may be found criminally liable if they declare bankruptcy.

Green economy and climate change incentives:

In March 2022, the GoE announced in March 2022 a series of incentives for companies undertaking green projects and investments, including:

• The ability to deduct between 30 and 50 percent of investment costs from taxes for green hydrogen and green ammonia production, storage, and export, and for manufacturing plastics-alternatives;
• Projects in the Suez Canal Economic Zone, the New Administrative Capital, and Upper Egypt are eligible for the largest tax breaks;
• Companies involved in other green and renewable energy projects are eligible for other non-tax incentives that the 2017 Investment Law authorizes, but did not provide further details; and
• Projects in green hydrogen, green ammonia, electric vehicle manufacturing and charging, plastics alternatives, and waste management will be fast-tracked through the approvals and permit process, with a 20 working day window for making decisions on new investment and project proposals.

The 2017 Investment Law

The Investment Law (Law 72 of 2017) gives multiple incentives to investors as described below.  In August 2019, President Sisi ratified amendments to the Investment Law that allow its incentive programs to apply to expansions of existing investment projects in addition to new investments.

General Incentives:

• All investment projects subject to the provisions of the new law enjoy the general incentives provided by it.
• Investors are exempted from the stamp tax, notary fees, registration of the Memorandum of Incorporation of the companies, credit facilities, and mortgage contracts associated with their business for five years from the date of registration in the Commercial Registry, in addition to the registration contracts of the lands required for a company’s establishment.
• If the establishment is under the provisions of the new investment law, it will benefit from a two-percent unified custom tax over all imported machinery, equipment, and devices required for the set-up of such a company.

Special Incentive Programs:

• Investment projects established within three years of the date of the issuance of the Investment Law (Law 72 of 2017) will enjoy a perpetual deduction from their net profit subject to the income tax;
• Fifty percent deduction of depreciated investment costs from taxes, infrastructure fees, and cost of lands for projects in regions the government has identified as most in need of development, as well as designated projects in Suez Canal Special Economic Zone and the “Golden Triangle” along the Red Sea between the cities of Safaga, Qena, and El Quseer; or
• Thirty percent deduction of depreciated investment costs from taxes, infrastructure fees, and land costs for projects elsewhere in Egypt; and
• Provided that such deduction shall not exceed 80 percent of the paid-up capital of the company, the incentive could be utilized over a maximum of seven years.

Additional Incentive Program:

The Cabinet of Ministers may decide to grant additional incentives for investment projects in accordance with specific rules and regulations as follows:

• The establishment of special customs ports for exports and imports of the investment projects.
• The state may incur part of the costs of the technical training for workers.
• Free allocation of land for a few strategic activities may apply.
• The government may bear in full or in part the costs incurred by the investor to invest in utility connections for the investment project.
• The government may refund half the price of the land allocated to industrial projects in the event of starting production within two years from receiving the land.

Other Incentives related to Free Zones according to Investment Law 72 of 2017:

• Exemption from all taxes and customs duties.
• Exemption from all import/export regulations.
• The option to sell a certain percentage of production domestically if customs duties are paid.
• Limited exemptions from labor provisions.
• All equipment, machinery, and essential means of transport (excluding sedan cars) necessary for business operations are exempted from all customs, import duties, and sales taxes.
• All licensing procedures are handled by GAFI. To remain eligible for benefits, investors operating inside the free zones must export more than 50 percent of their total production.
• Manufacturing or assembly projects pay an annual charge of one percent of the total value of their products excluding all raw materials. Storage facilities are to pay one percent of the value of goods entering the free zones, while service projects pay one percent of total annual revenue.
• Goods in transit to specific destinations are exempt from any charges.

Other Incentives related to the Suez Canal Economic Zone (SCZone):

• 100 percent foreign ownership of companies allowed.
• 100 percent foreign control of import/​export activities allowed.
• Imports are exempted from customs duties and sales tax.
• Customs duties on exports to Egypt imposed on imported components only, not the final product.
• Fast-track visa services.
• A full service one-stop shop for registration and licensing.
• Allowing enterprises access to the domestic market; duties on sales to domestic market will be assessed on the value of imported inputs only.

The Tenders Law (Law 89 of 1998) requires the government to consider both price and best value in awarding contracts and to issue an explanation for refusal of a bid. However, the law contains preferences for Egyptian domestic contractors, who are accorded priority if their bids do not exceed the lowest foreign bid by more than 15 percent.

The Ministry of Industry & Foreign Trade and the Ministry of Finance’s Decree 719 of 2007 provides incentives for industrial projects in the governorates of Upper Egypt (Upper Egypt refers to governorates in southern Egypt). The decree provides an incentive of 15,000 EGP (approx. $940) for each job opportunity created by the project, on the condition that the investment costs of the project exceed 15 million EGP (approx. $940,000). The decree can be implemented on both new and ongoing projects.

Public and private free-trade zones are authorized under GAFI’s Investment Incentive Law 72 of 2017. Free zones are located within the national territory, but are considered to be outside Egypt’s customs boundaries, granting firms doing business within them more freedom on transactions and exchanges. Companies producing largely for export (normally 80 percent or more of total production) may be established in free-trade zones and operate using foreign currency. Free-trade zones are open to investment by foreign or domestic investors. Companies operating in free-trade zones are exempted from sales taxes or taxes and fees on capital assets and intermediate goods. The Legislative Package for the Stimulation of Investment, issued in 2015, stipulated a one-percent duty paid on the value of commodities upon entry for storage projects and a one-percent duty upon exit for manufacturing and assembly projects.

There are currently nine public free trade zones in operation in the following locations: Alexandria; Damietta; Ismailia; Qeft; Media Production City; Nasr City; Port Said; Shebin el Kom; and Suez. Private free-trade zones may also be established with a decree by GAFI but are usually limited to a single project. Export-oriented industrial projects are given priority.  There is no restriction on foreign ownership of capital in private free zones.

The Special Economic Zones (SEZ) Law (Law 83 of 2002) allows establishment of special zones for industrial, agricultural, or service activities designed specifically with the export market in mind.  The law allows firms operating in these zones to import capital equipment, raw materials, and intermediate goods duty free. Companies established in the SEZs are also exempt from sales and indirect taxes and can operate under more flexible labor regulations. The first SEZ was established in the northwest Gulf of Suez.

Investment Law (Law 72 of 2017) authorized creation of investment zones with Prime Ministerial approval. The government regulates these zones through a board of directors, but the zones are established, built, and operated by the private sector. The government does not provide any infrastructure or utilities in these zones. Investment zones enjoy the same benefits as free zones in terms of facilitation of license-issuance, ease of dealing with other agencies, etc., but are not granted the incentives and tax/custom exemptions enjoyed in free zones. Projects in investment zones pay the same tax/customs duties applied throughout Egypt. The aim of the law is to assist the private sector in diversifying its economic activities. There are currently five investment zones located in Cairo, Giza, and Ismailia, and in 2019 GAFI approved the development of an additional 12 investment zones in the Alexandria, Dakhalia, Damietta, Fayoum, Giza, Qalyubia, and Sharkia governorates.

The Suez Canal Economic Zone ( http://www.sczone.com.eg/English/Pages/default.aspx) , a major industrial and logistics services hub announced in 2014, includes upgrades and renovations to ports located along the Suez Canal corridor, including West and East Port Said, Ismailia, Suez, Adabiya, and Ain Sokhna. The Egyptian government has invited foreign investors to take part in the projects, which are expected to be built in several stages, the first of which was scheduled to be completed by mid-2020. Reported areas for investment include maritime services like ship repair services, bunkering, vessel scrapping and recycling; industrial projects, including pharmaceuticals, food processing, automotive production, consumer electronics, textiles, and petrochemicals; IT services such as research and development and software development; renewable energy; and mixed use, residential, logistics, and commercial developments.

Egypt has rules on national percentages of employment and difficult visa and work permit procedures. 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. The application of these regulations is inconsistent. The Labor Law allows Ministers to set the maximum percentage of foreign workers that may work in companies in a given sector. There are no such sector-wide maximums for the oil and gas industry, but individual concession agreements may contain language establishing limits or procedures regarding the proportion of foreign and local employees.

No performance requirements are specified in the Investment Incentives Law, and the ability to fulfill local content requirements is not a prerequisite for approval to set up assembly projects. In many cases, however, assembly industries still must meet a minimum local content requirement in order to benefit from customs tariff reductions on imported industrial inputs.

Decree 184 of 2013 allows for the reduction of customs tariffs on intermediate goods if the final product has a certain percentage of input from local manufacturers, beginning at 30 percent local content. As the percentage of local content rises, so does the tariff reduction, reaching up to 90 percent if the amount of local input is 60 percent or above. Exporters receive additional subsidies if they use a greater portion of local raw materials. In certain cases, a minister can grant tariff reductions of up to 40 percent in advance.

Prime Minister issued Decision 3053 of 2019 regarding the formation of joint committees in the inspection yards at each customs port. These committees include representatives of the customs authority and the concerned authorities and bodies according to type of goods. The committees are responsible for completing inspection and control procedures for imported or exported goods within a period not exceeding three working days from the date of the customs declaration was registered.

Manufacturers wishing to export under trade agreements between Egypt and other countries must complete certificates of origin and satisfy the local content requirements contained therein. Oil and gas exploration concessions, which do not fall under the Investment Incentives Law, have performance standards specified in each individual agreement, which generally include the drilling of a specific number of wells in each phase of the exploration period stipulated in the agreement.

Egypt does not impose localization barriers on ICT firms. Egypt’s Personal Data Protection Act (Law 151 of 2020), signed into law in July 2020, will require licenses for cross-border data transfers once the law’s executive regulations are finalized, but it will not impose any data localization requirements. Similarly, Egypt does not make local production a requirement for market access, does not have local content requirements, and does not impose forced technology or intellectual property transfers as a condition of market access. But there are exceptions where the government has attempted to impose controls by requesting access to a company’s servers located offshore, or requested servers to be located in Egypt and thus under the government’s control.

The Egyptian legal system provides protection for real and personal property. Laws on real estate ownership are complex and titles to real property may be difficult to establish and trace.

The National Title Registration Program introduced by the Ministry of State for Administrative Development has been implemented in nine areas within Cairo. This program is intended to simplify property registration and facilitate easier mortgage financing. Real estate registration fees, long considered a major impediment to development of the real estate sector, are capped at no more than 2,000 EGP (approximately $120), irrespective of the property value.

Foreigners are limited to ownership of two residences in Egypt, and specific procedures are required for purchasing real estate in certain geographical areas.

The mortgage market is still undeveloped in Egypt, and in practice most purchases are still conducted in cash. Real Estate Finance Law 148/2001 authorized both banks and non-bank mortgage companies to issue mortgages. The law provides procedures for foreclosure on property of defaulting debtors, and amendments passed in 2004 allow for the issuance of mortgage-backed securities. According to the regulations, banks can offer financing in foreign currency of up to 80 percent of the value of a property.

Presidential Decree 17 of 2015 permitted the government to provide land free of charge, in certain regions only, to investors meeting certain technical and financial requirements. In order to take advantage of this provision companies must provide cash collateral for five years following commencement of either production (for industrial projects) or operation (for all other projects).

The ownership of land by foreigners is governed by three laws: Law 15 of 1963, Law 143 of 1981, and Law 230 of 1996. Law 15 of 1963 stipulates that no foreigners, whether natural or juristic persons, may acquire agricultural land. Law 143 of 1981 governs the acquisition and ownership of desert land. Certain limits are placed on the number of feddans (one feddan is approximately equal to one acre) that may be owned by individuals, families, cooperatives, partnerships and corporations. Partnerships are permitted to own up to 10,000 feddans. Joint stock companies are permitted to own up to 50,000 feddans.

Partnerships and joint stock companies may own desert land within these limits, even if foreign partners or shareholders are involved, provided that at least 51 percent of the capital is owned by Egyptians. Upon liquidation of the company, however, the land must revert to Egyptian ownership. Law 143 defines desert land as the land lying two kilometers outside city borders. Furthermore, non-Egyptians owning non-improved real estate in Egypt must build within a period of five years from the date their ownership is registered by a notary public. Non-Egyptians may only sell their real estate five years after registration of ownership unless the Prime Minister consents to an exemption.

Egypt remains on the Special 301 Watch List in 2022. Egypt’s intellectual property rights (IPR) legislation generally meets international standards, and the government has made progress enforcing those laws and reducing patent application backlogs. In 2020 and 2021, Egypt shut down a number of online illegal streaming websites. Stakeholders note continued challenges with widespread counterfeiting, opaque patent and trademark examination criteria, and the lack of an effective mechanism for the early resolution of potential patent disputes.

Multinational pharmaceutical companies in the past have complained that local generic drug-producing companies infringe on their patents. The government has not yet established a system linking pharmaceutical marketing applications with patent licenses, and as a result permits for the sale of pharmaceuticals are generally issued without first cross-checking patent filings.

Decree 251 of 2020, issued in January 2020, established a ministerial committee to review petitions for compulsory patent licenses. As of March 2022, the committee has not received any compulsory patent petitions, and the committee has not met or taken any actions. According to Egypt’s 2002 IPR Law (Law 82 of 2002), which allows for compulsory patent licenses in some cases, the committee has the power to issue compulsory patent licenses according to a number of criteria set forth in the law; to determine financial remuneration for the original patent owners; and to approve the expropriation of the patents.

Book, music, and entertainment software piracy is prevalent in Egypt, and a significant portion of the piracy takes place online. American film studios represented by the Motion Pictures Association of America are concerned about the illegal distribution of American movies on regional satellite channels.

Eight GoE ministries have the responsibility to oversee IPR concerns: Supply and Internal Trade for trademarks; Higher Education and Research for patents; Culture for copyrights; Agriculture for plants; Communications and Information Technology for copyright of computer programs; Interior for combatting IPR violations; Customs for border enforcement; and Trade and Industry for standards and technical regulations. Article 69 of Egypt’s 2014 Constitution mandates the establishment of a “specialized agency to uphold [IPR] rights and their legal protection.” A National Committee on IPR was established to address IPR matters until a permanent body is established. All IPR stakeholders are represented in the committee, and members meet every two months to discuss issues. The National Committee on IPR is chaired by the Ministry of Foreign Affairs and reports directly to the Prime Minister.

The Egyptian Customs Authority (ECA) handles IPR enforcement at the national border and the Ministry of Interior’s Department of Investigation handles domestic cases of illegal production. The ECA cannot act unless the trademark owner files a complaint. ECA’s customs enforcement also tends to focus on protecting Egyptian goods and trademarks. The ECA is taking steps to adopt the World Customs Organization’s (WCO) Interface Public-Members platform, which allows customs officers to detect counterfeit goods by scanning a product’s barcode and checking the WCO trademark database system.

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

IPR Contact at Embassy Cairo:

Elizabeth Stratton
Trade & Investment Officer
20-2-2797-2735
StrattonEC@state.gov

To date, high returns on Egyptian government debt have crowded out Egyptian investment in productive capacity.  As of February 2022, loans to the government and government-related entities accounted for 67 percent of banks’ assets, and Egypt’s debt-to-GDP ratio was 91.4 percent at the end of 2021. Meanwhile, consistently positive and relatively high real interest rates have attracted large foreign capital inflows since 2017, most of which has been volatile portfolio capital.  Foreign investors sold $1.19 billion of Egyptian treasury bonds following Russia’s full-scale invasion of Ukraine in February 2022.

The Egyptian Stock Exchange (EGX) is Egypt’s registered securities exchange. Some 246 companies were listed on the EGX, including Nilex, as of February 2022. There were more than 3.3 million investors registered to trade on the exchange in July 2021.  Stock ownership is open to foreign and domestic individuals and entities.  The Government of Egypt issues dollar-denominated and Egyptian Pound-denominated debt instruments, for which ownership is open to foreign and domestic individuals and entities.  Foreign investors conducted 18.3 percent of sales on the EGX in 2021. In September 2020, the GoE issued the region’s first sovereign green bonds with a value of $750 million. The GoE issued Eurobonds worth $11.75 billion in 2020 and 2021, and issued its first $500 million Japanese Yen-dominated bond in March 2022. The government has announced its intention to issue its first sovereign sukuk bonds and additional green bonds during the remainder of 2022.

The Capital Market Law 95 of 1992, along with Banking Law 94 that President Sisi ratified in September 2020, constitute the primary regulatory frameworks for the financial sector.  The law grants foreigners full access to capital markets, and authorizes establishment of Egyptian and foreign companies to provide underwriting of subscriptions, brokerage services, securities and mutual funds management, clearance and settlement of security transactions, and venture capital activities.  The law specifies mechanisms for arbitration and legal dispute resolution and prohibits unfair market practices.  Law 10 of 2009 created the Egyptian Financial Supervisory Authority (EFSA) and brought the regulation of all non-banking financial services under its authority.  In 2017, EFSA became the Financial Regulatory Authority (FRA).

Settlement of transactions takes one day for treasury bonds and two days for stocks.  Although Egyptian law and regulations allow companies to adopt bylaws limiting or prohibiting foreign ownership of shares, virtually no listed stocks have such restrictions.  A significant number of the companies listed on the exchange are family-owned or -dominated conglomerates, and free trading of shares in many of these ventures, while increasing, remains limited.  Companies are de-listed from the exchange if not traded for six months.

Prior to November 2020, foreign companies listing on the EGX had to possess minimum capital of $100 million. With the FRA’s passage of new rules, foreign companies joining the EGX must now meet lesser requirements matching those for Egyptian companies: $6.4 million (100 million EGP) for large companies and between $63,000 and $6.4 million (1-100 million EGP) for smaller companies, depending on their size. Foreign businesses are only eligible for these lower minimum capital requirements if the EGX is their first exchange and if they attribute more than 50 percent of their shareholders’ equites, revenues, and assets to Egyptian subsidiary companies.

A capital gains tax of 10 percent on Egyptian tax residents came into force in January 2022 after more than 6 years of suspension, then it was decreased in March to 5 percent for two years. The rate will rise to 7.5 percent once this period ends. Capital increases and share-swaps between listed and unlisted companies will not be taxed. Non-tax residents and foreigners are permanently tax-exempt. The government also set the stamp tax on stock market transactions by non-tax residents at 0.125 percent and at 0.05 percent for tax residents on unlisted securities. Tax residents are exempted from stamp tax on listed securities.

Foreign investors can access Egypt’s banking system by opening accounts with local banks and buying and selling all marketable securities with brokerages.  The government has repeatedly emphasized its commitment to maintaining the profit repatriation system to encourage foreign investment in Egypt, especially since the pound flotation and implementation of the IMF loan program in November 2016.  The current system for profit repatriation by foreign firms requires sub-custodian banks to open foreign and local currency accounts for foreign investors (global custodians), which are exclusively maintained for stock exchange transactions.  The two accounts serve as a channel through which foreign investors process their sales, purchases, dividend collections, and profit repatriation transactions using the bank’s posted daily exchange rates.  The system is designed to allow for settlement of transactions in fewer than two days, though in practice some firms have reported significant delays in repatriating profits due to problems with availability.  Foreign firms and individuals continue to report delays in repatriating funds and problems accessing hard currency for the purpose of repatriating profits.

The Egyptian credit market, open to foreigners, is vibrant and active. Repatriation of investment profits has become much easier, as there is enough available hard currency to execute foreign exchange (FX) trades. Since the flotation of the Egyptian Pound in November 2016, FX trading is considered straightforward, given the re-establishment of the interbank foreign currency trading system.  There have been no reports of difficulties executing FX transactions following the CBE’s interest rate hike and currency devaluation in March, 2022.

Thirty-eight banks operate in Egypt, including several foreign banks. The CBE has not issued a new commercial banking license since 1979. The only way for a new commercial bank, whether foreign or domestic, to enter the market (except as a representative office) is to purchase shares in an existing bank. According to the CBE, banks operating in Egypt held nearly $448 billion (8.6 trillion EGP) in total assets as of December 2021, generating a total profit of $6.8 billion with the five largest banks generating 74 percent, or $5 billion (79 billion EGP).

Egypt’s banking sector is generally regarded as well-capitalized, due in part to its deposit-based funding structure and ample liquidity, especially since the flotation and restoration of the interbank market.  The CBE declared that 3.5 percent of the banking sector’s loans were non-performing by December 2021. However, since 2011, a high level of exposure to government debt, accounting for two-thirds of banks’ assets as of February 2022, has reduced the diversity of bank balance sheets and crowded out domestic investment. Moody’s and S&P consider Egypt’s banking system to be stable, although S&P classifies it as facing high levels of economic and financial system risk due to its high exposure to sovereign debt and the government’s external funding vulnerabilities. In February 2022, S&P affirmed Egypt’s government issuer rating of B stable due to the government’s relatively low issuance of foreign currency loans and relatively low external government debt.

Benefitting from the nation’s increasing economic stability, Egypt’s banks have enjoyed both ratings upgrades and continued profitability. Banking competition is serving a largely untapped retail segment and the nation’s challenging, but potentially rewarding, small and medium-sized enterprise (SME) segment.

The Central Bank of Egypt (CBE) requires that banks direct 25 percent of their lending to SMEs.  Over the past two years, the Central Bank has launched a subsidized loan program worth $16 billion (253 billion EGP) to spur domestic manufacturing, agriculture, and real state development. Also, with only one-third of Egypt’s adult population owning or sharing an account at a formal financial institution (according press and comments from contacts), the banking sector has potential for growth and higher inclusion, which the government and banks discuss frequently. A low median income plays a part in modest banking penetration.

The CBE has taken steps to work with banks and technology companies to expand financial inclusion.  The employees of the government, one of the largest employers, must now have bank accounts because salary payment is through direct deposit. The CBE approved new procedures in October 2020 to allow deposits and the opening of new bank accounts with only a government-issued ID, rather than additional documents. The maximum limits for withdrawals and account balances also increased. In July 2020, President Sisi ratified a new Micro, Small and Medium Enterprises (MSMEs) Development Law (Law 152 of 2020) that will provide incentives, tax breaks, and discounts for small, informal businesses willing to register their businesses and begin paying taxes.

As an attempt to keep pace with best practices and international norms, President Sisi ratified a new Banking Law, Law 94 of 2020, in September 2020. The law establishes a National Payment Council headed by the President to move Egypt away from cash and toward electronic payments; establishes a committee headed by the Prime Minister to resolve disputes between the CBE and the Ministry of Finance; establishes a CBE unit to handle complaints of monopolistic behaviors; requires banks to increase their cash holdings to $320 million (5 billion EGP), up from the prior minimum of $32 million (500 million EGP); and requires banks to report deficiencies in their own audits to the CBE.

The chairman of the EGX stated that Egypt is exploring the use of blockchain technologies across the banking community. The FRA will regulate how the banking system adopts the fast-developing blockchain systems into banks’ back-end and customer-facing processing and transactions. The Central Bank developed a national fintech and innovation strategy in March 2019, and the government has issued regulations to incentivize mobile and electronic payments. The Central Bank launched in March 2022 a new mobile application, InstaPay, which allows Egyptian banking customers to perform instant bank and payments transactions. At the end of 2021 Egypt was among the top four African countries for fintech investment, with investments in fintech startups quadrupling between 2020 and 2021, reaching $159 million. According to research firm Magnitt, Egyptian startups received $509 million in venture capital investments in 2021, with a 100 percent year-on-year compound annual growth rate between 2017 and 2021.

Since 2020, the Central Bank has prohibited all dealings with cryptocurrencies: the issuance of them, trading in them, promoting them, and establishing or operating platforms for their trading.

Alternative financial services in Egypt are extensive, given the large informal economy, estimated to account for between 30 and 50 percent of GDP. Informal lending is prevalent, but the total capitalization, number of loans, and types of terms in private finance is less well known.

The 1992 U.S.-Egypt Bilateral Investment Treaty provides for free transfer of dividends, royalties, compensation for expropriation, payments arising out of an investment dispute, contract payments, and proceeds from sales. Prior to reform implementation throughout 2016 and 2017, large corporations had been unable to repatriate local earnings for months at a time, but repatriation of funds is no longer restricted.

The Investment Incentives Law (Law 72 of 2017) stipulates that non-Egyptian employees hired by projects established under the law are entitled to transfer their earnings abroad. Conversion and transfer of royalty payments are permitted when a patent, trademark, or other licensing agreement has been approved under the Investment Law.

Banking Law 94 of 2020 regulates the repatriation of profits and capital. The current system for profit repatriation by foreign firms requires sub-custodian banks to open foreign and local currency accounts for foreign investors (global custodians), which are exclusively maintained for stock-exchange transactions. The two accounts serve as a channel through which foreign investors process their sales, purchases, dividend collections, and profit-repatriation transactions using the bank’s posted daily exchange rates. The system is designed to allow for settlement of transactions in less than two days, though in practice some firms have reported short delays in repatriating profits due to the steps involved in processing.

Egypt’s sovereign wealth fund (SWF), approved by the Cabinet and launched in late 2018, holds 200 billion EGP ($12.5 billion) in authorized capital as of July 2021.  The SWF aims to invest state funds locally and abroad across asset classes and manage underutilized government assets. The sovereign wealth fund focuses on sectors considered vital to the Egyptian economy, particularly industry, energy, and tourism, and has established four new sub-funds covering healthcare, financial services, real estate, and infrastructure while plans to establish another two sub-funds for education and technology. The SWF participates in the International Forum of Sovereign Wealth Funds.

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.

SOEs in Egypt are structured as individual companies controlled by boards of directors and grouped under government holding companies that are arranged by industry, including Petroleum Products & Gas, Spinning & Weaving; Metallurgical Industries; Chemical Industries; Pharmaceuticals; Food Industries; Building & Construction; Tourism, Hotels, & Cinema; Maritime & Inland Transport; Aviation; and Insurance. The holding companies are headed by boards of directors appointed by the Prime Minister with input from the relevant Minister.

The Egyptian government has announced plans to privatize shares of SOEs several times since 2018, but has only carried out a small number of sales. It sold a minority stake in the Eastern Tobacco Company in March 2018, a 26 percent share of state-owned e-payment firm E-Finance in October 2021, and a 10 percent share of Abu Qir Fertilizers in December 2021. In December 2020 the government announced plans to sell stakes in two military-owned companies and in February 2022 added a handful of other SOEs to the list, but scaled back those plans following Russia’s war against Ukraine. The government has indefinitely delayed plans for privatizing stakes in 20 other SOEs, including up to 30 percent of the shares of Banque du Caire, due to adverse market conditions and increased global volatility. Egypt’s privatization program is based on Public Enterprise Law 203/1991, which permits the sale of SOEs to foreign entities.

Law 32 of 2014 limits the ability of third parties to challenge privatization contracts between the Egyptian government and investors. The law was intended to reassure investors concerned by legal challenges brought against privatization deals and land sales dating back to the pre-2008 period. Court cases at the time Parliament passed the law had put many of these now-private firms, many of which are foreign-owned, in legal limbo over concerns that they may be returned to state ownership.

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.

Department of State

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

Department of the Treasury

• OFAC Recent Actions 

Department of Labor

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

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.

Several agencies within the Egyptian government share responsibility for addressing corruption.  Egypt’s primary anticorruption body is the Administrative Control Authority (ACA), which has jurisdiction over state administrative bodies, state-owned enterprises, public associations and institutions, private companies undertaking public work, and organizations to which the state contributes in any form.  2017 amendments to the ACA law grant the organization full technical, financial, and administrative authority to investigate corruption within the public sector (with the exception of military personnel/entities).  The ACA appears well funded and well trained when compared with other Egyptian law enforcement organizations.  Strong funding and the current ACA leadership’s close relationship with President Sisi reflect the importance of this organization and its mission.  However, it is small (roughly 300 agents) and is often tasked with work that would not normally be conducted by a law enforcement agency.

The ACA periodically engages with civil society.  For example, it has met with the American Chamber of Commerce in Egypt and other organizations to encourage them to seek it out when corruption issues arise.

In addition to the ACA, the Central Auditing Authority (CAA) acts as an anti-corruption body, stationing monitors at state-owned companies to report corrupt practices. The Ministry of Justice’s Illicit Gains Authority is charged with referring cases in which public officials have used their office for private gain.  The Public Prosecution Office’s Public Funds Prosecution Department and the Ministry of Interior’s Public Funds Investigations Office likewise share responsibility for addressing corruption in public expenditures.

Minister of Interior
General Directorate of Investigation of Public Funds
Telephone: 02-2792-1395 / 02-2792 1396
Fax: 02-2792-2389

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.

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.

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

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

Elizabeth Stratton, Economic Officer, U.S. Embassy Cairo
02-2797-2735
StrattonEC@state.gov

Ethiopia needs significant inflows of FDI to meet its ambitious growth goals. Over the past year, to attract more foreign investment, the government passed a new investment law, acceded to the New York Convention on Arbitration, amended its 60-year-old commercial code, and digitized the commercial registration and business licensing processes. The government has also begun implementing the Public Private Partnership (PPP) Proclamation to allow for private investment in the power generation and road construction sectors.

The Ethiopian Investment Commission (EIC) has the mandate to promote and facilitate foreign investments in Ethiopia. To accomplish this task, the EIC is charged with 1) promoting the country’s investment opportunities to attract and retain investment; 2) issuing investment permits, business licenses, work permits, and construction permits; 3) issuing commercial registration certificates and renewals; 4) negotiating and signing bilateral investment agreements; and 5) registering technology transfer agreements. In addition, the EIC has the mandate to advise the government on policies to improve the investment climate and to hold regular and structured public-private dialogues with investors and their associations. At the local level, regional investment agencies facilitate regional investment.

The American Chamber of Commerce (AmCham) advances U.S. business interests in Ethiopia. AmCham provides a mechanism for coordination among American companies and facilitates regular meetings with government officials to discuss issues that hinder operations in Ethiopia. The Addis Ababa Chamber of Commerce organizes a monthly business forum that enables the business community to discuss issues related to the investment climate with government officials.

Foreign and domestic private entities have the right to establish, acquire, own, and dispose of most forms of business enterprises. The Investment Proclamation and associated regulations outline the areas of investment reserved for government and local investors. There is no private ownership of land in Ethiopia. All land is technically owned by the state but can be leased for up to 99 years. Small-scale rural landholders have indefinite use rights, but cannot lease out holdings for extended periods, except in the Amhara Region. The 2011 Urban Land Lease Proclamation allows the government to determine the value of land in transfers of leasehold rights to curb speculation by investors.

A foreign investor intending to buy an existing private enterprise or shares in an existing enterprise needs to obtain prior approval from the EIC. While foreign investors have complained about inconsistent interpretation of the regulations governing investment registration (particularly relating to accounting for in-kind investments), they generally do not face undue screening of FDI, unfavorable tax treatment, denial of licenses, discriminatory import or export policies, or inequitable tariff and non-tariff barriers.

Over the past three years, the government has not undertaken any third-party investment policy review by a multilateral or non-governmental organization. The government has worked closely with some international stakeholders, such as the International Finance Corporation, in its attempt to modernize and streamline its investment regulations.

The EIC has attempted to establish itself as a “one-stop shop” for foreign investors by acting as a centralized location where investors can obtain the visas, permits, and paperwork they need, thereby reducing the time and cost of investing and acquiring business licenses. The EIC has worked with international consultants to modernize its operations and has adopted a customer management system to build lasting relationships and provide post-investment assistance to investors. Despite progress, the EIC admits that many bureaucratic barriers to investment remain. U.S. investors report that the EIC, as a federal organization, has little influence at regional and local levels.

Currently, more than 95 percent of Ethiopia’s trade passes through the Port of Djibouti, with residual trade passing through the Somaliland Port of Berbera or Port Sudan. Ethiopia concluded an agreement in March of 2018 with the Somaliland Ports Authority and DP World to acquire a 19 percent stake in the joint venture developing the Port of Berbera. The agreement will help Ethiopia secure an additional logistical gateway for its increasing import and export trade.

The GOE is working to improve business facilitation services by making the licensing and registration of businesses easier and faster. In February 2021, the Ministry of Trade and Regional Integration (MOTRI) launched an eTrade platform ( etrade.gov.et ) for business registration licensing to enable individuals to register their companies and acquire business licenses online. The amended commercial registration and licensing law eliminates the requirement to publicize business registrations in local newspapers, allows business registration without a physical address, and reduces some other paperwork burdens associated with business registration. U.S. companies can obtain detailed information for the registration of their business in Ethiopia from an online investment guide to Ethiopia: ( https://www.theiguides.org/public-docs/guides/ethiopia ) and the EIC’s website: ( http://www.investethiopia.gov.et/index.php/investment-process/starting-a-business.html ). MOTRI has target timeframes for the registration of new businesses, but it often fails to meet its deadlines.

There is no officially recorded outward investment by domestic investors from Ethiopia as citizens/local investors are not allowed to hold foreign accounts.

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.

Ethiopia’s regulatory system is generally considered fair, though there are instances in which burdensome regulatory or licensing requirements have prevented the local sale of U.S. exports, particularly health-related products. Investment decisions can involve multiple government ministries, lengthening the registration and investment process.

The Constitution is the highest law of the country. The parliament enacts proclamations, which are followed by regulations that are passed by the Council of Ministers and implementing directives that are passed by ministries or agencies. The government engages the public for feedback before passage of draft legislation through public meetings, and regulatory agencies request comments on proposed regulations from stakeholders. Ministries or regulatory agencies do neither impact assessments for proposed regulations nor ex-post reviews. Parties that are affected by an adopted regulation can request reconsideration or appeal to the relevant administrative agency or court. There is no requirement to periodically review regulations to determine whether they are still relevant or should be revised.

All proclamations and regulations in Ethiopia are published in official gazettes and most of them are available online: http://www.hopr.gov.et/web/guest/122  and https://chilot.me/federal-laws/2/ 

Legal matters related to the federal government are entertained by Federal Courts, while state matters go to state courts. To ensure consistency of legal interpretation and to promote predictability of the courts, the Federal Supreme Court Cassation Division is empowered to give binding legal interpretation on all federal and state matters. Though there are no publicly listed companies in Ethiopia, all banks and insurance companies are obliged to adhere to International Financial Reporting Standards (IFRS).

Regulations related to human health and environmental pollution are often enforced. In January 2019, the Oromia Region’s Environment, Forest, and Climate Change Commission shut down three tanneries in the Oromia Region for what was said to be repeated environmental pollution offenses. The federal government also suspended the business license of MIDROC Gold Mining in May 2018 following weeks of protests by local communities who accused the company of causing health and environmental hazards in the Oromia Region. In February 2019, the Ethiopian Parliament passed a bill entitled ‘Food and Medicine Administration Proclamation number 1112/2019’, which bans smoking in all indoor workplaces, public spaces, and means of public transport and prohibits alcohol promotion on broadcasting media.

In April 2020, Ethiopia published the Administrative Procedure Proclamation number 1183/2020 (APP). The APP’s aim is to allow ordinary citizens who seek administrative redress to file suits in federal courts against government institutions. Potential redress includes financial restitution. The APP’s passage will require government institutions to set up offices that will handle such complaints. Complainants are required to follow an administrative appeal process, and only after exhausting administrative remedies will a person be allowed to file a suit in federal court. Four government institutions are exempt from the APP: the Ministry of Justice (MOJ); the Ethiopian Federal Police; the Ethiopian National Defense Force, and the intelligence agencies. To foster transparency, the APP obligates all government agencies’ regulations to be registered with MOJ (https://www.eag.gov.et/en-us/Home) and be widely accessible to the public. The enactment of the APP is widely viewed as a positive step in increasing confidence in the public sector and addressing the need for governmental institutions to adhere to the rule of law.

Ethiopia is a member of UNCTAD’s international network of transparent investment procedures . Foreign and national investors can find detailed information from the investment commission’s website ( https://www.invest-ethiopia.com/ ) on administrative procedures applicable to investing in Ethiopia.

The GOE provides accurate, comprehensive, and detailed information on the enacted budget and overall government debt. However, fiscal transparency in Ethiopia continues to have several deficiencies, including the unavailability of executive budget proposals, a lack of publicly available information on state-owned enterprise (SOE) debt, poor legislative oversight of budget preparation and execution, and limited budget execution reports.

In April 2020 Ethiopia became a member of the African Continental Free Trade Area (AfCFTA). The AfCFTA aims to create a single continental market for goods and services, with free movement of businesspersons and investments. Ethiopia is also a member of the Common Market for Eastern and Southern Africa (COMESA), a regional economic block, which has 21 member countries and has introduced a 10 percent tariff reduction on goods imported from member states. Ethiopia has not yet joined the COMESA free trade area, however. Ethiopia resumed its WTO accession process in 2018, which it originally began in 2003, but which later stagnated.

Ethiopian standards have a national scope and applicability and some of them, particularly those related to human health and environmental protection, are mandatory. The Ethiopian Standards Agency is the national standards body of Ethiopia.

Ethiopia has codified criminal and civil laws, including commercial and contractual law. According to the contractual law, a contract agreement is binding between contracting parties. Disputes between the parties can be taken to court. There are, however, no specialized courts for commercial law cases, though there are specialized benches at both the federal and state courts.

While there have been allegations of executive branch interference in judiciary cases with political implications, there is no evidence of widespread interference in purely commercial disputes. The country has a procedural code for both civil and criminal court. Enforcement actions are appealable and there are at least three appeal processes from the lower courts to the Supreme Court. The Criminal Procedure Code follows the inquisitorial system of adjudication.

Companies that operate businesses in Ethiopia assert that courts lack adequate experience and staffing, particularly with respect to commercial disputes. While property and contractual rights are recognized, judges often lack understanding of commercial matters, including bankruptcy and contractual disputes. In addition, companies complain that these cases often face extended scheduling delays, and that contract enforcement remains weak. To address these issues, the federal Supreme Court issued a new court-led mediation directive, number 12/2021, which is expected to resolve disputes including commercial ones within a shortened period while reducing litigation costs for involved parties.

In March 2021, the parliament revised the Commercial Code for the first time in 60 years. The revised code modernizes and simplifies business regulations, develops regulations for new technologies not covered in the prior version, and seeks to implement greater transparency and accountability in commercial activities.

Investment Proclamation number 1180/2020 and its implementing regulation number 474/2020 are Ethiopia’s main legal regime related to FDI. These laws instituted the opening of new economic sectors to foreign investment, enumerated the requirements for FDI registration, and outlined the incentives that are available to investors.

The investment law allows foreign investors to invest in any investment area except those that are clearly reserved for domestic investors. A few specified investment areas are possible for foreign investors only as part of a joint venture with domestic investors or the government. The Investment Proclamation has introduced an Investment Council, chaired by the Prime Minister, to accelerate implementation of the new law and to address coordination challenges investors face at the federal and regional levels. Further, the new law expanded the mandate of the EIC by allowing it to provide approvals to foreign investors proposing to buy existing enterprises. The EIC now also delivers “one stop shop” services by consolidating investor services provided by other ministries and agencies. Still, the EIC delegates licensing of investments in some areas: air transport services (the Ethiopian Civil Aviation Authority), energy generation and transmission (the Ethiopian Energy Authority), and telecommunication services (the Ethiopian Communications Authority).

The EIC’s website ( https://www.invest-ethiopia.com/ ) provides information on the government’s policy and priorities, registration processes, and regulatory details. In addition, the Business Negarit website ( http://businessnegarit.com/a/resources1/ ) provides relevant laws, rules, procedures, and reporting requirements for investors.

The MOJ Trade Competition and Consumer Protection Adjudicative Bench is responsible for reviewing merger and acquisition transactions and monopolistic business practices. The bench’s decisions can be appealed to the federal Supreme Court. Post is not aware any significant competition cases during the reporting period.

The 2020 Investment Proclamation stipulates that no investment by a domestic or foreign investor or enterprise can be expropriated or nationalized, wholly or partially, except when required by public interest in compliance with the law and provided adequate compensatory payment.

The former Derg military regime nationalized many properties in the 1970s. The current government’s position is that property seized lawfully by the Derg (by court order or government proclamation published in the official gazette) remains the property of the state. In most cases, property seized by oral order or other informal means is gradually being returned to the rightful owners or their heirs through a lengthy bureaucratic process. Claimants are required to pay for improvements made by the government during the time it controlled the property. The Public Enterprises Holding and Administration Agency stopped accepting requests from owners for return of expropriated properties in July of 2008.

The Commercial Code (Book III) outlines bankruptcy provisions and proceedings and establishes a court system that has jurisdiction over bankruptcy proceedings. The primary purpose of the law is to protect creditors, equity shareholders, and other contractors. Bankruptcy is not criminalized. However, there is limited application of bankruptcy procedures in Ethiopia as the process can take years to settle.

Investment Regulation 474/2020 retains the investment incentive provisions as outlined under the 2012 law. Accordingly, investors in manufacturing, agri-processing, and selected agricultural products are entitled to income tax exemptions ranging from two to five years, depending on the location of the investment. Additionally, investors in manufacturing; agriculture; ICT; electricity generation, transmission, and distribution; and producers who produce for export or supply to an exporter, or who export at least 60 percent of the products or services, are entitled to an additional two years of income tax exemption. Investors in renewable energy generation are eligible for 4-5 years of income tax exemptions. There are no special incentives for investments made by members of under-represented social groups such as women.

Industrial Park Proclamation 886/2015 mandates that the Ethiopian Industrial Parks Corporation develop and administer industrial parks under the auspices of government ownership. The law designates industrial parks as duty-free zones, and domestic as well as foreign operators in the parks are exempt from income tax for up to 10 years. Investors operating in parks are also exempt from duties and other taxes on the import of capital goods, construction materials, and raw materials for production of export commodities and vehicles.

An investor who operates in a designated Industrial Development Zone in or near Addis Ababa is entitled to two years of income tax exemptions, and four more years of income tax exemption if the investment is made in an industrial park in other areas, provided 80 percent or more of production is for export or constitutes input for an exporter.

Industrial Parks can be developed by either government or private developers. In practice, the majority have been developed by the GOE with Chinese financing. The list of operational industrial parks is available at https://ipdc.gov.et/service/parks.

Ethiopia does not impose official performance requirements on foreign investors, though foreign investors routinely encounter business visa delays and onerous paperwork requirements. In addition, foreign investors are required to comply with a $100,000 minimum capital investment requirement for architectural or engineering projects and a $200,000 requirement to projects in other sectors. For most joint investments with a domestic partner, the minimum capital investment requirement is $150,000.

The minimum capital requirement is waived if the foreign investor reinvests profits or dividends generated from an existing enterprise in any investment area open to foreign investors; and if a foreign investor purchases a portion or the entirety of an existing enterprise owned by another foreign investor. There are no forced localization or data storage requirements for private investors. Local content in terms of hiring, products, and services is strongly encouraged but not required.

Proclamation 808/2013 mandates that the Information Network Security Agency (INSA) control the import and export of information technology, build an information technology testing and evaluation laboratory center, and regulate cryptographic products and their transactions.

The constitution recognizes and protects ownership of private property, however all land in Ethiopia belongs to “the people” and is administered by the government. Private ownership does not exist, but land-use rights have been registered in most populated areas. As land is public property, it cannot be mortgaged. Confusion with respect to the registration of urban land-use rights, particularly in Addis Ababa, is common. The GOE retains the right to expropriate land for the “common good” – which it defines as expropriation for commercial farms, industrial zones, and infrastructure development – and offer replacement land or monetary compensation to the previous owner. While the government claims to allocate only sparsely settled or empty land to investors, it has in some cases forced people to resettle. Traditional grazing land has often been defined as empty and expropriated, leading to resentment, protests, and in some cases, conflict. In addition, leasehold regulations vary in form and practice by region. Successful investors in Ethiopia conduct thorough due diligence on land titles at both regional and federal levels and conduct consultations with local communities regarding the proposed use of the land before investing.

We encourage potential investors to ensure their needs are communicated clearly to the host government. It is important for investors to understand who had land-use rights preceding them, and to research the attitude of local communities to an investor’s use of that land, particularly in the region of Oromia, where conflict between international investors and local communities has occurred.

The Ethiopian Intellectual Property Office (EIPO) oversees intellectual property rights (IPR) issues. Ethiopia is not yet a signatory to several major IPR treaties, such as the Paris Convention for the Protection of Industrial Property, the World Intellectual Property Organization (WIPO) Copyright Treaty, the Berne Convention for Literary and Artistic Works, the Madrid System for the International Registration of Marks, or the Patent Cooperation Treaty. In 2020 Ethiopia ratified the Marrakesh Treaty to facilitate access to published works for persons who are blind, visually impaired, or otherwise print disabled. The government has expressed its intention to accede to the Berne Convention, the Paris Convention, and the Madrid Protocol. Because Ethiopia’s accession to the WTO is incomplete, it is not a party to the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS).

EIPO is primarily tasked with protecting Ethiopian patents and copyrights and fighting software piracy. Historically, however, the EIPO has struggled with a lack of qualified staff and small budgets; further, the institution does not have law enforcement authority. Abuse of U.S. trademarks is rampant, particularly in the hospitality and retail sectors. The government does not publicly track counterfeit goods seizures, and no estimates are available. Ethiopia is not included in the United States Trade Representative (USTR) Special 301 Report or Notorious Markets List.

EIPO contact and office information is available at http://www.eipo.gov.et/ 

For additional information about the national law and for a local WIPO point of contact, please see WIPO’s country profile at http://www.wipo.int/directory/en/ .

Embassy POC: Economic Officer, USEmbassyPolEconExternal@state.gov 

Ethiopia has a limited and undeveloped financial sector, and investment is largely closed off to foreign firms. Liquidity at many banks is limited, and commercial banks often require 100 percent collateral, making access to credit one of the greatest hindrances to growth in the country. Ethiopia is the largest economy in Africa without a securities market, and sales/purchases of debt are heavily regulated.

Ethiopia’s concessional IMF Extended Credit Facility (ECF) program expired in September 2021. The program aimed to reduce public sector borrowing, rein in inflation, reform the exchange rate regime, and ensure external debt sustainability. The GOE has not yet launched formal talks with the IMF on a new program.

The GOE has announced, as part of its overall economic reform effort, its intention to liberalize the financial sector. The government has already made good progress by allowing non-financial Ethiopian firms to participate in mobile money activities, introducing Treasury-bill auctions with market pricing, and reducing forced lending to the government on the part of the commercial banks. The parliament approved the establishment of a capital market in June 2021, and activities are underway to set up a capital market regulatory body and the stock market.

The National Bank of Ethiopia (NBE, the central bank) began offering a limited number of 28-day and 91-day Treasury bills at market-determined interest rates in December 2019. Since then, more bond offerings of longer tenures have been included in the auctions. The move was part of an effort to expand the NBE’s monetary policy tools and finance the government in a more sustainable way. Previously, the NBE had only sold Treasury bills at below-market interest rates, and the only buyers were public sector enterprises, primarily the Public Social Security Agency and the Development Bank of Ethiopia.

Ethiopia issued its first 10-year Eurobond in December of 2014, raising 1 billion U.S. dollars at a rate of 6.625 percent. According to the Ministry of Finance, the bond proceeds are being used to finance industrial parks, the sugar industry, and power transmission infrastructure. Due to its increasing external debt load, the Ethiopian government has committed to refrain from non-concessional financing for new projects and to shift ongoing projects to concessional financing when possible. As Ethiopia’s ability to service its external debts declined in the wake of the COVID-19 pandemic, Ethiopia participated in the World Bank Debt Service Suspension Initiative (DSSI), which suspended external debt payments from May 2020 through June of 2021. Ethiopia is seeking further debt treatment under the G20 Common Framework for Debt Treatments Beyond the DSSI.

Ethiopia has 23 commercial banks, two of which are state-owned. The Development Bank of Ethiopia, a state-owned bank, provides loans to investors in priority sectors, notably agriculture and manufacturing. By regional standards, the 21 private commercial banks are not large (either by total assets or total lending), and their service offerings are not sophisticated. Mobile money and digital finance, for instance, remain limited in Ethiopia. Foreign banks are not permitted to provide financial services in Ethiopia; however, since April 2007, Ethiopia has allowed some foreign banks to open liaison offices in Addis Ababa to facilitate credit to companies from their countries of origins. Chinese, German, Kenyan, Turkish, and South African banks have opened liaison offices in Ethiopia, but the market remains completely closed to foreign retail banks. Foreigners of Ethiopian origin are now allowed to both establish their own banks and hold shares in financial institutions.

The state-owned Commercial Bank of Ethiopia accounts for more than 50 percent of total bank deposits, bank loans, and foreign exchange in Ethiopia. The NBE controls banks’ minimum deposit rate, which now stands at 7 percent, while loan interest rates are allowed to float. Real deposit interest rates have been negative in recent years, mainly due to double digit annual inflation. Non-performing loans account for less than 3 percent of all loans.

Ethiopia’s Council of Ministers approved in December 2021 the creation of Ethiopian Investment Holdings (EIH) – Ethiopia’s Sovereign Wealth Fund. EIH is currently under formation and expects to manage assets worth about $2 billion across several sectors, including telecoms, mining, banking, aviation, and logistics.

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.

In July 2018, the GOE announced plans to fully or partially privatize several state-owned enterprises and sectors. In 2020, Ethiopia enacted Public Enterprises Privatization Proclamation number 1206/2020 regulate and encourage transparency and private sector participation in privatization processes. The GOE will implement privatizations through public tenders open to local and foreign investors. In September 2021, the GOE tendered a 40 percent stake of state-owned Ethio telecom but later postponed the process indefinitely due in part to muted investor interest. The government has sold more than 370 public enterprises since 1995, mainly small companies in the trade and service sectors, most of which were nationalized by the Derg military regime in the 1970s.

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.

Department of State

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

Department of the Treasury

• OFAC Recent Actions 

Department of Labor

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

Ethiopia is a signatory of the Paris Agreement on Climate Change and endorsed the Climate Resilience and Green Economy Strategy (CRGE). Ethiopia has formulated climate resilient sectoral policies and strategies to carry out environmental interventions in areas such as agriculture, forestry, transport, health, urban development, and housing. According to its Nationally Determined Contribution (NDC) towards the Paris Agreement goals, Ethiopia aims to reduce its carbon emissions by 68 percent by 2030 (2018 base year). The GOE Green Legacy Initiative, launched in 2019, is a tree planting campaign aimed at curbing the impact of climate change and deforestation.

The 2002 Environment Impact Assessment law authorizes pertinent environmental regulatory offices to provide technical and financial incentives to projects focused on environmental rehabilitation or pollution prevention.

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.

Contacts at a government agency responsible for combating corruption:

Federal Police Commission
Addis Ababa
+251 11 861-9595

Advocacy and Legal Advice Center in Ethiopia
Hayahulem Mazoria, Addis Ababa
+251-11-551-0738 / +251-11-655-5508
https://www.transparencyethiopia.org 

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.

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.

*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 ).

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

Economic Officer, USEmbassyPolEconExternal@state.gov

The Government of Ghana has made increasing FDI a priority and acknowledges the importance of having an enabling environment for the private sector to thrive.  Officials are implementing regulatory and other reforms such as automation and digitalization of government processes and enhancing GIPC’s own support services, to improve the ease of doing business and make investing in Ghana more attractive. The 2013 Ghana Investment Promotion Center (GIPC) Act requires the GIPC to register, monitor, and keep records of all business enterprises in Ghana.  Sector-specific laws further regulate investments in minerals and mining, oil and gas, industries within Free Zones, banking, non-bank financial institutions, insurance, fishing, securities, telecommunications, energy, and real estate.  Some sector-specific laws, such as in the oil and gas sector and the power sector, include local content requirements that could discourage international investment.  Foreign investors are required to satisfy the provisions of the GIPC Act as well as the provisions of sector-specific laws.  GIPC leadership has pledged to collaborate more closely with the private sector to address investor concerns, but there have been no significant changes to the laws.  More information on investing in Ghana can be obtained from GIPC’s website, www.gipc.gov.gh.

Most of Ghana’s major sectors are fully open to foreign capital participation. U.S. investors in Ghana are treated the same as other foreign investors.  All foreign investment projects must register with the GIPC.  Foreign investments are subject to the following minimum capital requirements: USD 200,000 for joint ventures with a Ghanaian partner, who should have at least 10 percent of the equity; USD 500,000 for enterprises wholly owned by a non-Ghanaian; and USD 1 million for trading companies (firms that buy or sell imported goods or services) wholly owned by non-Ghanaian entities.  The minimum capital requirement may be met in cash or capital goods relevant to the investment.  Trading companies are also required to employ at least 20 skilled Ghanaian nationals.

Ghana’s investment code excludes foreign investors from participating in eight economic sectors:  petty trading; the operation of taxi and car rental services with fleets of fewer than 25 vehicles; lotteries (excluding soccer pools); the operation of beauty salons and barber shops; printing of recharge scratch cards for subscribers to telecommunications services; production of exercise books and stationery; retail of finished pharmaceutical products; and the production, supply, and retail of drinking water in sealed pouches.  Sectors where foreign investors are allowed limited market access include: telecommunications, banking, fishing, mining, petroleum, and real estate.

Ghana has not conducted an investment policy review (IPR) through the OECD recently. UNCTAD last conducted an IPR in 2003.

The WTO last conducted a Trade Policy Review (TPR) in May 2014.  The next review is scheduled for May 4-6, 2022. The 2014 TPR concluded that the 2013 amendment to the investment law raised the minimum capital that foreigners must invest to levels above those specified in Ghana’s 1994 GATS horizontal commitments and excluded new activities from foreign competition.  However, it was determined that overall, this would have minimal impact on dissuading future foreign investment due to the size of the companies traditionally seeking to do business within the country.  An executive summary of the findings can be found at: https://www.wto.org/english/tratop_e/tpr_e/tp398_e.htm .

Although registering a business is a relatively easy procedure and can be done online through the Registrar General’s Department (RGD) at https://rgd.gov.gh/index.html , businesses have noted that the process involved in establishing a business is lengthy and complex, and requires compliance with regulations and procedures of at least four other government agencies, including GIPC, Ghana Revenue Authority (GRA), Ghana Immigration Service, and the Social Security and National Insurance Trust (SSNIT). In 2019, Ghana passed a new Companies Act, 2019 (Act 992), which among other things, created a new independent office called the Office of the Registrar of Companies, responsible for the registration and regulation of all businesses.  A new office is expected to be in place which would separate the registration process for companies from the Registrar General’s Department; the latter would continue to serve as the government’s registrar for non-business transactions such as marriages.  The new law also simplifies some registration processes by scrapping the issuance of a certificate to commence business and the requirement for a company to state business objectives, which limited the activities in which a company could engage.  The law also expands the role of the company secretary, which now requires educational qualifications with some background in company law practice and administration or having been trained under a company secretary for at least three years.  Foreign investors must obtain a certificate of capital importation, which can take 14 days.  The local authorized bank must confirm the import of capital with the Bank of Ghana, which confirms the transaction to GIPC for investment registration purposes.

Per the GIPC Act, all foreign companies are required to register with GIPC after incorporation with the RGD.  Registration can be completed online at www.gipc.gov.gh.  While the registration process is designed to be completed within five business days, but there are often bureaucratic delays.

The Ghanaian business environment is unique, and guidance can be extremely helpful.  In some cases, a foreign investment may enjoy certain tax benefits under the law or additional incentives if the project is deemed critical to the country’s development.  Most companies or individuals considering investing in Ghana or trading with Ghanaian counterparts find it useful to consult with a local attorney or business facilitation company.  The United States Embassy in Accra maintains a list of local attorneys, which is available through the U.S. Foreign Commercial Service ( https://www.trade.gov/ghana-contact-us ) or U.S. Citizen Services ( https://gh.usembassy.gov/u-s-citizen-services/attorneys/).

Specific information about setting up a business is available at the GIPC website:  https://gipc.gov.gh/4232-2/.   

Ghana Investment Promotion Centre
Post: P. O. Box M193, Accra-Ghana
Note: Omit the (0) after the country code when dialing from abroad.
Telephone: +233 (0) 302 665 125, +233 (0) 302 665 126, +233 (0) 302 665 127, +233 (0) 302 665 128, +233 (0) 302 665 129, +233 (0) 244 318 254/ +233 (0) 244 318 252
Email: info@gipc.gov.gh

Note that mining or oil/gas sector companies are required to obtain licensing/approval from the following relevant bodies:

Petroleum Commission Head Office
Plot No. 4A, George Bush Highway, Accra, Ghana
P.O. Box CT 228 Cantonments, Accra, Ghana
Telephone: +233 (0) 302 953 392 | +233 (0) 302 953 393
Website: http://www.petrocom.gov.gh/ 

Minerals Commission
Minerals House, No. 12 Switchback Road, Cantonments, Accra
P. O. Box M 248
Telephone: +233 (0) 302 772 783 /+233 (0) 302 772 786 /+233 (0) 302 773 053
Website: http://www.mincom.gov.gh/ 

Ghana has no specific outward investment policy.  It has entered into bilateral treaties, however, with a number of countries to promote and protect foreign investment on a reciprocal basis.  Some Ghanaian companies have established operations in other West African countries and there are a number of active Ghanaian investments in the United States in the food processing and personal care sectors.

The Government of Ghana’s policies on trade liberalization and investment promotion are guiding its efforts to create a clear and transparent regulatory system.

Ghana does not have a standardized consultation process, but ministries and Parliament generally share the text or summary of proposed regulations and solicit comments directly from stakeholders or via public meetings and hearings.  All laws that are currently in effect are printed by the Ghana Publishing Company, while the notice of publication of the law, bills, or regulations are made in the Ghana Gazette (equivalent of the U.S. Federal Register).  The non-profit Ghana Legal Information Institute ( Home | GhaLII ) re-publishes hard copies of the Ghana Gazette.  The Government of Ghana does not publish draft regulations online, and the Parliament publishes only some draft bills ( https://www.parliament.gh/docs?type=Bills&OT ), which inhibits transparency in the approval of laws and regulations.

The Government of Ghana has established regulatory bodies such as the National Communications Authority, the National Petroleum Authority, the Petroleum Commission, the Energy Commission, and the Public Utilities Regulatory Commission to oversee activities in the telecommunications, downstream and upstream petroleum, electricity and natural gas, and water sectors.  The creation of these bodies was a positive step, but the lack of resources and the bodies’ susceptibility to political influence undermine their ability to deliver the intended level of oversight.

The government launched a Business Regulatory Reform program in 2017, but implementation has been slow.  The program aims to improve the ease of doing business, review all rules and regulations to identify and reduce unnecessary costs and requirements, establish an e-registry of all laws, establish a centralized public consultation web portal, provide regulatory relief for entrepreneurs, and eventually implement a regulatory impact analysis system.  The government continues to work towards achieving these goals and in 2020 established the centralized public consultation web portal ( www.bcp.gov.gh ), the Ghana Business Regulatory Reforms platform.  It is an interactive platform to allow policymakers to consult businesses and individuals in a transparent, inclusive, and timely manner on policy issues.  Ghana adopted International Financial Reporting Standards in 2007 for all listed companies, government business enterprises, banks, insurance companies, security brokers, pension funds, and public utilities.  Projects likely to have significant impacts on the environment are required to obtain environmental permits from the Ghanaian Environmental Protection Agency before commencement of construction and operations.  The government, however, does not have a policy that requires or promotes companies’ environmental, social, and governance (ESG) disclosure.

Ghana has been a World Trade Organization (WTO) member since January 1995 and a member of the General Agreement on Tariffs and Trade since 1957.  Ghana issues its own standards for many products under the auspices of the Ghana Standards Authority (GSA).  The GSA has promulgated more than 500 Ghanaian standards and adopted more than 2,000 international standards including European Union and U.S. standards for certification purposes.  The Ghanaian Food and Drugs Authority is responsible for enforcing standards for food, drugs, cosmetics, and health items.  Ghana has a WTO obligation to notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Ghana’s legal system is based on British common law and local customary law.  Investors should note that the acquisition of real property is governed by both statutory and customary law.  The judiciary comprises both lower courts and superior courts.  The superior courts are the Supreme Court, the Court of Appeal, and the High Court and Regional Tribunals.  Lawsuits are permitted and usually begin in the High Court.  The High Court has jurisdiction in all matters, civil and criminal, other than those involving treason and some cases that involve the highest levels of the government – which go to the Supreme Court.  There is a history of government intervention in the court system, although somewhat less so in commercial matters.  The courts have entered judgments against the government.  However, the courts have been slow in disposing of cases and at times face challenges in having their decisions enforced, largely due to resource constraints and institutional inefficiencies.

The GIPC Act codified the government’s desire to present foreign investors with a transparent foreign investment regulatory regime.  GIPC regulates foreign investment in acquisitions, mergers, takeovers and new investments, as well as portfolio investment in stocks, bonds, and other securities traded on the Ghana Stock Exchange.  The GIPC Act also specifies areas of investment reserved for Ghanaian citizens, and further delineates incentives and guarantees that relate to taxation, transfer of capital, profits and dividends, and guarantees against expropriation.

GIPC helps to facilitate the business registration process and provides economic, commercial, and investment information for companies and businesspeople interested in starting a business or investing in Ghana.  GIPC provides assistance to enable investors to take advantage of relevant incentives.  Registration can be completed online at www.gipc.gov.gh.

As detailed in the previous section on “Limits on Foreign Control and Right to Private Ownership and Establishment,” sector-specific laws regulate foreign participation/investment in telecommunications, banking, fishing, mining, petroleum, and real estate.

Ghana regulates the transfer of technologies not freely available in Ghana.  According to the 1992 Technology Transfer Regulations, total management and technical fee levels higher than eight percent of net sales must be approved by GIPC.  The regulations do not allow agreements that impose obligations to procure personnel, inputs, and equipment from the transferor or specific source.  The duration of related contracts cannot exceed ten years and cannot be renewed for more than five years.  Any provisions in the agreement inconsistent with Ghanaian regulations are unenforceable in Ghana.

Ghana is reportedly working on a new competition law to replace the existing legislation, the Protection Against Unfair Competition Act, 2000 (Act 589); however, the new bill is still under review.

The Constitution sets out some exceptions and a clear procedure for the payment of compensation in allowable cases of expropriation or nationalization.  Additionally, Ghana’s investment laws generally protect investors against expropriation and nationalization.  The Government of Ghana may, however, expropriate property if it is required to protect national defense, public safety, public order, public morality, public health, town and county planning, or to ensure the development or utilization of property in a manner to promote public benefit.  In such cases, the GOG must provide prompt payment of fair and adequate compensation to the property owner, but the process for determining adequate compensation and making payments can be complicated and lengthy in practice.  The Government of Ghana guarantees due process by allowing access to the High Court by any person who has an interest or right over the property.

Ghana does not have a bankruptcy statute.  A new insolvency law, the Corporate Restructuring and Insolvency Act, 2020 (Act 1015), was passed to replace the Bodies Corporate (Official Liquidations) Act, 1963 (Act 180).  The new law, unlike the previous one, provides for reorganization of a company before liquidation when it is unable to pay its debts, as well as cross-border insolvency rules.  The new law does not have a U.S. Chapter 11-style bankruptcy provision but allows for a process that puts the company under administration for restructuring.  The new law complements the law for private liquidations under the Companies Act, 2019 (Act 992), but does not apply to businesses that are under specialized regulations such as banks and insurance companies.

Investment incentives differ slightly depending upon the law under which an investor operates.  For example, while all investors operating under the Free Zone Act are entitled to a ten-year corporate tax holiday, investors operating under the GIPC law are not.  Tax incentives vary depending upon the sector in which the investor is operating.

All investment-specific laws contain some incentives.  The GIPC law allows for import and tax exemptions for plant inputs, machinery, and parts imported for the purpose of the investment.  Chapters 82, 84, 85, and 89 of the Customs Harmonized Commodity and Tariff Code zero-rate these production items.  In 2015, the Government of Ghana imposed a new five percent import duty on some items that were previously zero-rated to conform to the new Economic Community of West African States (ECOWAS) common external tariff.

The Ghanaian tax system is replete with tax concessions that considerably reduce the effective tax rate.  The minimum incentives are specified in the GIPC law and are not applied in an ad hoc or arbitrary manner.  Once an investor has been registered under the GIPC law, the investor is entitled to the incentives provided by law.  The government has discretion to grant an investor additional customs duty exemptions and tax incentives beyond the minimum stated in the law.

The GIPC website ( www.gipc.gov.gh ) provides a thorough description of available incentive programs.  The law also guarantees an investor all the tax incentives provided for under Ghanaian law.  For example, rental income from commercial and residential property is exempt from tax for the first five years after construction.  Similarly, income from a company selling or leasing out premises is income tax exempt for the first five years of operation.  Rural banks and cattle ranching are exempt from income tax for ten years and pay eight percent thereafter.

The corporate tax rate is 25 percent, and this applies to all sectors, except income from non-traditional exports (eight percent tax rate), companies principally engaged in the hotel industry (22 percent rate), and oil and gas exploration companies (35 percent tax rate).  For some sectors there are temporary tax holidays.  These sectors include Free Zone enterprises and developers (0 percent for the first ten years and 15 percent thereafter); real estate development and rental (0 percent for the first five years and 25 percent thereafter); agro-processing companies (0 percent for the first five years, after which the tax rate ranges from 0 percent to 25 percent depending on the location of the company in Ghana), and waste processing companies (0 percent for seven years and 25 percent thereafter).  In December 2019, to attract investments under the Ghana Automotive Development Policy, corporate tax holidays among other import duty and value-added tax exemptions were granted to manufacturers or assemblers of semi-knocked-down vehicles (0 percent for three years) and complete knocked down vehicles (0 percent for ten years).  Tax rebates are also offered in the form of incentives based on location.  A capital allowance in the form of accelerated depreciation is applicable in all sectors except banking, finance, commerce, insurance, mining, and petroleum.  Under the Income Tax Act, 2015 (Act 896), all businesses can carry forward tax losses for at least three years.

Ghana has no discriminatory or excessively burdensome visa requirements.  While ECOWAS nationals do not require a visa to enter Ghana for 90 days, they need a work and residence permit to live and work in Ghana.  The current fees for work and residence permit for ECOWAS nationals is USD 500 while that for non-ECOWAS nationals is USD 1,000.  A foreign investor who invests under the GIPC Act is automatically entitled to a specific number of visas/work permits based on the size of the investment.  When an investment of USD 50,000 but not more than USD 250,000 or its equivalent is made in convertible currency or machinery and equipment, the enterprise can obtain a visa/work permit for one expatriate employee.  An investment of USD 250,000, but not more than USD 500,000, entitles the enterprise to two visas/work permits.  An investment of USD 500,000, but not more than USD 700,000, allows the enterprise to bring in three expatriate employees.  An investment of more than USD 700,000 allows an enterprise to bring in four expatriate employees.  An enterprise may apply for extra visas or work permits, but the investor must justify why a foreigner must be employed rather than a Ghanaian.  There are no restrictions on the issuance of work and residence permits to Free Zone investors and employees.  Overall, the process of issuing work permits is not very transparent.

Free Trade Zones (called Free Zones in Ghana) were first established in May 1996, with one near Tema Steelworks, Ltd., in the Greater Accra Region, and two other sites located at Mpintsin and Ashiem near Takoradi in the Western Region.  The seaports of Tema and Takoradi, as well as the Kotoka International Airport in Accra and all the lands related to these areas, are part of the Free Zone.  The law also permits the establishment of single factory zones outside or within the areas mentioned above.  Under the law, a company qualifies to be a Free Zone company if it exports more than 70 percent of its products.  Among the incentives for Free Zone companies are a ten-year corporate tax holiday and zero import duty.

To make it easier for Free Zone developers to acquire the various licenses and permits to operate, the Ghana Free Zones Authority ( www.gfzb.gov.gh ) provides a “one-stop approval service” to assist in the completion of all formalities.  A lack of resources has limited the effectiveness of the Authority.  Foreign employees of Free Zone businesses require work and residence permits.

In most sectors, Ghana does not have performance requirements for establishing, maintaining, and expanding a business.  Investors are not required to purchase from local sources or employ prescribed levels of local content, except in the mining sector, the upstream petroleum sector, and the power sector, which are subject to substantial local content requirements.  Similar legislation is being drafted for the downstream petroleum sector, and a National Local Content Policy is being debated by Cabinet that may extend to a broad array of sectors of the economy, but there is no clear timeline for its approval.

Generally, investors are not required to export a specified percentage of their output, except for Free Zone enterprises which, in accordance with the Free Zone Act, must export at least 70 percent of their products.  Government officials have intimated that local content requirements should be applied to sectors other than petroleum, power, and mining, but no local content regulations have been promulgated for other sectors.

As detailed earlier in this report, there are a few areas where the GOG does impose performance requirements, including the mining, oil and gas, insurance, and telecommunications sectors.

The legal system recognizes and enforces secured interest in property.  However, the process to get clear title over land is difficult, complicated, and lengthy.  It is important to conduct a thorough search at the Lands Commission to ascertain the identity of the true owner of any land being offered for sale.  Investors should be aware that land records can be incomplete or non-existent and, therefore, clear title may be impossible to establish.  Ghana passed a new land law, Land Act, 2020 (Act 1036), which revised, harmonized, and consolidated laws on land to ensure sustainable land administration and management.  The new law makes it possible to transfer and create or register interests in land by electronic means to speed up conveyancing, supports decentralized land service delivery, and includes provisions relating to property rights of spouses by ensuring that spouses are deemed to be party to the interest in land that is jointly acquired during the marriage.  These changes are expected to improve accessibility and secured tenure.

Mortgages exist, although there are only a few thousand due to factors such as land ownership issues and scarcity of long-term finance.  Mortgages are regulated by the Home Mortgages Finance Act, 2008 (Act 770), which has enhanced the process of foreclosure.  A mortgage must be registered under the Land Act, 2020 (Act 1036), for it to take effect.  Registration with the Land Title Registry is a reliable system of recording the transaction.

The protection of intellectual property rights (IPR) is an evolving area of law in Ghana.  There has been progress in recent years to afford protection under both local and international law.  Ghana is a party to the Universal Copyright Convention, the Berne Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, the Patent Cooperation Treaty (PTC), the Singapore Trademark Law Treaty (STLT), and the Madrid Protocol Concerning the International Registration of Marks.  Ghana is also a member of the World Intellectual Property Organization (WIPO), the English-speaking African Regional Intellectual Property Organization (ARIPO), and the World Trade Organization (WTO).  In 2004, Ghana’s Parliament ratified the WIPO internet treaties, namely the WIPO Copyright Treaty and the WIPO Performance and Phonograms Treaty.  Ghana also amended six IPR laws to comply with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), including:  copyrights, trademarks, patents, layout-designs (topographies) of integrated circuits, geographical indications, and industrial designs.  Except for the copyright law, implementing regulations necessary for fully effective promulgation have not been passed.

The Government of Ghana launched a National Intellectual Property Policy and Strategy in January 2016, which aimed to strengthen the legal framework for protection, administration, and enforcement of IPR and promote innovation and awareness, although progress on implementation stalled.  Enforcement remains weak, and piracy of intellectual property continues.  Although precise statistics are not available for many sectors, counterfeit computer software is regularly available at street markets, and counterfeit pharmaceuticals have found their way into public hospitals.  Counterfeit products have also been discovered in such disparate sectors as industrial epoxy, cosmetics, drinking spirits, and household cleaning products.  Based on cases where it has been possible to trace the origin of counterfeit goods, most have been found to have been produced outside the region, usually in Asia.  IPR holders have access to local courts for redress of grievances, although the few trademark, patent, and copyright infringement cases that U.S. companies have filed in Ghana have reportedly moved through the legal system slowly.

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

Please contact the following at Mission Ghana if you have further questions regarding IPR issues:

U.S. Embassy, Economic Section
No. 24 Fourth Circular Road, Cantonments, Accra, Ghana
Tel: +233(0) 302 741 000 (Omit the (0) after the area code when dialing from abroad)
Email: AccraICS@state.gov

The United States Embassy in Accra maintains a list of local attorneys, which is available through the U.S. Foreign Commercial Service ( https://www.trade.gov/ghana-contact-us) or U.S. Citizen Services ( https://gh.usembassy.gov/u-s-citizen-services/attorneys/).

American Chamber of Commerce Ghana
No. 10 Mensah Wood Avenue, East Legon, Accra.P.O. Box CT2869, Cantonments-Accra, Ghana
Tel: +233 (0) 302 247 562/ +233 (0) 307 011 862 (Omit the (0) after the area code when dialing from abroad)
Email: info@amchamghana.org
Website: http://www.amchamghana.org/. 

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

Private sector growth in Ghana is constrained by financing challenges.  Businesses continue to face difficulty raising capital on the local market.  While credit to the private sector has increased in nominal terms, levels as percentage of GDP have remained stagnant over the last decade, and high government borrowing has brought interest rates above 20 percent and crowded out private investment.

Capital markets and portfolio investment are gradually evolving.  The longest-term domestic bonds are 20 years, with Eurobonds ranging up to 41-year maturities.  Foreign investors are permitted to participate in auctions of bonds only with maturities of two years or longer.  In January 2022, foreign investors held about 16.6 percent (valued at USD 5 billion) of the total outstanding domestic securities.  In 2015, the Ghana Stock Exchange (GSE) added the Ghana Fixed-Income Market (GFIM) – https://gfim.com.gh/, a specialized platform for secondary trading in debt instruments to improve liquidity.

The rapid accumulation of debt over the last decade, and particularly the past three years, has raised debt sustainability concerns.  Ghana received debt relief under the Heavily Indebted Poor Country (HIPC) initiative in 2004, and began issuing Eurobonds in 2007.  In February 2020, Ghana sold sub-Saharan Africa’s longest-ever Eurobond as part of a $3 billion deal with a tenor of 41 years.  At the end of December 2021, total public debt, roughly evenly split between external and domestic, stood at 80 percent of GDP, according to the Bank of Ghana, partly as a result of the economic shock of COVID-19 as revenue declined and expenditures spiked.

The Ghana Stock Exchange (GSE) has 36 listed companies.  Both foreign and local companies are allowed to list on the GSE.  The Securities and Exchange Commission regulates activities on the Exchange.  There is an eight percent tax on dividend income.  Foreigners are permitted to trade stocks listed on the GSE without restriction.  There are no capital controls on the flow of retained earnings, capital gains, dividends, or interest payments.  The GSE composite index (GGSECI) has exhibited mixed performance.

Banks in Ghana are relatively small, with the largest in the country in terms of operating assets, Ecobank Ghana Ltd., holding assets of about USD 2.3 billion in 2020.  The Central Bank’s minimum capital requirement for commercial banks is 400 million (USD 57 million), effective December 2018.  As a result of the reforms and subsequent closures and mergers of some banks from 2017 to 2019, the number of commercial banks dropped from 36 to 23.  Eight are domestically controlled, and the remaining 15 are foreign controlled.  In total, there are over 1,500 branches distributed across the sixteen regions of the country.

Overall, the banking industry in Ghana is well capitalized with a capital adequacy ratio of 19.6 percent as of December 2021, above the 11.5 percent prudential and statutory requirement.  The non-performing loans ratio increased from 14.8 percent in December 2020 to 15.2 percent as of December 2021.  Lending in foreign currencies to unhedged borrowers poses a risk, and widely varying standards in loan classification and provisioning may be masking weaknesses in bank balance sheets.  The BoG has almost completed actions to address weaknesses in the non-bank deposit-taking institutions sector (e.g., microfinance, savings and loan, and rural banks) and has also issued new guidelines to strengthen corporate governance regulations in the banks.

Recent developments in the non-banking financial sector indicate increased diversification, including new rules and regulations governing the trading of Exchange Traded Funds.  Non-banking financial institutions such as leasing companies, building societies, and village savings and loan associations have increased access to finance for underserved populations, as have rural and mobile banking.  Currently, Ghana has no “cross-shareholding” or “stable shareholder” arrangements used by private firms to restrict foreign investment through mergers and acquisitions, although, as noted above, the Payments Systems and Services Act, 2019 (Act 987), does require a 30 percent Ghanaian company or Ghanaian holding by any electronic payments service provider, including banks or special deposit-taking institutions.

Ghana’s main sovereign wealth fund is the Ghana Petroleum Fund (GPF), which is funded by oil profits and flows to the Ghana Heritage Fund and Ghana Stabilization Fund.  The Petroleum Revenue Management Act (PRMA), 2011 (Act 815), spells out how revenues from oil and gas should be spent and includes transparency provisions for reporting by government agencies, as well as an independent oversight group, the Public Interest and Accountability Committee (PIAC).  Section 48 of the PRMA requires the Fund to publish an audited annual report by the Ghana Audit Service.  The Fund’s management meets the legal obligations. Management of the Ghana Petroleum Fund is a joint responsibility between the Ministry of Finance and the Bank of Ghana.  The minister develops the investment policy for the GPF, and is responsible for the overall management of GPF funds, consults regularly with the Investment Advisory Committee and Bank of Ghana Governor before making any decisions related to investment strategy or management of GPF funds.  The minister is also in charge of establishing a management agreement with the Bank of Ghana for the oversight of the funds.  The Bank of Ghana is responsible for the day-to-day operational management of the Petroleum Reserve Accounts (PRAs) under the terms of Operation Management Agreement.

For additional information regarding Ghana Petroleum Fund, please visit the 2020 Petroleum Annual Report at: https://mofep.gov.gh/sites/default/files/reports/petroleum/2020-Annual-Petroleum-Report.pdf .

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.

Ghana has no formal privatization program.  The government has announced its intention, however, to prioritize the creation of public-private partnerships (PPPs) to restructure and privatize non-performing SOEs, although progress to implement this goal has been slow.  Procuring PPPs is allowed under the National Policy on Public Private Partnerships in Ghana, which was adopted in June 2011.  The Public Private Partnership Act, 2020 (Act 1039) was passed in December 2020.

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.

Department of State

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

Department of the Treasury

• OFAC Recent Actions 

Department of Labor

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

Ghana’s national climate strategy is contained in the Ghana National Climate Change Policy published in 2013 and Ghana’s Nationally Determined Contributions (NDCs). The revised NDCs, submitted to the United Nations Framework Convention on Climate Change (UNFCCC) in September 2021, outline Ghana’s strategies in various sectors regarding climate change. To reduce its carbon footprint and greenhouse gas emissions (GHG), Ghana aims to reduce carbon emissions by 64 MtCO2e through the adoption of 47 climate actions across 19 policy areas.

Although Ghana has not officially announced a policy to reach net-zero emission by 2050, policies are being designed to reduce energy and CO2 intensity driven by the transition to renewable and low-carbon energy sources. In December 2021, the government established the .National Energy Transition Committee to prescribe risk mitigation measures towards environmental sustainability. Policies introduced to reduce carbon emissions include the Liquefied Petroleum Gas (LPG) Promotion Policy, the Renewable Energy Master Plan, and improved charcoal stove distribution. Ghana has set a target of increasing the share of renewable energy (including hydropower capacity up to 100 MW) from 42.5 MW in 2015 to 1363.63 MW by 2030.

The government, however, does not include environmental and green growth considerations in public procurement policies for businesses aimed at preserving biodiversity, clean air, and other ecological benefits.

Corruption in Ghana is comparatively less prevalent than in most other countries in the region, according to Transparency International’s Perception of Corruption Index, but remains a serious problem, with Ghana scoring 45 on a scale of 100 and ranking 73 out of 180 countries in 2020.  The government has a relatively strong anti-corruption legal framework in place, but enforcement of existing laws is rare and inconsistent.  Corruption in government institutions is pervasive.  The Government of Ghana has vowed to combat corruption and has taken some steps to promote better transparency and accountability.  These include establishing an Office of the Special Prosecutor (OSP) in 2017 to investigate and prosecute corruption cases and passing a Right to Information Act, 2019 (Act 989) (similar to the U.S. Freedom of Information Act) to increase transparency.  The President named a new Special Prosecutor in 2021 but the OSP still has not prosecuted a significant anti-corruption case.  The Auditor-General, was appointed in an acting capacity in 2021 and was confirmed as the substantive Auditor-General in September 2021.

Businesses have noted that bribery is most pervasive in the judicial system and across public services.  Companies report that bribes are often exchanged in return for favorable judicial decisions.  Large corruption cases are prosecuted, but proceedings are lengthy and convictions are slow.  A 2015 exposé captured video of judges and other judicial officials extorting bribes from litigants to manipulate the justice system.  Thirty-four judges were implicated, and 25 were dismissed following the revelations, though none have been criminally prosecuted.

The Public Procurement (Amendment) Act, 2016 (Act 914) was passed to address the shortcomings identified over a decade of implementation of the original 2003 law aimed at harmonizing the many public procurement guidelines used in the country and to bring public procurement into conformity with WTO standards.  (Note: Ghana is a not a party to the plurilateral WTO Agreement on Government Procurement). Nevertheless, complete transparency is lacking in locally funded contracts.  There continue to be allegations of corruption in the tender process, and the government has in the past set aside international tender awards in the name of alleged national interest.  The Public Financial Management Act, 2016 (Act 921) provided for stiffer sanctions and penalties for breaches, but its effectiveness in stemming corruption has yet to be demonstrated.  In 2016, Ghana amended the company registration law (which has been retained in the new Companies Act, 2019 (Act 992)) to include the disclosure of beneficial owners.  In September 2020, Ghana deployed a Central Beneficial Ownership Register to collect and maintain a national database on beneficial owners for all companies operating in Ghana.  The law requires each person who creates a company in Ghana to report the identities of the company’s beneficial owners on the Beneficial Ownership Declaration form at the Registrar-General’s Department (RGD).  There are different thresholds for reporting beneficial owners, depending on the sector the company belongs to and who the beneficial owner is.  For the general threshold, a person who has direct or indirect interest of 10 percent or more in a company must be registered as a beneficial owner.  A Politically Exposed Person (PEP) in Ghana who has any shares or any form of control over a company in any sector must be registered as a beneficial owner, while for a foreign PEP, shares must be five percent or more.  For companies in the extractive industry, financial institutions, and businesses operating in sectors listed as high risk by the RGD, the threshold for reporting beneficial owners is five percent.  Failure to comply with the requirements may attract a fine of up to 6,000 cedis (USD 856) or two years in prison, or both.

The 1992 Constitution established the Commission for Human Rights and Administrative Justice (CHRAJ).  Among other things, CHRAJ is charged with investigating alleged and suspected corruption and the misappropriation of public funds by officials.  CHRAJ is also authorized to take appropriate steps, including providing reports to the Attorney General and the Auditor-General in response to such investigations.  The effectiveness of CHRAJ, however, is hampered by a lack of resources, as it conducts few investigations leading to prosecutions.  CHRAJ issued guidelines on conflict of interest to public sector workers in 2006 and issued a new Code of Conduct for Public Officers in Ghana with guidelines on conflicts of interest in 2009.  CHRAJ also developed a National Anti-Corruption Action Plan that Parliament approved in July 2014, but many of its provisions have not been implemented due to lack of resources.  In November 2015, then-President John Mahama fired the CHRAJ Commissioner after she was investigated for misappropriating public funds.

In 1998, the Government of Ghana also established an anti-corruption institution, called the Serious Fraud Office (SFO), to investigate corrupt practices involving both private and public institutions.  The SFO’s name became the Economic and Organized Crime Office (EOCO) in 2010, and its functions were expanded to include crimes such as money laundering and other organized crimes. EOCO is empowered to initiate prosecutions and to recover proceeds from criminal activities.  The government passed a “Whistle Blower” law in July 2006, intended to encourage Ghanaian citizens to volunteer information on corrupt practices to appropriate government agencies.

Like most other African countries, Ghana is not a signatory to the OECD Convention on Combating Bribery.

The most common commercial fraud scams are procurement offers tied to alleged Ghanaian government or, more frequently, ECOWAS programs.  U.S. companies frequently report being contacted by an unknown Ghanaian firm claiming to be an authorized agent of an official government procurement agency.  Foreign firms that express an interest in being included in potential procurements are lured into paying a series of fees to have their companies registered or products qualified for sale in Ghana or the West Africa region.  U.S. companies receiving offers from West Africa from unknown sources should contact the U.S. Commercial Service in Ghana ( Ghana (trade.gov) ), use extreme caution, and conduct significant due diligence prior to pursuing these offers.  American firms can request background checks on companies with whom they wish to do business by purchasing the U.S. Commercial Service’s International Company Profile (ICP).

Office of the Special Prosecutor
6 Haile Selassie Avenue
South Ridge, Accra, Ghana GA-079-096
Telephone: 233 (302) 668 517; 233 (302) 668 506
corruptionreports@osp.gov.gh; info@osp.gov.gh
www.osp.gov.gh 

The Commissioner
Commission on Human Rights and Administrative Justice (CHRAJ)
Old Parliament House, High Street, Accra
Omit the (0) after the area code when dialing from abroad: +233 (0) 242 211 53 info@chraj.gov.gh
http://www.chraj.gov.gh 

The Executive Director
Economic and Organized Crime Office (EOCO)
Behind Old Parliament House, High Street, Accra
Omit the (0) after the area code when dialing from abroad: +233 (0) 302 665559, +233 (0) 302 634 363
eoco@eoco.gov.gh
www.eoco.gov.gh 

George Amoh
An Advocacy and Legal Advice Centre (ALAC) Ghana – Transparency International
Abelenkpe Rd Accra, Accra
Omit the (0) after the area code when dialing from abroad: +233 (0)302 760 884
alacghana@yahoo.com
https://www.transparency.org/en/report-corruption/ghana 

Ghana offers a relatively stable and predictable political environment for American investors when compared to the broader region and has a solid democratic tradition.  In December 2020, Ghana completed its eighth consecutive peaceful presidential and parliamentary elections and transfer of power since 1992, with power transferred between the two main political parties three times during that period.  On December 7, 2020 New Patriotic Party (NPP) candidate (and incumbent) Nana Akufo-Addo was re-elected over the National Democratic Congress (NDC) candidate, former President John Mahama.  The NDC disputed the 2020 presidential election result.  The Supreme Court heard the case and ruled that Akufo-Addo had, indeed, won the election.  There were isolated cases of violence during the election but no widespread civil disturbances.  The next general elections are scheduled for December 7, 2024.

Ghana has a large pool of unskilled labor.  English is widely spoken, especially in urban areas. However, according to the Ghana Statistical Service, nationwide illiteracy remains high at 30 percent in 2021.  While the unemployment rate was 13.4 percent in 2021, 32.8 percent of Ghanaians aged 15 to 24 were unemployed.  About 77 percent of Ghana’s employed population are in the informal sector and contributed about a quarter of its GDP in 2020.  Labor regulations and policies are generally favorable to business.  Although labor-management relationships are generally positive, occasional labor disagreements stem from wage policies in Ghana’s inflationary environment.  Many employers find it advantageous to maintain open lines of communication on wage calculations and incentive packages.  A revised Labor Act of 2003 (Act 651) unified and modified the old labor laws to bring them into conformity with the core principles of the International Labor Convention, to which Ghana is a signatory.

Under the Labor Act, the Chief Labor Officer both registers trade unions and approves applications by unions for a collective bargaining certificate.  A collective bargaining certificate entitles the union to negotiate on behalf of a class of workers.  The Labor Act also created a National Labor Commission to resolve labor and industrial disputes, and a National Tripartite Committee to set the national daily minimum wage and provide policy guidance on employment and labor market issues.  The National Tripartite Committee includes representatives from government, employers’ organizations, and organized labor.  The Labor Act sets the maximum hours of work at eight hours per day or 40 hours per week but makes provision for overtime and rest periods.  Some categories of workers, including trades workers and domestic workers, are excluded from the eight hours per day or 40 hours per week maximum.

The Labor Act prohibits the “unfair termination” of workers for specific reasons outlined in the law, including participation in union activities; pregnancy; or based on a protected class, such as gender, race, color, ethnicity, origin, religion, creed, social, political or economic status, or disability.  The Labor Act also provides procedures companies are required to follow when laying off staff, including under certain situations providing severance pay, known locally as “redundancy pay.”  Disputes over redundancy pay can be referred to the National Labor Commission.  The Act’s provisions regarding fair and unfair termination of employment do not apply to some classes of contract, probationary, and casual workers.

There is no legal requirement for labor participation in management.  However, many businesses utilize joint consultative committees in which management and employees meet to discuss issues affecting business productivity and labor issues.

There are no statutory requirements for profit sharing, but fringe benefits in the form of year-end bonuses and retirement benefits are generally included in collective bargaining agreements. Child labor remains a problem.  Child labor is particularly severe in agriculture, including in cocoa and fishing.  In general, worker protection provisions in the Labor Act, including health and safety provisions, are weakly enforced.  Post recommends consulting a local attorney for detailed advice regarding labor issues.  The U.S. Embassy in Accra maintains a list of local attorneys, which is available through the U.S. Foreign Commercial Service (https://www.trade.gov/ghana) or U.S. Citizen Services ( https://gh.usembassy.gov/u-s-citizen-services/attorneys/). 

Ghana signed an agreement with the Overseas Private Investment Cooperation (OPIC), the predecessor agency to the U.S. International Development Finance Corporation (DFC).  DFC is active in Ghana, providing financing and insurance for a number of projects – particularly in the energy, housing, agriculture, and health sectors.  All OPIC activities have been assumed by the DFC.  The Multilateral Investment Guarantee Agency (MIGA), African Project Development Facility (APDF), African Trade Insurance Agency, and the African investment program of the International Finance Corporation are other sources of information.

* Source for Host Country Data: Ghana Statistical Service 

U.S. Embassy, Economic Section
No. 24 Fourth Circular Road, Cantonments, Accra, Ghana
Tel: +233 (0) 302 741 000 (Omit the (0) after the area code when dialing from abroad)
Email: AccraICS@state.gov

Former President Conde’s government had adopted a strong, positive attitude toward foreign direct investment (FDI), an approach that has been echoed by the transition government.  In the face of budget shortfalls and low commodity prices, both former President Conde’s government and the transition government have expressed hope FDI will help diversify the economy, spur GDP growth, and provide reliable employment.  To that end, former President Conde’s government reduced land transfer fees, and improved procedures for import and construction permits.  Guinea does not discriminate against foreign investors, with the exception of a prohibition on foreign media ownership.  One area of concern, mining companies have negotiated different taxation rates despite mining code requirements.  In some instances, short-term tax breaks end up being costly for the investor as they are then expected to “contribute” resources like electrical energy or roadbuilding as an informal quid pro quo for the lighter tax burden.  According to the 2021World Investment Report, FDI in Guinea increased from USD 44 million in 2019 to 325 million in 2020.  In late 2015, the U.S. Embassy facilitated the establishment of an informal international investors group to liaise with the government, although the group has not been very active since.  There is the Chambre des Mines (Chamber of Mines), a government-sanctioned advisory organization that includes Guinea’s major mining firms.  Guinea’s Agency for the Promotion of Private Investment (APIP) provides support in the following areas:

1. Create and register businesses
2. Facilitate access to incentives offered under the investment code
3. Provide information and resources to potential investors
4. Publish targeted sector studies and statistics
5. Provide training and technical assistance
6. Facilitate solutions for investors in Guinea’s interior

On March 13, 2021, a presidential decree changed the structure of APIP into a public agency under the technical supervision of the Ministry of Investments and Public Private Partnerships, and under the financial supervision of the Ministry of Economy and Finance.  Since the September 2021 coup d’etat, APIP falls under the Ministry of Commerce, Industry, and Small and Medium Enterprises.

More information about APIP can be found at: http://apip.gov.gn/

Investors can register under one of four categories of business in Guinea. More information on the four types of business registration is available at http://invest.gov.gn/page/create-your-company.  There are no general limits on foreign ownership or control, and 100 percent ownership by foreign firms is legal in most sectors.  Foreign ownership of print media, radio, and television stations is not permitted.  The 2013 Mining Code gives the government the right to a 15 percent interest in any major mining operation in Guinea (the government decides when an operation has become large enough to qualify).  Mining and media notwithstanding, there are no sector-specific restrictions that discriminate against market access for foreign investment.  Despite this lack of official discrimination, many enterprises have discovered the licensing process to be laden with bureaucratic delays that are usually dealt with by paying consultant fees to help expedite matters.  The U.S. Embassy may be able to advocate on behalf of American companies when it is aware of excessive delays.

According to the Investment Code, the National Investment Commission has a role in reviewing requests for approval of foreign investment and for monitoring companies’ efforts to comply with investment obligations.  The Ministry of Planning and Economic Development hosts the secretariat for this commission, which grants investment approvals.  The government gives approved companies, especially industrial firms, the use of the land necessary for their plant, with the duration and conditions of use set out in the terms of the approval.  The land and associated buildings belong to the State but can also be rented by or transferred to another firm with government approval.

There has been no investment policy review conducted by the UN Conference on Trade and Development or the Organization for Economic Cooperation and Development within the past several years.  The World Trade Organization (WTO) last conducted a review of Guinea in 2018.  The 2018 report can be viewed here: https://www.wto.org/english/tratop_e/tpr_e/tp470_e.htm.

APIP promotes investment, helps register businesses, assists with the expansion of local companies, and works to improve the local business climate.  APIP maintains an online guide for potential investors in Guinea (http://invest.gov.gn).  Business registration can be completed in person at APIP’s office in Conakry or through their online platform:  https://synergui.apipguinee.com/fr/utilisateurs/register/.  The only internationally accredited business facilitation organization that assesses Guinea is the Global Enterprise Registration (GER.co), which gives Guinea’s business creation/investment website a 6/10 rating for 2021.  It takes roughly seventy-two hours to register a business.  APIP’s services are available to both Guinean and foreign investors.  The “One Stop Shop” at APIP’s Conakry office can provide small and medium sized enterprises (SMEs) with requisite registration numbers, including tax administration numbers and social security numbers.  Notaries are required for the creation of any other type of enterprise.

An SME in Guinea is defined as a business with less than 50 employees and revenue less than 500 million Guinean francs (GNF) (around USD 50,000).  SMEs are taxed at a yearly fixed rate of GNF 15 million (USD 1,500).  Administrative modalities are simplified and funneled through the “One Stop Shop”.   In December 2019, the Prime Minister inaugurated the “Maison des PME,” (“The SME House”) a public-private partnership between the Societe Generale bank and APIP to help local SMEs expand and develop.

Guinea does not formally promote outward investment, though the government does not restrict domestic investors from investing abroad.

Under former President Alpha Conde, Guinea made its laws and regulations more transparent, though draft bills were not always made available for public comment.  Ministries did not develop forward-looking regulatory plans and publish neither summaries nor proposed legislation.  Once ratified, laws were not enforceable until published in the government’s official gazette.  Since January 2022, the National Transition Council (CNT) has served as Guinea’s legislative body, tasked by the CNRD to draft a new constitution and recommend an electoral timeline to return to democratic and civilian rule.  All laws relevant to international investors are posted (in French) on invest.gov.gn. When investing, it is important to engage with all levels of government to ensure each authority is aware of expectations and responsibilities on both sides.

Guinea has had an independent Supreme Audit Institution since 2016. The institution is charged with making available information on public finances.  The institution presented its first 2016 activities report in January 2018. The institution presented the 2017, 2018, 2019 and 2020 activities report to the President of CNT in February 2022

Guinea’s 2013 amended Mining Code commits the country to increasing transparency in the mining sector. In the code, the government commits to awarding mining contracts by competitive tender and to publish all past, current, and future mining contracts for public scrutiny.  Members of mining sector governing bodies and employees of the Ministry of Mines are prohibited from owning shares in mining companies active in Guinea or their subcontractors.  Each mining company must sign a code of good conduct and develop and implement a corruption-monitoring plan.  There is a public database of mining contracts designed by the Natural Resource Governance Institute (http://www.contratsminiersguinee.org/).

The Extractive Industries Transparency Initiative (EITI) ensures greater transparency in the governance of Guinea’s natural resources and full disclosure of government revenues from its extractives sector. The EITI standard aims to provide a global set of conditions that ensures greater transparency of the management of a country’s oil, gas, and mineral resources. EITI reiterates the need to augment support for countries and governments that are making genuine efforts to address corruption but lack the capacity and systems necessary to manage effectively the businesses, revenues, and royalties derived from extractive industries.  Guinea requires mining companies to file environmental, social, and governance (ESG) disclosures.

Guinea was accepted as EITI compliant for the first time by the international EITI Board at its meeting in Mexico City on July 2, 2014.  As an EITI country, Guinea must disclose the government’s revenues from natural resources.  Guinea completed its most recent report in December 2020 for the 2018 reporting period.  The report is located at: https://www.itie-guinee.org/rapport-itie-guinee-2018/.

While Guinea’s laws promote free enterprise and competition, there is often a lack of transparency in the law’s application.  Business owners openly assert that application procedures are sufficiently opaque to allow for corruption, and regulatory activity is often instigated due to personal interests.

Every year Guinea publishes budget documents and debt obligations.  The yearly enacted budgets are published online LOIS DE FINANCES | Ministère du Budget Guinée (mbudget.gov.gn) https://mbudget.gov.gn/.

Guinea has historically been a member of ECOWAS, but not a member of the West African Economic and Monetary Union (UEMOA) and as such has its own currency.  At the beginning of 2017, Guinea adopted ECOWAS’s Common Exterior Tariff (TEC), which harmonizes Guinea’s import taxes with other West African states and eliminates the need for assessing import duties at Guinea’s land border crossings, though, sometimes it is difficult to get the required certificates to export under these ECOWAS exemptions.  Guinea is a member of the WTO and is not party to any trade disputes.  Since the September 2021 coup, the African Union and ECOWAS have suspended Guinea’s memberships.

Guinea’s legal system is codified and largely based upon French civil law.  Under former President Conde, the judicial system was reported to be generally understaffed, corrupt, and opaque.  Accounting practices and bookkeeping in Guinean courts are frequently unreliable.  U.S. businesspersons should exercise extreme caution when negotiating contract arrangements and do so with proper local legal representation.  Although the current transition charter, former constitution, and laws provide for an independent judiciary; in practice the judicial system lacks independence, is underfunded, inefficient, and is portrayed in the press as corrupt.  Budget shortfalls, a shortage of qualified lawyers and magistrates, nepotism, and ethnic bias contribute to the judiciary’s challenges.  Former President Conde’s administration successfully implemented some judicial reforms and increased the salaries of judges by 400 percent to discourage corruption.

After the September 2021 coup, Guinea’s penal and civil code remains in force. The transition government maintained the existing legal structure and stated that “justice will be the compass guiding every Guinean citizen.”  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.

There are few international investment lawyers accredited in Guinea and it is a best practice to include international arbitration clauses in all major contracts.  U.S. companies have identified the absence of a dependable legal system as a major barrier to investment.  Despite dispute settlement procedures set forth in Guinean law, business executives complain of the glacial pace of the adjudication of business disputes.  Most legal cases take years and significant legal fees to resolve.  In speaking with local business leaders, the general sentiment is that any resolution occurring within three to five years might be considered quick.

In many cases, the government does not meet payment obligations to private suppliers of goods and services, either foreign or Guinean, in a timely fashion.  Arrears to the private sector are a major issue that is often ignored.  There is no independent enforcement mechanism for collecting debts from the government, although some contracts have international arbitration clauses. The government, while bound by law to honor judgments made by the arbitration court, often actively influences the decision itself.

Although the situation has improved recently, Guinean and foreign business executives have publicly expressed concern over the rule of law in the country. In 2014, high-ranking members of the military harassed foreign managers of a telecommunications company because they did not renew a contract.  American businesses experience long delays in getting required signatures and approvals from government ministries, and in some cases the presidency, under both former President Conde’s government and the transition government.  Some businesses have been subject to sporadic harassment from tax authorities and demands for donations from military and police personnel.

The National Assembly ratified an Investment Code regulating FDI in May 2015. Developed in cooperation with the Work Bank and IMF, the code harmonizes Guinea’s FDI regulations with other countries in the region and broadens the definition of FDI. The code also allows for direct agreements between investors and the State. Other important legislation related to FDI includes the Procurement Code, the BOT (Build Operate Transfer, now Public Private Partnership or PPP) Law and the Customs Code.  An October 2017 Public-Private Partnerships (PPP) law replaced the earlier BOT law, providing a clearer, updated, and more secure legal, regulatory, and institutional framework for PPP projects, including through partnership agreements, BOT schemes, concessions, public leasing, and delegated public service.  PPP procurement tender processes also have been clarified and updated.  The PPP law seeks to increase infrastructure development in Guinea.  Under the new law, Parliament no longer needs to approve Guinean government contracts with private companies, as was required under BOT, apart from mining contracts.  Obligations to conduct feasibility studies and to precisely define public needs also have been increased in this new law.  Guinea’s investment promotion agency has a website (www.invest.gov.gn) to increase transparency and streamline investment procedures.

The legal system handles domestic cases involving foreign investors.  However, the legal system continues to be weak, is in need of reform, and continues to be subject to interference.  Although the transition charter provides for an independent judiciary, in practice the judicial system lacks independence and is underfunded, inefficient, and is perceived by many to be corrupt.

APIP launched a website in 2016 that lists information related to laws, rules, procedures, and registration requirements for foreign investors, as well as strategy documents for specific sectors http://invest.gov.gn.  Further information on APIP’s services is available at https://apip.gov.gn/.   APIP has a largely bilingual (English and French) staff and is designed to be a clearinghouse of information for investors.

The National Assembly ratified an Investment Code regulating FDI in May 2015. Developed in cooperation with the Work Bank and IMF, the code harmonizes Guinea’s FDI regulations with other countries in the region and broadens the definition of FDI. The code also allows for direct agreements between investors and the State. Other important legislation related to FDI includes the Procurement Code, the BOT (Build Operate Transfer, now Public Private Partnership or PPP) Law and the Customs Code.  An October 2017 Public-Private Partnerships (PPP) law replaced the earlier BOT law, providing a clearer, updated, and more secure legal, regulatory, and institutional framework for PPP projects, including through partnership agreements, BOT schemes, concessions, public leasing, and delegated public service.  PPP procurement tender processes also have been clarified and updated.  The PPP law seeks to increase infrastructure development in Guinea.  Under the new law, Parliament no longer needs to approve Guinean government contracts with private companies, as was required under BOT, apart from mining contracts.  Obligations to conduct feasibility studies and to precisely define public needs also have been increased in this new law.  Guinea’s investment promotion agency has a website (www.invest.gov.gn) to increase transparency and streamline investment procedures.

The legal system handles domestic cases involving foreign investors.  However, the legal system continues to be weak, is in need of reform, and continues to be subject to interference.  Although the transition charter provides for an independent judiciary, in practice the judicial system lacks independence and is underfunded, inefficient, and is perceived by many to be corrupt.

APIP launched a website in 2016 that lists information related to laws, rules, procedures, and registration requirements for foreign investors, as well as strategy documents for specific sectors http://invest.gov.gn.  Further information on APIP’s services is available at https://apip.gov.gn/.   APIP has a largely bilingual (English and French) staff and is designed to be a clearinghouse of information for investors.

There are no agencies that review transactions for competition-related concerns.

Guinea’s Investment Code states that the government will not take any steps to expropriate or nationalize investments made by individuals and companies, except for reasons of public interest.  It also promises fair compensation for expropriated property.

In 2011, the former President Conde’s government claimed full ownership of several languishing industrial facilities in which it had previously held partial shares as part of several joint ventures—including a canned food factory and processing plants for peanuts, tea, mangoes, and tobacco—with no compensation to the private sector partner.  Each of these facilities was privatized under opaque circumstances in the late 1980s and early 1990s.  By expropriating these businesses, which the Conde government deemed to be corrupt and/or ineffective, and putting them to public auction, Guinea hoped to correct past mistakes and put the assets in more productive hands.  During the 1990s, a U.S. investor acquired a 67 percent stake in an explosives and munitions factory from a Canadian entity.  The Guinean government owned the remaining 33 percent.  From 2000 to 2008, the government halted manufacturing at the factory, nationalizing the factory in 2010.

While there had not been recent large-scale expropriation cases by the end of former President Conde’s administration, some mining concession contracts have had their initial award revoked and were sold to another bidder.  In 2008, the previous regime of Lansana Conde stripped Rio Tinto of 50 percent of its concession of the Simandou iron ore mine and sold it to another company.  In March 2022, the transition government began seizing property they believed belonged to the state and was inappropriately sold under former President Conde’s government, in some cases demolishing houses and buildings on the disputed land before legal challenges were exhausted.

Guinea, as a member of OHADA, has the same bankruptcy laws as most West African francophone countries.  OHADA’s Uniform Act on the Organization of Securities enforces collective proceedings for writing off debts and defines bankruptcy in articles 227 to 233.  The Uniform Act also distinguishes fraudulent from non-fraudulent bankruptcies.  There is no distinction between foreign and domestic investors.  The only distinction made is a privilege ranking that defines which claims must be paid first from the bankrupt company’s assets.  Articles 180 to 190 of OHADA’s Uniform Act define which creditors are entitled to priority compensation.  Bankruptcy is only criminalized when it occurs due to fraudulent actions and leaves criminal penalties to national authorities.  Non-fraudulent bankruptcy is adjudicated though the Uniform Act.

The Investment Code provides preferential tax treatment for investments meeting certain criteria (See Screening of FDI).  Some mining companies currently benefit from preferential tax treatment.  Other exemptions can be agreed to during contract negotiations with the government.  The government’s priority investments categories include promotion of small- and medium-sized Guinean businesses, development of non-traditional exports, processing of local natural resources and local raw materials, and establishment of activities in economically less developed regions.  Priority activities include agricultural promotion, especially of food, and rural development; commercial farming involving processing and packaging; livestock, especially when coupled with veterinary services; fisheries; fertilizer production, chemical or mechanical preparation and processing industries for vegetable, animal, or mineral products; health and education-related businesses; tourism facilities and hotel operations; socially beneficial real estate development; and investment banks or any credit institutions settled outside specified population centers.  Detailed information on each of these opportunities is available at http://invest.gov.gn.

Neither former President Conde’s government nor the transition government provide incentives for businesses owned by underrepresented investors, such as women.

Guinea currently has no foreign trade zones or free ports. In 2017, a presidential decree created a special economic zone in the Boke corridor of western Guinea.

Under the revised 2013 Mining Code, mining companies are required to employ Guinean citizens as a certain percentage of their staff, to eventually transition to a Guinean country director, and to award a certain percentage of contracts to Guinean-owned firms.  The percentage varies based on employment category and the chronological phase of the project.  The Mining Code requires that 20 percent of senior managers be Guinean; however, the Code does not define what constitutes senior management.  The Code also aims to liberalize mining development and promote investment.  In 2013, the Code called for the creation of a Mining Promotion and Development Center, a One Stop Shop for mining administrative processes for investors, which opened in May 2016.  Guinea has no forced localization policy related to the use of domestic content in goods or technology, and there are no requirements for foreign IT providers to turn over source code or provide access to surveillance or to store data within Guinea.

In 2019, the government launched an e-visa platform allowing for online visa applications at http://www.paf.gov.gn/.  Fees vary depending on citizenship.  This is the only way to apply for a visa to Guinea as Guinean embassies around the world no longer process visa applications.

The Estate and Land Tenure Code of 1992 provides a legal base for documentation of property ownership.  Mortgages are nearly non-existent in Guinea.  As with ownership of business enterprises, both foreign and Guinean individuals have the right to own property.  However, enforcement of these rights depends upon an inefficient Guinean legal and administrative system.  It is not uncommon for the same piece of land to have several overlapping deeds. Furthermore, land sales and business contracts generally lack transparency.  Only about 2.5 percent of the population has title to real property.  The Ministry of Urban Affairs is developing an online platform that will facilitate the registration of land titles and reduce waiting times to about five days.  The Ministry of Urban Development, Housing, and Regional Planning launched the Building Permit One-Stop-Shop in February 2022, which is slated to reduce building permit procurement processing from 40 to seven days.

Guinea is a member of the African Intellectual Property Organization (OAPI) and the World Intellectual Property Organization (WIPO).  OAPI is a signatory to the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, the Patent Cooperation Treaty, the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), and several other intellectual property treaties.  Guinea modified its intellectual property rights (IPR) laws in 2000 to bring them into line with established international standards.  There have been no formal complaints filed on behalf of American companies concerning IPR infringement in Guinea.  However, it is not certain that an affirmative IPR judgment would be enforceable, given the general lack of law enforcement capability.  The Property Rights office in Guinea is severely understaffed and underfunded.  Guinea is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.  For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at https://www.wipo.int/directory/en/contact.jsp?country_id=67&type=ADMIN.

Commercial credit for private enterprises is difficult and expensive to obtain in Guinea. The FY 2022 Millennium Challenge Corporation score for Access to Credit in Guinea reached 30 percent, increasing from 21 percent in FY 2021.

Guinea adopted a Build-Operate-Transfer (BOT) law in 1998, but the law was never fully implemented as the government failed to adopt the decree necessary for its implementation.  An October 2017 Public-Private Partnerships (PPP) law replaced the earlier BOT law, providing a clearer, updated, and more secure legal, regulatory, and institutional framework for PPP projects, including through partnership agreements, BOT schemes, concessions, public leasing, and delegated public service.  PPP procurement tender processes also have been clarified and updated.  The PPP law seeks to increase infrastructure development in Guinea.  Under the new law, Parliament no longer needs to approve Guinean government contracts with private companies, as was required under BOT, apart from mining contracts. Obligations to conduct feasibility studies and to precisely define public needs also have been increased in this new law.  Guinea’s investment promotion agency has a website (www.invest.gov.gn) to increase transparency and streamline investment procedures.  However, in practice businesses often wait months or years to receive final approvals from one ministry or another or the President, depending on the sector.  Guinea’s capacity to enforce its more investor-friendly laws is compromised by a weak and unreliable legal system.  Some especially large-scale enterprises or extractives industry firms must wait for final permission from the President himself to begin operations.  These facts make personal relationships with high-ranking officials desirable and indeed generally essential, though as mentioned above, this brings the risk of a project’s becoming associated with specific individuals or administrations, and thus subject to subsequent rescission.

Guinea updated its Investment Code in 2015 and renewed efforts to attract international investors.  The Investment Code allows income derived from investment in Guinea, the proceeds of liquidating that investment, and the compensation paid in the event of nationalization, to be transferred to any country in convertible currency.  The legal and regulatory procedures, based on French civil law, are not always applied uniformly or transparently.

Individuals or legal entities making foreign investments in Guinea are guaranteed the freedom to transfer the original foreign capital, profits resulting from investment, capital gains on disposal of investment, and fair compensation paid in the case of nationalization or expropriation of the investment to any country of their choice.  The Guinean franc is subject to a managed floating exchange rate.  The few commercial banks in Guinea are dependent on the Central Bank (BCRG) for foreign exchange liquidity, making large transfers of foreign currency difficult.

Laws governing takeovers, mergers, acquisitions, and cross-shareholding are limited to rules for documenting financial transactions and filing any change of status documents with the economic register.  There are no laws or regulations that specifically authorize private firms to adopt articles of incorporation that limit or prohibit investment.

Guinea’s financial system is small and dominated by the banking sector. It comprises 19 active banks, 19 insurance companies and 19 microfinance institutions.  Guinea’s banking sector is overseen by the Central Bank (BCRG), which also serves as the agent of the government treasury for overseeing banking and credit operations in Guinea and abroad. The BCRG manages foreign exchange reserves on behalf of the State.  The Office of Technical Assistance of the Department of the Treasury assesses that Guinea does not properly manage debt and that its treasury is too involved in the process, although improvements made in 2017-2018 point to a better future.  Further information on the BCRG can be found in French at http://www.bcrg-guinee.org.

Due to the difficulty of accessing funding from commercial banks, small commercial and agricultural enterprises have increasingly turned to microfinance, which has been growing rapidly with a net increase in deposits and loans.  The quality of products in the microfinance sector remains mediocre, with bad debt accounting for five percent of loans with approximately 17 percent of gross loans outstanding.

Guinea plans to broaden the country’s SME base through investment climate reform, improved access to finance, and the establishment of SME growth corridors.  Severely limited access to finance (especially for SMEs), inadequate infrastructure, deficiencies in logistics and trade facilitation, corruption and the diminished capacity of the government, inflation, and poor education of the workforce has seriously undermined investor confidence in Guinean institutions.  Guinea’s weak enabling environment for business, its history of poor governance, erratic policy, and inconsistent regulatory enforcement exacerbate the country’s poor reputation as an investment destination.  As a result, private participation in the economy remains low and firms’ productivity measured by value added is one of the lowest in Africa. Firms’ links with the financial sector are weak:  only 3.9 percent of firms surveyed in the 2016 World Bank Enterprise survey had a bank loan.

Credit to the private sector is low, at around 8.6 percent of GDP in 2021.  Commercial banks are reluctant to extend loans due to the lack of credit history reporting for potential borrowers. Through the Central Bank, Guinea is in the process of establishing a credit information bureau to overcome this asymmetry of credit information.  Despite the pandemic and September 2021 coup, the banking sector remains liquid and solvent with limited credit available to the private sector.  Heavy government borrowing drained the excess liquidity and crowded out private sector credit in 2021.  Despite the COVID-19 slowdown and political instability, private sector credit grew by 7.36 percent from January 2021 to January 2022.

Guinea is a cash-based society driven by trade, agriculture, and the informal sector, which all function outside the banking sector.  The banking sector is highly concentrated in Conakry and is technologically behind.  Banks in Guinea tend to favor short-term lending at high interest rates.  In collaboration with the U.S. Treasury’s Office of Technical Assistance, the Central Bank began planning to implement a bank deposit insurance scheme.  The deposit coverage limit has not been set yet, but the Central Bank began to collect premiums from commercial banks in 2019.

While the microfinance sector grew strongly from a small base, it was hit hard during the 2014-2016 Ebola crisis.  Currently it is not generally profitable and needs capacity and technology upgrades.  Furthermore, many microfinance institutions struggle to meet higher minimum capital requirements imposed by the Central Bank since 2019.  This heightened financial hurdle will likely lead to a consolidation of the microfinance sector.  The efficiency and use of payment services by all potential users needs to be improved, with an emphasis on greater financial inclusion.

The penetration of digital cellphone fund transfers is increasing.  Four foreign e-money (or mobile banking) institutions lead the effort to digitize payments and improve access to financial services in underserved and rural segments of the population.  However, the vast majority of operations processed by these e-money institutions remain cash-in cash-out transactions within a single network.  In an effort to modernize payment methods, the transition government is continuing an initiative of former President Conde’s administration to implement a national switch — a nationwide platform that will interface all electronic payment systems and facilitate payment processing between service providers.  This service was still under development in 2022, and the Central Bank is in the process of selecting a service provider.

Generally, there are no restrictions on foreigners’ ability to establish bank accounts in Guinea. EcoBank is the preferred bank for most U.S. dealings with Foreign Account Tax Compliant Act (FACTA) reporting requirements. With the acquisition of a majority stake in BICIGUI (Banque Internationale pour le Commerce et l’Industrie de la Guinee) in July 2021, Vista Bank became the largest bank in Guinea, a first on the African continent for a U.S.-owned financial institution.

Guinea does not have a sovereign wealth fund.

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.

The transition government is continuing the former Conde administration’s initiative to privatize the energy sector.  In April 2015, the government tendered a management contract to run the state-owned electrical utility EDG.  French company Veolia won the tender and attempted to manage and rehabilitate the insolvent utility until the end of 2019.  In February 2020, EDG became a public limited company with its own board of directors.  The new directors were appointed by former President Conde through decree, replaced with a new Board of Directors with a decree from Transition President COL Doumbouya in February 2022.  Bidding processes are clearly spelled out for potential bidders; however, Guinea gives weight to competence in the French language and experience working on similar projects in West Africa.  In spring 2015, a U.S. company lost a fiber optics tender largely due to its lack of native French speakers on the project and lack of regional experience.

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.

Department of State

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

Department of the Treasury

• OFAC Recent Actions

Department of Labor

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

Guinea ratified the United Nations Framework Convention on Climate Change (UNFCCC) in 1993 and the Kyoto Protocol in 2005.  Guinea prepared an Initial National Communication in 2001 to inventory greenhouse gases (GHG), based on emissions in 1994).  A second GHG inventory was completed in 2011, based on 2000 emissions.  Guinea prepared its National Adaptation Plan of Action (NAPA) in 2007 and undertook several projects to implement the plan.  Prior to COP 21 in Paris in December 2015, Guinea submitted an Intended National Contribution Determination in September 2015, committing to a 13 percent decrease in GHG emissions by 2030, as compared to 1994 emission levels.  In preparation for COP 26 in Edinburgh in November 2021, Guinea prepared a Nationally Determined Contribution in July 2021, making a commitment to a 17 percent reduction target across sectors, potentially reaching a 49 percent reduction by 2030 by including land-use and forestry.  Guinea has not yet prepared a National Adaptation Plan.

As of April 2022, Guinea does not offer any regulatory incentives to achieve policy outcomes that preserve climate change benefits, nor do public procurement policies include environmental and green growth considerations.

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 

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.

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.

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

The GRM welcomes foreign investment and sees it as a critical driver of economic growth and job creation. Except for a few sectors related to national security, all business sectors are open to foreign investment. Mozambique’s 1993 Investment Law (no. 3/93) and a 2009 decree (no. 43/2009) govern foreign investments. Many observers perceive the Investment Law as obsolete, although the GRM has not yet taken steps to revise it.

In general, large investors receive more support from the GRM than small and medium-sized investors.  GRM authorities must approve all foreign and domestic investment, including guarantees and incentives.  Regulations for the 2009 Code of Fiscal Benefits law (no. 4/2009), were established under a 2009 Decree (no. 56/2009).

The Agency for Promotion of Investments and Exports (APIEX, Agencia para a Promocao de Investimentos e Exportacoes) is the primary investor contact within the GRM, operating under the Ministry of Industry and Commerce (MIC), with the objective of promoting and facilitating private and public investment.  APIEX also oversees the promotion of national exports and assists investors with administrative, financial, and property issues.  Through APIEX, investors can receive exemptions from some customs and value-added tax (VAT) duties when importing “Class K” equipment, which includes capital investments.

Contact information for APIEX is:

Agency for Promotion of Investments and Exports
http://www.apiex.gov.mz/
Rua da Imprensa, 332 (ground floor)
Tel: (+258) 21313310

Ahmed Sekou Touré Ave., 2539 Maputo
Telephone: (+258) 21 321291
Mobile: (+258) 823056432

GRM dialogue with the private sector is primarily coordinated by Mozambique’s Ministry of Industry and Commerce (MIC). Most businesses in Mozambique interact with the GRM via the country’s largest business association, the Confederation of Economic Associations (CTA, Confederação das Associações Económicas de Moçambique). CTA was formed in 1996 and continues to be the most influential business association in Mozambique. CTA hosts an annual conference for private sector dialogue with the GRM (Conferencia Annual do Sector Privado; CASP), which is usually attended by the President of Mozambique and senior cabinet officials.

With some exceptions, Mozambique’s Investment Law and its regulations generally do not distinguish between investor origin or limit foreign ownership or control of companies.  The 2011 “Mega-Projects Law” (no. 15/2011) stipulates that 5 – 20 percent of the equity capital of public-private partnerships, large-scale ventures, and major business concessions be owned by Mozambicans.

The Petroleum Law (no. 14/2014) states that the GRM regulates the exploration, research, production, transportation, trade, refinery, and transformation of liquid hydrocarbons and their by-products, including petrochemical activities.  Article 4.6 of this law establishes the state-owned oil company, the National Hydrocarbon Company (Empresa National das Hidrocarbonetos; ENH) as the GRM’s exclusive representative for investment and participation in oil and gas projects.  ENH typically owns up to 15 percent of shares in oil and gas projects in the country.

Depending on the size of the investment, the GRM approves both domestic and foreign investments at the provincial or national level, but there is no other formal investment screening process.

In March 2022, CTA published a report entitled “ Accelerating actions for economic recovery in Mozambique’s Private Sector.” The report lists seven key recommendations announced at the March 30-31 CASP conference: 1) Reduce the number of days required to obtain a business license; 2) reduce the cost of finance; 3) apply incentives to increase industrialization; 4) increase the number of products certified at international standards; 5) strengthen small and medium enterprises through legal reforms and payment of all government debts to companies; 6) increase agricultural productivity through fiscal reform; and 7) increase influx of international tourists to Mozambique by facilitating visas and lowering value added taxes paid by tourists.

Starting a business in Mozambique is a lengthy, bureaucratic, and complex process that has contributed to Mozambique’s relatively low score on the World Bank’s Doing Business Report. In the 2020 report (the most recent available), Mozambique ranked 176 out of 190 economies worldwide for ease of starting a new business, scoring well below the regional average for sub-Saharan Africa. Its low rank is due in part to the relatively high cost of registering a business and number of procedures required to complete the process.

Registering a business typically involves many steps including reserving a name, signing an incorporation contract, paying registration fees, publishing the company’s name and statutes in the national gazette, registering with the tax authority, and notifying relevant agencies of the start of activity. According to the World Bank, this process takes approximately seventeen days. There is not a business registration website; however, APIEX maintains a guide  to starting a business with some resources. In 2020, the City of Maputo consolidated some of the steps by establishing a “one stop shop” (balcão de atendimento unico; BAU), reducing the number of days required to register a new company to eleven.

The GRM has initiated several projects to promote competitiveness within the private sector. The MIC collaborated with CTA to create an action plan for improving the business environment (Plano de Acção para Melhorar a Ambiente de Negocios; PAMAN) in the 2019-2021 period, although the GRM achieved only 38.6 percent of the proposed reforms. In 2020, the GRM partnered with CTA to launch the Programa Nacional de Certificação Empresarial (PRONACER) to support small and medium enterprises.

The GRM does not promote or incentivize outward investment.  It also does not restrict domestic investors from investing abroad.  However, Mozambique does require domestic investors to remit investment income from overseas, except for amounts required to pay debts, taxes, or other expenses abroad.

Investors face numerous requirements for permits, approvals, and clearances, which often take substantial time and effort to obtain.  The difficulty of navigating the system creates vulnerabilities to corruption, a risk that is aggravated by relatively low wages earned by administrative clerks.  Labor, health, safety, and environmental regulations may go unenforced or are selectively enforced.  In some cases, civil servants have reportedly threatened to enforce antiquated regulations that remain on the books in order to obtain favors or bribes.

The private sector, through CTA, maintains an ongoing dialogue with the GRM, holding quarterly meetings with the Prime Minister and an annual meeting with the President. On behalf of its members and other business associations, CTA provides feedback to the GRM on laws and regulations that impact the business environment. However, because of its exclusive role in communicating with the GRM on behalf of the private sector, some businesses have expressed concerns that not all voices are heard. In addition, some businesses have argued that CTA is not an effective advocate given its political affiliation with long-time ruling party Frelimo. Numerous other business associations exist, including a newly accredited American Chamber of Commerce (AmCham), formed in 2019 to represent the interests of the U.S. business community in Mozambique.

The GRM requires businesses in certain sectors to apply for an Environmental License, via the Environmental Impact Evaluation Process, regulated under the Environmental Impact Assessment Regulation (no. 54/2015). The Ministry of Land and Environment and its subordinate institutions and directorates issue licenses following the Environmental Impact Evaluation Process, which entails creation of an Environmental and Social Management Plan (ESMP).

Draft bills are made available for public comment through business associations or in public meetings.  The GRM publishes changes to laws and regulations in the National Gazette, which is available electronically.  Public comments are usually limited to input from a few private sector organizations, such as CTA.  There have been complaints of short comment periods and that comments are not properly reflected in the National Gazette.

Overall fiscal transparency in Mozambique is improving in the wake of the “hidden debts” scandal, which broke in 2016. GRM reporting on public debts has improved, with SOE debt now included in the national budget. However, publicly available budget documents still do not provide a complete picture of the GRM’s revenue streams, particularly with regard to SOE earnings, which generally do not have publicly available audited financial statements. The GRM also maintains off-budget accounts not subject to adequate audit or oversight.  For published portions of the budget that were relatively complete, the information provided was generally reliable. The March 2022 IMF agreement contains reform measures designed to improve the GRM’s public financial management.

Mozambique is a member of the Southern African Development Community (SADC).  In 2016, Mozambique, Botswana, Lesotho, Namibia, South Africa, and Eswatini (then-Swaziland), signed an Economic Partnership Agreement (EPA) with the European Union.  Mozambique exports aluminum under this EPA agreement. The GRM ratified the World Trade Organization (WTO) Trade Facilitation Agreement (TFA) in July 2016 and notified the WTO in January 2017.  The GRM established a National Trade Facilitation Committee to coordinate the implementation of the TFA.

Mozambique is a member of the WTO and generally notifies the WTO Committee on Technical Barriers to Trade (TBT) of all draft technical regulations. The National Institute of Norms and Quality (Instituto Nacional de Normalização e Qualidade, INNOQ) falls under the supervision of the Ministry of Industry and Commerce and is the WTO enquiry point for TBT-related issues. INNOQ is a member of the International Standards Organization (ISO) and carries the mandate to issue ISO 9001 certificates. According to the WTO’s 2017 Trade Policy Review of Mozambique , no specific trade concerns have been raised about Mozambique’s TBT measures in the WTO TBT Committee.

Like most countries in Africa, Mozambique generally uses standards based on existing ISO and International Electrotechnical Commission (IEC) standards for most products.

Mozambique’s legal system is based on Portuguese civil law and customary law.  The GRM updated its Commercial Code in 2005 and 2018.

In recent years, Mozambique’s legal system has shown a degree of independence. In August 2021, the Maputo City Judicial Court began proceedings for 19 defendants in the “hidden debts” trial, who were accused of illicitly acquiring over $2 billion in state-backed loans under the guise of developing a tuna fishing fleet and coastal protection system. The court completed hearings in March 2022, and anticipated verdicts to be announced on August 1, 2022. It is unclear whether Mozambique’s General Prosecutor will pursue further indictments. The former Finance Minister responsible for signing the illicit state-backed loan guarantees in the scandal remains under custody in South Africa, pending possible extradition to the United States. The General Prosecutor’s office has also pursued suspects in separate corruption-related cases.

The 2009 Code of Fiscal Benefits (no. 4/2009) and 2009 Decree (no. 56/2009) form the legal basis for foreign direct investment in Mozambique. Operating within these regulations, APIEX analyzes the fiscal and customs incentives available for a particular investment.  Investors must establish foreign business representation and acquire a commercial representation license. During project development, investors must document their community consultation efforts related to the project.  If the investment requires the use of land, the investor must present, among other documents, a topographic plan or an outline of the site where the project will be developed.

If the investment involves an area under 1,000 hectares and the investment is under approximately $25 million, the governor of the province where it will be located can approve the investment.  While APIEX has the authority to approve any project up to $40 million, the Minister of Economy and Finance (MEF) must approve national or foreign investments between $40 million and $225 million.  If the investment occupies an area of 10,000 hectares, or an area greater than 100,000 hectares for a forestry concession, or it amounts to more than $225 million, the Council of Ministers must approve it. APIEX  provides additional information regarding Mozambique’s investment requirements.

The 2013 “Competition Law” (no. 10/2013), established a modern legal framework for competition and created the Competition Regulatory Authority, inspired by the Portuguese competition enforcement system.  Violating the prohibitions contained in the Competition Law (either by entering into an illegal agreement or practice or by implementing a concentration subject to mandatory filing) could result in a fine of up to five percent of the turnover of the company in the previous year.  Competition Regulatory Authority decisions may be appealed in the Judicial Court in Maputo for cases leading to fines or other sanctions, or to the Administrative Court for merger control procedures.

There have been no significant cases of nationalization since the adoption of the 1990 Constitution. Mozambican law holds that “when deemed absolutely necessary for weighty reasons of national interest or public health and order, the nationalization or expropriation of goods and rights shall result in the owner being entitled to just and equitable compensation.”

The GRM adopted a comprehensive legal regime for bankruptcy in 2013 known as the “Insolvency Law” (no. 1/2013). This law streamlines the bankruptcy process, sets the rules for business recovery, facilitates potential recovery for struggling businesses, and establishes legal methods to declare bankruptcy. Under the law, creditors can approve a proposed rescue plan, request that a debtor be declared insolvent, and challenge suspicious transactions.

The GRM reformulated its Code of Fiscal Benefits in 2009 (Law no. 4/2009 and Decree no. 56/2009). These benefits aim to encourage development in Mozambique by reducing the amount of tax to be paid by certain companies or entities in the public interest. The law contains specific incentives for entities that intend to invest in certain geographical areas within Mozambique that have natural resource potential but lack infrastructure and have low levels of economic activity.  Additional modest incentives are available for professional training and the construction and rehabilitation of public infrastructure, including but not limited to roads, railways, water supply, schools, and hospitals.

Mozambique has six Special Economic Zones (SEZs) including one specific SEZ for Agriculture, and five Industrial Free Zones (IFZs). Created in 2007, Mozambique’s SEZs are zones of general economic activity, geographically delimited and governed by a special customs regime in which goods entering, circulating, transforming, and leaving Mozambican territory are exempt from tax, customs and foreign exchange obligations. Goods produced in SEZs can be sold domestically or abroad, although goods sold domestically are treated by Mozambican authorities as an export to the domestic market and are therefore subject to the applicable customs duties. Mozambique’s six SEZs are distributed in Nampula, Sofala, Zambézia, Niassa and Gaza provinces.

Mozambique’s IFZs are similar to SEZs, except that they are designed specifically for industry, and firms operating in IFZs must export at least 70% of their total production. Investments in IFZs are eligible for specific tax incentives. Mozambique’s five IFZs are located in the provinces of Maputo, Nampula, and Tete.

Investors should pay close attention to documents and procedures requested to establish a business locally or request fiscal and customs incentives if investing in an SEZ or IFZ. Investors have complained that some GRM officials may not be aware of the benefits conferred by tax-free status, particularly related to customs and duty-free imports.

The GRM established the Limpopo Valley Agribusiness SEZ (ZEEA-L) in January 2021, with the objective of exploring and developing the agricultural potential of the Limpopo Valley. The zone falls under the 2009 Code of Fiscal Benefits. ZEEA-L is part of the GRM’s World Bank funded 2020-2024 SUSTENTA Program, which aims to stimulate investment in agriculture by integrating family farming into productive value chains.

Although the concept of local content in terms of employment and procurement by international firms has featured prominently in Mozambican public discourse, the GRM does not require investors to purchase from local sources, nor does it require technology or proprietary business information to be transferred to a local company.  However, within certain sectors, the GRM has implemented specific local content requirements. In the oil and gas sector, the Petroleum Law (no. 21/2014) requires oil and gas companies to give preference to Mozambican individuals and companies if the goods or services are of an internationally comparable quality and competitively priced. The exact local content requirements for each project operating under this law are negotiated within the “Local Content Working Group,” an inter-ministerial body responsible for implementing the GRM’s local content strategy. In March 2022, President Nyusi declared that Mozambique would not adopt a local content law, which he said would make Mozambique uncompetitive.

Companies may hire foreign workers only when there are not sufficient Mozambican workers available to meet specific job qualifications.  The Ministry of Labor enforces maximum quotas on foreign workers as a percentage of the workforce within companies, which varies based on the size of the company.  The 2007 Labor Law (no. 23/2007) sets minimum quotas for the percentage of Mozambicans a company operating in Mozambique must employ.  Many companies have found a work-around by hiring foreigners as outside consultants. Work permits for foreigners cost approximately $370 and take at least one month to be issued.  All investments must specify the number and category of Mozambican and foreign workers.

The GRM currently has no data localization policies in effect.  Several international companies offer cloud services to Mozambique; however, none operate in-country data centers. In addition to the GRM-operated Maluana Park and Teledata centers, Mozambique hosts three private data centers: SEACOM, Webmasters, and Eduardo Mondlane University. None of Mozambique’s facilities are carrier-neutral and they do not host individual servers. In February 2022, Mozambique became the first African country to grant a license to SpaceX’s satellite-based internet service provider Starlink.

The government agency responsible for enforcing IT policies and rules is:

UTICT – Unidade Tecnica de Implementacao da Politica de Informatica
Technical Implementation Unit for IT Policy
Tel: (258) 21 309 398; 21 302 241
Mobile (258) 305 3450
Email: cpinfo@infopol.gov.mz 

The legal system recognizes and protects property rights to buildings and movable property, although private land ownership is not permitted, as all land is owned by the State. The GRM grants land-use concessions called Direitos de Uso e Aproveitamento de Terra (DUAT) for periods of up to 50 years with options to renew for additional periods. In practice, DUATs serve as proxies for land titles, although there is no robust market for DUATs as they are not easily transferable.  The process to award DUATs is not transparent and the GRM at times has granted overlapping DUATs that require lengthy negotiations to resolve.  It takes an average of 90 days to issue a DUAT. Banks in Mozambique tend to rely on property other than land – cars, private houses, and infrastructure – as collateral. While CTA and other entities have made efforts to make DUATs “bankable,” it is not currently possible to securitize DUATs for lending purposes.

In urban areas, the DUAT of a plot passes automatically to the purchaser following the sale of a house or building.  In rural areas, the purchaser of physical infrastructure or improvements and crops must request authorization from the GRM for the DUAT to be transferred.  This requirement is often cited as a barrier to obtaining loans in the agricultural sector and is seen as a potential barrier to investment and the transition to more intensive commercial forms of agriculture.

Investors should be aware of the requirement to obtain endorsement of their projects in terms of land use and allocation at a local level from affected communities.  APIEX assists investors in finding land for development and obtaining appropriate documentation, including agricultural land.  The GRM advises companies on relocating individuals currently occupying land designated for development; however, companies are ultimately responsible for planning and executing resettlement programs.

Despite enforceable laws and regulations protecting intellectual property rights (IPR) and a relatively simple registration process, it remains difficult for investors to protect their IPR in Mozambique. Private sector organizations work with various GRM entities on an IPR taskforce to combat IPR infringement and related public safety issues stemming from the use of counterfeit products, but enforcement in Mozambique remains sporadic and inconsistent. Mozambique’s National Inspectorate of Economic Activities (INAE) has conducted seizures, confiscating fake Hewlett-Packard (HP) toner cartridges and falsely branded Nike, Adidas, Ralph Lauren, and other merchandise in several raids in 2019. However, in general, enforcement and prosecutions are limited.  Pirated DVDs and other counterfeit goods are commonly sold in Mozambique.

The Parliament passed a copyright and related rights bill in 2000 (no. 4/2001), which, when combined with the 1999 Industrial Property Act, brought Mozambique into compliance with the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).  The law provides for the security and legal protection of industrial property rights, copyrights, and other related rights.  In addition, Mozambique is a signatory to the Bern Convention, as well as the New York and Paris Conventions.

Mozambique joined the African Regional Intellectual Property Organization (ARIPO) in February 2020. Joining ARIPO paved the way for Mozambique to implement the Banjul Protocol and the GRM deposited its instrument of accession to the protocol at ARIPO in May 2020. Mozambique’s adhesion to ARIPO should facilitate filing trademarks, as ARIPO processes are standardized across all member states and valid across all jurisdictions.

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

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

The Mozambique Stock Exchange (Bolsa de Valores de Mocambique, BVM) is a public institution under the guardianship of the MEF and the supervision of the Central Bank of Mozambique.  In general, the BVM is underutilized as a means of financing and investment.  However, the GRM has expressed interest in reforming market rules to increase capitalization and potentially prepare to require foreign companies active in Mozambique to be listed on the local stock exchange. Corporate and GRM bonds are traded on the BVM, but there is only one dealer that operates in the country, with all other brokers incorporated into commercial banks, which act as primary dealers for treasury bills.  The secondary market in Mozambique remains underdeveloped.  Available credit instruments include medium- and short-term loans, syndicated loans, foreign exchange derivatives, and trade finance instruments, such as letters of credit and credit guarantees.  The BVM remains illiquid, in the sense that very limited activity occurs outside the issuing time.  Investors tend to hold their instruments until maturity.  The market also lacks a bond yield curve as GRM issuances use a floating price regime for the coupons with no price discovery for tenures above 12 months.  In 2022 the Central Bank accepted technical assistance manuals from the U.S. Securities and Exchange Commission related to regulation of the BVM.

The GRM notified the IMF that it has accepted the obligations of Article VIII sections 2, 3, and 4 of the IMF Articles of Agreement, effective May 20, 2011.

According to a December 2021 Mozambican Bank Association (MBA) survey, there are 20 commercial banks operating in Mozambique. The top three banks – Banco Comercial e de Investimentos (BCI), Banco Internacional de Moçambique SA (BIM), and Standard Bank – account for 68 percent of total banking assets. However, Mozambique’s other banks have been gaining market share. MyBucks Banking Corporation SA, Societe Generale Mocambique SA and Banco Nacional de Investimento SA have recorded impressive asset growth rates of 78 percent, 64 percent, and 51 percent respectively in recent years.

The non-performing loan ratio for the sector improved from 11.3 percent in December 2019 to 10.2 percent in December 2020, the most recent years for which such figures are available. It was possible to see an increase in the expected credit losses going into the income statement for the year 2020 when compared to the year 2019. The total level of impairment going into the income statement increased from 4.8 billion meticais to 6.3 billion meticais for the period 2019 to 2020.

Despite recent challenges including the COVID-19 pandemic, damaging cyclones, and terrorist activity in Cabo Delgado province, Mozambique’s economy has been recovering following a recession in 2020. According to the 2021 MBA survey, Mozambique’s banking system has continued to grow at around 17 percent annually, with an annual increase in the volume of deposits of 22 percent, an increase in financing by 10 percent, and an expansion in the number of bank branches nationwide by 2 percent over the previous year.

According to 2019 FinScope data, only 21 percent of the population had access to a bank account, which is well below the country’s target of 60 percent. As of March 2021, Mozambique had 719 bank agencies, 1,742 ATMs, and 36,839 point of sale devices. Most banking locations are concentrated in provincial capitals, and rural districts often have no banks at all.  Thanks to the partnership between mobile communications companies and banks for electronic or mobile-money transactions, access to financial services is improving, with many Mozambicans using the mobile money service M-PESA. The number of services available from ATMs is also increasing. There are 1,697 banking agents in the country that provide basic banking services to customers without access to a bank branch.

With financing already prohibitively expensive for most Mozambicans, the Central Bank increased interest rates by 200 basis points to 15.25 percent in March 2022, following commodity price rises associated with the Russian invasion of Ukraine. Credit is allocated on market terms, but eligibility requirements exclude much of the population from obtaining credit. Banks request collateral, but since DUATs generally cannot be used as collateral, the majority of Mozambican applicants do not qualify for loans. Foreign investors’ export activities in food, fuel, and health markets have access to credit in foreign currency.  All other sectors have access to credit only in the local currency.

In October 2020, Mozambique’s Central Bank published an initial proposal for a Sovereign Wealth Fund (SWF) to manage the expected increase in GRM revenues from natural gas projects in northern Mozambique. The GRM is still studying the proposal, although the March 2022 IMF program includes adoption of a SWF law as one of its proposed reforms, and President Nyusi has recently signaled that implementing the SWF remains a GRM priority.

The initial SWF draft from the Central Bank calls for 50 percent of GRM revenue from extractive industries to be used to fund the SWF for a period of 20 years, and sets up strict payout criteria for any withdrawals from the SWF before it reaches maturity. In general, the GRM’s proposal follows the Santiago Principles, and the Central Bank consulted with the International Forum of Sovereign Wealth Funds to refine its proposal.

The GRM’s National Petroleum Institute (INP) estimates total government revenues from LNG projects in the Rovuma Basin would amount to $49.4 billion over the lifetime of the projects through 2048. A Central Bank proposed model published in 2020 had estimated total revenues could amount to as much as $96 billion. However, delay of both the Area 1 and Area 4 onshore projects and fluctuating international energy prices could impact Mozambique’s real returns from this sector. In March 2021, TotalEnergies declared force majeure and halted work on its Area 1 project, citing concerns over insecurity around the project site in Cabo Delgado province. The Exxon-Mobil-led Area 4 onshore project has yet to see a Final Investment Decision (FID). The Eni-led Floating LNG platform, also part of Area 4, is set to begin LNG production in 2022, with projected production of 3.4 million tons per annum.

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).

Mozambique’s privatization program has been relatively transparent, with tendering procedures that are generally open and competitive.  Most remaining parastatals operate as state-owned public utilities with GRM oversight and control, making their privatization more politically sensitive.  While the GRM has indicated an intention to include private partners in most of these utility industries, progress has been slow.

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.

Department of State

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

Department of the Treasury

• OFAC Recent Actions

Department of Labor

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

In response to climate-related challenges, in November 2012 the GRM approved The National Climate Change Adaptation and Mitigation Strategy (NCCAMS), covering the 2013-2025 period. The NCCAMS aims to reduce climate risk, both at the community and national level, while promoting low-carbon development and the green economy. To mitigate climate change risk, the GRM revised its Nationally Determined Contribution (NDC) and announced its increased climate change ambitions during COP26. The Government of Mozambique committed to reducing their greenhouse gas (GHG) emissions by 40.48 Metric tons of CO2 equivalent (MtCO2EQ) between 2020 and 2025, totaling 99.22 MtCO2EQ by 2030.

While these GHG reductions represent a slight increase in mitigation goals, its revised NDC primarily focuses on increasing its ambitions to increase climate adaptation and limit the impact of climate change-related droughts and natural disasters. In addition, the National Directorate for Climate Change under the Ministry of Land and Environment leads the GRM’s climate change policy development and coordinates adaptation and resilience activities with other ministries. Mozambique has developed district-level climate adaptation plans for about 75 percent of its districts; however, funding has not yet been secured to implement many of the activities defined in the plans.

The GRM also plans to increase climate resilience by promoting flood-resilient solutions for water, sanitation and hygiene in rural areas, increasing efforts to combat vector-borne diseases associated with climate change, improving management and conservation of land and marine biodiversity, reducing deforestation, and improving fire management programs. In 2021, Mozambique became the first country to receive a results-based payment for reduced emissions from deforestation and forest degradation (REDD+) for its Forest Carbon Partnership Facility program in Zambezia province, which could serve as a model for reforestation as a mechanism for funding conservation. Other legislation the Government of Mozambique is implementing includes:

• The National Action Program for Climate Change Adaptation (NAPA- 2008)
• The Country has ratified the UN Action Plan approved in 2003
• The Convention to Combat Desertification (CDD)
• The Framework Convention on Climate Change (UNFCCC)
• Sustainable Resilience and Sanitation Water Services
• The Mozambique Strategic Programme for Climate Resilience
• The Country is also a signatory of the Paris Declaration Agreement for Sendai Framework for Disaster Risk Reduction 2015-2030 and is committed to the 17SDGs

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.

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

Ana Maria Gemo
Central Anti-Corruption Office (Gabinete Central de Combate a Corrupção)
Avenida 10 de Novembro, 193
+258 82 3034576
gabinetecorrupção@yahoo.com.br 

Contact at a “watchdog” organization:

Borges Nhamirre
Project Coordinator Extractive Industries
Center for Public Integrity (CIP, Centro de Integridade Publica)
Rua Fernão Melo e Castro, 124
+258 84 8866440
borgesfaduco@gmail.com 

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.

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

* Source for Host Country Data: Nigerian Bureau of Statistics

Table 4: Sources of Portfolio Investment
Data not available.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The major laws affecting foreign investment in South Africa are:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Additional Resources

Department of State

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

Department of the Treasury

• OFAC Recent Actions

Department of Labor

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

To report corruption to the GoSA:

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

Or for a non-government agency:

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

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

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

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

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

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

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

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

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

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

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

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

The Sudanese government eagerly encourages foreign direct investment (FDI). The Ministry of Investment and International Cooperation acts as the government’s investment promotion agency for foreign investors seeking to initiate projects that include domestically produced content. The Ministry offers, depending on the type of project, a range of tax incentives, customs exclusions, and land grants to attract investment. The Ministry provides “single window” service for potential investors who submit project proposals and feasibility studies for review and possible approval. Project proposals are reviewed by officials and technical experts from related ministries. Potential investors are informed in writing of decisions to approve or reject project proposals.

The Investment Encouragement Act of 2021 establishes equal treatment to foreign and domestic business owners, allowing foreign investors to own business enterprises in Sudan. [Note: The law is new and its applicability untested. Officials at the Ministry of Investment and International Cooperation strongly encourage foreign investors to engage with a Sudanese partner when considering entering the market.] The Act requires foreign investors to deposit at least $250,000 to obtain a business license. Furthermore, it clarifies the definitions of the various types of investment projects which were regulated in the 2013 Act, including state projects, investment projects, national projects, and strategic projects.

There are foreign investment restrictions in the transportation sector, specifically in railway, freight transportation, inland waterways barge service, and airport operations. Most telecommunications and media, including television broadcasting and newspaper publishing, are closed to foreign capital participation. Foreign ownership is also restricted in the electrical power generation and financial services sectors. In addition to those overt statutory ownership restrictions, a comparatively large number of sectors are dominated by government monopolies, including those mentioned above. Such monopolies, together with a high perceived difficulty of obtaining required operating licenses, make it more difficult for foreign companies to invest.

Sudan has not undergone any third-party investment policy reviews (IPR) through the Organization of Economic Cooperation and Development (OECD), the World Trade Organization (WTO), or the UN Conference on Trade and Development (UNCTAD) in the last five years.  No civil society organization, including those based in the host country or in third countries, have published reviews of investment policy-related concerns. UNCTAD’s last IPR of Sudan was in 2015.

In late 2020, the CLTG launched a series of economic reforms designed to meet the benchmarks established under the IMF’s Staff Monitored Program (SMP). The SMP focused on addressing major macroeconomic imbalances caused by decades of mismanagement, laying the groundwork for inclusive growth, and establishing a track record of sound policies required for debt relief. The CLTG subsequently enacted structural reforms which slashed costly and unsustainable subsidies, adopted foreign exchange liberalization, reduced the government’s fiscal gap, and improved public financial management. The CLTG’s significant progress under the SMP led to an Extended Credit Facility (ECF) program launched in June 2021. However, most IMF assistance was paused after the military’s October 25 government takeover.

On March 7, 2022, the Central Bank of Sudan abandoned its managed float policy and allowed the Sudanese Pound to freely float against other currencies. However, Sudan faces a severe foreign exchange reserves shortage and the national currency faces depreciation pressures. Domestic businesses have no assurance of obtaining needed levels of foreign currency for international transactions. The government strictly controls incoming hard currency from exports and business owners wishing to retrieve cash can only make withdrawals denominated in Sudanese pounds at the time of this report. Foreign companies operating in Sudan must have the Central Bank of Sudan’s permission to repatriate profits and foreign currency. The Investment Act of 2013 enshrines the right to repatriate capital and profits, provided the investor has opened an investment account at the Central Bank of Sudan before entering into business. To avoid banking delays, many Sudanese firms complete a significant number of transactions outside of official channels or complete transactions abroad in U.S. Dollars, Euros, Riyals, or Dirhams. Whether or not the government will revise its practices to ensure a steady stream of foreign exchange, if international correspondent banking ever resumes, remains to be seen. The Investment Act also established courts to handle investment issues and disputes.

According to the 2015 UNCTAD report, Sudan has put in place a relatively open investment legislative framework and many laws are in line with international best practices. However, their implementation is often impeded by the absence of secondary legislation, insufficient institutional capacity, and lack of coordination between different levels of government. https://investmentpolicy.unctad.org/investment-policy-review/205/sudan 

Sudan’s investment authority lists the process by which businesses must register to operate at:  http://www.sudaninvest.org/English/Default.htm .  The website outlines procedures for companies that wish to invest, including forming and ending relationships and license applications.  There is no online business registration process.  Officials at the Ministry of Investment and International Cooperation recommend enlisting the service on an agent to help facilitate the business registration process.

http://investmentpolicyhub.unctad.org/Publications/Details/148  provides an outline of investment facilitation proposals.

www.GER.co  provides links to business registration sites worldwide.

Sudan’s government does not have policies in place to promote outward investment. It does not restrict domestic investors from investing abroad.

http://www.sudaninvest.org/English/Invest-Services.htm 

Some ministries and regulatory agencies distribute the text or summary of proposed regulations before their enactment to interested stakeholders but are under no legal obligation to do so. There is no period of time set by law for the text of proposed regulations to be publicly available. Some agencies make received comments publicly accessible. There is no specialized government body or department tasked with soliciting and receiving these comments. Some ministries and agencies report on the results of the consultation on proposed regulations in the form of one consolidated response in an official gazette, journal, or other publication or directly distributed to interested stakeholders. This reporting on the results of the consultation is not required by law. https://rulemaking.worldbank.org/en/data/explorecountries/sudan# . There is no centralized online location where key regulatory actions are published. https://rulemaking.worldbank.org/en/data/explorecountries/sudan# 

Regulations are developed at the federal (national), state, and local levels. Ministries develop regulations to support federal laws, while state and local jurisdictions can adopt additional regulations to address local concerns. Federal legislation is the most relevant to foreign businesses.

Under the CLTG, legislation was drafted using a consensus approach that included input from affected ministries, consultations with local academics, business leaders, and international experts. The consultation period did not make the draft legislation available for public comment. The legislation was next reviewed by the Ministry of Justice (MoJ) to determine if it conformed to the Sudanese Constitution. After receiving MoJ approval, the legislation was reviewed and endorsed independently by the civilian Council of Ministers and the joint military-civilian Sovereign Council. Following endorsement, the bill would receive final approval by a majority vote during a joint Council of Ministers/Sovereign Council. The approved legislation would become law once it was published in the MoJ’s Official Gazette. [Note: With the ouster of Prime Minister Hamdok and dissolution of the CLTG’s Council of Ministers, military authorities have governed through the Sovereign Council by decree. End Note.]

New regulations are posted on ministry websites and made available in printed pamphlets and booklets. Regulations are legally reviewable in court. Several ministries have committees that review complaints and arbitrate regulatory disputes.

The CLTG committed to strengthen governance and improve fiscal transparency by establishing civilian control over all public finances and assets, including those under the control of the Sudanese security and intelligence services, and to develop a transparent budget that accounts for all public expenditures. The government sought to institutionalize its commitment to accountability and good governance through the development and adoption of a Public Financial Management (PFM) roadmap by September 2021. The roadmap would seek to outline a series of medium-term actions to address identified PFM vulnerabilities. Although finalization of the roadmap was derailed by the military takeover, the draft roadmap would provide a useful reference point for future civilian leadership to adopt.

Sudan’s Ministry of Industry and Trade provides a list of all of Sudan’s bilateral and regional trade agreements:

http://www.tpsudan.gov.sd/index.php/en/pages/details/154/Agreements 

Sudan is a signatory of the Greater Arab Free Trade Area Agreement (GAFTA) and a member of the Common Market for Eastern and Southern Africa (COMSEA). It is not a member of the WTO. Sudan does not currently qualify for the U.S Generalized System of Preferences (GSP).

Sudan’s legal code is a mixture of British common law practices, Islamic law, and customary law. Contracts are enforced through the courts. Sudan has written commercial and contractual laws.  Business regulations or enforcement actions are appealable and are adjudicated in the national court system. The Investment Act of 2013 established courts to handle disputes.

Sudan’s investment authority lists the process by which businesses much register to operate at:  http://www.sudaninvest.org/English/Default.htm .  The website outlines procedures for companies that wish to invest, including forming and ending relationships and license applications.  There is not an online business registration process.

On May 12, 2021, Sudan passed Public Private Partnership Law No. 10 of 2021, which aims to create a business-friendly environment that attracts foreign investors. The law is part of a set of reforms driven by the transitional government to achieve a successful transition to an open, dynamic, and business-friendly economy. The law organizes and promotes public private partnerships (PPPs) to encourage private entities to invest and participate in projects alongside public entities. It also intends to ensure transparency and integrity in procedures and equal and fair treatment for bidders. The law creates a central unit with an independent budget to ensure the development, management, and implementation of PPP projects. It allows both the public and private sectors to suggest PPP projects.

The Investment Encouragement Act, which was issued on 11 April 2021, seeks to improve on the 2013 Investment Act in terms of treatment of investors regardless of their nationality, and to create a more predictable and transparent regime that facilitates investment. Key changes include: (i) provision of new tax exemptions, including as regards the business profits tax; (ii) creation of an investment register for collecting data on investing entities; (iii) introduction of an online investment guide to clarify and facilitate investment procedures; (iv) creation of a specialized insurance company that insures investors against various risks (e.g., risks of nationalization, risks of war, domestic conflict and civil disobedience, risks of recession, etc.) for an annual premium, and (v) publication of a special exclusion list detailing the sectors and activities not available to foreign investors.

The new law also requires foreign investors to deposit at least $250,000 to obtain a license. Furthermore, it clarifies the definitions of the various types of investment projects which were regulated in the 2013 Act, including State Projects, Investment projects, National Projects, and Strategic Projects.

The law was published in the official Sudan Gazette of 12 May 2021 and is available at:  https://moj.gov.sd/files/index/28 .

The Economic Security Department of the General Intelligence Service (GIS) reviews transactions (mergers, acquisitions, etc.) and conduct (cartels, monopolization) for competition-related concerns (whether domestic or international in nature). This system is opaque; however, its decisions can be appealed through the judicial system.

The government has the legal right to expropriate private property for public use under its eminent domain powers. The government has a history of expropriating private property without adequately compensating owners. In certain circumstances the government has incarcerated owners who refused to surrender their property.

The CLTG formed the Empowerment Elimination, Anti-Corruption, and Funds Recovery Committee (commonly called the Dismantling Committee) in November 2019 after the CLTG approved a law to dismantle the institutions established under the Bashir regime. Despite initial steps by the Committee to recover assets stolen during the Bashir dictatorship and remove Bashir allies from leadership positions in government institutions, its efforts lacked a clear strategy and legal framework for recovering assets domestically and abroad associated with the banned National Congress Party, its officials, and its affiliates. Some of the Committee’s actions appeared partisan, capricious, and undertaken unilaterally without coordination with the Ministry of Finance and Economic Planning, the agency that should, in theory, lead on asset recovery efforts. For example, the Committee oversaw the firing of over two hundred Central Bank of Sudan (CBOS) technical experts in March 2021 but provided no recourse for those who contested their supposed affiliation with the National Congress Party. After the military takeover, members of the Committee were explicitly targeted for arrest. Several former members remain in custody on charges of criminal breach of trust, illicit wealth, and dealing in foreign exchange. Meanwhile, hundreds of government officials dismissed by the Committee were reinstated at the CBOS, Ministries, and other government agencies, although it is unclear how many of those reinstated are genuinely affiliated with the Bashir regime and how many are merely long-serving civil servants.

The government controls most of the agricultural land in Sudan and has sold or leased millions of acres to Saudi Arabia and other countries. Land laws have historically been an issue of dispute between local communities and the government. The most recent examples of government expropriations were in 2019 when the Bashir regime bulldozed churches and sold the land to private investors. The government claimed the churches did not have permits. Some churches which had existed for decades lacked permits because the government would not issue them. The government claimed the churches were simply squatting on the land illegally. According to the law, for eminent domain claims the government should have compensated the churches. That did not happen in all cases. Government and Arab militias’ expropriation of land in Darfur, Gedaref, and Kassala states without compensation have been reported. In some cases, displaced persons returned to their land only to be denied access. In most instances, the government did not adequately respond to appeals.

The Bankruptcy Act of 1929, Companies Act of 2003, and Insolvency Act of 2011 are the key bankruptcy laws currently in force in Sudan. The bankruptcy system is based on British legal traditions.

The Sudanese government lists the following investment incentives:

• Exemption from taxes on profits for a term of not less than ten years.
• Free land or land at an incentivized price for the project.
• Nondiscriminatory treatment of the capital of investment, whether be it public, private, cooperative, or multi-sector capital.
• Guarantees the capital shall not to be nationalized, confiscated, or expropriated except through a law and against indemnity.
• Guarantees that money invested in a project shall not be confiscated or frozen, except through a judicial order.
• Recognition that the investor is entitled to transfer his or her money and profits; and
• Customs privileges for vehicles.

http://sudanembassyke.org/index.php/economy-investment/why-invest-in-sudan/ 

The Investment Encouragement Act of 2021 included a provision to establish a specialized insurance company to insure investors against various risks (e.g., risks of nationalization, risks of war, domestic conflict and civil disobedience, risks of recession, etc.) for an annual premium. However, the government has not acted on this provision in the law.

The government currently does not offer any special incentives for clean energy investments, including renewable energy, energy storage, energy efficiency, clean hydrogen, carbon sequestration, low-carbon transport and fuels, or other decarbonization technologies.

Sudan currently operates free trade zones in Port Sudan and Garri. The Free Zones and Free Markets Law of 1994 govern these zones.  The investment authority reports that projects in areas designated as Free Trade Zones and Duty-Free Zones enjoy the following policies:

• Exemption from a tax on profits for 15 years, renewable for an extra period;
• Exemption from personal income tax for salaries of expatriates;
• Exemption from all customs fees and taxes except service fees for products imported into or exported abroad from the zone;
• Exemption from all taxes and fees for real estate inside the zone;
• Authorization to transfer invested capital and profits from Sudan abroad through any bank licensed to operate in the zone;
• Exemption from customs fees for products of industrial projects established in the zones depending on materials used and local costs incurred in production and provided the value be estimated by a designated committee;
• Guarantees that money invested in the zones may not be frozen, confiscated, or arrested;
• Authorization to store goods transiting Sudan in zones under the supervision of customs police; and,
• Authorization to rent its land and buildings according to the terms it agrees upon and without being bound by any other law.

http://www.sudaninvest.org/English/Sudan-Invest-FreeZone.htm 

The government does not follow “forced localization” policies but offers tax incentives to foreign investors to establish “value-added” industries within Sudan.

Sudanese laws protect private property rights. However, these laws are poorly enforced, and the government has a history of arbitrary property seizures without providing adequate compensation. Mortgages and liens exist, but the property registration system is antiquated. Property disputes, often involving claims over traditional lands, can take years to resolve.

The government offers foreign investors restricted leases on land for specific projects. These leases are for five years but can be renewed in five-year increments for up to thirty years. Investors can transfer the leases to other investors, but only if the new investors maintain the general purpose of the original project.

The legislative framework on intellectual property rights (IPR) is adequate, but enforcement remains uneven. Trademarks of popular American businesses, usually chain restaurants, are often used or changed slightly to suggest the original brand. Many grocery and hardware stores display American name-brand products shipped from Egypt and the United Arab Emirates. Sudan is not listed in the U.S. Trade Representative (USTR) 2021 Special 301 report or the 2021 Notorious Markets List. Sudan is in the accession process to join the World Trade Organization (WTO) and is not currently a party to the WTO’s Agreement on Trade-Related Intellectual Property Rights (TRIPS). Sudan is a member of the World Intellectual Property Organization (WIPO).

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

Sudan has a stock market (KSE) which is located in Khartoum. The KSE has over 67 companies ( http://www.kse.com.sd/ ) that include banks, brokerage firms, communication/media companies, investment and development houses, and industrial firms. Market trading occurs Sunday-Thursday from 1000-1200 local time. KSE has not published an annual report since 2019.

Historically, Sudan has not had access to international banking institutions as it was under comprehensive U.S. economic and financial sanctions until late 2017. The U.S. government delisted Sudan as a State Sponsor of Terrorism in December 2022. Despite lifting of these comprehensive sanctions, international banks remain reluctant to operate in Sudan. Most foreign banks operating in Sudan are based in Gulf states, such as Saudi Arabia, United Arab Emirates, or Qatar. Sudan faces a monetary crisis, with limited foreign exchange and a significant currency black market. The Central Bank of Sudan lists banks operating in Sudan at: https://cbos.gov.sd/en/content/operating-banks-sudan 

Under the IMF’s ECF program, Sudan has committed to strengthening financial sector soundness and mitigating risks, including through enhanced risk-based anti-money laundering and countering terrorist financing (AML/CTF) supervision. In June 2021, Sudanese authorities had completed ten required AML/CTF onsite inspections of local banks. The inspections focused on politically exposed persons, suspicious transaction reporting, and higher-risk customers and transactions in the real estate sector. Following the conclusion of these onsite inspections, the Central Bank planned to provide aggregate data to the IMF on violations identified and sanctions levied, in line with Sudan’s existing legal framework. Under the ECF, Sudan has agreed to complete a money laundering and terrorist financing national risk assessment (NRA) and to disseminate the results of the NRA to financial institutions, designated non-financial businesses and professions, and the general public. Sudanese civilian authorities also committed to endorse and adopt a national AML/CTF strategy to mitigate risks identified in the NRA. These are fundamental steps necessary to building an AML/CTF regime which can effectively respond to identified money laundering and terrorist financing threats.

Sudan has a sovereign wealth fund called the Oil Revenue Stabilization Account, established in 2008.  The Natural Resource Governance Institute (NRGI) ranked it 32 out of 34 funds in its 2017 Resource Governance Index, and eight of nine funds in sub-Saharan Africa, ahead of Nigeria’s Excess Crude Account. ( https://resourcegovernanceindex.org/country-profiles/SDN/oil-gas .) The CLTG established a sovereign wealth fund in 2020 to manage real estate recovered by the Dismantling Committee. This fund is not operational.

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.

Sudan does not have an active privatization program in place for SOEs.

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.

Sudan’s government does not have a natural climate strategy nor strategy for monitoring natural capital, such as biodiversity and ecosystems. It does not have policies to reach net-zero carbon emissions, nor are there any regulatory incentives in place to encourage resource efficiency, pollution abatement, or climate resilience.

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 

Shaza Elmahdi
Consultant on Sudan
Center for International Private Enterprise
1211 Connecticut Avenue NW, Suite 700, Washington, D.C. 20036
+1 202-721-9200
selmahdi@cipe.org

Transparency International U.S. Office
1100 13th St NW, Suite 800Washington, DC 2000520005
Info-us@transparency.org

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/.

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.

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

The United Republic of Tanzania welcomes foreign direct investment (FDI) as it pursues its industrialization and development agenda. On her inauguration in March 2021, President Samia Suluhu Hassan identified removing obstacles to inward foreign investment as a key priority, along with other measures to improve the overall business climate and rebuild trust between the private sector and government. This follows declining FDI and investor confidence over the past six years, with UNCTAD’s 2021 World Investment Report indicating around $1.0 billion in FDI for 2020, stagnant growth in recent years and well below 2015 levels. The development of a $3.5 billion 1,400 km oil pipeline to transport crude oil extracted in Uganda to the Tanzanian port of Tanga could sustain investment in both countries in the future. Investors and potential investors note the biggest challenges to investment include difficulty in hiring foreign workers, unfriendly and opaque tax policies, increased local content requirements, regulatory and policy instability, lack of trust between the GoT and the private sector, and mandatory initial public offerings (IPOs) in key industries. In 2020 and 2021, the GoT recognized many of these concerns’ impacts on both foreign and domestic investment and created task forces and working groups to engage the private sector to identify solutions. These efforts were expanded by President Hassan’s government.

The United Republic of Tanzania has framework agreements on investment and offers various incentives and the services of investment promotion agencies. Investment is mainly a non-Union matter (i.e., different laws, policies, and practices apply between mainland Tanzania and the semi-autonomous state of Zanzibar). Zanzibar updated its investment policy in 2019, while the mainland/Union policy dates from 1996. Efforts to update the Mainland Investment Policy and Investment Act are underway, but incomplete as of the date of this publication. International agreements on investment are covered as Union matters and therefore apply to both regions.

The Tanzania Investment Center (TIC) is intended to be a one-stop center for investors, providing services such as permits, licenses, visas, and land ( view TIC’s portal ). The Zanzibar Investment Promotion Authority (ZIPA) provides the same function in Zanzibar ( view ZIPA ).

The GoT has an ongoing dialogue with the private sector via the Tanzania National Business Council (TNBC). TNBC meetings are chaired by the President of the United Republic of Tanzania and co-chaired by the head of the Tanzania Private Sector Foundation (TPSF). President Hassan reinvigorated this formal mechanism during her first months in office. There is also a Zanzibar Business Council (ZBC), as well as Regional Business Councils (RBCs), and District Business Councils (DBCs).

Investors have found that technical expertise of their negotiating partners is a stumbling block to completing their investment plans.  Investors should examine the level of sophistication of their negotiating partners at the onset of discussions to determine if outside expertise or training may be necessary.  The U.S. government offers programs to develop expertise to facilitate investments and investors are encouraged to work with the Embassy’s economic and commercial sections to determine what, if any, programs may be available.

Foreign investors generally receive treatment equivalent to domestic investors, though limits persist in a number of sectors. There are no geographical restrictions on private establishments with foreign participation or ownership, no limitations on number of foreign entities that can operate in any given sector, and no sectors in which approval is required for greenfield FDI but not for domestic investment.

However, Tanzania discourages foreign investment in several sectors through limitations on foreign equity ownership or other activities, including aerospace; agribusiness (fishing); banking; insurance; construction and heavy equipment; travel and tourism; energy and environmental industries; information and communication; and publishing, media, and entertainment. In 2020, Tanzania relaxed but did not eliminate the foreign ownership limitations in the mining sector.

Specific examples include the following:

• The Tourism Act of 2008 bars foreign companies from engaging in mountain guiding activities, and states that only Tanzanian citizens can operate travel agencies, car rental services, or engage in tour guide activities (with limited exceptions).
• Per the Merchant Shipping Act of 2003, only citizen-owned ships are authorized to engage in local trade, a requirement that can be waived at the minister’s discretion. Furthermore, the Tanzania Shipping Agencies Act of November 2017 gives exclusive monopoly power to the Tanzania Shipping Agency Corporation (TASAC) to conduct business as shipping agent, shipping regulator, and licensor of other private shipping agencies. The Act also gives TASAC an exclusive mandate to provide clearing and forwarding functions relating to imports and exports of minerals, mineral concentrates, machinery and equipment for the mining and petroleum sector, products and/or extracts related to minerals and petroleum. arms and ammunition, live animals, government trophies, and any other goods that the minister responsible for maritime transport may specify. A 2019 amendment extended this exclusive mandate to additional imports, including fertilizers, sugar (both industrial and domestic), cooking oil, wheat, oil products, liquefied gas, and chemicals related to the products. As of May 2021, the extended mandate has yet to go into effect, following extensive objections for private sector stakeholders.
• A 2009 amendment to the Fisheries Regulations imposes onerous conditions for foreign citizens to engage in commercial fishing and the export of fishery products, sets separate licensing costs for foreign citizens and Tanzanians, and limits the types of fishery products that foreign citizens may work with.
• Foreign construction contractors can only obtain temporary licenses, per the Contractors Registration Act of 1997, and contractors must commit in writing to leave Tanzania upon completion of the set project. 2004 amendments to the Contractors Registration By-Laws limit foreign contractor participation to specified, more complex classes of work.
• Foreign capital participation in the telecommunications sector is limited to a maximum of 75 percent.
• All insurers require one-third controlling interest by Tanzania citizens, per the Insurance Act.
• The Electronic and Postal Communications (Licensing) Regulations 2011 limits foreign ownership of Tanzanian TV stations to 49 percent and prohibits foreign capital participation in national newspapers.
• Mining projects must be at least partially owned by the GoT and “indigenous” companies, and hire – or at least favor – local suppliers, service providers, and employees. (See Chapter 4: Laws and Regulations on FDI for details.). Gemstone mining is limited to Tanzanian citizens with waivers of the limitation at ministerial discretion. In February 2019, responding to low growth and investment in the sector, the government revised the 2018 Mining Regulations to reduce local ownership requirements from 51 percent to 20 percent.

Currently, foreigners can invest in stock traded on the Dar es Salaam Stock Exchange (DSE), but only East African residents can invest in government bonds. East Africans, excluding Tanzanian residents, however, are not allowed to sell government bonds bought in the primary market for at least one year following purchase.

There have not been any third-party investment policy reviews (IPRs) on Tanzania in the past several years, the most recent OECD report is for 2013. The World Trade Organization (WTO) published a Trade Policy Review in 2019 on all the East African Community states, including Tanzania.

• WTO – Trade Policy Review: East African Community (2019)
• UNCTAD– Tanzania Investment Policy Review (2002)
• WTO – Secretariat Report of Tanzania
• UNCTAD – Trade and Gender Implications (2018)

The Business Registration and Licensing Agency (BRELA) issues certificates of compliance for foreign companies, certificates of incorporation for private and public companies, and business name registrations for sole proprietor and corporate bodies. After registering with BRELA, the company must: obtain a taxpayer identification number (TIN) certificate, apply for a business license, apply for a VAT certificate, register for workmen’s compensation insurance, register with the Occupational Safety and Health Authority (OSHA), receive inspection from OSHA, and obtain a Social Security registration number.

The Tanzania Investment Center (TIC) now sits under the Prime Minister’s Office (PMO), after being moved around several times in recent years. The TIC is a one-stop shop which provides simultaneous registration with BRELA, TRA, and social security for enterprises whose minimum capital investment is not less than USD 500,000 if foreign-owned or USD 100,000 if locally owned. Throughout 2021, TIC has streamlined its operations to facilitate the process of business registration.

The government has been slow to implement its May 2018 Blueprint for Regulatory Reforms to improve the business environment and attract more investors. The reforms seek to improve the country’s ease of doing business through regulatory reforms and to increase efficiency in dealing with the government and its regulatory authorities. The official implementation of the Business Environment Improvement Blueprint started in July 2019, though there have been few tangible changes or advancements. President Hassan’s government identified implementation of the Blueprint as a priority for her first term.

Tanzania does not promote or incentivize outward investment. There are restrictions on Tanzanian residents’ participation in foreign capital markets and ability to purchase foreign securities. Under the Foreign Exchange (Amendment) Regulations 2014 (FEAR), however, there are circumstances when Tanzanian residents may trade securities within the East African Community (EAC). In addition, FEAR provides some opportunities for residents to engage in foreign direct investment and acquire real assets outside of the EAC.

According to the World Bank’s Global Indicators of Regulatory Governance ( view the World Bank’s Global Indicators of Regulatory Governance ), Tanzania scores low in regulatory governance with 1.25 out of 5 totals in transparency of regulatory governance (neighboring Kenya and Uganda, by contrast, both score 3.25).

Tanzania has formal processes for drafting and implementing rules and regulations. Generally, after an Act is passed by Parliament, the creation of regulations is delegated to a designated ministry. In theory, stakeholders are legally entitled to comment on regulations before they are implemented. However, ministries and regulatory agencies frequently fail to provide adequate opportunity for meaningful input as there is no minimum period of time for public comment set forth in law. Stakeholders often report that they are either not consulted or given too little time to provide meaningful input. Ministries or regulatory agencies do not have the legal obligation to publish the text of proposed regulations before their enactment. Sometimes, it is difficult to obtain the final, adopted version of a bill in a timely manner nor is it always public information if and when the President signed the bill. Moreover, the government over the past few years used presidential decree powers to bypass regulatory and legal structures.

The 2016 Access to Information law in theory grants citizens more rights to information; however, some claim that the Act gives too much discretion to the GoT to withhold disclosure. Although information, including rules and regulations, is available on the GoT’s “Government Portal” ( view the Government Portal ), the website is generally not current and is incomplete. Alternatively, rules and regulations can be obtained on the relevant ministry’s website, but many offer insufficient information.

Nominally, independent regulators are mandated with impartially following the regulations. The process, however, has been criticized as being subject to political influence, depriving the regulator of the independence it is granted under the law.

Tanzania does not meet the minimum standards for transparency of public finances and debt obligations ( view the Department of State’s Fiscal Transparency Report).

Tanzania is part of both the East African Community (EAC) and the Southern African Development Community (SADC) and subject to their respective regulations. Notably in 2021, Tanzania ratified the EAC’s Sanitary and Phytosanitary (SPS) Protocol after a protracted period of deliberation.

Tanzania is a member of the International Organization for Standardization (ISO). The national standards body, the Tanzania Bureau of Standards, was established in 1975. It has been most active in promoting standards and quality in process technology, including agro-processing, chemicals and textiles, and engineering, including mining and construction.

Tanzania is a member of the World Trade Organization (WTO) and its National Enquiry Point (NEP) is the Tanzania Bureau of Standards (TBS). As the WTO NEP, TBS handles information on adopted or proposed technical regulations, as well as on standards and conformity assessment procedures. Tanzania does not notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Tanzania’s legal system is based on the English Common Law system. The first source of law is the 1977 Constitution, followed by statutes or acts of Parliament; and case law, which are reported or unreported cases from the High Courts and Courts of Appeal and are used as precedents to guide lower courts. The Court of Appeal, which handles appeals from Mainland Tanzania and Zanzibar, is the highest court, followed by the High Court, which handles civil, criminal and commercial cases. There are four specialized divisions within the High Courts: Labor, Land, Commercial, and Corruption and Economic Crimes. The Labor, Land, and Corruption and Economic Crimes divisions have exclusive jurisdiction over their respective matters, while the Commercial division does not claim exclusive jurisdiction. The High Court and the District and Resident Magistrate Courts also have original jurisdiction in commercial cases subject to specified financial limitations.

Apart from the formal court system, there are quasi-judicial bodies, including the Tax Revenue Appeals Tribunal and the Fair Competition Tribunal, as well as alternate dispute resolution procedures in the form of arbitration proceedings. Judgments originating from countries whose courts are recognized under the Reciprocal Enforcement of Foreign Judgments Act (REFJA) are enforceable in Tanzania. To enforce such judgments, the judgment holder must make an application to the High Court of Tanzania to have the judgment registered. Countries currently listed in the REFJA include Botswana, Lesotho, Mauritius, Zambia, Seychelles, Somalia, Zimbabwe, Swaziland, the United Kingdom, and Sri Lanka.

The Tanzanian constitution guarantees judicial independence. However, the degree of judicial independence has varied significantly in the past few years, and many perceive that political interference and corruption in the form of illicit payments to influence decisions in justice is a concern.

Regulations and enforcement actions are appealable, and they are adjudicated in the national court system.

Several laws and regulations enacted over the past six years affect the risk-return profile on foreign investments, especially those in the extractives and natural resources industries. The laws/regulations include the Natural Wealth and Resources (Permanent Sovereignty) Act 2017, Natural Wealth and Resources Contracts (Review and Renegotiation of Unconscionable Terms) Act 2017, Written Laws (Miscellaneous Act) 2017, and Mining (Local Content) Regulations 2019. These acts were introduced by the executive branch under a certificate of urgency, meaning that standard advance publication requirements were waived to expedite passage. As a result, there was minimal stakeholder engagement. Stakeholders continue to call for revision to these laws.

Investors, especially those in natural resources and mining, express concern about the effects of these laws. Two laws apply to “natural wealth and resources,” which are broadly defined and not only include oil and gas, but in theory, could include wind, sun, and air space. Investors are encouraged to seek legal counsel to determine the effect these laws may have on existing or potential investments. For natural resources, the new laws subject the contracts, past and present, to Parliamentary review. More specifically, the law states “Where [Parliament] considers that certain terms …or the entire arrangement… are prejudicial to the interests of the People and the United Republic by reason of unconscionable terms it may, by resolution, direct the Government to initiate renegotiation with a view to rectifying the terms.”  Further, if the GoT’s proposed renegotiation is not accepted, the offending terms are automatically expunged. “Unconscionable” is defined broadly, including catch-all definitions for clauses that are, for example, “inequitable or onerous to the state.” Under the law, the judicial branch does not play a role in determining whether a clause is “unconscionable.” The Mining (Local Content) Regulations 2019 require that ‘indigenous’ Tanzanian companies are given first preference for mining licenses. An ‘indigenous Tanzanian company’ is one incorporated under the Companies Act with at least 20 percent of its equity owned by and 100 percent of its non-managerial positions held by Tanzanians (this is an improvement from the 2018 regulations which required 51 percent Tanzanian ownership). Furthermore, foreign mining companies must have at least five percent equity participation from an indigenous Tanzanian company and must grant the GoT a 16 percent carried interest. Lastly, foreign companies that supply goods or services to the mining industry must incorporate a joint venture company in which an indigenous Tanzanian company must hold equity participation of at least 20 percent.

The Tanzania Investment Center contains many relevant laws, rules, procedures, and reporting requirements for investors on its portal ( view the portal ), though it is not comprehensive.

Note: TIC and the GoT are currently in the process of reviewing several investment- and business-related regulations. Investors are encouraged to contact the U.S. Embassy or to seek legal counsel with a firm operating in Tanzania.

The Fair Competition Commission (FCC) is an independent government body mandated to intervene, as necessary, to prevent significant market dominance, price fixing, extortion of monopoly rent to the detriment of the consumer, and market instability. The FCC has the authority to restrict mergers and acquisitions if the outcome is likely to create market dominance or lead to uncompetitive behavior.

The constitution and investment acts require government to refrain from nationalization. However, the GoT may expropriate property after due process for the purpose of national interest. The Tanzanian Investment Act guarantees payment of fair, adequate, and prompt compensation; access to the court or arbitration for the determination of adequate compensation; and prompt repatriation in convertible currency where applicable. For protection under the Tanzania Investment Act, foreign investors require $500,000 minimum capital and Tanzanian investors require $100,000.

There are numerous examples of indirect expropriation, such as confiscatory tax regimes or regulatory actions that deprive investors of substantial economic benefits from their investments. This is another area that the GoT expected to address in 2021, though significant changes to tax-related laws and regulations have yet to be finalized.

Tanzania has a bankruptcy law which allows for companies to declare insolvency. The insolvency process includes the appointment of receiver managers, administrative receivers, or liquidators. In practice the process is very long and expensive. Preferential debts such as government taxes and rents, outstanding wages and salaries, and other employee compensation take priority over other claims, including those from creditors. Insolvent or illiquid companies may also seek the protection of the courts by seeking a compromise or arrangement as proposed between a company and its creditors, a certain class of creditors, or its shareholders.

Bankruptcy proceedings can take several years to conclude in Tanzania. The recovery rate for creditors on insolvent firms was reported at 20.4 U.S. cents on the dollar, with judgments typically made in local currency.

The Tanzania Investment Center (TIC) offers a package of investment benefits and incentives to both domestic and foreign investors without performance requirements. A minimum capital investment of $500,000 if foreign owned or $100,000 if locally owned is required. (At the time of this publication, the government was revising these incentives. Investors are advised to consult the TIC for up-to-date information.)

Current investment incentives include the following:

• Discounts on customs duties, corporate taxes, and VAT paid on capital goods for investments in mining, infrastructure, road construction, bridges, railways, airports, electricity generation, agribusiness, telecommunications, and water services.
• 100 percent capital allowance deduction in the years of income for the above-mentioned types of investments – though there is ambiguity as to how this is accomplished.
• No remittance restrictions. The GoT does not restrict the right of foreign investors to repatriate returns from an investment.
• Guarantees against nationalization and expropriation. Any dispute arising between the GoT and investors may be settled through negotiations or submitted for arbitration.
• Allowing interest deduction on capital loans and removal of the five-year limit for carrying forward losses of investors.

Investors may apply for “Strategic Status” or “Special Strategic Status” to receive further incentives. The criteria used to determine whether an investor may receive these designations are available on TIC’s website ( view TIC’s website ).

The government introduces waivers through the Public Finance Act with the aim of attracting investment in certain targeted sectors. In Financial year 2021/2022, the government introduced VAT exemption on entities with agreements with the GoT for the operation or execution of strategic projects, to the extent that the agreements provide for such exemption; a strategic project is defined as a project that has been so determined by the Cabinet of Ministers. The government also re-introduced VAT exemption for non-governmental organizations having agreements with the GoT, to the extent that the agreements provide for such exemption. The minister of finance may make regulations prescribing the manner of application, granting and monitoring of exemptions, which previously required the minister to appoint a technical committee for guidance on these matters.

The government does not currently offer any incentives for clean energy investments.

The Export Processing Zones Authority (EPZA) oversees Tanzania’s Export Processing Zones (EPZs) and Special Economic Zones (SEZs). EPZA’s core objective is to build and promote export-led economic development by offering investment incentives and facilitation services ( view EPZA ). Minimum capital requirements for EPZ and SEZ investors are $500,000 for foreign investors and $100,000 for local investors. Investment incentives offered for EPZs include the following:

• An exemption from corporate taxes for ten years.
• An exemption from duties and taxes on capital goods and raw materials.
• An exemption on VAT for utility services and on construction materials.
• An exemption from withholding taxes on rent, dividends, and interests.
• Exemption from pre-shipment or destination inspection requirements.
• SEZs offer similar incentives, excluding the ten-year exemption from corporate taxes.

The Zanzibar Investment Promotion Agency (ZIPA) and the Zanzibar Free Economic Zones Authority (ZAFREZA) offer the following incentives:

Category “A” Free Economic Zone Developers: Development of Infrastructure

The developer of a Free Economic Zone shall benefit to the following incentives:

• exemption from payment of taxes and duties for machinery, equipment, heavy duty vehicles, building and construction materials, and any other goods of capital nature to be used for purposes of development of the Free Economic Zone infrastructure.
• exemption from payment of corporate tax for an initial period of ten years and thereafter a corporate tax, shall be charged at the rate specified in the Income Tax Act.
• exemption from payment of withholding tax on rent, dividends ‘and interest for the first ten years.
• exemption from payment of property tax for the first ten years.
• remission of customs duty, value added tax and any other tax payable in respect of importation of one administrative vehicle, ambulances, firefighting equipment and firefighting vehicles and up to two buses for employees’ transportation to and from the Free Economic Zone.
• exemption from payment of stamp duty on any instrument executed in or outside the Free Economic Zone relating to transfer, lease or hypothecation of any movable or immovable property situated within the Free Economic Zone or any document, certificate, instrument, report or record relating to any activity, action, operation, project, undertaking, or venture in the Free Economic Zone;
• treatment of goods destined into Free Economic Zones as transit goods; and
• on site customs inspection of goods within Free Economic Zones.

Category “B” Free Economic Zones Operators: Approved Investors Producing for Sale into the Customs Territory

Approved Investors whose primary markets are within the customs territory shall be entitled to the:

• remission of customs duty, value added tax and any other tax charged on raw materials and goods of capital nature related to the production in the Free Economic Zones;
• exemption from payment of withholding tax on interest on foreign sourced loan;
• remission of customs duty, value added tax and any other tax payable in respect of importation of one administrative vehicle, one ambulances, firefighting equipment and firefighting vehicles and up to two buses for employees’ transportation into and from the Free Economic Zones;
• exemption from pre-shipment or destination inspection requirements;
• on site customs inspection of goods within Free Economic Zones;
• access to competitive, modern and reliable services available within the Free Economic Zones; and
• subject to compliance with applicable conditions and procedures for foreign exchange and payment of tax whenever appropriate, unconditional transfer through any authorized dealer bank in freely convertible currency of:

(i) net profits or dividends attributable to the investment; (ii) payments in respect of loan servicing where a foreign loan has been obtained;

(ii) payments in respect of loan servicing where a foreign loan has been obtained; (iii) royalties, fees and charges for any technology transfer agreement;

(iii) royalties, fees and charges for any technology transfer agreement; (iv) the remittance of proceeds in the event of sale or liquidation of the licensed business or any interest attributable to the licensed business;

(iv) the remittance of proceeds in the event of sale or liquidation of the licensed business or any interest attributable to the licensed business; and

(v) payments of emoluments and other benefits to foreign personnel employed in Tanzania in connection with the licensed business.

Category “C” Free Economic Zone Operators: Approved Investors Producing for Export Markets

• Approved Investors producing for export markets in non-manufacturing or processing sectors shall be entitled to the:
• subject to compliance with applicable conditions and procedures, accessing the export credit guarantee scheme;
• remission of customs duty, value added, and any other tax charged on raw materials and goods of capital nature related to the production in the Free Economic Zones;
• exemption from payment of corporate tax for an initial period of ten years and thereafter, a corporate tax shall be charged at the rate specified in the Income Tax Act;
• exemption from payment of withholding tax on rent, dividends and interests for the first ten years;
• exemption from payment of all taxes and levies imposed by the Local Government Authorities for products produced in the Free Economic Zones for a period of ten years;
• exemption from pre-shipment or destination inspection requirements;
• on site customs inspection of goods in the Free Economic Zones;
• remission of customs duty, value added tax and any other tax payable in respect of importation of one administrative vehicle, ambulances, firefighting equipment and vehicles and up to two buses for employees’ transportation to and from the Free Economic Zones;
• treatment of goods destined into Free Economic Zones as transit goods;
• access to competitive, modern and reliable services available within the Free Economic Zones; and
• subject to compliance with applicable conditions and procedures for foreign exchange and payment of tax whenever appropriate, unconditional transfer through any authorized dealer bank in freely convertible currency of:

(i) net profits or dividends attributable to the investment;

(ii) payments in respect of loan servicing where a foreign loan has been obtained;

(iii) royalties, fees and charges for any technology transfer agreement;

(iv) the remittance of proceeds in the event of sale or liquidation of the business enterprises or any interest attributable to the investment;

(v) payments of emoluments and other benefits to foreign personnel employed in Tanzania in connection with the business enterprise; twenty percent of total turnover is allowed to be sold to the local market and is subject to the payment of all taxes;

• twenty percent of total turnover is allowed to be sold to the local market and is subject to the payment of all taxes;
• hundred percent foreign ownership is allowed; and
• no limit to the duration that goods may be stored in the Freeport Zones.

2. For purposes of this section, investors licensed primarily for export markets are investors whose exports are more than eighty percent of total annual production.

Incentives and allowances outside Free Economic Zones

1. Approved investor investing outside Free Economic Zones, may be granted the:

• exemption from payment of import duty, excise duty Value Added Tax and other similar taxes on machinery, equipment, spare parts, vehicles and other input necessary and exclusively required by that enterprise during construction period indicated in the Investment Certificate;
• exemption from payment of business license fee for the first three months of trial operation;
• corporate tax exemption for up to five years;
• hundred percent foreign ownership;
• hundred percent retention of all profits after tax;
• hundred percent allowance Research and Development; and
• hundred percent allowance for free repatriation of profit after tax.

2. Without prejudice to the provisions of paragraph 1 of this Part, approved investor investing in manufacturing sector may further be granted the:

• exemption from payment of any tax on all goods produced for exports;
• exemption from payment of trade levy for raw materials and industrial inputs procured from Tanzania mainland;
• exemption from payment of import duty, VAT, and other similar taxes on raw and packaging materials during project operations;
• exemption of Income Tax on interest on registered borrowed capital; and
• hundred percent allowance investment deduction on capital expenditure within five years.

3. Without prejudice to the provisions of paragraph 1 of this Part, Approved Investor investing in real estate business may also be granted the:

• exemption of income tax on interest on borrowed capital;
• stamp duty exemption;
• hundred percent allowance investment deduction on capital expenditure within five years; and
• capital gains tax on properties sold or purchased.

Tanzania’s export processing zones (EPZs) and special economic zones (SEZs) are assigned geographical areas or industries designated to undertake specific economic activities with special regulations and infrastructure requirements. EPZ status can also be extended to stand-alone factories at any geographical location. EPZ status requires the export of 80 percent or more of the goods produced. SEZ status has no export requirement, allowing manufacturers to sell their goods locally. There are currently 14 designated EPZ/SEZ industrial parks, 10 of which are in development, and 75 stand-alone EPZ factories.

The Non-Citizens (Employment Regulation) Act of 2015 (see Section 12 Labor Policies and Practices below) requires employers to attempt to fill positions with Tanzanian citizens before seeking work permits for foreign employees, and to develop plans to transition all positions held by foreign employees to local employees over time. The Act was amended in June 2021 to extend the time limit for work permits of non-citizen employees from the initial five years to eight years; applications are now submitted through the Online Work Permit Application and Issuance System (OWAIS). The amendment also allows an investor who has been granted incentives and registered with the TIC and Export Processing Zone Authority (EPZA) to employ up to ten non-citizens. Prior to the amendment, an investor could employ up to five non-citizens during the initial period of investment.

Because the local content (LC) initiative cuts across all economic sectors, the government decided that oversight of LC development should take a multi-sector approach, rather than being confined to a single ministry or sector. In 2015, the government directed the National Economic Empowerment Council (NEEC) to oversee implementation of local empowerment initiatives. The objective of the local content policy is to put local products and services – delivered by businesses owned and operated by Tanzanians – in an advantageous position to exploit opportunities emanating from inbound foreign direct investments. In 2015, the GoT enacted The Petroleum Act and, subsequently, issued The Petroleum (Local Content) Regulations 2017. Similarly, in 2017, the GoT amended mining laws, issuing The Mining (Local Content) Regulations 2018. (See Chapter 4: Laws and Regulations on Foreign Direct Investment for more on recent local content laws.)

Bank of Tanzania (BoT) regulations require banks to physically house their primary data centers in Tanzania or face steep penalties.

The GoT launched a USD 94 million National Internet Data Center (NIDC) in 2016, which is operated by the GoT’s Tanzania Telecommunications Company Limited (TTCL). Under the Tanzania Telecommunications Corporation (TTC) Act 2017, the TTC plans, builds, operates and maintains the “strategic telecommunications infrastructure,” which is defined as transport core infrastructure, data center and other infrastructure that the GoT proclaims “strategic” via official public notice.

All land is owned by the government and procedures for obtaining a lease or certificate of occupancy may be complex and lengthy. Less than 15 percent of land has been surveyed, and registration of title deeds is handled manually, mainly at the local level. Foreign investors may occupy land for investment purposes through a government-granted right of occupancy (“derivative rights” facilitated by TIC), or through sub-leases from a granted right of occupancy. Foreign investors may also partner with Tanzanian leaseholders to gain land access.

Land may be leased for up to 99 years, but the law does not allow individual Tanzanians to sell land to foreigners. There are opportunities for foreigners to lease land, including through TIC, which has designated specific plots of land (a land bank) to be made available to foreign investors. Foreign investors may also enter into joint ventures with Tanzanians, in which case the Tanzanian provides the use of the land (but retains ownership, i.e., the leasehold).

Secured interests in property are recognized and enforced. Though TIC maintains a land bank, restrictions on foreign ownership may significantly delay investments. Land not in the land bank must go through a lengthy approval process by local-level authorities, the Ministry of Lands, Housing, Human Settlements Development (MoLHHSD), and the President’s Office to be designated as “general land,” which may be titled for investment and sale.

The MoLHHSD handles registration of mortgages and rights of occupancies and the Office of the Registrar of Titles issues titles and registers mortgage deeds. Title deeds are recognized as collateral for securing loans from banks. In January 2018, the GoT amended the land law, requiring that loan proceeds secured by mortgaging underdeveloped land be used solely to develop the specific piece of land used as collateral. The changes apply to general land managed by the MoLHHSD’s Commissioner for Lands, who must receive a report from the lender showing how loan proceeds will be used to develop the land. The law does not apply to village land allocated by village councils, which cannot be mortgaged to a financial institution.

The GoT’s Copyright Society of Tanzania (COSOTA) is responsible for registration and enforcement of copyrighted materials, while the Business Registrations and Licensing Agency (BRELA) within the Ministry of Trade administers trademark and patent registration. It is the responsibility of the rights holders to enforce their rights where relevant, retaining their own counsel and advisors. The Fair Competition Commission (FCC) promotes competition, protects consumers against unfair market conduct, and has quasi-judicial powers to determine trademark and patent infringement cases. The FCC is also tasked with combating the sale of counterfeit merchandise. However, the Tanzania Medicines and Medical Devices Authority (TMDA) handles counterfeit human medicines, cosmetics, and packaged food materials, and its mandate is stipulated in the Tanzania Food, Drugs, and Cosmetics Act (TFDCA) as per the amendment of 2019. Despite its efforts, limited resources make it difficult for the GoT to adequately combat counterfeiting.

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

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

Tanzania’s Dar es Salaam Stock Exchange (DSE) is a self-listed publicly owned company. In 2013, the DSE launched a second-tier market, the Enterprise Growth Market (EGM) with lower listing requirements designed to attract small and medium sized companies with high growth potential. As March 2022, the total market capitalization was $7.076 billion, a 5.6 percent increase from March 2021 ($6.7 billion). The Capital Markets and Securities Authority (CMSA) Act facilitates the flow of capital and financial resources to support the capital market and securities industry. Tanzania, however, restricts the free flow of investment in and out of the country, and Tanzanians cannot sell or issue securities abroad unless approved by the CMSA.

Under the Capital Markets and Securities (Foreign Investors) Regulation 2014, there is no aggregate value limitation on foreign ownership of listed non-government securities. Only companies or citizens from EAC nations are permitted to participate in the government securities market. Even with this recent development allowing EAC participation, foreign ownership of government securities is still limited to 40 percent of each security issued.

Tanzania’s Electronic and Postal Communications Act 2010 amended in 2016 by the Finance Act 2016 requires telecom companies to list 25 percent of their shares via an initial public offering (IPO) on the DSE. Of the seven telecom companies that filed IPO applications with the CMSA, only Vodacom’s application received approval.

As part of the Mining (Minimum Shareholding and Public Offering) Regulations 2016, large scale mining operators were required to float a 30 percent stake on the DSE by October 7, 2018. Currently, no mining companies are listed on the DSE.

Tanzania’s financial inclusion rate increased significantly over the past decade thanks to mobile phones and mobile banking. However, participation in the formal banking sector remains low. Low private sector credit growth and high non-performing loan (NPL) rates are persistent problems. The NPL ratios further deteriorated with the COVID 19 pandemic.

According to the IMF’s most recent Financial System Stability Assessment ( view assessment ), Tanzania’s bank-dominated financial sector is small, concentrated, and at a relatively nascent stage of development. Financial services provision is dominated by commercial banks, with the ten largest institutions being preeminent in terms of mobilizing savings and intermediating credit. The report found that nearly half of Tanzania’s 45 banks are vulnerable to adverse shocks and risk insolvency in the event of a global financial crisis.

The two largest banks are CRDB Bank and National Microfinance Bank (NMB), which represent almost 30 percent of the market. The only U.S. bank operating in Tanzania is Citibank Tanzania Limited. Private sector companies have access to commercial credit instruments including documentary credits (letters of credit), overdrafts, term loans, and guarantees. Foreign investors may open accounts and earn tax-free interest in Tanzanian commercial banks, however a special exemption is required from the Bank of Tanzania to open an account as a “foreign entity.” A foreign entity account is an account owned by a company without a registered, legal business presence in Tanzania.

The Banking and Financial Institution Act 2006 established a framework for credit reference bureaus, permits the release of information to licensed reference bureaus, and allows credit reference bureaus to provide to any person, upon a legitimate business request, a credit report. Currently, there are two private credit bureaus operating in Tanzania: Credit Info Tanzania Limited and Dun & Bradstreet Credit Bureau Tanzania Limited.

Tanzania does not have a sovereign wealth fund.

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 ).

The government retains a strong presence in energy, mining, telecommunication services, and transportation. The government is increasingly empowering the state-owned Tanzania Telecommunications Corporation Limited (TTCL) with the objective of safeguarding the national security, promoting socio-economic development, and managing strategic communications infrastructure. The government also acquired 51 percent of Airtel Telecommunication Company Limited and became the majority shareholder. In the past, the GoT has sought foreign investors to manage formerly state-run companies in public-private partnerships, but successful privatizations have been rare. Though there have been attempts to privatize certain companies, the process is not always clear and transparent. The GoT currently has 20 companies/assets awaiting privatization.

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.

Department of State

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

Department of the Treasury

• OFAC Recent Actions

Department of Labor

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

Tanzania maintains a national climate strategy, and recently developed and submitted its second Nationally Determined Contribution (NDC) to the United Nations Framework Convention on Climate Change (UNFCCC) in 2021.  Its second NDC builds on the 2021 National Climate Change Strategy (NCCS), the 2014 Zanzibar Climate Change Strategy (ZCCS) and other national climate change development processes.

Tanzania has also developed/adopted and implements various other policies, legislation, strategies, plans and programs to address climate change.  This includes Tanzania’s National Communications Plans (2003 and 2015); Natural Gas Policy (2013); the Zanzibar Environmental Policy (2014); the Renewable Energy Strategy (2014); the Natural Gas Act (2015); the National Forestry Policy (1998); the National Transport Master Plan (2013); the National Environmental Policy (1997 and 2022); the Zanzibar Environmental Policy (2013); the National Environmental Action Plan (2012-2017); the National REDD+ Strategy and Action Plan (2013); the National Climate-Smart Agriculture Program (2015-2025); and the National Environment Management Act (2004).

Despite Tanzania’s low greenhouse gas emissions, the country is committed to climate change mitigation and adaption strategies. Tanzania’s 2021 National Environmental Policy reflects the country’s commitment to reach net-zero carbon emissions by 2050. Strategies and policies exist, but specifics are lacking, as is data sharing on progress towards targets and goals.  The GoT’s second Nationally Determined Contribution (NDC) – submitted to UNFCCC in 2021 – highlights an overall mitigation goal of nationally reducing greenhouse gas (GHG) emissions by 30-35% relative to Business-As-Usual scenario by 2030, and indicates that it has formulated the cost of net-zero emissions by 2050, though the details are not clear.

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.

The Director General
Prevention and Combating of Corruption Bureau
P.O. Box 4865, Dar es Salaam, Tanzania
Tel: +255 22 2150043
Email: dgeneral@pccb.go.tz 

Executive Director
Legal and Human Rights Centre
P.O. Box 75254, Dar es Salaam, Tanzania
Tel: +255 22 2773038/48
Email: lhrc@humanrights.or.tz 

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.

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.

* 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).

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

The Ugandan government and authorities vocally welcome FDI and celebrate its job creation benefits. Furthermore, the country’s free market economy, liberal financial system, and close to 45-million-person consumer market together attract investors. However, rampant corruption, weak rule of law, threats to open and free internet access – including a five-day complete internet shutdown surrounding January 2021 elections and an ongoing, year-long ban on Facebook – and an increasingly aggressive tax collection regime by the Uganda Revenue Authority (URA) create a challenging business environment. In June 2021, the government scrapped the $0.056 Over the Top (OTT) daily tax for consumers to access social media channels. The tax was replaced by a 12% excise duty levy on each internet package purchased.

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

In December 2021, MTN Uganda – the largest telecom company in Uganda – sold 13% of its shares to the public when it listed on the Uganda Securities Exchange (USE). MTN listed the shares in order to move toward compliance with the 2020 Communications Licensing Framework (CLF). The CLF requires telecommunication (telecom) companies to list 20% of their equity on the USE with the aim of increasing local ownership and reducing the repatriation of profits. Airtel, the second largest telecom, is expected to float shares by mid-2022. In 2020, MTN and Airtel paid $100 million and $75 million, respectively, to renew their licenses for 12 years and 20 years, respectively.

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

President Museveni hosts an annual investors’ roundtable to consult a select group of foreign and local investors on increasing investment, occasionally including U.S. investors. However, the last meeting was held in March 2020, a few days before the first national lockdown was announced to control the spread of COVID-19.

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

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

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

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

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

The United Nations Commission on Trade and Development (UNCTAD) issued its World Investment Report, 2020, available at:

https://unctad.org/system/files/official-document/wir2021_en.pdf

The IMF issued an Article IV Consultation and Review of the Extended Credit Facility Arrangement and Requests for Modifications of Performance Criteria in 2022, and its concluding statement is available at: https://www.imf.org/en/Publications/CR/Issues/2022/03/15/Uganda-2021-Article-IV-Consultation-and-First-Review-under-the-Extended-Credit-Facility-515168 

The World Trade Organization (WTO) issued its most recent Trade Policy Review in 2019; the report is available at:

https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=254764,251521,117054,95202,80262,80232,82036,106989&CurrentCatalogueIdIndex=0&FullTextHash=&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True 

Global Witness reviewed the state of the mining sector in 2017 and proposed reforms to the mining code:

https://www.globalwitness.org/en/campaigns/oil-gas-and-mining/uganda-undermined/ 

The UIA “one-stop shop” website assists in registering businesses and investments. In practice, investors and businesses may need to liaise with multiple authorities to set up shop, and the UIA lacks the capacity to play a robust business facilitation role.

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

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

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

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

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

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

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

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

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

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

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

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

Public finances are generally transparent and budget documents are available online. The government annually publishes the Annual Debt Statistical Bulletin, which contains the country’s debt obligations including status of public debt, cost of debt servicing, and liabilities. However, the government’s significant use of supplementary and classified budget accounts – which accounted for 9% of the FY2020/21 budget – undermines parliamentary and public oversight of public finances.

The government does not require companies to disclose environmental, social, and governance (ESG) profiles.

Per treaty, Uganda’s regulatory systems must conform to the below supranational regulatory systems (though in practice, domestication of supranational legislation remains imperfect):

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

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

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

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

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

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

Uganda does not have any specialized laws or institutions dedicated to competition-related concerns, although commercial courts occasionally handle disputes with competition elements. There was no significant competition-related dispute handled by the courts in 2021.

The constitution guarantees the right to property for all persons, domestic and foreign. It also prohibits the expropriation of property, except when in the “national interest” such as eminent domain and preceded by compensation to the owner at fair market value. In 2020, the two National Telecom Operators – MTN Uganda and Airtel Uganda – renewed their licenses to operate in Uganda for 12 and 20 years respectively. One requirement of those license renewals is for the telecom companies to list 20% stakes on the Ugandan stock market within two years of being granted the license. MTN Uganda listed on the stock exchange in 2021.

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

The Bankruptcy Act of 1931, the Insolvency Act of 2011, and the Insolvency Regulations of 2013 generally align Uganda’s legal framework on insolvency with international standards. On average, Uganda recovers $ 0.39 per dollar, well above the sub-Saharan average of $0.20. Bankruptcy is not criminalized.

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

In June 2020, the government scrapped 18% excise duty on cooking gas in order to encourage clean energy cooking. This is meant to reduce the use of charcoal that contributes to deforestation. While the scrapping of this excise duty is positive, the usage of cooking gas is still limited to major cities because the cost is still high.

The Uganda Free Zones Authority (UFZA) ( https://freezones.go.ug/ ) regulates free trade zones, which offer a range of tax advantages. The government’s process in awarding free trade zone status is generally transparent. In 2021, UFZA licensed three private Free Zone Developers, bringing the total number of free zones to 27. Estimates from UFZA indicate that in FY 2020/2021, the 27 free zones attracted $527 million worth of capital investment, created 8,610 jobs, and contributed $1.25 billion to total exports.

The ICA does not impose any direct requirements regarding local employment or specify mandatory numbers for local employment in management positions. The broadness of its provisions, however, arguably leaves the door open for enforcement of local employment requirements. The Petroleum Exploration, Development, and Production Act and the Petroleum Refining, Conversion, Transmission, and Midstream Storage Act require investors in the oil sector to contribute to the creation of a locally skilled workforce.

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

No general localization law exists in Uganda, but sector-specific laws impose localization requirements. The petroleum laws require foreign oil companies to prioritize the use of local goods and labor when available, and the MEMD has the authority to determine the extent of local content requirements in the sector. The Public Procurement and Disposal of Public Assets Act, which regulates government procurements, also imposes thresholds on the contracts for which a foreign company can apply. Per the petroleum laws, MEMD has the responsibility to monitor companies in the oil sector to ensure they are meeting the local content requirements. Additionally, the Office of the Auditor General carries out audits of the oil and gas sector to ensure adherence to local content requirements. These performance reviews can form grounds for granting incentives or enforcement of the restrictions. Since the 2013 oil laws were passed, no company has been punished for breaching local content rules. Investment incentives in Uganda are quite controversial because they are applied on a case-by-case basis, even though the ICA lists seven grounds for granting investment incentives.

While there are no general requirements for foreign information technology (IT) providers to hand over to the Ugandan government any source code or information related to encryption, the National Information Technology Authority Act allows the Minister for Information, Communication, and Technology (ICT) to order an IT provider to submit any information to the National Information Technology Authority (NITA). However, it is unclear to what extent, if any, the Ugandan government has invoked this law. Similarly, the Computer Misuse Act allows the government to “compel a service provider…to co-operate and assist the competent authorities in the collection or recording of traffic data in real time, associated with specified communication transmitted by means of a computer system.” These regulatory requirements apply to all IT providers, both foreign and local. There are no measures to prevent or unduly impede companies from freely transmitting customer or other business-related data outside of Uganda. In 2017, however, the BOU interpreted Uganda’s cyber security legislation as providing it with the mandate to require financial institutions to relocate their data centers to Uganda to provide the government with access to customers’ digital financial information. Supervised financial institutions are currently implementing this policy. A U.S.- owned data center firm inaugurated in May 2021 a Tier III data center targeting the market for localizing data storage and opportunities for cloud services.

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

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

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

Ugandan law provides for the protection of intellectual property rights (IPR), but enforcement mechanisms are weak. The country lacks the capacity to prevent piracy and counterfeit distribution. As a result, theft and infringement of IPR is common and widespread. Uganda did not enact any IP-related laws and regulations in the past year. In August 2021, Uganda did adopt the African Regional Intellectual Property Organization (ARIPO)’s draft protocol on regional voluntary registration of Copyright and Related Rights. The Protocol was adopted by ARIPO member countries with the aim of ensuring African creators benefit from their creative works.

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

Uganda is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List. For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles https://www.wipo.int/directory/en/ .

The government generally welcomes foreign portfolio investment and has put in place a legal and institutional framework to manage such investments. The Capital Markets Authority (CMA) licenses brokers and dealers and oversees the USE, which is now trading the stock of 18 companies. USE liquidity remains low, constraining entry and exit from sizeable positions. Capital markets are open to foreign investors and there are no restrictions for foreign investors to open a bank account in Uganda. However, the government imposes a 15% withholding tax on interest and dividends. Foreign-owned companies may trade on the stock exchange, subject to some share issuance requirements. The government respects IMF Article VIII and refrains from restricting payments and transfers for current international transactions.

Credit is available from commercial banks on market terms, and foreign investors can access credit. However, persistently high yields on Ugandan government-issued securities push up lending rates more broadly, including interest rates on commercial loans, undermining the private sector’s access to affordable credit. For instance, commercial lending rates averaged 19.4% and government 10-year bonds averaged 14% at the end of February 2022.

Formal banking participation remains low, with only 35.5% of Ugandans having access to bank accounts, many via their membership in formal savings groups. However, there are 19 million total bank accounts and more than 32 million mobile money accounts used to conduct basic financial transactions as some Ugandans hold multiple accounts. Uganda’s banking and financial sector is generally healthy, though non-performing loans remain a problem. According to the Bank of Uganda’s Financial Soundness Indicators, Uganda’s non-performing loan rate stood at 4.25% at the end of June 2021, down from 6% in June 2020. Uganda has 26 commercial banks, with the top six controlling at least 62% of the banking sector’s total assets, valued at $10 billion. The Bank of Uganda regulates the banking sector, and foreign banks may establish branches in the country. In June 2021, the BOU started the direct regulation of mobile money service providers under the National Payment Systems Act, 2020. In February 2020, the Financial Action Taskforce added Uganda to its “Grey List” due to the country’s insufficient implementation of its anti-money laundering and countering financing of terrorism (AML/CFT) policies. As of the end of February 2021, Uganda was still on this watch list due to seven strategic deficiencies in the implementation of AML/CFT policies. As a result, Uganda’s correspondent banking relationships face increased oversight. Uganda has made a high-level political commitment to work with the FATF and (Eastern and Southern Africa Anti-Money Laundering Group) ESAAMLG to strengthen its AML/CFT regime and plans to implement FATF’s recommendations by May 2022. Uganda does not restrict foreigners’ ability to establish a bank account.

In 2015, the government established the Uganda Petroleum Fund (PF) to receive and manage all government revenues from the oil and gas sector. By law, the government must spend a portion of proceeds from the fund on oil-related infrastructure, with parliament appropriating the remainder of revenues through the normal budget procedure. As of June 2021, the PF had a balance of $65 million. Uganda does not have a sovereign wealth fund but established a fund called the Petroleum Revenue Investment Reserve (PRIR) to ensure responsible and long-term management of revenue from Uganda’s oil resources when oil production begins. As of the end of 2021, the government had not passed the Petroleum Revenue Investment policy to determine where petroleum revenue would be invested. In the 2021 – 2026 Charter of Fiscal Responsibility, the government has committed to spending oil revenue worth 0.8% of non-oil GDP from the previous fiscal year as part of the national budget. The balance would be sent to the PRIR for Investment.

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.

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

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.

Department of State

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

Department of the Treasury

• OFAC Recent Actions

Department of Labor

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

Uganda’s Nationally Determined Contribution, or NDC, covers the energy, forestry, and wetland sectors. It is looking to reduce emissions by 22% by 2030 compared to a business-as-usual scenario, with estimated emissions of 77.3 million metric tons of CO2 equivalent a year in 2030. As a part of this goal, it seeks to raise renewable electricity generation capacity from 729 megawatts in 2013 to at least 3,200 megawatts by 2030 and to reverse deforestation and increase forest cover from approximately 14% in 2013 to 21% in 2030 through forest protection. It also plans to increase wetland coverage from 10.9% in 2014 to 12% by 2030. The objective of Uganda’s NDC is to pursue a low-carbon development pathway and reduce the vulnerability of the population, environment, and economy to the impacts of climate change by implementing measures and policies that build resilience, with a primary focus on forest and wetland conservation. The government has not introduced any policies to reach net-zero carbon emissions by 2050, and public procurement policies do not include environment and green growth considerations.

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.

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

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

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

Contact at a “watchdog” organization: Anti-Corruption Coalition Uganda

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

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.

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.

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 

In general, Zambian law does not restrict foreign investors in any sector of the economy, although there are a few regulations and practices limiting foreign control laid out below. Foreign Direct Investment (FDI) continues to play an important role in Zambia’s economy. The Zambia Development Agency (ZDA) is charged with attracting more FDI to Zambia, in addition to promoting trade and investment and coordinating the country’s private sector-led economic development strategy.

Zambia has undertaken certain institutional reforms aimed at improving its attractiveness to investors; these reforms include the Private Sector Development Reform Program (PSDRP), which addresses the cost of doing business through legislation and institutional reforms, and the Millennium Challenge Account (MCA), which addresses issues relating to transparency and good governance. However, frequent government policy changes have created uncertainty for foreign investors.

The ZDA does not discriminate against foreign investors, and all sectors are open to both local and foreign investors. Foreign and domestic private entities have a right to establish and own business enterprises and engage in all forms of remunerative activities, and no business ventures are reserved solely for the government. Although private entities may freely establish and dispose of interests in business enterprises, investment board approval is required to transfer an investment license for a given enterprise to a new owner.

Currently, all land in Zambia is considered state land and ownership is vested in the president. Land titles held are for renewable 99-year leases; ownership is not conferred. According to the government, the current land administration system leaves little room for the empowerment of citizens, especially the poor and vulnerable rural communities. The government began reviewing the current land policy in earnest in March 2017; though shorter terms continue to be suggested, no changes have been adopted to date.

Foreign investors in the telecom sector are required to disclose certain proprietary information to the ZDA as part of the regulatory approval process. Further information regarding information and communication regulation can be found at the website of the Zambia Information and Communication Technology Authority at http://www.zicta.zm 

The ZDA board screens all investment proposals and usually makes its decision within 30 days. The reviews appear to be routine and non-discriminatory, and applicants have the right to appeal investment board decisions. Investment applications are screened, with effective due diligence to determine the extent to which the proposed investment will help to create employment; the development of human resources; the degree to which the project is export-oriented; the likely impact on the environment; the amount of technology transfer; and any other considerations the Board considers appropriate.

The following are the requirements for registering a foreign company in Zambia:

1. At least one and not more than nine local directors must be appointed as directors of a majority foreign-owned company. At least one local director of the company must be resident in Zambia, and if the company has more than two local directors, more than half of them shall be residents of Zambia.
2. There must be at least one documentary agent (a firm, corporate body registered in Zambia, or an individual who is a resident in Zambia).
3. A certified copy of the Certificate of Incorporation from the country of origin must be attached to Form 46.
4. The charter, statutes, regulations, memorandum and articles, or other instrument relating to a foreign company must be submitted.
5. The Registration Fee of K5,448.50 (~ USD 320.00) must be paid.
6. The issuance and sealing of the Certificate of Registration marks the end of the process for registration.

This and further information can be found through the following Government of Zambia’s regulatory websites: Patents and Companies Registration Agency (PACRA), https://www.pacra.org.zm/ ; Zambia Development Agency http://www.zda.org.zm/ ; Business Regulatory Review Agency, http://www.brra.org.zm/ ; and Business License Portal, http://www.businesslicenses.gov.zm/ .

Zambia has not undergone any third-party investment policy reviews since 2012 through a multilateral organization such as the OECD, WTO, UNCTAD. However, domestic investment policies and legislation have been revised periodically, whenever impediments to investment laws are identified.

The Zambian government, often with support from cooperating partners, has undertaken economic reforms to improve its business facilitation process and attract foreign investors, including steps to support more transparent policymaking and to encourage competition. The impact of these progressive policies, however, has been undermined by persistent fiscal deficits, struggling economy, high cost of doing business and widespread corruption. Business surveys, including TRACE International, generally indicate that corruption in Zambia is a major obstacle for conducting business in the country.

The Zambian Business Regulatory Review Agency (BRRA) manages Regulatory Services Centers (RSCs) that serve as a one-stop shop for investors. RSCs provide an efficient regulatory clearance system by streamlining business registration processes; providing a single licensing system; reducing the procedures and time it takes to complete the registration process; and increasing accessibility of business registration institutions by placing them under one roof.

The government established RSCs in Lusaka, Livingstone, Kitwe, and Chipata, and has plans to establish additional RSCs so that there is at least one in each of the country’s 10 provinces. Information about the RSCs can be found at the following links:

The Companies Act No. 10 of 2017 was operationalized through a statutory instrument (June 2018) and implementing regulations (February 2019) aimed at fostering accountability and transparency in the management of companies. Companies are required to maintain a register of beneficial owners, and persons holding shares on behalf of other persons or entities must now disclose those beneficial owners.

In order to facilitate improved access to credit, the Patents and Company Registration Office (PACRA) established the collateral registry system, a central database that records all registrations of charges or collaterals created by borrowers to secure credits provided by lenders. This service allows lenders to search for collateral offered by loan applicants to see if that collateral already an existing claim has registered against it. Creditors can also register security interests against the proposed collateral to protect their priority status in accordance with the Movable Property (Security Interest) Act No. 3 of 2016. Generally, the first registered security interest in the collateral has first priority over any subsequent registrations.

Parliament passed the Border Management and Trade Facilitation Act in December 2018. The Act, among other things, calls for coordinated border management and control to facilitate the efficient movement and clearance of goods; puts into effect provisions for one-stop border posts; and simplifies clearance of goods with neighboring countries. While one-stop border posts have existed for several years and agencies are co-located at some border crossings, the new law seeks to harmonize conflicting regulations and processes within the interagency.

There are no incentives for outward investment.

Proposed laws and other statutory instruments are often insufficiently vetted with interest groups or are not released in draft form for public comment. Proposed bills are published on the National Assembly of Zambia website ( http://www.parliament.gov.zm/ ) for public viewing and to facilitate public submissions to parliamentary committees reviewing the legislation; however, these are frequently issued with little advanced notice. Hard copies of the documents are delivered by courier to the stakeholders’ premises/mailboxes.

Opportunities for comment on proposed laws and regulations sometimes exist through trade associations and policy thinktanks such as the Zambia Institute for Policy Analysis and Research, Centre for Trade Policy and Development, Zambia Chamber of Commerce and Industry, Zambia Association of Manufacturers, Zambia Chamber of Mines, and the American Chamber of Commerce in Zambia. The government established the Business Regulatory Review Agency (BRRA) in 2014 with the mandate to administer the Business Regulatory Act. The Act requires public entities to submit for Cabinet approval a policy or proposed law that regulates business activity, after the policy or proposed law has BRRA approval. A public entity that intends to introduce any policy or law for regulating business activities should give notice, in writing, to the BRRA at least two months prior to submitting it to Cabinet; hold public consultations for at least 30 days with relevant stakeholders; and perform a Regulatory Impact Assessment (RIA). The BRRA works in collaboration with the Ministry of Justice, which does not approve any proposed law to regulate business activity without the approval of BRRA. While this framework exists on paper, the BRRA and the consultative process is still relatively new and unknown even by other government officials, and in some cases, it appears that the BRRA was informed after the Ministry of Justice had already approved a law.

While there are clear public procurement guidelines, transparency remains a concern for potential investors and bidders. To enhance the transparency, integrity, and efficiency of Zambia’s procurement system, the GRZ launched the Electronic Government Procurement (e-GP) in July 2016. President Hichilema has made public procurement reform a key priority for his administration, introducing a new financial crimes fast track court and strengthening the mandate of key investigative institutions.

Zambia is a member of several regional and international economic groupings, including the COMESA and SADC Free Trade Areas. Zambia was also an active participant in the establishment of the Tripartite Free Trade Area between COMESA, SADC, and the East African Community (EAC). The top five intra-COMESA exports from Zambia include tobacco, sugar, wire, refined copper, and cement. Trade among SADC member states is conducted on reciprocal preferential terms. Rules of Origin define the conditions for products to qualify for preferential trade in the SADC region. Products have to be “wholly produced” or “sufficiently processed” often warranting change in tariff heading in the SADC region to be considered compliant with the SADC Rules of Origin, which are product-specific and not generic.

COMESA, EAC, and SADC member states agreed in October 2008 to negotiate a Tripartite Free Trade Area (TFTA) covering half of Africa. The TFTA was launched in June 2015 in Egypt; to date, Zambia is one of the 22 out of the 26 member states which have signed the agreement. The Agreement will enter into force once it has been ratified by 14 Member States-with 10 Members (Botswana, Burundi, Egypt, Eswatini, Kenya, Namibia, Rwanda, Uganda, South Africa and Zambia) ratified.

According to OECD trade facilitation indicators, Zambia performs better than the average sub-Saharan African and lower middle-income countries in the areas of information availability, involvement of the trade community, appeal procedures, and automation. Zambia’s performance for internal border agency co-operation and governance and impartiality is below average for sub-Saharan African and lower middle-income countries.

In February 2019, Zambia signed the African Continental Free Trade Agreement (AfCFTA) and in February 2021 it deposited the instruments of ratification with the African Union, making Zambia the 36th member to fully accede to the agreement. The trade agreement among 54 African Union member states creates in theory a continent-wide single market, with plans for free movement of people and a single-currency union.

At the multilateral level, Zambia has been a WTO member since 1995. Zambia’s investment incentives program is transparent and has been included in the WTO’s trade policy reviews. The incentive packages are also subject to reviews by the Board of the ZDA and to periodic reviews by the Parliamentary Accounts Committee. Zambia is a signatory to the WTO Trade Facilitation Agreement (TFA), but still faces major challenges in expediting the movement, release, and clearance of goods, including goods in transit, which is a major requisite of the TFA. The new administration has committed to implement a robust infrastructure development for roads and bridges which form a backbone of Zambia’s transport network and regional connectivity. Zambia has benefited from duty-free and quota-free market access to the EU through its Everything but Arms FTA, and to the United States via the Generalized System of Preferences (GSP) and AGOA agreements.

Zambia has a dual legal system that consists of statutory and customary law enforced through a formal court system. Statutory law is derived from the English legal system with some English Acts of Parliament still deemed to be in full force and effect within Zambia. Traditional and customary laws, which remain in a state of flux, are generally not written or codified, although some of them have been unified under Acts of Parliament. No clear definition of customary law has been developed by the courts, and there has not been systematic development of this subject.

Zambia has a written commercial law. The Commercial Court, a division of the High Court, deals with disputes arising out of commercial transactions. All commercial matters are registered in the commercial registry and judges of the Commercial Court are experienced in commercial law. Appeals from the Commercial Court, based on the amended January 2016 constitution, now fall under the recently established Court of Appeals, comprised of eight judges. The Foreign Judgments (Reciprocal Enforcement) Act, Chapter 76, makes provision for the enforcement in Zambia of judgments given in foreign countries that accord reciprocal treatment. The registration of a foreign judgment is not automatic. Although Zambia is a state party to international human rights and regional instruments, its dualist system of jurisprudence considers international treaty law as a separate system of law from domestic law. Domestication of international instruments by Acts of Parliament is necessary for these to be applicable in the country. Systematic efforts to domesticate international instruments have been slow but continue to see progress.

The courts support Alternative Dispute Resolution (ADR) and there has been an increase in the use of arbitration, mediation, and tribunals by litigants in Zambia. Arbitration is common in commercial matters and the proceedings are governed by the Arbitration Act No. 19 of 2000. The Act incorporates United Nations Commission on International Trade Law (UNCITRAL) and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Zambian courts have no jurisdiction if parties have agreed to an arbitration clause in their contract. The establishment of the fee-based judicial commercial division in 2014 to adjudicate high-value claims has helped accelerate resolution of such cases.

The courts in Zambia are generally independent, but contractual and property rights enforcement is weak and final court decisions can take a prohibitively long time. At times, politicians have exerted pressure on the judiciary in politically controversial cases. Regulations or enforcement actions are appealable, and adjudication depends on the matter at hand and the principal law or act governing the regulations.

The major laws affecting foreign investment in Zambia include:

1. The Zambia Development Agency Act of 2006, which offers a wide range of incentives in the form of allowances, exemptions, and concessions to companies.
2. The Companies Act of 1994, which governs the registration of companies in Zambia.
3. The Zambia Revenue Authority’s Customs and Excise Act, Income Tax Act of 1966, and the Value Added Tax of 1995 provide for general incentives to investors in various sectors.
4. The Employment Code Act of 2019, Zambia’s basic employment law that provides for required minimum employment contractual terms.
5. The Immigration and Deportation Act, Chapter 123, regulates the entry into and residency in Zambia of visitors, expatriates, and immigrants.

The Zambian economy operates under free market norms with a fairly developed competition and regulatory framework. There is freedom of pricing, currency convertibility for a small currency basket, freedom of trade, and free use of profits. A fairly strong institutional framework is provided for strategic sectors, such as mining and mining supply industries, and large-scale commercial farming. The Competition and Consumer Protection Commission (CCPC) is a statutory body established with a unique dual mandate to promote competition in the economy, curtail restrictive business practices and protect consumer rights. The CCPC’s mandate implemented through the CCPC ACT cuts across all economic sectors in an effort to eliminate abuse of dominant position of market power, anti-competitive mergers and acquisitions, and cartels, and to enhance consumer protection and safeguard competition.

In 2016 the CCPC published a series of guidelines and policies that included adoption of a formal Leniency Policy intended to encourage persons to report information that may help to uncover prohibited agreements. In certain circumstances the person receives immunity from prosecution, imposition of fines, or the guarantee of a reduction in fines. The policy also calculates administrative penalties. In addition, the CCPC in 2016 published draft Settlement Guidelines, which provide a formal framework for parties seeking to engage the CCPC to reach a settlement.

The CCPC Act, Chapter 417, prevents firms from distorting the competitive process through conduct or agreements designed to exclude actual or potential competitors, and applies to all entities, regardless of whether private, public, or foreign. Although the CCPC largely opens investigations when a complaint is filed, it can also open investigations on its own initiative. Zambian competition law can also be enforced by civil lawsuits in court brought by private parties, while criminal prosecution by the CCPC is possible in cartel cases without the involvement of the Director of Public Prosecution under the Competition and Consumer Protection Act (CCPA) No. 24 of 2010. However, the general perception is that the Commission may be restricted in applying the competition law against government agencies and State-Owned Enterprises (SOEs), especially those protected by other laws.

Zambia is a signatory to the Multilateral Investment Guarantee Agency (MIGA) of the World Bank and other international agreements. This guarantees foreign investment protection in cases of war, strife, disasters, and other disturbances, or in cases of expropriation. Zambia has signed bilateral reciprocal promotional and protection of investment protocols with a number of countries. The ZDA also offers further security for investments in the country through the signing of the Investment Promotion and Protection Agreements (IPPAs).

Investments may only be legally expropriated by an act of Parliament relating to the specific property expropriated. Although the ZDA Act states that compensation must be at a fair market value, the method for determining fair market value is ill-defined. Compensation is convertible at the current exchange rate. The ZDA Act also protects investors from being adversely affected by any subsequent changes to the Investment Act of 1993 for seven years from their initial investment.

Leasehold land, which is granted under 99-year leases, may revert to the government if it is determined to be undeveloped after a certain amount of time, generally five years. Land title is sometimes questioned in court, and land is re-titled to other owners.

There is no pattern of discrimination against U.S. persons by way of an illegal expropriation by the government or authority in the country. There are no high-risk sectors prone to expropriation.

The Bankruptcy Act, Chapter 82, provides for the administration of bankruptcy of the estates of debtors and makes provision for punishment of offenses committed by debtors. It also provides for reciprocity in bankruptcy proceedings between Zambia and other countries and for matters incidental to and consequential upon the foregoing. This applies to individuals, local, and foreign investors. Bankruptcy judgments are made in local currency but can be paid out in any internationally convertible currency. Under the Bankruptcy Act, a person can be charged as a criminal. A person guilty of an offense declared to be a felony or misdemeanor under the Bankruptcy Act in respect of which no special penalty is imposed by the Act shall be liable on conviction to imprisonment for a term not exceeding two years.

Zambia has made strides in improving its credit information system. Since 2008, the credit bureau, TransUnion, requires banks and some non-banks to provide loan requirement information and consult it when making loans. The credit bureau eventually captures data from other institutions, such as utilities. However, the bureau’s coverage is still less than ten percent of the population, the quality of its information is suspect, and there it lacks clarity on data sources and the inclusion of positive information.

Under the Income Tax Act, Chapter 323, or the Customs and Excise Act, Chapter 322, investors (local and foreign) who invest not less than USD 50,000 in a Multi-Facility Economic Zones (MFEZ), an industrial park, a priority sector (among them manufacturing, agro processing, energy and tourism), or who invest in a Rural Enterprise under the ZDA Act, are entitled to the following fiscal incentives:

1. Zero corporate tax for five years from commencement of operations.
2. Taxation on only 50 percent of profits in year six through year eight from commencement of operations and only 75 percent for years nine and ten.
3. Five-year exemption on dividend taxes following the first year of declaration.
4. Five-year customs duties exemption on imported machinery and equipment.
5. Improvement allowance of 100 percent of capital expenditure on improvements or upgrading of infrastructure.

An investor may apply to establish and operate a bonded factory under Section 65 of the Customs and Excise Act. The GRZ created MFEZs in 2007, providing investors with waivers on customs duty on imported equipment, excise duty, and value added tax, among other concessions. It is currently unclear if the government will maintain these incentives (see Investment Incentives section).

There are four MFEZs currently operating: the Chambishi MFEZ in Copperbelt Province, the Lusaka South MFEZ which houses a mix of multi-national firms, and the Lusaka East MFEZ located near Lusaka’s Kenneth Kaunda International Airport and Chibombo MFEZ in Central Province which are heavily (if not exclusively) dominated by Chinese-owned enterprises. Foreign-owned firms enjoy the same investment opportunities as domestic firms in MFEZs. The ZDA Act is the primary legislation for investment in Zambia. An investor, foreign or local, is free to identify and suggest any other location in the country deemed economical for MFEZ development, although the government has prioritized designated areas in Lusaka, Chibombo, Ndola, Mpulungu, Chembe, Nakonde, Kasumbalesa, and Mwinilunga. Investors are encouraged to provide local employment and skills transfer to local entrepreneurs and communities. Investors are also encouraged to utilize local raw materials and intermediate goods and engage in technology transfer to qualify to operate in an MFEZ.

Zambia is active in several key regional organizations that promote regional trade and regulatory harmonization. COMESA launched its FTA in October 2000 and established a customs union in June 2009.

Although performance requirements are not imposed, authorities expect commitments made in applications for investment licenses to be fulfilled. Foreign contractors bidding on infrastructure projects are required by law to give 20 percent of works to Zambian small contractors. Outside of infrastructure projects, no requirements currently exist for local content, equity, financing, employment, or technology transfers. However, in January 2018 the government issued a Statutory Instrument (SI) instructing all industries to transport 30 percent of their cargo by rail. The Data Protection Bill, which was signed into law in March 2021, mandates data localization for sensitive personal data, but also outlines conditions for the cross-border transfer of other kinds of personal data. The government does not impose offset or local content requirements or preconditions for permission to invest in a specific geographic area, but investors are encouraged to employ local nationals. There is no legal definition of local content, and the most comprehensive local content legislation is contained in the Mines and Minerals Development Act of 2008. The Citizens Economic Empowerment Act of 2006 and Statutory Instrument of 2008 also contain local content provisions.

The GRZ encourages employment of local workers for unskilled labor as well as for skilled middle or senior management workers. Under the ZDA Act, any foreign investor who invests a minimum of $250,000 or its equivalent and employs a minimum of 200 employees at certain technical or managerial levels is entitled to a self-employment permit or resident permit.

The GRZ encourages investors where possible to use domestic content in goods or technology if available. Government through the Ministry of Commerce has developed the Local Content Strategy (launched 2018) to promote inclusive and sustainable growth through increased use of locally available goods and services in development sectors. The Strategy will be implemented through a law currently under formulation in a Bill and will compels businesses to use a predetermined local content percentage of local inputs and products in the production and provision of goods and services.

Currently, there is no requirement for foreign information technology providers to turn over source code or provide access to surveillance. The telecommunications sector is governed by the Information and Communications Technology Act No. 15 of 2009 (ICT Act) and falls under the Ministry of Technology & Science and regulated by the Zambia Information and Communications Technology Authority (ZICTA).

Government is committed to ensuring compliance and consistency with multilateral obligations through Trade Related Investment Measures (TRIMs) requirements. Although performance requirements are not imposed, authorities expect commitments made in applications for investment licenses to be fulfilled.

Property rights and the regulation of property are well defined in principle, but face problems in implementation. Contractual and property rights are weak. Courts are often inexperienced in commercial litigation and are frequently slow in reaching their decisions. The ZDA Act ensures investors’ property rights are respected. Secured interests in property, both movable and real, are recognized and enforced. Property can be owned individually, jointly in undivided shares, or by an entity such as a company, close corporation or trust, or similar entity registered outside Zambia. The ZDA Act provides for legal protection and facilitates acquisition and disposition of all property rights such as land, buildings, and mortgages. The Lands and Deeds Registry Act of Zambia states that a mortgage is only to operate as security and not a transfer or lease of the estate or interest mortgaged. There are two types of mortgages in Zambia, a legal and an equitable mortgage. A legal mortgage is created in respect to a legal estate by deed. An equitable mortgage does not convey legal title to the mortgage, and no power of sale vests in the mortgagee.

The president holds all land on behalf of the people of Zambia, which he may give to any Zambian, but the process is set in law. The Lands Act, Chapter 184, places a number of restrictions on the president’s allocation of land to foreigners. The ZDA Act makes provision for leasehold tenure of land by investors. The ZDA, in consultation with the Ministry of Lands, assists an investor in identifying suitable land for investment, as well as assisting the investor to apply through the Ministry of Lands. While land is technically owned by the president, it is worth noting that traditional chiefs have jurisdiction over traditional, or customary, land, which makes up roughly 70 percent of Zambia.

The Commissioner of Lands verifies that properties can be transferred after checking if ground rent has been paid and by conducting due diligence on the purchaser. Land held under customary tenure has no title, but where a sketch plan of the area exists, the chief can give written consent to an investor and a 14-year lease can be obtained for traditional land.

Despite Zambia’s abundant land for agriculture and other purposes, the process of land acquisition and registration is a major obstacle for investors in part due to extensive traditional ownership. Its acquisition involves negotiations with traditional leaders, who have to balance the demands of their subjects against the pressure to convert land for commercial purposes. Most available land has not been surveyed or mapped and, where this has been done, records are often outdated or difficult to retrieve from the Ministry of Lands.

The Ministry of Lands is centralized in Lusaka and faces problems with poor record keeping and slow processing of title deeds. To address these challenges the government, with the support of donor partners, has been working to reform land policy, including modernization of the Lands Department at Ministry of Lands, establishment of Land Banks, establishment of a Land Development Fund, demarcation of MFEZs and industrial parks, and development of farming blocks.

Intellectual property laws in Zambia cover domain names, traditional knowledge, transfer of technology, trademarks, patents, and copyrights, etc. Zambia is party to several international intellectual property agreements. The legal framework for trademark protection in Zambia is adequate; however, enforcement of intellectual property rights (IPR) is weak, and courts have little experience with commercial litigation. Copyright protection is limited and does not cover computer applications. Of the many pirated and counterfeit goods in Zambia, the main ones are DVDs, CDs, audio-visual software, infant milk, pharmaceuticals, body lotions, motor vehicle spare parts (such as tires and brake pads), beverages, cigarettes, toothpaste, electrical appliances, fertilizer, pesticides, and corn seed. Small-scale trademark infringement occurs in connection with some packaged goods utilizing copied or deceptive packaging. The Industrial Designs Act encourages the creation of designs and development of creative industries through enhanced protection and utilization of designs, and it provides for the registration and protection of designs and the rights of proprietors of registered designs. The Protection of Traditional Knowledge, Genetic Resources, and Expressions of Folklore Act provides a transparent legal framework for the protection of, access to, and use of, traditional knowledge, genetic resources, and expressions of folklore and guarantees equitable sharing of benefits and effective participation of holders.

The Zambia Police Service Intellectual Property Unit (IPU) carries out raids in shops and markets to confiscate counterfeit and pirated materials. The IPU tracks and reports on seizures of counterfeit goods but no consolidated record is available. There are fines for revealing proprietary business information, but they are not large enough to adequately penalize possible disclosures. Zambia’s patent laws conform to the requirements of the Paris Convention for the Protection of Industrial Property, to which Zambia is a signatory. It takes a minimum of four months to patent an item or process. Duplicative patent searches are not performed, but patent awards may be appealed on grounds of infringement.

Zambia is a signatory to a number of international agreements on patents and intellectual property, including the World Intellectual Property Organization (WIPO) Paris Convention and Bern Convention, as well as the Universal Copyright Convention of UNESCO. Zambia is also a member of the African Regional Industrial Property Organization (ARIPO). The country is a signatory to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which is an international legal agreement between all the member nations of the World Trade Organization.

The Ministry of Commerce, Trade, and Industry and the Patents and Companies Registration Agency (PACRA) are the leading institutions responsible for the implementation of IPR laws in Zambia. The industrial property registration system at PACRA underwent an upgrade that linked its electronic documentation management system to WIPO’s WIPOScan, which provides for digitization of IPR records.

Zambia is not included in USTR’s Special 301 Report nor its Notorious Markets List. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Government policies generally facilitate the free flow of financial resources to support the entry of resources in the product and factor market. Banking supervision and regulation by the Bank of Zambia (BoZ) has improved slightly over the past few years. Improvements include revoking licenses of some insolvent banks, denying bailouts, limiting deposit protection, strengthening loan recovery efforts, and upgrading the training of and incentives for bank supervisors. High domestic lending rates, a lack of dollar and foreign exchange liquidity, and the limited accessibility of domestic financing have constrained business for several years. High returns on government securities encourage commercial banks to invest heavily in government debt to the exclusion of financing productive private sector investments, particularly for SMEs.

The Lusaka Stock Exchange (LuSE), established in 1993, is structured to meet international recommendations for clearing and settlement system design and operations. There are no restrictions on foreign participation in the LuSE, and foreigners may invest in stocks on the same terms as Zambians. The LuSE has offered trading in equity securities since its inception and, in March 1998, the LuSE became the official market for selling Zambian government bonds. Investors intending to trade a listed security or government bond are now mandated to trade via the LuSE. The market is regulated by the Securities Act of 1993 and enforced by the Securities and Exchange Commission (SEC) of Zambia. Secondary trading of financial instruments in the market is very low or non-existent in some areas.

The financial sector is comprised of three sub-sectors according to financial sector supervisory authorities. The banking and financial institutions sub-sector is supervised by the BoZ, the securities sub-sector by the SEC, and the pensions and insurance sub-sector by the Pensions and Insurance Authority. The Banking and Financial Services Act, Chapter 387, and the Bank of Zambia Act, Chapter 360, govern the banking industry. Zambia’s banking sector is considered relatively well-developed in the African context, but the sector remains highly concentrated. There are currently 19 banks in Zambia with the largest four banks holding nearly two-thirds of total banking assets. The dominance of the four largest banks in deposits and total assets has been diluted by increased market capture of smaller banks and new industry entrants, an indication of growing competitive intensity in this segment of the banking market. Government policies generally facilitate the free flow of financial resources to support the entry of resources in the product and factor market. There continued to be a steady increase in electronic banking and related services over the last few years.

The BoZ’s current policy rate as of March 2022 is 9.0 percent. Commercial lending rates averaged 25.65 percent in 2021, among the highest in the region, making the cost of capital for investment unattractive. One factor inhibiting more affordable lending is a culture of tolerating loan default, which many borrowers view as a minor transgression. Non-performing loans (NPLs) have continued to decline, closing the 2021 financial year at 5.82 percent compared to 11.63 percent in 2020. The government contributes to this problem, with arrears to government contractors estimated at $1.3 billion.

Banking officials acknowledge the need to upgrade the risk assessment and credit management skills of their institutions to better serve borrowers but note widespread financial illiteracy limits borrowers’ ability to access credit. Banks provide credit denominated in foreign currencies only for investments aimed at producing goods for export. Banks provide services on a fee-based model and banking charges are generally high. Home mortgages are available from several leading Zambian banks, although interest rates are still very high.

To operate a bank in Zambia, the bank must be licensed by the Registrar of Banks, Financial Institutions, and Financial Businesses (“the Registrar”) whose office is based at the BoZ. The decision to license banks lies with the Registrar. Foreign banks or branches are allowed to operate in country as long as they fulfill BoZ requirements and meet the minimum capital requirement of $100 million for foreign banks and $20 million for local banks. According to the BoZ, many banks in the country have correspondent banking relationships.

Generally, all regulatory agencies that issue operating licenses have statutory reporting requirements that businesses operating under their laws and regulations must meet. For example, the Banking and Financial Services Act has stringent reporting provisions that require all commercial banks to submit weekly returns indicating their liquidity position. Late submission of the weekly returns or failure to meet the minimum core liquidity and statutory reserves incur punitive penalty interest and may lead to the placement of non-compliant commercial banks under direct supervision of BoZ, closure of the undertaking, or the prosecution of directors.

All companies listed under the Lusaka Stock Exchange (LuSE) are obliged to publish interim and annual financial statements within three months after the close of the financial year. Listed companies are also required to disclose in national print media any information that can affect the value of the price of their securities. According to the Companies Act, Chapter 388, company directors need to generate annual account reports after the end of each financial year. The annual account, auditor’s report or reports on the accounts, and directors’ report should be sent to each person entitled to receive notice of the annual general meeting and to each registered debenture holder of the company. A foreign company is required to submit annual accounts and an auditor’s report to the Registrar.

The Non-Bank Financial Institutions (NBFIs) are licensed and regulated in accordance with the provisions of the Banking and Financial Services Act of 1994 (BFSA) and related Regulations and Prudential Guidelines. As key players in the financial sector, NBFIs are subject to regulatory requirements governing their prudential position, consumer protection, and market conduct in order to safeguard the overall soundness and stability of the financial system. The NBFIs comprise eight leasing and finance companies, three building societies, one credit reference bureau, one savings and credit institution, one development finance institution, 80 bureaux de change, one credit reference bureau, and 34 micro-finance institutions.

Private firms are open to foreign investment through mergers and acquisitions. The CCPC reviews and handles big mergers and acquisitions. The High Court of Zambia may reverse decisions made by the Commission. Under the CCPA, foreign companies without a presence in Zambia and taking over local firms do not have to notify their transactions to the Commission, as it has not established disclosure requirements for foreign companies acquiring existing businesses in Zambia.

Zambia does not have a sovereign wealth fund.

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.

There were no sectors or companies targeted for privatization in 2021. The privatization of parastatals began in 1991, with the last one occurring in 2007. The divestiture of state enterprises mostly rests with the IDC, as the mandated SOE holding company. The Privatization Act includes the provision for the privatization and commercialization of SOEs; most of the privatization bidding process is advertised via printed media and the IDC’s website ( www.idc.co.zm ). There is no known policy that forbids foreign investors from participating in the country’s privatization programs.

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.

Department of State

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

Department of the Treasury

• OFAC Recent Actions

Department of Labor

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

The Hichilema administration has made climate a priority with the establishment of a new Ministry of Green Economy & Environment. The new ministry consolidates several departments that were previously spread across multiple ministries, including the Forest Department, Climate Change Department, and the Zambia Environmental Management Agency. Zambia’s Nationally Determined Contribution (NDC) is pioneering metrics for resilience under its monitoring plan; however, the government has identified room for improvement in developing more qualitative indicators to support the quantitative indicators currently in place.

Zambia has policies, strategies and programs aimed at promoting the conservation of fauna and flora. The government has developed a National Biodiversity Strategy and Action Plan (NBSAP) that guides conservation and sustainable use of biodiversity. Zambia’s NBSAP has a monitoring and evaluation component with a monitoring matrix that includes key performance indicators and targets. Other relevant policies include the Climate Change Policy and the National Policy on Environment.

Zambia does not currently have a net-zero GHG emission target.  According to the government’s NDC commitments, Zambia has made a conditional pledge to reduce GHG emissions by 25 percent (20,000 Gg CO2 eq.) by 2030 against a base year of 2010, with substantial international support. Zambia’s two-year tenure as the lead of the Africa Group of Negotiators started in November 2021.

Regulatory reform is needed to promote increasing access to modern energy, improve reliability of the existing energy supply, and the expand the proportion of renewable energy available and utilized, both on- and off-grid.  The Zambian government says that it intends to use nature-based solutions for the sustainable management and use of natural resources to address climate change, water security, water pollution, food security, human health, biodiversity loss, and disaster risk management.

The Zambian government has implemented a zero-rated tax on the following components of solar energy equipment: solar panels, inverters, batteries, and charge controllers to encourage users of solar energy-based equipment. Customs duties and value added taxes are not charged on these components of solar energy equipment. The taxes remain in force on other equipment such as diesel generators.

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.

Contact at government agency or agencies are responsible for combating corruption:
Mr. Silumesi Muchula
Acting Director General, Anti-Corruption Commission
Kulima House, Cha Cha Cha Road, P.O. Box 50486, Lusaka
+260 211 237914
e-mail: smuchula@acc.gov.zm 

Contact at “watchdog” organization:
Mr. Maurice Nyambe
Executive Director, Transparency International Zambia
3880 Kwacha Road, Olympia Park, P.O. Box 37475, Lusaka
+260 211 290080
e-mail: MNyambe@tizambia.org.zm 

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.

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.

* 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.

**Bank of Zambia Private Capital Flow 2021 Report

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 

To attract FDI and improve the country’s competitiveness, the government has encouraged public-private partnerships and emphasized the need to improve the investment climate by lowering the cost of doing business as well as restoring the rule of law and sanctity of contracts. Implementation, however, has been limited.

The government amended the Indigenization Act by removing diamonds and platinum from minerals subject to indigenization (requiring majority ownership by indigenous Zimbabweans), although the new legislation appeared to grant broad discretion to the GOZ to designate minerals as subject to indigenization in the future. Subsequently, the GOZ reassured investors that no minerals will be subject to indigenization, including diamonds and platinum. However, there are smaller sectors “reserved” for Zimbabweans (see below).

To improve the ease of doing business, the government enacted legislation that led to the formation of the Zimbabwe Investment and Development Agency (ZIDA) in 2020. ZIDA replaced the Zimbabwe Investment Authority and serves as a one-stop-shop center in promoting and facilitating both domestic and foreign investment in Zimbabwe.

While the government has committed to prioritizing investment retention, there are still no mechanisms or formal structures to maintain ongoing dialogue with investors.

Foreign and domestic private entities have a right to establish and own business enterprises and engage in all forms of remunerative activity, but foreign ownership of businesses in certain reserved sectors is limited.

Foreign investors are free to invest in most sectors without any restrictions as the government aims to bring in new technologies, value-add manufacturing, and generate employment. According to the ZIDA Act, “foreign investors may invest in, and reinvest profits of such investments into, any and all sectors of the economy of Zimbabwe, and in the same form and under the same conditions as defined for Zimbabweans under the applicable laws and regulations of Zimbabwe.” However, the government reserves certain sectors for Zimbabweans such as passenger buses, taxis and car hire services, employment agencies, grain milling, bakeries, advertising, dairy processing, and estate agencies.

The country screens FDI through the ZIDA in liaison with relevant line ministries to confirm compliance with the country’s laws.

According to the country’s laws, U.S. investors are not especially disadvantaged or singled out by any of the ownership or control mechanisms relative to other foreign investors. In its investment guidelines, the government states its commitment to non-discrimination between foreign and domestic investors and among foreign investors.

In a 2019 review, Global Witness recommended reform of Zimbabwe’s shadowy diamond sector through publication of all diamond mining contracts, shareholdings, and their ultimate beneficial owners; production of timely annual reports, including audited accounts detailing revenues raised and all payments to the Treasury and all transfers to private shareholders. https://www.globalwitness.org/en/blog/time-zimbabwes-opaque-diamond-sector/ 

The Zimbabwe Environmental Lawyers Association (ZELA) published in October 2021 and March 2022 reports focused on the investment climate around the extractive sector. Though the reports view the extractive sector through the lens of PRC engagement, the information on laws, regulations, and gaps in legislation and enforcement remain relevant for all interested investors.

• The Handbook of Zimbabwe-China Economic Relations:
• Zimbabwe Open for Business: Progress Check on Implementation:

Policy inconsistency, administrative delays and costs, and corruption hinder business facilitation. Zimbabwe does not have a fully online business registration process, though one can begin the process and conduct a name search online via the ZimConnect web portal. The government created the Zimbabwe Investment Development Agency (ZIDA, https://www.zidainvest.com/ ) which replaced the Zimbabwe Investment Authority (ZIA), the Special Economic Zones Authority, and the Joint Venture Unit to oversee the licensing and implementation of investment projects in the country. The Agency has established a one-stop investment services center (OSISC) which houses several agencies that play a role in the licensing, establishment, and implementation of investment projects including the Zimbabwe Revenue Authority (ZIMRA), Environmental Management Agency (EMA), Reserve Bank of Zimbabwe (RBZ), National Social Security Authority (NSSA), Zimbabwe Energy Regulatory Authority (ZERA), Zimbabwe Tourism Authority, the State Enterprises Restructuring Agency, and specialized investment units within relevant line ministries. The business registration process currently takes 27 days.

Zimbabwe does not promote or incentivize outward investment due to the country’s tight foreign exchange reserves. Although the government does not restrict domestic investors from investing abroad, any outward investment requires approval by exchange control authorities. Firms interested in outward investment would face difficulty accessing the limited foreign currency at the more favorable official exchange rate.

The government officially encourages competition within the private sector and seeks to improve the ease of doing business, but the bureaucracy within regulatory agencies lacks transparency, and corruption is prevalent. Investors complain of policy inconsistency and unpredictability. Moreover, Zimbabwe does not have a centralized online location where key regulatory actions are published, and investors must contact ZIDA.

The government at times uses statutory instruments and temporary presidential powers to alter legislation impacting economic policy. These powers have limited duration – the government must pass legislation within six months for the presidential powers to become permanent. These measures, which can appear without warning, often surprise businesses and lack implementation details, leading firms to delay major business decisions until gaining clarity. For example, the government unexpectedly prohibited the use of foreign currencies for domestic transactions in June 2019 but lifted the ban in March 2020, amidst the COVID-19 pandemic and growing economic pressure. The government has made changes to the share of foreign currency earnings exporters must surrender to the central bank without warning or stakeholder consultations. The standard legislative process, on the other hand, does provide ample opportunity for public review and comment before the final passage of new laws. The development of regulations follows a standard process and includes a period for public review and comment.

According to the Department of State’s 2021 Fiscal Transparency Report, public budget documents do not provide a full picture of government expenditures, and there is a notable lack of transparency regarding state-owned enterprises and the extraction of natural resources. Information on public finances is generally unreliable, as actual revenues and expenditures have deviated significantly from the enacted budgets. Information on some debt obligations is publicly available, but not information on contingent debt.

Zimbabwe is a member of the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA), and it is a signatory to the SADC and COMESA trade protocols establishing free trade areas (FTA) with the aim of growing into a customs union. Zimbabwe is also a member of the African Continental Free Trade Area (AfCFTA) which came into force on January 1, 2021, with the aim of creating a single continental market and paving the way for the establishment of a customs union. Although the country is also a member of the World Trade Organization (WTO), it normally notifies only SADC and COMESA of measures it intends to implement.

According to the country’s law and constitution, Zimbabwe has an independent judicial system whose decisions are binding on the other branches of government. The country has written commercial law and, in 2019, established four commercial courts at the magistrate level. The government also trained 55 magistrates in the same year. Administration of justice in commercial cases that do not touch on political interests is still generally impartial, but for politicized cases government interference in the court system has hindered the delivery of impartial justice. Regulations or enforcement actions are appealable and are adjudicated in the national court system.

Foreign investors are free to invest in most sectors including mining without any restrictions. In 2020, the government amended the Indigenization and Economic Empowerment Act which required majority ownership by indigenous Zimbabweans to attain its goal to bring in new technologies, generate employment, and value-added manufacturing. In certain sectors, such as primary agriculture, transport services, and retail and wholesale trade including distribution, foreign investors may not own more than 35 percent equity.

The ZIDA ( https://www.zidainvest.com/ ), which now acts a one-stop shop for investors, promotes and facilitates both local and foreign direct investment.

The government officially encourages competition within the private sector according to the Zimbabwe Competition Act. The Act provided for the formation of the Tariff and Competition Commission charged with investigating restrictive practices, mergers, and monopolies in the country. The Competition and Tariff Commission (CTC) is an autonomous statutory body established in 2001 with the dual mandate of implementing and enforcing Zimbabwe’s competition policy and law and executing the country’s trade tariffs policy. The Act provides for transparent norms and procedures. Although the decision of the Commission is final, any aggrieved party can appeal the decision to the Administrative Court.

In 2000, the government began to seize privately-owned agricultural land and transfer ownership to government officials and other regime supporters. In April 2000, the government amended the constitution to grant the state’s right to assert eminent domain, with compensation limited to the improvements made on the land. In September 2005, the government amended the constitution again to transfer ownership of all expropriated land to the government. Since the passage of this amendment, top government officials, supporters of the ruling Zimbabwe African National Union – Patriotic Front (ZANU-PF) party, and members of the security forces have continued to disrupt production on commercial farms, including those owned by foreign investors, those owned by black indigenous farmers, and those covered by bilateral investment agreements. Similarly, government officials have sought to impose politically connected individuals as indigenous partners on privately and foreign-owned wildlife conservancies.

In 2006, the government began to issue 99-year leases for land seized from commercial farmers, retaining the right to withdraw the lease at any time for any reason. These leases, however, are not readily transferable, and banks do not accept them as collateral for borrowing and investment purposes. The government continues to seize commercial farms without compensating titleholders, who have no recourse to the courts. The seizures continue to raise serious questions about respect for property rights and the rule of law in Zimbabwe.

In 2017, the government announced its intention to compensate farmers who lost their land and made small partial payments to the most vulnerable claimants. In July 2020, the government and white commercial farmers who lost land to the land reform program signed a US$3.5 billion Global Compensation Deed Agreement for improvements made by commercial farmers on the farms. The government promised to pay a 50 percent deposit within 12 months of signing the agreement and 25 percent of the remainder in each subsequent year so that it makes full payment over five years. Given fiscal constraints, it remains unclear how the government will finance this sum. As of July 2021, the GOZ paid a token US$1 million towards compensating former commercial farmers, but it still lacks a credible plan to pay the remaining US$3.499 billion and has pushed back its deadline for doing so.

In the event of insolvency or bankruptcy, Zimbabwe applies the Insolvency Act. All creditors have equal rights against an insolvent estate. Zimbabwe does not criminalize bankruptcy unless it is the result of fraud, but the government blacklists a person declared bankrupt from undertaking any new business.

Government incentives to foreign investors depend on the form of investment, the sector, and whether the GOZ awards the investment national project status. For investment in industrial parks and tourism development zones, investors are exempt from paying tax for the first five years, after which they will pay tax at the rate of 25 percent (the normal tax rate is 35 percent). For build, own, operate, and transfer (BOOT) and build, operate, and transfer (BOT) joint ventures, investors are exempt from paying taxes for the first five years after which they will pay tax at the rate of 15 percent. Investors in the mining sector who export 50 percent of output benefit from a reduced corporation tax of 20 percent and are exempt from import duties on capital goods while losses are carried forward indefinitely for mining operations. Moreover, the government generally allows for duty exemptions in the importation of raw materials used in the manufacture of goods for export. In addition to these incentives, investments with national project status such as those in the renewable energy sector are allowed to borrow on local capital markets where lenders enjoy incentives including tax exemption on interest.

The GOZ set up a Zimbabwe Women’s Microfinance Bank in 2018 so marginalized women could access credit facilities with affordable rates and innovative women-centered financial products and services.

The GOZ encourages investment in renewable energy by waiving payment of duty on importation of solar equipment including batteries and panels.

Zimbabwe now has approximately 183 companies operating in Export Processing Zones (EPZs). Benefits include a five-year tax holiday, duty-free importation of raw materials and capital equipment for use in the EPZ, and no tax liability from capital gains arising from the sale of property forming part of the investment in EPZs. The government generally requires foreign capital comprise a majority of the investment in an EPZ-designated company and requires the company to export at least 80 percent of output. The latter requirement has constrained foreign investment in the zones. ZIDA took over the regulation of EPZs and the Special Economic Zones. However, to date, activity in special economic zones has been limited despite the incentives.

Although there are no discriminatory import or export policies affecting foreign firms, the government’s approval criteria heavily favor export-oriented projects. Import duties and related taxes range as high as 110 percent.

Foreigners intending to engage in meetings or discussions for business purposes are advised to secure a business visa for entry into Zimbabwe. Individuals found to be engaging in business-related activities on a tourist visa have been arrested, expelled from the country, and/or fined. A passport, visa, return ticket, and adequate funds are required to enter Zimbabwe.

In 2019, the government approved the Zimbabwe local content strategy to promote local value addition and linkages through utilization of domestic resources. According to the strategy, the country wants to increase local content levels in prioritized sectors from 25 to approximately 80 percent by 2023. However, the government has found it difficult to implement such a strategy.

There are no general performance requirements for businesses located outside Export Processing and Special Economic Zones. Government policy, however, encourages investment in enterprises that contribute to rural development, job creation, exports, the addition of domestic value to primary products, use of local materials, and the transfer of appropriate technologies.

Government participation is required for new investments in strategic industries such as energy, public water provision, and railways. The terms of government participation are determined on a case-by-case basis during license approval. The few foreign investors (for example, from China, Russia, and Iran) in reserved strategic industries have either purchased existing companies or have supplied equipment and spares on credit.

While foreign investors are not currently forced to use domestic content in production, the government is in the process of developing a local content policy designed to encourage the use of local inputs in production.

The government does not require foreign IT providers to turn over source code and/or provide access to surveillance. Only banks are required to maintain all their data in the country through the escrow agreement.

The new government investment guidelines do not permit mandatory and/or arbitrary performance requirements that distort or limit the expansion of trade and investment.

The government enforces property rights in residential and commercial properties in cities although this is not the case with agricultural land, as discussed above. Mortgages and liens do exist for urban properties although liquidity constraints have led to a fall in the number of mortgage loans. The recording of mortgages is generally reliable. The government retains ownership of all agricultural land with 99-year leases guaranteeing use. These leases remain too weak to serve as collateral for bank loans.

Zimbabwe follows international patent and trademark conventions, and it is a member of the World Intellectual Property Organization (WIPO). Generally, the government seeks to honor intellectual property ownership and rights, although a lack of expertise and manpower as well as corruption limit its ability to enforce these obligations. Pirating of books, videos, music, and computer software is common.

The government has not enacted new IP related laws or regulations over the past year. The country does not publish information on the seizures of counterfeit goods.

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

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

Zimbabwe has two stock exchanges in Harare and Victoria Falls. The Zimbabwe Stock Exchange (ZSE) in Harare currently has 51 publicly listed companies with a total market capitalization of US$13 billion as of March 16, 2022. Stock and money markets are open to foreign portfolio investment. Foreign investors can take up to a maximum of 49 percent of any locally listed company with any single investor limited to a maximum of 15 percent of the outstanding shares. Regarding the money market, foreign investors may buy up to 100 percent of the primary issues of bonds and stocks and there is no limit on the level of individual participation.

There is a 1.48 percent withholding tax on the sale of marketable securities, while the tax on purchasing stands at 1.73 percent. Totaling 3.21 percent, the rates are comparable with the average of 3.5 percent for the region. As a way of raising funds for the state, the government mandated insurance companies and pension funds invest between 25 and 35 percent of their portfolios in prescribed government bonds. Zimbabwe’s high inflation has greatly eroded the value of domestic debt instruments and resulted in negative real interest rates on government bonds.

Zimbabwe launched the Victoria Falls Stock Exchange (VFEX) in September 2020. Four companies have listed on the VFEX with a market capitalization of US$256 million as of March 16, 2022.

The country respects the IMF’s Article VIII and refrains from restrictions on payments and transfers for current international transactions provided there is sufficient foreign exchange to finance the transactions. Depending on foreign currency availability, foreign companies with investments in Zimbabwe can borrow locally on market terms.

Although credit is allocated on market terms and foreigners are allowed to borrow on the local market, lack of foreign exchange constrains the financial sector from extending credit to the private sector.

Three major international commercial banks and several regional and domestic banks operate in Zimbabwe, but they have reduced their branch network substantially in line with declining business opportunities. The central bank (Reserve Bank of Zimbabwe (RBZ)) maintains the banking sector is generally stable despite a harsh operating environment characterized by high credit risk, high inflation, and foreign exchange constraints. Most Zimbabwean correspondent banking relationships are in jeopardy or have already been severed due to international bank efforts to reduce risk (de-risking) connected to the high penalties for non-compliance with prudential anti-money laundering/counter-terrorism finance (AML/CFT) guidelines in developed countries. However, in March 2022, the Financial Action Task Force (FATF) removed Zimbabwe from the “gray list” in response to “significant progress in improving its AML/CFT regime” and Zimbabwe is no longer subject to the FATF’s increased monitoring process.

As of December 31, 2021, the sector had 19 operating institutions, comprising 13 commercial banks, five building societies, and one savings bank. According to the RBZ, as of December 2021, 11out of 13 operating commercial banking institutions and two out of five building societies complied with the prescribed minimum core capital requirements. The level of non-performing loans rose slightly from 0.31 percent in December 2020 to 0.94 percent by December 2021. The RBZ attributed the increase to the disruptive effects of the COVID-19 pandemic. The RBZ reports the total loans-to-deposits ratio rose from 40.4 percent in December 2020 to 48.3 percent in December 2021.

According to the central bank, total deposits (including interbank deposits), rose from ZWL$204.13 billion in December 2020 to ZWL$476.35 billion in December 2021, an increase of 76 percent in U.S. dollar terms. The total assets of the banking sector stood at ZWL$763 billion or US$7 billion at the end of December 2021 up from ZWL$349.6 billion or US$4.3 billion on December 31, 2020.

The government set aside US$1 million toward administrative costs related to the setting up of a SWF in its 2016 budget. Although the government proposed to capitalize the SWF through a charge of up to 25 percent on royalty collections on mineral sales, as well as through a special dividend on the sale of diamond, gas, granite and other minerals, it has not done so. In 2021, state media listed the SWF as a shareholder of a new major mining company in Zimbabwe.

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.

Although the government committed itself to privatize most SOEs in the 1990s, it only successfully privatized two parastatals. In 2018, the government announced it would privatize 48 SOEs. So far, it has only targeted five in the telecommunications, postal services, and financial sectors for immediate reform, but the privatizations have not yet concluded. The government encourages foreign investors to take advantage of the privatization program to invest in the country, but inter-SOE debts of nearly USD 1 billion pose challenges for privatization plans. According to the government’s investment guidelines, it is still working out the process under which it will dispose its shareholding to the private sector.

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.

Department of State

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

Department of the Treasury

• OFAC Recent Actions

Department of Labor

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

Zimbabwe developed a national climate policy in 2017 which provides an overarching framework that gives the country basic principles and guidance under which climate change response strategy will be implemented. The government has stated its intention to reduce emissions of sectoral greenhouse gasses without specifying action plans to achieve these objectives. The policy does not specify any regulatory incentives towards achievement of set objectives.

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.

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

Zimbabwe Anti-Corruption Commission (ZACC)
172 Herbert Chitepo Avenue,
Harare.
+263 (242) 369602; +263 71 952 9483
reports@zacc.co.zw

Contact at a “watchdog” organization:

Transparency International Zimbabwe
96 Central Avenue,
P O Box CY 434, Causeway
Harare
+263 4 793 246/7
tiz@tizim.org ; info@tizim.org 

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.

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.

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